FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period________ to ________
Commission file number 1-7007
BANDAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Iowa 42-0802143
(State of incorporation) (I.R.S Employer Identification No.)
2905 N HWY 61, Muscatine, Iowa 52761-5886
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: 319/262-1400
Not Applicable
(Former name, address, or 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 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 -- 11,130,276 shares as of April 30, 1994.
Class A Common Stock, $1 par value -- 13,348,571 shares as of April 30,
1994.
Class B Common Stock, $1 par value -- 2,359,245 shares as of April 30,
1994.
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BANDAG, INCORPORATED AND SUBSIDIARIES
INDEX
Part I : FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Statement of Earnings 3
Consolidated Condensed Statement of Cash Flows 4
Consolidated Condensed Balance Sheets 5
Notes to Consolidated Condensed Financial
Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II : OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
EXHIBITS :
Exhibit 11 - Computation of Earnings Per Share 14
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BANDAG, INCORPORATED AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
Item l - Financial Statements:
Unaudited Consolidated Condensed Statements of Earnings
(In thousands except
per share data)
Three Months Ended
3/31/94 3/31/93
Net sales $131,649 $126,592
Other income 4,481 2,905
-------- --------
136,130 129,497
-------- --------
Cost of products sold 80,031 76,865
Engineering, selling,
administrative and other
expenses 31,151 30,333
Interest expense 454 583
-------- --------
111,636 107,781
-------- --------
Earnings before income taxes 24,494 21,716
Income taxes 9,063 7,818
-------- --------
Net earnings $ 15,431 $ 13,898
======== ========
Net earnings per share $ 0.57 $ 0.51
Cash dividends per share $ 0.1750 $ 0.1625
Depreciation included in
expenses $ 8,382 $ 7,331
Average shares outstanding 27,212 27,409
NOTE: Net earnings increased approximately $983,000 and net earnings per
share increased approximately $.04 as a result of the sale of a portion of
the Company's investment in marketable equity securities during the
quarter.
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BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
(In thousands)
Three Months Ended
3/31/94 3/31/93
Operating Activities
Net earnings $15,431 $13,898
Depreciation and amortization 8,526 7,331
Increase in operating assets and
liabilities - net 17,415 23,575
------- -------
Net cash provided by operating activities 41,372 44,804
------- -------
Investing Activities
Additions to property, plant and equipment (7,960) (9,559)
Purchases of investments (24,958) (7,125)
Maturities of investments 14,513 ---
------- -------
Net cash used in investing activities (18,405) (16,684)
------- -------
Financing Activities
Sale of marketable equity securities 2,447 ---
Principal payments on short-term notes payable
and other liabilities (1,864) (3,164)
Cash dividends (4,746) (4,435)
Purchases of Common Stock (7,973) ---
------- -------
Net cash used in financing activities (12,136) (7,599)
------- -------
Effect of exchange rate changes on cash and cash
equivalents (68) (303)
------- -------
Increase in cash and cash equivalents 10,763 20,218
Cash and cash equivalents at beginning of year 58,004 33,817
------- -------
Cash and cash equivalents at end of period $68,767 $54,035
======= =======
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BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
(In thousands)
March 31, December 31,
1994 1993
ASSETS:
Cash and cash equivalents $ 68,767 $ 58,004
Investments 35,489 25,043
Accounts receivable - net 148,968 161,506
Inventories:
Finished products 38,929 34,947
Materials & work-in-process 10,047 8,186
-------- --------
48,976 43,133
Other current assets 32,152 28,455
-------- --------
Total current assets 334,352 316,141
-------- --------
Property, plant, and equipment 328,222 320,142
Less accumulated depreciation & amortization (182,023) (173,521)
-------- --------
146,199 146,621
-------- --------
Marketable equity securities, at market value 79,634 69,496
Other assets 11,244 18,473
-------- --------
Total assets $571,429 $550,731
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY:
Accounts payable $ 15,478 $ 15,757
Income taxes payable 17,124 11,429
Accrued employee compensation and benefits 11,551 15,391
Accrued marketing expenses 24,907 26,163
Other accrued expenses 29,619 21,585
Short-term notes payable and other liabilities 10,243 12,217
-------- --------
Total current liabilities 108,922 102,542
-------- --------
Deferred income tax and other liabilities 39,983 35,097
Stockholders' equity:
Common stock; $1 par value;
Authorized - 21,500,000 shares;
Issued and outstanding - 11,154,676 shares
in 1994; 11,215,008 in 1993 11,155 11,215
Class A Common stock; $1 par value;
Authorized - 50,000,000 shares;
Issued and outstanding - 13,480,471 shares
in 1994; 13,576,971 in 1993 13,480 13,577
Class B Common stock; $1 par value;
Authorized - 8,500,000 shares;
Issued and outstanding - 2,359,345 shares
in 1994; 2,360,513 in 1993 2,359 2,361
Additional paid-in capital 2,796 2,859
Retained earnings 364,972 362,040
Unrealized gain on securities 34,118 27,693
Equity adjustment from foreign currency
translation (6,356) (6,653)
-------- --------
Total equity 422,524 413,092
-------- --------
Total liabilities & stockholders' equity $571,429 $550,731
======== ========
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BANDAG, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
The consolidated condensed 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 months ended March 31, 1994, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1994. 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, 1993.
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BANDAG, INCORPORATED AND SUBSIDIARIES
Item 2 -Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Consolidated sales increased 4% compared to the same quarter a year ago,
which was not as favorable as the unit volume increase of 6% because of
the stronger U.S. dollar having a negative impact on the translated value
of foreign currency denominated sales. Sales and unit volume for the
Company's domestic operation, which includes export, were 5% higher than
the same period last year. Unit volume for the Company's Western European
operations ended the quarter approximately equal to last year, which
followed the recent trend. Western European sales increased 6% over last
year, in local currency, but were approximately 2% lower when translated
to U.S. dollars. Western Europe's sales increase was due to a more
favorable sales mix among various countries and higher equipment sales.
Unit volume for the other combined geographic areas increased 15% over
last year, but sales increased only 6%, again due to the lower translated
value of foreign currency denominated sales.
Consolidated gross margin for the first quarter was even with the same
period last year, but one percentage point below the fourth quarter of
last year. This is in line with the Company's normal business cycle, with
the first quarter usually being the slowest quarter of the year with its
lower production resulting in less favorable overhead absorption. Since
mid-year 1992 the Company has experienced higher raw material costs, which
the Company has absorbed rather than passing on to its dealers. Since raw
material costs continue to increase, and further increases are likely, the
Company announced selling price increases effective April 15, 1994 in the
U.S., Canadian and certain export markets. Despite the mid-April
announcement, the impact of these increases will not be evident in the
Company's financial results until the latter part of the second quarter
because the Company gives dealers a special allowance to offset the higher
material prices until such time as their end-user price increases can be
implemented.
Net earnings for the first quarter increased 11% over the same period last
year and earnings per share increased 12%, despite a one percentage point
increase in the Company's effective income tax rate. Other income
included a non-recurring after-tax capital gain of $983,000, $.04 per
share, from the sale of a portion of the Company's long-term marketable
equity securities for the purpose of offsetting expiring prior period
capital losses. Although consolidated operating expenses were 2.7% higher
than last year in absolute terms, they were approximately even with last
year as a percentage of sales.
Except for the gain from the sale of equity securities, the Company's
domestic earnings before income taxes increased at approximately the same
rate as sales because of a proportional increase in operating expenses.
Earnings before income taxes for the Company's Western European operations
improved this year to 4% of sales, versus break-even in the previous year,
due to lower spending for marketing programs.
Earnings before income taxes for the combined other foreign operations
decreased approximately 31% from last year primarily due to lower earnings
by the Company's Canadian operations. These lower earnings were primarily
due to significantly lower production, resulting in unfavorable overhead
absorption, and a higher proportion of product being sourced from the U.S.
at intercompany prices which exceeded local manufacturing costs. Both
were attributable to a shutdown of the Company's Canadian plant for the
purposes of completing the relocation of finished goods inventory to an
off-site distribution center begun in 1993 and repairing a major piece of
manufacturing equipment. This shutdown did not impact delivery of product
to the Company's Canadian dealers as needed product was supplemented from
the U.S.
Financial Condition:
Operating Activities.
The Company's net cash provided by operating activities for the three
months ended March 31, 1994 was $3.4 million less than in the same period
last year. The increase in cash flow from higher earnings and non-cash
charges for depreciation was more than offset by this year's smaller
seasonal decrease in accounts receivables because of the relatively
stronger sales in this year's quarter.
Investing Activities.
During the quarter the Company spent about $8 million on capital
expenditures, which compares to $9.6 million for the same period in the
previous year. The Company funded these capital expenditures from its
operational cash flow. During the quarter the Company increased its
investments by $10.4 million, net of maturities. Excess funds are
invested over various terms, but only instruments with maturities greater
than 3 months when purchased are classified as investments.
Financing Activities.
Cash dividends amounted to $4.7 million for the quarter as dividends
increased from $.1625 per share to $.175 per share, a 7.7% increase on a
per share basis. The Company purchased 158,000 shares of its outstanding
Common and Class A Common stock during the quarter, at prevailing market
prices, for $7.8 million. The cash dividends and stock purchases were
funded from operational cash flows. The Company sold a portion of its
long-term marketable equity securities for $2.4 million in the quarter,
for reasons cited in the net earnings comments above. The Company
continues to have $117 million in funds available under unused lines of
credit and foreign credit and overdraft facilities.
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BANDAG, INCORPORATED AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter
ended March 31, 1994.
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BANDAG, INCORPORATED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANDAG, INCORPORATED
(Registrant)
Date May 11, 1994 \S\ Martin G. Carver
Martin G. Carver
Chairman and Chief
Executive Officer
Date May 11, 1994 \S\ Thomas E. Dvorchak
Thomas E. Dvorchak
Sr. Vice President and
Chief Financial
Officer
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BANDAG, INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit Page
11 Computation of Earnings Per Share 12
BANDAG, INCORPORATED AND SUBSIDIARIES
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
For The Three
Months Ended
March 31,
1993 1992
(In thousands except per share
data)
Net earnings per common and common
equivalent share:
Weighted average number of shares of
Common Stock, Class A Common Stock
and Class B Common Stock outstanding 27,095 27,292
Additional shares assuming exercise of
dilutive stock options - based on
treasury stock method using average
market price 117 117
------- -------
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES 27,212 27,409
======= =======
Net earnings $15,431 $13,898
======= =======
Net earnings per common and common
equivalent share $ 0.57 $ 0.51
======= =======
Net earnings per common share assuming
full dilution:
Weighted average shares outstanding 27,095 27,292
Additional shares assuming exercise
of dilutive stock options - based on
the treasury stock method using the
month-end price if higher than the
average market price 117 118
------- -------
FULLY-DILUTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT SHARES 27,212 27,410
======= =======
Net earnings $15,431 $13,898
======= =======
Net earnings per common and common
equivalent share $ 0.57 $ 0.51
======= =======
