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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number  1-7007

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  |X|     No  |_|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes  |X|     No  |_|

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $1 par value; 9,119,464 shares as of April 30, 2004.
Class A Common Stock, $1 par value, 9,373,206 shares as of April 30, 2004.
Class B Common Stock, $1 par value; 918,688 shares as of April 30, 2004.

BANDAG, INCORPORATED AND SUBSIDIARIES

INDEX

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PART I. FINANCIAL INFORMATION

BANDAG, INCORPORATED AND SUBSIDIARIES

Item 1.  Financial Statements
Condensed Consolidated Balance Sheets

See notes to condensed consolidated financial statements.

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BANDAG, INCORPORATED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Earnings

See notes to condensed consolidated financial statements.

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BANDAG, INCORPORATED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

See notes to condensed consolidated financial statements.

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BANDAG, INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

Note 1.   Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Note 2.   Comprehensive Net Earnings

Comprehensive net earnings for the three month period ended March 31 were as follows (in thousands):

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BANDAG, INCORPORATED AND SUBSIDIARIES

Note 3.   Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Note 4.   Retirement Benefit Plans

Net periodic (benefit) cost for the three month period ended March 31 is composed of the following (in thousands):

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was enacted. For further information, refer to the footnotes of the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

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BANDAG, INCORPORATED AND SUBSIDIARIES

Note 5.   Non-Recurring Charges

During the fourth quarter of 2001, the Company recorded a non-recurring charge totaling $4,300,000 ($2,580,000 net of tax benefits) related to the closure of a North American tread rubber manufacturing facility and certain retirement benefits. Costs included $2,659,000 ($1,595,000 net of tax benefits) for termination benefits for the reduction of 46 employees, $1,521,000 ($913,000 net of tax benefits) for early retirement benefits of 19 employees, and other miscellaneous closure costs. The Company paid $93,000 and $1,321,000 in 2003 and 2002, respectively, related to the termination of employees. In the year-to-date period ended March 31, 2004, the Company paid $5,000 relating to the termination of employees. As of March 31, 2004, $1,339,000 of the charges related to the closure of the North American tread rubber manufacturing facility remained accrued. The Company estimates that substantially all of the remaining payments will be made by the end of 2004.

Note 6.   Restructuring Charges

In 2002, the Company recorded restructuring charges totaling $3,500,000 ($2,450,000 net of tax benefits) for termination benefits covering 39 employees. The Company paid approximately $2,428,000 and $650,000 in 2003 and 2002, respectively, related to the termination of employees. In the year-to-date period ended March 31, 2004, the Company paid approximately $328,000 relating to the termination of employees. As of March 31, 2004, $540,000 of the charges related to the restructuring remained accrued, which reflects a $446,000 increase in the original provision due to exchange rate changes. Substantially all of the remaining payments, which are primarily severance pay, will be made by the end of 2006.

Note 7.   Acquisition

On February 13, 2004, the Company acquired an 87.5% majority interest in Speedco, Inc. from its founders and Equilon Enterprises, LLC, a Royal Dutch Shell Group company. Speedco provides quick-service truck lubrication nationwide through 26 company-owned and six licensed on-highway locations. In total, Bandag paid approximately $53,000,000 for its 87.5% interest and to assume and retire $20,100,000 of debt. The Company anticipates recording approximately $8,000,000 of goodwill and $12,500,000 of other intangible assets; however, the purchase price allocation is still being finalized pending a final asset valuation. Speedco generated unaudited revenues of approximately $46,000,000 and unaudited pre-tax income of approximately $4,800,000 in 2003. Included in the purchase agreement is the option for Bandag to purchase the six facilities operated by the licensees.

Note 8.   Divestitures

Bandag’s TDS subsidiary sold 3 locations during the first quarter of 2004 with a net carrying value of $1,434,000 for cash of $862,000 and assumed liabilities of $374,000. The assets of these locations consisted primarily of inventory and property, plant and equipment. The divestitures resulted in a loss before income taxes and minority interest of $198,000 for the year-to-date period ended March 31, 2004.

The TDS locations divested and closed during 2004 had net sales and earnings (loss) before income taxes and minority interest as follows (in thousands):