UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| [_] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
| BANDAG, INCORPORATED |
| (Exact name of registrant as specified in its charter) |
| Iowa |
42-0802143 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
2905 North Highway 61, Muscatine, Iowa |
52761-5886 |
| (Address of principal executive offices) | (Zip Code) |
| (563) 262-1400 |
| (Registrant's telephone number, including area code) |
| Not Applicable |
| (Former name, former address and former fiscal year, if changed |
| since last report) |
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, 9,117,975
shares as of July 31, 2004.
Class A Common Stock, $1 par value, 9,338,307 shares as of
July 31, 2004.
Class B Common Stock, $1 par value; 918,688 shares as of July 31, 2004.
BANDAG, INCORPORATED AND SUBSIDIARIES
INDEX
| PART I: FINANCIAL INFORMATION | Page No. | ||
Item |
1. | Financial Statements (Unaudited) | |
| Condensed consolidated balance sheets - | |||
| June 30, 2004 and December 31, 2003 | 3 | ||
| Condensed consolidated statements of operations | |||
| Three months ended June 30, 2004 and 2003 | |||
| Six months ended June 30, 2004 and 2003 | 4 | ||
| Condensed consolidated statements of cash flows | |||
| Six months ended June 30, 2004 and 2003 | 5 | ||
| Notes to condensed consolidated financial statements | |||
| June 30, 2004 | 6 | ||
Item |
2. | Management's Discussion and Analysis of Financial | |
| Condition and Results of Operations | 13 | ||
Item |
3. | Quantitative and Qualitative Disclosure about Market Risk | 20 |
Item |
4. | Controls and Procedures | 20 |
PART II: OTHER INFORMATION |
|||
Item |
2. | Changes in Securities, Use of Proceeds and Issuer Purchases | |
| of Equity Securities | 21 | ||
Item |
6. | Exhibits and Reports on Form 8-K | 23 |
SIGNATURES |
24 | ||
2
PART I. FINANCIAL INFORMATION
BANDAG, INCORPORATED AND SUBSIDIARIES
| In thousands, except share data | (Unaudited) June 30, 2004 |
December 31, 2003 | ||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 130,492 | $ | 189,976 | ||||
| Investments | 8,088 | 10,808 | ||||||
| Accounts receivable, net | 136,976 | 156,894 | ||||||
| Inventories | ||||||||
| Finished products | 54,451 | 50,112 | ||||||
| Material and work in process | 15,408 | 12,653 | ||||||
| 69,859 | 62,765 | |||||||
| Other current assets | 92,696 | 77,533 | ||||||
| Total current assets | 438,111 | 497,976 | ||||||
Property, plant, and equipment | 515,962 | 465,994 | ||||||
| Less accumulated depreciation and amortization | (359,079 | ) | (358,019 | ) | ||||
| 156,883 | 107,975 | |||||||
Intangible assets, net | 28,575 | 10,131 | ||||||
| Other assets | 49,795 | 44,447 | ||||||
| Total assets | $ | 673,364 | $ | 660,529 | ||||
Liabilities and shareholders' equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 32,633 | $ | 25,710 | ||||
| Accrued employee compensation and benefits | 36,431 | 36,978 | ||||||
| Accrued marketing expenses | 28,151 | 31,845 | ||||||
| Other accrued expenses | 30,227 | 28,462 | ||||||
| Income taxes payable | 9,414 | 14,946 | ||||||
| Short-term notes payable and current portion of other obligations | 10,721 | 10,252 | ||||||
| Total current liabilities | 147,577 | 148,193 | ||||||
Long-term debt and other obligations | 40,405 | 35,259 | ||||||
| Minority interest | 2,238 | -- | ||||||
| Shareholders' equity | ||||||||
| Common stock; $1.00 par value; authorized - 21,500,000 shares; | ||||||||
| issued and outstanding - 9,118,828 shares in 2004; | ||||||||
| 9,099,745 shares in 2003 | 9,119 | 9,100 | ||||||
| Class A common stock; $1.00 par value; authorized - 50,000,000 shares; | ||||||||
| issued and outstanding - 9,335,965 shares in 2004; | ||||||||
| 9,249,756 shares in 2003 | 9,336 | 9,250 | ||||||
| Class B common stock; $1.00 par value; authorized - 8,500,000 shares; | ||||||||
| issued and outstanding - 918,688 shares in 2004; | ||||||||
| 918,688 shares in 2003 | 919 | 919 | ||||||
| Additional paid-in capital | 24,824 | 17,903 | ||||||
| Retained earnings | 478,612 | 477,499 | ||||||
| Accumulated other comprehensive loss | (39,666 | ) | (37,594 | ) | ||||
| Total shareholders' equity | 483,144 | 477,077 | ||||||
| Total liabilities and shareholders' equity | $ | 673,364 | $ | 660,529 | ||||
See notes to condensed consolidated financial statements.
3
BANDAG, INCORPORATED AND SUBSIDIARIES
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
| In thousands, except per share data | 2004 |
2003 |
2004 |
2003 | ||||||||||
| Income | ||||||||||||||
| Net sales | $ | 211,088 | $ | 204,077 | $ | 384,617 | $ | 379,356 | ||||||
| Other | 1,725 | 1,691 | 3,487 | 3,535 | ||||||||||
| 212,813 | 205,768 | 388,104 | 382,891 | |||||||||||
Costs and expenses | ||||||||||||||
| Cost of products sold | 134,087 | 129,535 | 246,890 | 244,866 | ||||||||||
| Engineering, selling, administrative, and other expenses | 61,789 | 63,228 | 118,345 | 121,836 | ||||||||||
| 195,876 | 192,763 | 365,235 | 366,702 | |||||||||||
Income from operations | 16,937 | 13,005 | 22,869 | 16,189 | ||||||||||
| Interest income | 992 | 1,052 | 2,042 | 2,208 | ||||||||||
| Interest expense | (557 | ) | (551 | ) | (1,119 | ) | (1,210 | ) | ||||||
| Earnings before income taxes and minority interest | 17,372 | 13,506 | 23,792 | 17,187 | ||||||||||
| Income taxes | 5,341 | 4,813 | 7,684 | 6,101 | ||||||||||
| Minority interest | 137 | -- | 195 | -- | ||||||||||
| Net earnings | $ | 11,894 | $ | 8,693 | $ | 15,913 | $ | 11,086 | ||||||
Earnings per share | ||||||||||||||
| Basic | $ | 0.62 | $ | 0.45 | $ | 0.83 | $ | 0.58 | ||||||
| Diluted | $ | 0.60 | $ | 0.45 | $ | 0.81 | $ | 0.57 | ||||||
Comprehensive net earnings | $ | 8,636 | $ | 17,520 | $ | 13,841 | $ | 22,633 | ||||||
| Cash dividends per share | $ | 0.325 | $ | 0.320 | $ | 0.650 | $ | 0.640 | ||||||
| Depreciation included in expense | $ | 5,628 | $ | 6,571 | $ | 11,238 | $ | 13,532 | ||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 19,299 | 19,156 | 19,275 | 19,137 | ||||||||||
| Diluted | 19,688 | 19,371 | 19,672 | 19,324 | ||||||||||
See notes to condensed consolidated financial statements.
4
BANDAG, INCORPORATED AND SUBSIDIARIES
| Six Months Ended June 30, | ||||||||
| In thousands | 2004 |
2003 | ||||||
Operating Activities |
||||||||
| Net earnings | $ | 15,913 | $ | 11,086 | ||||
| Provision for depreciation and amortization | 11,708 | 14,010 | ||||||
| Decrease (increase) in operating assets and liabilities, net | 9,036 | (4,991 | ) | |||||
| Net cash provided by operating activities | 36,657 | 20,105 | ||||||
Investing Activities | ||||||||
| Additions to property, plant, and equipment | (12,857 | ) | (8,647 | ) | ||||
| Purchases of investments | (12,501 | ) | (9,188 | ) | ||||
| Maturities of investments | 15,221 | 7,055 | ||||||
| Divestitures of businesses | 882 | 11,115 | ||||||
| Acquisitions of businesses | (71,868 | ) | -- | |||||
| Net cash provided by (used in) investing activities | (81,123 | ) | 335 | |||||
Financing Activities | ||||||||
| Principal payments on short-term notes payable and long-term obligations | (760 | ) | (31 | ) | ||||
| Cash dividends | (12,567 | ) | (12,279 | ) | ||||
| Purchases of Common Stock, Class A Common Stock and Class B Common Stock | (2,348 | ) | (110 | ) | ||||
| Stock options exercised | 1,891 | 616 | ||||||
| Net cash used in financing activities | (13,784 | ) | (11,804 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (1,234 | ) | 3,906 | |||||
| Increase (decrease) in cash and cash equivalents | (59,484 | ) | 12,542 | |||||
| Cash and cash equivalents at beginning of period | 189,976 | 129,412 | ||||||
| Cash and cash equivalents at end of period | $ | 130,492 | $ | 141,954 | ||||
See notes to condensed consolidated financial statements.
5
BANDAG, INCORPORATED AND SUBSIDIARIES
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 six month period ended June 30, 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.
Comprehensive net earnings for the three and six month periods ended June 30 were as follows (in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Net earnings | $ | 11,894 | $ | 8,693 | $ | 15,913 | $ | 11,086 | ||||||
| Other comprehensive income: | ||||||||||||||
| Foreign currency translation | (3,258 | ) | 8,827 | (2,072 | ) | 11,547 | ||||||||
| Comprehensive net earnings | $ | 8,636 | $ | 17,520 | $ | 13,841 | $ | 22,633 | ||||||
6
BANDAG, INCORPORATED AND SUBSIDIARIES
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
Numerator: |
||||||||||||||
| Net earnings | $ | 11,894 | $ | 8,693 | $ | 15,913 | $ | 11,086 | ||||||
Denominator: | ||||||||||||||
| Weighted-average shares - Basic | 19,299 | 19,156 | 19,275 | 19,137 | ||||||||||
| Effect of dilutive: | ||||||||||||||
| Restricted stock | 91 | 73 | 76 | 63 | ||||||||||
| Stock options | 298 | 142 | 321 | 124 | ||||||||||
| 389 | 215 | 397 | 187 | |||||||||||
Weighted-average shares - Diluted | 19,688 | 19,371 | 19,672 | 19,324 | ||||||||||
Earnings per share | ||||||||||||||
| Basic | $ | 0.62 | $ | 0.45 | $ | 0.83 | $ | 0.58 | ||||||
| Diluted | $ | 0.60 | $ | 0.45 | $ | 0.81 | $ | 0.57 | ||||||
Net periodic (benefit) cost for the three and six month periods ended June 30 is composed of the following (in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Pension Benefits | ||||||||||||||