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Bandag posts $12.7 million in earnings

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Bandag Inc. posted consolidated net earnings of $12.7 million on consolidated net sales of $227.3 million for the second quarter ended June 30.

That compares to earnings of $11.9 million on sales of $213.2 for the same period in 2004. (Consolidated net earnings for second quarter 2004 included favorable tax adjustments of $1 million, resulting primarily from the reassessment of certain tax matters.)

Consolidated net sales for second quarter were up seven percent, compared to the previous year. Net sales were positively impacted by

approximately $4.9 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

For the first six months of 2005, Bandag reported consolidated net earnings of $18.7 million on consolidated net sales of $417 million. That compares to second-quarter 2004 earnings of $15.9 million on sales of $389.9 million.

"Reflecting the benefits of increased transportation activity, North American net sales and unit volume were up over the 2004 period. These favorable transportation business conditions also were evident in the quarter's strong performance at Speedco and Tire Distribution Systems Inc. (TDS)," says Martin Carver, chairman and CEO.

Factors that affected consolidated net sales for second quarter included the following:

* Speedco sales increased by $6.2 million compared to the prior year period, primarily due to the June 2004 acquisition of six licensed locations which were owned and operated by PM Express Inc. Net sales also were positively impacted by an increase in volume at existing

locations, the addition of three new facilities and the expansion of tire lanes at nine existing locations.

* TDS sales declined $8 million from the prior year period, reflecting the divestitures during 2004. The divested locations had net sales of approximately $17 million in the second quarter of 2004. TDS net sales were positively impacted by an increase in service revenue and new tire sales.

* North America business unit volume increased 5% and net sales increased 8% compared to second quarter 2004 results. Net sales were positively impacted by price increases in December 2004 and May 2005.

* European business unit volume decreased 10% while net sales increased 9%. Net sales were positively impacted by a September 2004 price increase and by approximately $1 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

* International business unit volume decreased 2% while net sales increased 25%. Net sales were positively impacted by price increases and by approximately $2.8 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

Second quarter 2005 consolidated gross margin declined by one percentage point.

Speedco’s gross margin declined 4.2 percentage points, primarily due to the start-up of new stores and the addition of tire lanes to existing stores. TDS' gross margin increased 0.5 percentage points.

Traditional business gross margin declined 2.1 percentage points, primarily due to lower than anticipated gross margin on fleet contract business.

Consolidated operating and other expenses for the second quarter were $0.8 million higher than the prior year period.

"Continued high equipment utilization in the trucking sector, improving fundamentals at TDS and the ongoing expansion of Speedco

should bode well for Bandag," says Carver. "Nevertheless, we continue to carefully monitor the impact of higher oil prices on both transportation industry fuel costs and our own raw material costs for the remainder of the year."

Bandag's common stock closed at $47.13 a share on the New York Stock Exchange on July 19. That compares to a 52-week high of $50.83 and low of $42.51. Bandag's Class A common stock closed at $41.20 a share vs. a 52-week high of $46.69 and low of $37.70.

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