SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1993;
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-7007
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)
Registrant's telephone number, including area code: 319/262-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock - $1 Par Value New York Stock Exchange and
Class A Common Stock - $1 Par Value Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock - $1 Par Value
(Title of class)
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
periods 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 21, 1994: Common Stock,
$745,467,306; Class A Common Stock (non-voting), $954,797,012; Class B
Common Stock, $253,273,608.
The number of shares outstanding of the issuer's classes of common
stock as of March 21, 1994: Common Stock, 11,216,176 shares. Class A
Common Stock, 13,541,971 shares. Class B Common Stock, 2,359,345 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's Proxy Statement for the Annual Meeting of
the Shareholders to be held May 5, 1994 are incorporated by reference in
Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
All references herein to the "Corporation" or "Bandag" refer to
Bandag, Incorporated and its subsidiaries unless the context indicates
otherwise.
Bandag is engaged in the production and sale of precured tread rubber
and equipment used by its franchisees for the retreading of tires for
trucks, buses, light commercial trucks, industrial equipment, off-the-road
equipment and passenger cars. Bandag specializes in a patented
cold-bonding retreading process which it introduced to the United States
in 1957. The Bandag Method, as it is called, separates the process of
vulcanizing the tread rubber from the process of bonding the tread rubber
to the tire casing, allowing for optimization of temperature and pressure
levels at each stage of the retreading process. Although a Bandag retread
is typically sold at a higher unit price than the alternative "hot-capped"
process, as well as retreads sold using competitive precured systems, the
Bandag product is considered to be superior, resulting in a longer lasting
retread and lower user cost per mile.
The Corporation and its licensees have 1,325 franchisees worldwide,
with 38% located in the United States and 62% internationally. The
majority of Bandag's franchisees are independent operators of full service
tire distributorships. Bandag's revenues primarily come from the sale of
retread material and equipment to its franchisees. Bandag's products
compete with new tire sales, as well as retreads produced using other
retread processes. The Corporation concentrates its marketing effort on
existing franchisees and on expanding their respective market penetration.
Due to its strong distribution system, marketing efforts, and leading
technology, Bandag, through its independent franchisee network, has been
able to maintain the largest market presence in the retreading industry.
The Company as a tread rubber supplier to its independent network of
franchisees competes in the light and heavy truck tire replacement market.
Both new tire manufacturers and tread rubber suppliers compete in this
market. While the Company has independent franchisees in over 110
countries, and competes in all of these geographic markets, its largest
market is the United States. Truck tires retreaded by the Company's
franchisees make up approximately 16% of the U.S. light and heavy truck
tire replacement market. The Company's primary competitors are new tire
manufacturers such as Goodyear Tire and Rubber Company, Bridgestone
Corporation and Groupe Michelin. Goodyear Tire and Rubber Company also
competes in the U.S. market as a tread rubber supplier to a combination of
company owned and independent retreaders.
As a result of a recapitalization of the Corporation approved by the
Corporation's shareholders on December 30, 1986, and substantially
completed in February 1987, the Carver Family (as hereinafter defined)
obtained absolute voting control of the Corporation. As of March 21, 1994
the Carver Family beneficially owned shares of Common Stock and Class B
Common Stock constituting 73% of the votes entitled to be cast in the
election of directors and other corporate matters. The "Carver Family" is
composed of (i) Lucille A. Carver, a director and widow of Roy J. Carver,
(ii) the lineal descendants of Roy J. Carver and their spouses, and (iii)
certain trusts and other entities for the benefit of the Carver Family
members.
Description of Business
The Corporation's business consists of the franchising of patented
processes for the retreading of tires for trucks, buses, light commercial
trucks, industrial equipment, off-the-road equipment, and passenger cars,
and the production and sale of precured tread rubber and related products
used in connection with these processes.
The Bandag retreading process can be divided into two steps: (i)
manufacturing the tread rubber and (ii) bonding the tread to a tire
casing. Bandag manufactures over 500 separate tread designs and sizes,
treads specifically designed for various applications, allowing fleet
managers to fine-tune their tire program. Bandag tread rubber is
vulcanized prior to shipment to its independent franchisees. The Bandag
franchisee performs the retreading process of bonding the cured tread to a
prepared tire casing. This two-step process allows utilization of the
optimum temperature and pressure levels at each step. Lower temperature
levels during the bonding process results in a more consistent, higher
quality finished retread with less damage to the casing. Bandag has
developed a totally integrated retreading system with the raw materials,
bonding process and manufacturing equipment specifically designed to work
together as a whole.
The Corporation also franchises the use of another cold process
precured retreading system, the Vakuum Vulk Method, for which the
Corporation owns worldwide rights. In connection with the Vakuum Vulk
Method, the Corporation currently sells tread rubber, equipment, and
supplies to franchisees located in certain European countries.
Markets and Distribution
The principal market categories for tire retreading are truck and
bus, with more than 90% of the tread rubber sold by the Corporation used
in the retreading of these tires. Additionally, the Corporation markets
tread rubber for the retreading of off-the-road equipment, industrial and
light commercial vehicle and passenger car tires; however, historically,
sales of tread rubber for these applications have not contributed
materially to the Corporation's results of operations.
Trucks and Buses Tread rubber, equipment, and supplies for
retreading and repairing truck and bus tires are sold primarily to
independent franchisees by the Corporation to use the Bandag Method for
that purpose. Bandag has 1,325 franchisees throughout North America,
Central America, South America, Europe, Africa, Far East, Australia and
New Zealand. These franchisees are owned and operated by independent
franchisees and corporations, some with multiple franchises and/or
locations. Of these franchisees 500 are located in the United States.
Additionally, the Corporation has approximately 65 franchisees in Europe
who retread tires using the Vakuum Vulk Method. One hundred twenty-three
of Bandag's foreign franchisees are franchised by licensees of the
Corporation in Australia and India. A limited number of franchisees are
trucking companies which operate retread shops essentially for their own
needs. A few franchisees also offer "hot-cap" retreading and most sell
one or more lines of new tires.
The current franchise agreement offered by the Corporation grants the
franchisee the non-exclusive retread manufacturing rights to use the
Bandag Method for one or more applications and the Bandag trademarks in
connection therewith within a specified territory, but the franchisee is
free to market Bandag products outside the territory. No initial
franchise fee is paid by a franchisee for his franchise.
Other Applications The Corporation continues to manufacture and
supply to its franchisees a limited amount of tread for Off-the-Road (OTR)
tires. The Corporation's program for retreading of industrial tires
includes all varieties, solid and pneumatic, and its light commercial
vehicle program is directed at the market of light trucks and recreational
vehicles.
Regulations
Various federal and state authorities have adopted safety and other
regulations with respect to motor vehicles and components, including
tires, and various states and the Federal Trade Commission enforce
statutes or regulations imposing obligations on franchisors, primarily a
duty to disclose material facts concerning a franchise to prospective
franchisees. Management is unaware of any present or proposed regulations
or statutes which would have a material adverse effect upon the
Corporation's business, but cannot predict what other regulations or
statutes might be adopted or what their effect on the Corporation's
business might be.
Competition
The Corporation faces strong competition in the market for
replacement truck and bus tires, the principal retreading market which it
serves. The competition comes not only from the major manufacturers of
new tires, but also from manufacturers of retread- ing materials.
Competitors include producers of "camelback", "strip stock", and "slab
stock" for "hot-cap" retreading, as well as a number of producers of
precured tread rubber. Various methods for bonding precured tread rubber
to tire casings are used by competitors.
Bandag retreads are often sold at a higher price than tires retreaded
by the "hot-cap" process. The Corporation believes that the superior
quality and greater mileage of Bandag retreads and expanded service
programs to franchisees and end users outweigh any price differential.
Bandag franchisees compete with many new tire dealers and retreading
operators of varying sizes, which include shops operated by the major new
tire manufacturers, large independent retread companies, retreading
operations of large trucking companies, and smaller commercial tire
dealers.
Sources of Supply
The Corporation manufactures the precured tread rubber, cushion gum,
and related supplies in Corporation-owned manufacturing plants in the
United States, Canada, Brazil, Belgium, South Africa, Mexico, Malaysia and
New Zealand. The Corporation has a 40% minority interest in its licensee
in India. The Corporation also manufactures pressure chambers, tire
casing analyzers, buffers, tire builders, tire handling systems, and other
items of equipment used in the Bandag and Vakuum Vulk retreading methods.
Curing rims, chucks, spreaders, rollers, certain miscellaneous equipment,
and various retreading supplies, such as repair patches sold by the
Corporation, are purchased from others.
The Corporation purchases rubber and other materials for the
production of tread rubber and other rubber products from a number of
suppliers. The rubber for tread is primarily synthetic and obtained
principally from sources which most conveniently serve the respective
areas in which the Corporation's plants are located. Although synthetic
rubber and other petrochemical products have periodically been in short
supply and significant cost fluctuations have been experienced in previous
years, the Corporation to date has not experienced any significant
difficulty in obtaining an adequate supply of such materials. However,
the effect on operations of future shortages will depend upon their
duration and severity and cannot presently be forecast.
The principal source of natural rubber, used for the Corporation's
cushion gum, is the Far East. The supply of natural rubber has
historically been adequate for the Corporation's purposes. Natural rubber
is a commodity subject to wide price fluctuations as a result of the
forces of supply and demand. Synthetic prices have historically been
related to the cost of petrochemical feedstocks which are relatively
stable. A relationship between natural rubber and synthetic rubber prices
exists, but it is by no means exact.
Patents
The Corporation owns or has licenses for the use of a number of
United States and foreign patents covering various elements of the Bandag
and Vakuum Vulk Methods. The Corporation has patents covering improved
features which began expiring in 1993, and the Corporation has
applications pending for additional patents.
The Corporation's patent counsel has advised the Corporation that the
United States patents are by law presumed valid and that the Corporation
does not infringe upon the patent rights of others. While the outcome of
litigation can never be predicted with certainty, such counsel has advised
the Corporation that, in his opinion, in the event of litigation placing
the validity of such patents at issue, the Corporation's United States
patent position should remain adequate.
The protection afforded the Bandag Method by foreign patents owned by
the Corporation, as well as those under which it is licensed, varies among
different countries depending mainly upon the extent to which the elements
of the Bandag Method are covered, the strength of the patent laws and the
degree to which patent rights are upheld by the courts. Patent counsel
for the Corporation is of the opinion that its patent position in the
foreign countries in which its principal sales are made is adequate and
does not infringe upon the rights of others. The Corporation has,
however, extended its foreign market penetration to some countries where
little or no patent protection exists.
The Corporation does not consider that patent protection is the
primary factor in its successful retreading operation, but rather, that
its proprietary technical "know-how", product quality, franchisee support
programs and effective marketing programs are more important to its
success.
The Corporation has secured registrations for its trademark and
service mark BANDAG, as well as other trademarks and service marks, in the
United States and most of the other important commercial countries.
Other Information
The Corporation conducts research and development of new products,
primarily in the tire retreading field, and the improvement of materials,
equipment, and retreading processes. The cost of this research and
development program was approximately $14,715,000 in 1991, $12,612,000 in
1992, and $12,321,000 in 1993.
The Company's business has seasonal characteristics which are tied
not only to the overall performance of the economy, but more specifically
to the level of activity in the trucking industry. Tire demand does,
however, lag the seasonality of the trucking industry. The Company's
third and fourth quarters have historically been the strongest in terms of
sales volume and earnings.
As stated in the Company's 13D filed pursuant to the acquisition of
the HON Industries common stock, "The shares of Common Stock purchased by
Bandag have been acquired for investment purposes. Bandag believes that
the Common Stock represents an attractive investment opportunity at this
time." The Company continues to believe that HON Industries' common stock
is a good, long-term investment consistent with the Company's overall
corporate strategy to maximize long term shareholder value. The Company
purchased the stock in 1987 and 1988 at a cost of $25.3 million and its
market value at the end of 1993 was $69.5 million.
The Corporation has sought to comply with all statutory and
administrative requirements concerning environmental quality. The
Corporation has made and will continue to make necessary capital
expenditures for environmental protection. It is not anticipated that
such expenditures will materially affect the Corporation's earnings or
competitive position.
As of December 31, 1993, the Corporation had 2,334 employees.
Financial Information about Industry Segments
As stated above, the Corporation's continuing operations are
conducted in one principal business and, accordingly, the Corporation's
financial statements contain information concerning a single industry
segment.
Revenues of Principal Product Groups
The following table sets forth (in millions of dollars), for each of
the last three fiscal years, revenues attributable to the Corporation's
principal product groups:
1993 1992 1991
Revenues:
Tread rubber, cushion gum,
and retreading supplies $555.9 $544.9 $524.4
Other products (1) 39.8 51.6 64.9
Corporate (2) 5.4 5.9 4.6
_____ _____ _____
Total $601.1 $602.4 $593.9
(1) Includes retreading equipment, rubber compounds, and the sale of
new and retreaded tires and related services.
(2) Consists of interest and dividend income.
Financial Information about Foreign and Domestic Operations
Financial Statement "Operations in Different Geographic Areas and Sales by
Principal Products" follows on page 10.
<PAGE>
Operations in Different Geographic Areas and Sales by Principal Products
The Company's operations are conducted in one principal business, which
includes the manufacture of precured tread rubber, equipment and supplies
for retreading tires.
Information concerning the Company's operations by geographic area and
sales by principal product for the years ended December 31, 1993, 1992 and
1991 is shown below (in millions):
Information concerning operations in different geographic areas:
<TABLE>
<CAPTION>
United States Western Europe Other
1993 1992 1991 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Revenues from unaffiliated customers (1) (2) $376.1 $361.0 $372.8 $104.6 $119.4 $111.0 $115.0 $116.1 $105.5
Transfers between areas (3) 25.5 26.3 22.9 0.2 0.5 0.6 3.5 5.9 5.2
______ ______ ______ ______ ______ ______ ______ ______ ______
Geographic area totals $401.6 $387.3 $395.7 $104.8 $119.9 $111.6 $118.5 $122.0 $110.7
Elimination's (deduction)
Corporate revenues
Total Revenues
Earnings (Expenses):
Operations (4) $110.4 $110.6 $101.9 $1.9 $4.7 $15.5 $15.5 $17.7 $15.5
Interest income
Interest expense
General corporate expenses
Earnings Before Income Taxes
Assets at December 31:
Operations $258.2 $256.0 $251.2 $71.8 $85.9 $71.2 $66.2 $63.3 $55.0
Corporate (5)
Total Assets
Liabilities at December 31:
Operations $76.6 $64.5 $96.5 $19.5 $24.3 $24.8 $13.8 $16.3 $10.7
Corporate (5)
Total Liabilities
Sales information by principal product group:
Retread materials and supplies
Other
<CAPTION>
Consolidated
1993 1992 1991
<S> <C> <C> <C>
Revenues:
Revenues from unaffiliated customers (1) (2) $595.7 $596.5 $589.3
Transfers between areas (3) 29.2 32.7 28.7
______ ______ ______
Geographic area totals $624.9 $629.2 $618.0
Elimination's (deduction) (29.2) (32.7) (28.7)
Corporate revenues 5.4 5.9 4.6
______ ______ ______
Total Revenues $601.1 $602.4 $593.9
Earnings (Expenses):
Operations (4) $127.8 $133.0 $132.9
Interest income 5.3 5.9 4.6
Interest expense (2.2) (2.2) (2.9)
General corporate expenses (5.9) (6.0) (6.2)
______ ______ ______
Earnings Before Income Taxes $125.0 $130.7 $128.4
Assets at December 31:
Operations $396.2 $405.2 $377.4
Corporate (5) 154.5 64.0 64.8
______ ______ ______
Total Assets $550.7 $469.2 $442.2
Liabilities at December 31:
Operations $109.9 $105.1 $132.0
Corporate (5) 27.7 29.5 13.1
______ ______ ______
Total Liabilities $137.6 $134.6 $145.1
Sales information by principal product group:
Retread materials and supplies 93% 91% 89%
Other 7% 9% 11%
___ ___ ___
100% 100% 100%
<FN>
(1) No single customer accounted for 10% or more of the Company's sales to unaffiliated customers in each of the years 1993,
1992 or 1991.
(2) Export sales from the United States were less than 10% of sales to unaffiliated customers in each of the years 1993, 1992
or 1991.
(3) Transfers between geographic areas are made at the transferor's selling price to unaffiliated customers less a
predetermined discount to allow the transferee to recover it's costs and earn an operating profit.
(4) Aggregate foreign exchange losses included in determining net earnings amounted to approximately $611,000, $7,723,000 and
$1,818,000 in 1993, 1992 and 1991, respectively.
(5) Corporate assets are principally cash, investments, Corporate office and related equipment. Corporate liabilities are
principally dividends payable, short-term notes payable and other liabilities.
</TABLE>
The Company does not have a formal continuous exchange risk hedging
program, but selectively hedges transactions which are believed to be
subject to unacceptable foreign currency exchange risk.
<PAGE>
Executive Officers of the Corporation
The following table sets forth the names and ages of all executive
officers of the Corporation, the period of service of each with the
Corporation, positions and offices with the Corporation presently held by
each, and the period during which each officer has served in his present
office:
Period of Present Period in
Service with Position or Present
Name Age Corporation Office Office
Martin G. Carver* 45 15 Yrs. Chairman of the 13 Yrs.
Board, Chief
Executive Officer
and President
Lucille A. Carver* 76 36 Yrs. Treasurer 35 Yrs.
Gary L. Carlson 43 20 Yrs. Sr. Vice President 1 Mo.
and General Manager
Eastern Hemisphere
Retreading Division
(EHRD)
Donald F. Chester 58 11 Yrs. Sr. Vice President, 11 Yrs.
International
Nathaniel L. Derby II 51 22 Yrs. Vice President, 8 Yrs.
Engineering
Thomas E. Dvorchak 61 23 Yrs. Sr. Vice President 16 Yrs.
and Chief Financial
Officer
Stuart C. Green 52 2 Yrs. Sr. Vice President, 2 Yrs.
7 Mos. Manufacturing 7 Mos.
William D. Herd 50 16 Yrs. Sr. Vice President, 4 Yrs.
Sales & Marketing
Melvin P. Hershey 48 10 Yrs. Vice President, 5 Yrs.
Personnel
Administration
John A. Lodge 51 14 Yrs. Vice President, 2 Yrs.
Materials 8 Mos.
Dr. Floyd S. Myers 53 12 Yrs. Vice President, 8 Yrs.
Technical
* Denotes that officer is also a director of the Corporation.
<PAGE>
Mr. Martin G. Carver was elected Chairman of the Board effective June
23, 1981, Chief Executive Officer effective May 18, 1982, and President
effective May 25, 1983. Prior to his present position, Mr. Carver was
also Vice Chairman of the Board from January 5, 1981 to June 23, 1981.
Mrs. Carver, has, for more than five years, served as a Director and
Treasurer of the Corporation.
Mr. Carlson joined Bandag in 1974. In 1985 he was appointed to Vice
President, Personnel Administration and in 1989 was appointed Vice
President, Planning and Development. In November 1993, he was named to
his current position of Sr. Vice President and General Manager EHRD.
Mr. Chester joined Bandag in 1983 and was elected Senior Vice
President, International. From 1969 to 1983, he was employed by the
Singer Corporation, serving as President, Singer Mexicana S.A. de C.V.
from 1981 to 1983.
Mr. Derby joined Bandag in 1971 and was appointed to his present
position in 1985 as Vice President, Engineering.
Mr. Dvorchak joined Bandag in 1971 and has held his present office
since January 1978.
Mr. Green joined Bandag in 1991 and was elected Senior Vice
President, Manufacturing. From 1981 to that date, he was employed by
Nissan Motor Manufacturing Corporation in various management positions in
manufacturing, the latest of which was Director, Manufacturing Vehicle
Assembly, Component Assembly and Paint Plants, Manufacturing Division.
Mr. Herd joined Bandag in 1977 as Canadian Division Manager and was
appointed to Vice President, North American Sales in August 1982. He was
elected to the position of Senior Vice President, North American Sales in
1983, and in 1990 he was elected to his current office of Senior Vice
President, Sales and Marketing.
Mr. Hershey joined Bandag in 1983 as Plant Manager and was appointed
to Vice President, Marketing in 1986. He was appointed to his present
position as Vice President, Personnel Administration in 1989.
Mr. Lodge joined Bandag in 1979 as a Systems Analyst. He was
promoted to Manager of Domestic Customer Service in 1984; in 1985 he was
promoted to the position of Personnel Manager; and in 1988 he became
Manager of Management Services. Mr Lodge served as Manager, Materials
since 1990 before being appointed to his current position in 1991.
Dr. Myers joined Bandag in 1982 as Vice President, Advanced Research
and was appointed to his present position as Vice President, Technical in
1985.
All of the above-named executive officers are elected annually by the
Board of Directors or are appointed by the Chairman of the Board and serve
at the pleasure of the Board of Directors, or the Chairman of the Board as
the case may be.
<PAGE>
ITEM 2. PROPERTIES
The general offices of the Corporation are located in a seventeen-
year-old, 56,000 square foot leased office building in Muscatine, Iowa.
The tread rubber manufacturing plants of the Corporation are located
to service principal markets. The Corporation operates fourteen of such
plants, six of which are located in the United States, and the remainder
in Canada, Belgium, South Africa, Brazil, New Zealand, Mexico, Malaysia
and Venezuela. The plants vary in size from 9,600 square feet to 194,000
square feet with the first plant being placed into production during 1959.
All of the plants are owned in fee or under lease purchase contracts,
except for the plants located in New Zealand, Malaysia and Venezuela,
which are under standard lease contracts.
Retreading equipment is manufactured at a company-owned plant of
approximately 60,000 square feet in Muscatine. In addition, the
Corporation owns a research and development center in Muscatine of
approximately 58,400 square feet; a 26,000 square foot facility, used
primarily for training franchisees and franchisee personnel; and a 26,000
square foot office and warehouse facility.
In addition, the Corporation mixes rubber and produces cushion gum at
a company-owned 168,000 square foot plant in California. The Company owns
its European headquarters office in Belgium and a 129,000 square foot
warehouse in the Netherlands.
In the opinion of the Corporation, its properties are maintained in
good operating condition and the production capacity of its plants is
adequate for the near future. Because of the nature of the activities
conducted, necessary additions can be made within a reasonable period of
time.
At December 31, 1993, the net carrying amount of property, plant, and
equipment pledged as collateral on other liabilities was approximately
$16,047,000.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Information concerning cash dividends declared and market prices of
the Company's Common Stock and Class A Common Stock for the last three
fiscal years is as follows:
<TABLE>
<CAPTION>
1993 % Change 1992 % Change 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Dividends Per Share-Declared (A)
First Quarter $ 0.1625 $ 0.1500 $ 0.1375
Second Quarter 0.1625 0.1500 0.1375
Third Quarter 0.1625 0.1500 0.1375
Fourth Quarter 0.1750 0.1625 0.1500
______________ ______________ ________
Total Year 0.6625 8.2 0.6125 8.9 0.5625
Stock Price Comparison (B)
Common Stock
First Quarter $ 51.50 - 60.25 $ 58.75 - 67.25 $ 40.75 - 50.25
Second Quarter 44.75 - 57.88 62.00 - 70.00 46.50 - 52.75
Third Quarter 45.50 - 57.00 56.00 - 73.25 49.63 - 55.44
Fourth Quarter 52.88 - 56.63 56.50 - 63.75 51.75 - 60.00
Year-End Closing Price 55.38 58.13 59.94
Class A Common Stock
First Quarter $ 52.25 - 58.00 $ - -
Second Quarter 44.25 - 55.00 62.38 - 65.63
Third Quarter 44.63 - 54.00 55.75 - 71.00
Fourth Quarter 49.75 - 54.13 55.00 - 61.50
Year-End Closing Price 51.75 56.25
<FN>
(A) Adjusted to give retroactive effect to the Company's June 10, 1992 stock dividend of Class A Common Stock.
(B) High and low composite prices in trading on the New York and Chicago Stock Exchanges (ticker symbol BDG for Common Stock
and BDGA for Class A Common Stock) as reported in The Wall Street Journal. Adjusted to give retroactive effect to the
Company's June 10, 1992 stock dividend of Class A Common Stock.
</TABLE>
<PAGE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS (Cont.)
The approximate number of record holders of the Corporation's Common
Stock as of March 21, 1994, was 2,029, the number of holders of Class A
Common Stock was 1,990 and the number of holders of Class B Common Stock
was 351. The Common Stock and Class A Common Stock are traded on the New
York Stock Exchange and the Chicago Stock Exchange. There is no
established trading market for the Class B Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain Consolidated Selected
Financial Data for the periods and as of the dates indicated:
<TABLE>
<CAPTION>
(In thousands, except per share data)
1993 1992 1991 1990 1989
________________________________________________
<S> <C> <C> <C> <C> <C>
Net Sales $590,199 $591,374 $582,913 $586,223 $525,330
Earnings Before Cumulative Effect of Changes in
Accounting Methods $78,734 $83,023 $79,599 $78,783 $75,927
Cumulative Effect of Changes in Accounting
Methods, Net of Related Tax Effect - (220) - - -
_________ _______ _______ _______ _______
Net Earnings 78,734 82,803 79,599 78,783 75,927
_________ ______ _______ _______ _______
Total Assets (B) $550,731 $469,239 $442,157 $392,166 $347,247
Other Liabilities 11,039 7,366 5,586 6,497 7,923
Earnings Per Share Before Cumulative Effect of
Changes in Accounting Methods (A) $2.88 $2.99 $2.86 $2.75 $2.61
Cumulative Effect of Changes in Accounting
Methods, Net of Related Tax Effect - (0.01) - - -
_____ _____ _____ _______ _____
Earnings Per Share (A) 2.88 2.98 2.86 2.75 2.61
_____ _____ _____ _______ _____
Dividends Per Share (A) $0.6625 $0.6125 $0.5625 $0.5125 $0.4625
<FN>
(A) Adjusted to give retroactive effect to the Company's June 10, 1992 stock dividend of Class A Common Stock.
(B) As described in Note B to the consolidated financial statements, the effect of the change in accounting for certain
investments increased stockholders' equity $27,693,000 (net of $16,500,000 of deferred tax) to reflect the unrealized holding
gain on securities classified as available-for-sale. Prior period financial data has not been restated.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1993-1992
Consolidated net sales were approximately equal with 1992, whereas
unit volume increased by 4%. Selling prices were generally stable, except
in some European markets, but the U.S. dollar strengthened during 1993 and
this had an unfavorable impact on the translated value of the Company's
foreign-currency-denominated sales. The Company's seasonal sales pattern,
which is closely related to trucking industry activity and shows the
highest activity during the third and fourth quarters, was similar to
previous years.
Because of stable selling prices, domestic unit volume and sales
showed 5% and 4% improvements, respectively, over the prior year. Western
Europe, while experiencing a relatively small 1% decrease in unit volume,
showed a 13% decrease in sales revenue. Contributing factors were the
unfavorable impact of currency rates and lower selling prices in some
European markets, with the currency rate having the greater impact. Unit
volume for the Company's other combined foreign operations improved 7%
over the previous year, but sales did not increase accordingly. This again
was due to the stronger U.S. dollar and the resulting unfavorable impact
when translating foreign-currency-denominated sales at lower rates and, to
a lesser extent, due to the discontinuance of sales in certain of the
Company's markets.
Consolidated net earnings decreased by 5% compared to 1992. The
Company's consolidated gross profit margin declined by 2.4 percentage
points, but this was partially offset by a 1.5 percentage point decline in
total operating expenses as a percent of sales because of generally lower
spending in many categories. The Company's decrease in gross margin was
primarily due to higher depreciation expense attributable to higher
capital spending in recent years and higher overall manufacturing costs
in line with generally higher cost levels.
Although total domestic revenues increased by 4%, domestic earnings
before income taxes was the same as the previous year, with higher product
costs only partially offset by decreased operating expenses.
The Company's foreign operations comprised 37% and 14% of this year's
revenues and earnings before income taxes, respectively. This represented
a two percentage point decline as a percent of total revenues and a three
percentage point decline as a percent of total earnings before income
taxes compared to the previous year.
The Western European operation's earnings before income taxes were
adversely impacted again this year, decreasing by 60% from the previous
year. The earnings decrease was due primarily to the lower translation
rate, combined with a five percentage point drop in gross profit margin.
The lower gross profit margin was due to higher raw material and
manufacturing costs, which the Company absorbed because of strong
competitive pressures, and non-recurring inventory valuation adjustments.
Earnings before income taxes for the combined other foreign
operations decreased 12% from last year primarily due to lower gross
margins in Brazil and Canada. Brazil's lower margin was primarily due to
a refinement in the methodology used to determine certain manufacturing
costs. Canada's lower gross margin was the result of a higher-than-usual
amount of finished goods imported from the U.S. this year and the plant
being shut down for an extended period in December in order to relocate
its finished goods inventory to a distribution center closer to major
markets in Southeastern Canada.
The Company's effective income tax rate increased from 36.5% in 1992
to 37% in 1993, reflecting the higher federal income tax rates enacted for
1993. This increase in tax rate reduced net earnings by $625,000 and
earnings per share by $.02 compared to the prior year.
Earnings per share were $.10 lower in 1993, which represents a 3%
decrease from the previous year. During the third quarter of 1993, the
Company acquired 144,200 shares of its outstanding Common Stock and Class
A Common Stock for $6,797,000 at prevailing market prices. There were
fewer shares outstanding in 1993 as a result of these purchases. The
cumulative current year impact of these purchases and those made in the
previous year had a $.02 favorable impact on earnings per share.
1992-1991
Consolidated net sales increased 1% from 1991, which was 4 percentage
points less than the unit volume increase due mainly to the impact of
discontinuing the sale of custom compounding services to outside
customers. Partially offsetting this decrease was the favorable impact of
the higher translated value of foreign-currency-denominated sales.
Domestic unit volume showed nominal improvement despite the soft North
American economy, with foreign markets, in total, showing a slightly
better performance than the domestic markets.
Consolidated net earnings increased 4% from 1991. The Company's
selling price increases were not sufficient to offset the increases in raw
material and plant costs during the year, which resulted in a slight drop
in gross profit margin. This was offset by a decrease in operating
expenses and higher interest income. The decrease in operating expenses
resulted primarily from reduced spending for R&D and marketing programs,
especially in the United States. R&D spending was lower in 1992 than the
previous year because the previous year included heavy spending on the
development of the Eclipse System, which is now substantially complete.
Earnings from foreign operations represented 17% and 24% of total
earnings before taxes in 1992 and 1991, respectively. Net earnings from
operations in Western Europe declined by 70% from 1991, even though net
sales were 7% higher on a 4% increase in unit volume. The percentage
differential between the net sales and volume increases was due primarily
to favorable foreign translation rates into U. S. dollars. Net earnings
for the year were adversely impacted by a substantial increase in
operating expenses and unusually high foreign exchange losses due to
devaluations of several European countries' currencies in which sales are
denominated. The Company has undertaken a concerted effort to increase
market share in Western Europe, and spending related to this effort is
primarily responsible for the substantial increase in operating expenses.
Net sales for the other combined foreign operations increased 10%
over last year, with the operations in Mexico and Brazil accounting for
the majority of the increase. Net earnings were 14% higher than last year
primarily due to improved gross margins in Brazil and slightly lower
operating expenses, as a percentage of net sales.
The Company's effective income tax rate decreased from 38% in 1991 to
36.5% in 1992, having a positive impact on net income. Earnings per share
before the cumulative effect of changes in accounting methods increased
$.13, a 5% increase from 1991. During the year, the Company acquired
451,300 shares of its outstanding Common Stock and Class A Common Stock.
These purchases took place during the latter half of the year and,
therefore, did not significantly affect the average shares outstanding.
The Company adopted, effective January 1, 1992, Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions" (FAS 106) and No. 109 "Accounting for Income Taxes" (FAS
109). The cumulative effect of adopting FAS 106 reduced net earnings by
$.09 per share. The cumulative effect of adopting FAS 109 increased net
earnings by $.08 per share. Adoption of FAS 106 and 109 did not
significantly impact operating results for 1992. See Notes D and G for
further details.
1991-1990
Consolidated net sales decreased 1% from 1990 due to a combination of
lower effective selling prices and flat unit volume. Volume in the United
States market was impacted by the depressed economy and the work-off of
dealer inventories accumulated late in 1990 during the uncertainty
surrounding the Gulf War. The effective selling price was also impacted
by the Gulf War as raw material costs rose sharply in late 1990, but
dropped back again to previous levels in 1991. Volume in foreign markets,
in total, showed a slight increase compared to the previous year.
Consolidated net earnings increased 1% from 1990. Lower effective
selling prices were offset by lower raw material costs, keeping gross
profit margin stable. Operating and other expenses increased only
slightly from 1990 as reduced spending on marketing programs offset higher
expenses in other categories. The Company's effective income tax rate
decreased from 38.5% in 1990 to 38% in 1991, having a positive impact on
net income.
Earnings per share increased $.11, a 4% increase from 1990. The
percentage increase in earnings per share was higher than the increase in
net earnings due to fewer average shares outstanding during 1991, as a
result of the full year impact of shares acquired in 1990.
Impact of Inflation and Changing Prices
Although the Company has generally been able to adjust its effective
selling prices in response to changes in product costs, during the past
two fiscal years the Company's gross profit margin has declined because
the Company, due to competitive conditions, has elected not to increase
its selling prices in response to increased product costs.
Replacement of fixed assets requires a greater investment than the
original asset cost due to the impact of increases in the general price
level over the useful lives of plant and equipment. This increased
capital investment would result in higher depreciation charges affecting
both inventories and cost of products sold.
However, for new assets, the replacement cost depreciation,
calculated on a straight-line basis, is not significantly greater than
historical depreciation that has principally been calculated by
accelerated methods resulting in higher depreciation charges in the early
years of an asset's life.
Capital Resources and Liquidity
Current assets exceeded current liabilities by $213,599,000 at the
end of 1993, while cash and cash equivalents increased by $24,187,000 from
December 31, 1992, and totaled $58,004,000 at year-end. The Company
invests excess funds over various terms, but only instruments with an
original maturity date of over 90 days are classified as investments. The
increase in cash flow from operating activities was primarily from higher
income taxes payable and reduced inventories.
No major changes in working capital requirements are foreseen, except
for those normally faced in the growth of the business.
The Company funds its capital expenditures from the cash flow
generated from operations. During 1993 the Company spent $40,472,000 for
capital additions, including a major expansion at its Oxford, North
Carolina plant.
As of December 31, 1993, the Company had available uncommitted lines
of credit totaling $86,000,000 in the United States for working capital
purposes. Also, the Company's foreign subsidiaries have approximately
$31,000,000 credit and overdraft facilities available to them. From time
to time during 1993, the Company's Western Europe subsidiary borrowed
funds to supplement its operational cash flow needs or to repay
intercompany transactions. The Company's other liabilities totaled
$11,039,000, which are 2.6% of the sum of other liabilities and
stockholders' equity. The Company has no plans at this time to undertake
additional other liabilities of any material amount.
During the year, the Company acquired 144,200 shares of its
outstanding Common Stock and Class A Common Stock for $6,797,000 at
prevailing market prices and paid cash dividends amounting to $18,033,000.
The Company generally funds its dividends and stock repurchases from the
cash flow generated from its operations, and the Company has historically
utilized excess funds to purchase its own shares, believing the
acquisition of the Company's stock to be a good investment.
In 1993, the Company adopted FAS 115 and recorded the related
non-cash effect to the Company's balance sheet. See Note B for further
details.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Report of Independent Auditors 22
Consolidated Balance Sheets as of December 31, 1993,
1992 and 1991 23 - 24
Consolidated Statements of Earnings for the Years
Ended December 31, 1993, 1992 and 1991 25
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1993, 1992
and 1991 26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991 27
Notes to Consolidated Financial Statements
28 - 36
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors
Bandag, Incorporated
We have audited the accompanying consolidated balance sheets of Bandag,
Incorporated and subsidiaries as of December 31, 1993, 1992 and 1991, and
the related consolidated statements of changes of stockholders' equity,
earnings and cash flows for the years then ended. Our audits also
included the financial statement schedules listed in the Index at Item
14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform and audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Bandag, Incorporated and subsidiaries at December 31, 1993,
1992 and 1991, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note B to the consolidated financial statements, as of
December 31, 1993, the Company changed its method of accounting for
certain investments in debt and equity securities.
As discussed in Notes D and G to the consolidated financial statements, in
1992 the Company changed its method of accounting for income taxes and
postretirement employee benefits other than pensions.
ERNST & YOUNG
February 4, 1994
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets (In thousands)
December 31
Assets 1993 1992 1991
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $58,004 $33,817 $37,183
Investments - Note B 25,043 2,950 -
Accounts receivable, less allowance
(1993 - $11,217; 1992 - $10,415; 1991 - $9,176) 161,506 166,225 172,815
Inventories:
Finished products 34,947 43,453 38,618
Material and work in process 8,186 10,018 12,842
______ ______ ______
43,133 53,471 51,460
Deferred income tax assets 20,210 21,061 26,848
Prepaid expenses and other current assets 8,245 7,069 5,440
_______ _______ _______
Total Current Assets 316,141 284,593 293,746
Property, Plant, and Equipment, on the basis of cost:
Land 3,332 3,421 3,400
Buildings and improvements 73,016 68,697 60,101
Machinery and equipment 233,143 191,727 153,406
Construction and equipment installation in progress 10,651 28,072 20,603
________ ________ ________
320,142 291,917 237,510
Less allowances for depreciation and amortization (173,521) (149,622) (126,410)
________ ________ ________
146,621 142,295 111,100
Marketable Equity Securities - Note B 69,496 25,303 25,303
Other Assets 18,473 17,048 12,008
________ ________ ________
Total Assets $550,731 $469,239 $442,157
________ ________ ________
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $15,757 $15,702 $19,981
Accrued employee compensation and benefits 15,391 16,846 17,434
Accrued marketing expenses 26,163 30,456 29,296
Other accrued expenses 16,833 20,187 25,999
Dividends payable 4,752 4,435 4,161
Income taxes payable 11,429 10,248 17,352
Short-term notes payable and other liabilities 12,217 17,759 3,394
_______ _______ _______
Total Current Liabilities 102,542 115,633 117,617
Other Liabilities 11,039 7,366 5,586
Deferred Income Tax Liabilities 24,058 11,630 21,902
Stockholders' Equity - Note E
Common Stock; $1.00 par value; authorized - 21,500,000 shares;
issued and outstanding - 11,215,008 shares in 1993; 11,233,382 shares
in 1992; 11,154,664 shares in 1991 11,215 11,233 11,155
Class A Common Stock; $1.00 par value; authorized - 50,000,000 shares;
issued and outstanding - 13,576,971 shares in 1993; 13,646,971 shares
in 1992; none in 1991 13,577 13,647 -
Class B Common Stock; $1.00 par value; authorized - 8,500,000 shares;
issued and outstanding - 2,360,513 shares in 1993; 2,411,189 shares
in 1992; 2,714,007 shares in 1991 2,361 2,411 2,714
Additional paid-in capital 2,859 2,631 2,535
Retained earnings 362,040 307,939 281,479
Unrealized gain on securities available-for-sale,
net of related tax effect 27,693 - -
Equity adjustment from foreign currency translation (6,653) (3,251) (831)
________ ________ ________
Total Stockholders' Equity 413,092 334,610 297,052
________ ________ ________
Total Liabilities and Stockholders' Equity $550,731 $469,239 $442,157
________ ________ ________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
(In thousands, except per share data)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Income:
Net sales $590,199 $591,374 $582,913
Other income 10,860 11,014 11,004
________ ________ ________
601,059 602,388 593,917
Costs and expenses:
Cost of products sold 352,095 338,610 325,547
Engineering, selling, administrative and other expenses 121,823 130,834 137,073
Interest 2,166 2,198 2,912
_______ _______ _______
476,084 471,642 465,532
_______ _______ _______
Earnings Before Income Taxes 124,975 130,746 128,385
Income Taxes - Note D 46,241 47,723 48,786
_______ _______ _______
Earnings before cumulative effect of
changes in accounting methods 78,734 83,023 79,599
Cumulative effect of changes in accounting methods,
net of related tax effect of $1,400 - Notes D and G - (220) -
_______ _______ _______
Net Earnings $78,734 $82,803 $79,599
_______ _______ _______
Earnings per share before cumulative effect of
changes in accounting methods $2.88 $2.99 $2.86
Cumulative effect of changes in accounting methods,
net of related tax effect of $.05 - Notes D and G - (0.01) -
_____ _____ _____
Net earnings per share - Note E $2.88 $2.98 $2.86
_____ _____ _____
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except per share data)
<CAPTION>
Class A Class B
Common Stock Common Stock Common Stock
Issued and Issued and Issued and Additional
Outstanding Outstanding Outstanding Paid-In
Shares Amount Shares Amount Shares Amount Capital
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1991 11,148,549 $11,148 2,717,572 $2,718 $2,232
Net earnings for the year
Cash Dividends - $.5625 per share
Conversion of Class B Common Stock
to Common Stock - Note E 3,565 4 (3,565) (4)
Common Stock issued under Restricted
Stock Grant Plan - Note E 2,550 3 303
Adjustment from foreign currency
translation
________________________________________________________________________________________________________________
Balance at December 31, 1991 11,154,664 11,155 2,714,007 2,714 2,535
Net earnings for the year
Cash Dividends - $.6125 per share
Class A Common Stock
Dividend - Note E 13,868,671 $13,869
Conversion of Class B Common Stock
to Common Stock - Note E 302,818 303 (302,818) (303)
Common Stock issued under Restricted
Stock Grant Plan - Note E 5,500 5 328
Purchases of Common Stock and
Class A Common Stock (229,600) (230) (221,700) (222) (232)
Adjustment from foreign currency
translation
_________________________________________________________________________________________________________________
Balance at December 31, 1992 11,233,382 11,233 13,646,971 13,647 2,411,189 2,411 2,631
Net earnings for the year
Cash Dividends - $.6625 per share
Conversion of Class B Common Stock
to Common Stock - Note E 50,676 51 (50,676) (50)
Common Stock issued under Restricted
Stock Grant Plan - Note E 5,150 5 281
Purchases of Common Stock and
Class A Common Stock (74,200) (74) (70,000) (70) (53)
Unrealized gain on securities
available-for-sale, net of deferred
income taxes of $16,500,000
Adjustment from foreign currency
translation
_________________________________________________________________________________________________________________
Balance at December 31, 1993 11,215,008 $11,215 13,576,971 $13,577 2,360,513 $2,361 $2,859
_________________________________________________________________________________________________________________
<CAPTION>
Unrealized Equity
Gain on Adjustment
Available- From Foreign
Retained for-Sale Currency
Earnings Securities Translation
__________________________________________________________________________________
<S> <C> <C> <C>
Balance at January 1, 1991 $217,480 $2,375
Net earnings for the year 79,599
Cash Dividends - $.5625 per share (15,600)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Adjustment from foreign currency
translation (3,206)
_____________________________________________________________________________
Balance at December 31, 1991 281,479 (831)
Net earnings for the year 82,803
Cash Dividends - $.6125 per share (16,917)
Class A Common Stock
Dividend - Note E (13,869)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Purchases of Common Stock and
Class A Common Stock (25,557)
Adjustment from foreign currency
translation (2,420)
_____________________________________________________________________________
Balance at December 31, 1992 307,939 (3,251)
Net earnings for the year 78,734
Cash Dividends - $.6625 per share (18,033)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Purchases of Common Stock and
Class A Common Stock (6,600)
Unrealized gain on securities
available-for-sale, net of deferred
income taxes of $16,500,000 $27,693
Adjustment from foreign currency
translation (3,402)
_____________________________________________________________________________
Balance at December 31, 1993 $362,040 $27,693 $(6,653)
_____________________________________________________________________________
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(In thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Operating activities
Net earnings $78,734 $82,803 $79,599
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provisions for depreciation and amortization of property, plant and equipment 32,939 27,550 21,813
Amortization of intangible assets 383 - -
Change in deferred income taxes (3,129) (2,342) (10,767)
Cumulative effect of change in accounting methods - 220 -
Change in operating assets and liabilities:
Accounts receivable 567 5,470 (7,309)
Inventories 8,573 (2,820) 4,725
Prepaid expenses and other current assets (1,686) (1,624) (1,019)
Accounts payable and other accrued expenses (6,019) (8,648) 15,365
Income taxes payable 1,472 (7,058) 1,796
Other assets (1,978) (8,529) (3,328)
Net cash provided by operating activities 109,856 85,022 100,875
_______ ______ _______
Investing activities
Additions to property, plant and equipment (40,472) (60,591) (39,224)
Net disposition of property, plant and equipment 3,207 1,846 4,306
Purchase of investments (37,868) (2,950) -
Maturities of investments 15,775 - -
_______ _______ _______
Net cash used in investing activities (59,358) (61,695) (34,918)
Financing activities
Proceeds from short-term and long-term notes payable 75,094 100,023 49,960
Principal payments on short-term notes payable and other liabilities (75,623) (83,218) (73,953)
Cash dividends (18,033) (16,917) (15,600)
Purchases of Common Stock and Class A Common Stock (6,797) (26,241) -
_______ _______ _______
Net cash used in financing activities (25,359) (26,353) (39,593)
Effect of exchange rate changes on cash and cash equivalents (952) (340) (502)
______ ______ ______
Increase (decrease) in cash and cash equivalents 24,187 (3,366) 25,862
Cash and cash equivalents at beginning of year 33,817 37,183 11,321
_______ _______ _______
Cash and cash equivalents at end of year $58,004 $33,817 $37,183
_______ _______ _______
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts and
transactions of all subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash Equivalents:
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The
carrying amount reported in the consolidated balance sheet for cash and
cash equivalents approximates its fair value.
Accounts Receivable and Concentrations of Credit Risk:
Concentrations of credit risk with respect to accounts receivable are
limited due to the number of customers the Company has and their
geographic dispersion. The Company maintains close working relationships
with these customers and performs ongoing credit evaluations of their
financial condition. No one customer is large enough to pose a significant
financial risk to the Company. The Company maintains an allowance for
losses based upon the expected collectibility of accounts receivable.
Credit losses have been within management's expectations.
Inventories:
Inventories are valued at the lower of cost, determined by the last
in, first out (LIFO) method, or market.
The excess of current cost over the amount stated for inventories
valued by the LIFO method amounted to approximately $20,189,000,
$18,145,000, and $16,111,000 at December 31, 1993, 1992, and 1991,
respectively.
Property, Plant, and Equipment:
Provisions for depreciation and amortization of plant and equipment
are principally computed using declining-balance methods, based upon the
estimated useful lives of the various classes of depreciable assets.
Foreign Currency Translation:
Assets and liabilities of foreign subsidiaries are translated at the
current exchange rate and items of income and expense are translated at
the average exchange rate for the year. The effects of these translation
adjustments as well as gains and losses from certain hedges are reported
in a separate component of stockholders' equity. Exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the foreign subsidiary and translation adjustments
in countries with highly inflationary economies or in which operations are
directly and integrally linked to the Company's U.S. operations are
included in income.
Research and Development:
Expenditures for research and development are expensed as incurred.
Revenue Recognition:
Sales are recognized when products are shipped to dealers at which
time costs associated with the sale are recognized.
B. INVESTMENTS
In May 1993 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No.115, "Accounting for Certain
Investments in Debt and Equity Securities." As permitted under the
Statement, the Company elected to adopt the provisions of the new standard
as of December 31, 1993. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in
accounting principle. The effect of adopting the Statement increased
stockholders' equity $27,693,000 (net of $16,500,000 of deferred tax) to
reflect the net unrealized holding gain on securities classified as
available-for-sale.
Under Statement 115, management determines the appropriate
classification of debt securities at the time of purchase and reevaluates
such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity based upon the positive intent and ability
of the Company to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization and
accretion is included in investment income. Interest on securities
classified as held-to-maturity is included in investment income.
Marketable equity securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value with the
unrealized gains, net of tax, reported in a separate component of
stockholders' equity. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in investment income. The cost of securities sold is based on
the specific identification method. Dividends on securities classified as
available-for-sale are included in investment income.
The following is a summary of securities held-to-maturity and
available-for-sale:
<TABLE>
<CAPTION>
(In thousands)
December 31, 1993
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Held-to-Maturity:
Obligations of states and political
subdivisions $27,343 $28 ($14) $27,357
Short-term corporate debt 16,500 - - 16,500
Investment in Eurodollar time deposits 33,050 - - 33,050
_______ ___ ____ _______
$76,893 $28 ($14) $76,907
_______ ___ ____ _______
Securities Available-for-Sale:
Marketable equity securities $25,303 $44,193 - $69,496
</TABLE>
At December 31, 1993, securities held-to-maturity are due in one year
or less and include $51,850,000 reported as cash equivalents.
Prior to the adoption of Statement 115, investments other than
marketable equity securities were carried at cost and include short-term
investments with maturities greater than three months when purchased. The
carrying amount of such investments approximates its fair value.
Marketable equity securities, prior to the adoption of Statement 115, were
carried at lower of cost or market value. At December 31, 1992, and 1991,
the market value of the investment in marketable equity securities, based
on quoted market prices, ($58,327,000, and $47,779,000, respectively)
exceeded cost by $33,024,000, and $22,476,000, respectively.
C. SHORT-TERM NOTES PAYABLE
The carrying amount reported in the consolidated balance sheet of the
Company's short- term notes payable approximates its fair value.
Total available funds under unused lines of credit and foreign credit
and overdraft facilities at December 31, 1993 amounted to $117 million.
Interest paid on short-term notes payable and other obligations
amounted to $1,529,000, $1,598,000 and $2,421,000 in 1993, 1992, and 1991,
respectively.
D. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Effective January 1, 1992, the Company adopted the
provisions of Statement 109 and changed its method of accounting for
income taxes. As permitted by Statement 109, prior-year consolidated
financial statements have not been restated to reflect the change in
accounting method. The cumulative effect of adopting Statement 109 as of
January 1, 1992, was to increase net earnings by $2,215,000 or $.08 per
share. Other than the cumulative effect of adoption, Statement 109 did not
have a material effect on the remaining quarterly operating results for
1992.
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
Prior to the adoption of Statement 109, income tax expense was determined
using the deferred method. Deferred tax expense was based on items of
income and expense that were reported in different years in the financial
statements and tax returns and were measured at the tax rate in effect in
the year the difference originated.
Significant components of the Company's deferred tax assets
(liabilities) reflecting the net tax effects of temporary differences are
summarized as follows:
(In thousands)
December 31
1993 1992
Obligation to provide postretirement benefits $1,728 $2,242
Marketing programs 8,515 9,994
Accounts receivable valuation allowances 2,690 2,445
Unremitted earnings of foreign subsidiaries (3,886) (4,760)
Excess pension funding (2,761) (2,512)
Purchased tax benefits
Unrealized holding gain on marketable equity securities (16,500) -
Other, net 8,724 4,644
_______ ______
Net deferred tax assets (liabilities) ($3,848) $9,431
_______ ______
The components of earnings before income taxes are summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Domestic $107,450 $107,094 $96,855
Foreign 17,525 23,652 31,530
________ ________ ________
$124,975 $130,746 $128,385
________ ________ ________
</TABLE>
Significant components of the provision for income tax expense
(credit) attributable to continuing operations under the liability method
in 1993 and 1992 and the deferred method in 1991 are summarized as
follows:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Current:
Federal $35,200 $32,048 $42,642
State 3,665 3,939 4,473
Foreign 6,260 13,444 10,009
Deferred 1,441 1,061 (6,259)
Equivalent credit relating to purchased income
tax benefits (325) (2,769) (2,079)
_______ _______ _______
$46,241 $47,723 $48,786
_______ _______ _______
</TABLE>
The components of the provision (credit) for deferred income taxes
for the year ended December 31, 1991, principally relate to undistributed
earnings of certain subsidiaries, provisions for depreciation, and accrued
marketing expenses. No timing difference had a tax effect in excess of 5%
of the income tax expense computed at the statutory rate.
No item, other than state income taxes in 1993, 1992 and 1991,
affects the Company's effective income tax rate by an amount which exceeds
5% of the income tax expense computed at the statutory rate.
Undistributed earnings of subsidiaries on which deferred income taxes
have not been provided are not significant.
Income taxes paid amounted to $42,840,000, $56,319,000, and
$56,417,000 in 1993, 1992, and 1991, respectively.
E. STOCKHOLDERS' EQUITY
On May 6, 1992, the Company's stockholders adopted an amendment to
the Company's articles of incorporation establishing a new class of common
stock, Class A Common Stock, and the Board of Directors authorized a stock
dividend whereby one share of Class A Common Stock was distributed for
each share of Common Stock and Class B Common Stock outstanding at the
close of business on May 27,1992.
Class A Common Stock and Class B Common Stock have the same rights
regarding dividends and distributions upon liquidation as Common Stock.
However, Class A Common Stockholders are not entitled to vote, Class B
Common Stockholders are entitled to ten votes for each share held and
Common Stockholders are entitled to one vote for each share held. Transfer
of shares of Class B Common Stock is substantially restricted and must be
converted to Common Stock prior to sale. In certain instances, outstanding
shares of Class B Common Stock will be automatically converted to shares
of Common Stock. Unless extended for an additional period of five years by
the Board of Directors, all then-outstanding shares of Class B Common
Stock will be converted to shares of Common Stock on January 16, 2002.
Under the terms of the Bandag, Incorporated Restricted Stock Grant
Plan, the Company is authorized to grant up to an aggregate of 100,000
shares of Common Stock and 100,000 shares of Class A Common Stock to
certain key employees. The Shares granted under the plan will entitle the
grantee to all dividends and voting rights; however, such shares will not
vest until seven years after the date of grant. If a grantee's employment
is terminated prior to the end of the seven-year period for any reason
other than death, disability or termination of employment after age 60,
the shares will be forfeited and made available for future grants. A
grantee who has attained age 60 and employment is then terminated prior to
the end of the seven-year vesting period does not forfeit the nonvested
shares. During the years ended December 31, 1993, 1992, and 1991, 5,150
shares, 5,500 shares and 2,550 shares of Common Stock, respectively, were
granted under the Plan. The resulting charge to net earnings amounted to
$495,000, $532,000, and $493,000, in 1993, 1992, and 1991, respectively.
At December 31, 1993, 54,325 shares of Common Stock and 64,975 shares of
Class A Common Stock are available for grant under the Plan.
Under the terms of the Bandag, Incorporated Nonqualified Stock Option
Plan, the Company is authorized to grant options to purchase up to 500,000
shares of Common Stock and 500,000 shares of Class A Common Stock to
certain key employees. The option price is equal to the market value of
the shares on the date of grant. At December 31, 1993, options to purchase
100,000 shares of Common Stock and 100,000 shares of Class A Common Stock
are outstanding and exercisable at $23.458 per share for Common Stock
options and $22.792 per share for Class A Common Stock options. Options to
purchase 20,000 shares of Common Stock and 20,000 shares of Class A Common
Stock expire on November 13, 1997, and each of the four anniversaries
thereafter. At December 31, 1993, no options granted under this Plan have
been exercised and options to purchase 400,000 shares of Common Stock and
400,000 shares of Class A Common Stock are available for grant. No options
may be granted after November 13, 1997.
Earnings per share amounts are based upon the weighted average number
of shares of Common Stock, Class A Common Stock, Class B Common Stock, and
common stock equivalents (dilutive stock options) outstanding during each
year. The weighted average number of shares assumed outstanding was
27,337,000 in 1993, 27,743,000 in 1992, and 27,842,000 in 1991. These
amounts and the related earnings and cash dividend per share information
have been adjusted to reflect the 1992 stock dividend on a retroactive
basis.
F. EMPLOYEE PENSION PLANS
The Company sponsors defined-benefit pension plans covering
substantially all of its full-time employees in North America. Benefits
are based on years of service and, for salaried employees, the employee's
average annual compensation for the last five years of employment. The
Company's funding policy is to contribute annually the maximum amount that
can be deducted for income tax purposes. Contributions are intended to
provide for benefits attributed to service to date and those expected to
be earned in the future.
Aggregate accumulated benefit obligations and projected benefit
obligations, as estimated by consulting actuaries, and plan net assets and
funded status are as follows:
<TABLE>
<CAPTION>
(In thousands)
December 31
1993 1992 1991
<S> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested $29,463 $25,211 $18,212
Nonvested 2,932 3,017 2,660
_______ _______ _______
$32,395 $28,228 $20,872
_______ _______ _______
Plan net assets at fair value $60,723 $57,180 $53,942
Projected benefit obligations 50,947 42,711 32,732
_______ _______ _______
Plan net assets in excess of projected
benefit obligations 9,776 14,469 21,210
Unrecognized prior service cost 1,653 1,764 1,461
Unamortized actuarial net loss (gain) 481 (4,011) (8,985)
Unamortized net transition gain (7,939) (8,614) (9,454)
______ ______ ______
Prepaid pension cost included in the consolidated
balance sheet $3,971 $3,608 $4,232
______ ______ ______
</TABLE>
Assumptions used in the determination of the actuarial present value
of the projected benefit obligation and net pension cost are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.50% 7.25%
Rate of increase in future compensation 5.25% 5.25% 6.00%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
</TABLE>
Assets of the plans are principally invested in guaranteed interest
contracts and common stock.
The pension expense is composed of the following:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Service cost for benefits earned during the year $2,957 $2,302 $2,047
Interest cost on projected benefit obligations 3,079 2,556 2,134
Investment return on plan assets (3,958) (4,500) (13,697)
Net amortization and deferral (1,269) 1,060 9,812
______ ______ ______
$809 $1,418 $296
______ ______ ______
</TABLE>
The Company also sponsors defined-contribution plans, covering
substantially all salaried employees in the United States. The annual
contributions are made in such amounts as determined by the Company's
Board of Directors. Although employees may contribute up to 12% of their
annual compensation from the Company, they are generally not required to
make contributions in order to participate in the plans. The Company
recorded aggregate expense in connection with employee pension plans in
the amount of $2,921,000, $2,685,000, and $2,432,000 in 1993, 1992, and
1991, respectively.
G. OTHER POSTRETIREMENT EMPLOYEE BENEFITS
The Company provides certain medical benefits under its self-insured
health benefit plan to certain individuals who retired from employment
before January 1, 1993. The program is contributory, with retiree
contributions adjusted periodically. The program also contains
co-insurance provisions, which result in shared costs between the Company
and the retiree. In addition, the company provides post-termination
benefit continuation in accordance with the requirements of the Omnibus
Budget Reconciliation Act of 1989 ("OBRA"). The Company does not maintain
any separate fund to provide postretirement medical obligations.
Substantially all employees with the Company on and after January 1,
1993 are covered by the Bandag Security Program, which provides fully
vested benefits with only 5 years of service. Benefits under this program
are available upon retirement or separation for any other reason and may
be used in connection with medical expense or for any other purpose. The
periodic cost and benefit obligation information for the Bandag Security
Program is reflected in Note F.
In December 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Effective
January 1, 1992, the Company adopted the provisions of Statement 106 and,
as permitted by the Statement, elected to immediately recognize the
transition obligation. The cumulative effect of adopting Statement 106 was
to decrease net earnings by approximately $2,435,000 or $.09 per share
(net of the related tax effect of approximately $1,400,000 or $.05 per
share). Postretirement benefit costs for prior periods have not been
restated.
Other than the cumulative effect of adoption, Statement 106 did not
have a material effect on the remaining quarterly operating results for
1992.
The following table sets forth amounts recognized in the Company's
consolidated balance sheet:
<TABLE>
<CAPTION>
(In thousands)
December 31
1993 1992
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees ($1,998) ($2,080)
Fully eligible active plan participants (114) (120)
Other active plan participants (1,958) (2,470)
______ ______
Accumulated postretirement benefit obligation (4,070) (4,670)
Unrecognized net (gain) loss (443) 559
______ ______
Accrued postretirement benefit cost ($4,513) ($4,111)
______ ______
Net periodic postretirement benefit cost
includes the following components:
Service cost $195 $185
Interest cost on accumulated postretirement benefit
obligation 293 267
Net amortization and deferral 4 -
____ ____
Net periodic postretirement benefit cost $492 $452
____ ____
</TABLE>
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits is 13% for 1994 and is assumed to decrease
gradually to 7% for 2001 and remain at that level thereafter. Increasing
the assumed health care cost trend rates by one percentage point in each
year would increase the accumulated postretirement benefit obligation as
of December 31, 1993, by $569,000, and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for
1993 by $114,000. The weighted-average discount rate used in determining
the accumulated postretirement benefit obligation was 6.5% at December 31,
1993 and 1992.
Employees in most foreign countries are covered by various
postretirement benefit arrangements generally sponsored by the foreign
governments. The Company's contributions to foreign plans were not
significant in 1993, 1992 and 1991.
H. BUSINESS INFORMATION BY GEOGRAPHIC AREA
The information regarding operations in different geographic areas is
presented on page 10 of this report and is included herein by reference.
I. SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS
Unaudited quarterly results of operations for the years ended
December 31, 1993 and 1992 are summarized as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data)
Quarter Ended
Mar. 31 Jun. 30 Sep. 30 Dec. 31
<S> <C> <C> <C> <C>
1993:
Net sales $126,592 $148,950 $154,300 $160,357
Gross profit 49,727 60,212 64,307 63,858
Net earnings 13,898 19,266 22,547 23,023
Net earnings per share $0.51 $0.70 $0.83 $0.84
1992:
Net sales $129,481 $146,724 $154,314 $160,855
Gross profit 55,981 64,277 65,180 67,326
Net earnings 16,369 21,597 22,401 22,436
Net earnings per share $0.59 $0.77 $0.81 $0.81
</TABLE>
Results for the quarter ended March 31, 1992, have been restated to
retroactively reflect the changes in accounting methods described in
Notes D and G, which resulted in a decrease in previously reported net
earnings of $220,000 or $.01 per share. These changes in accounting
methods did not have a material effect on the remaining quarterly
operating results for 1992.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by Item 10 (with respect to the directors
of the registrant) is incorporated herein by reference from the
registrant's definitive Proxy Statement involving the election of
directors filed or to be filed pursuant to Regulation 14A not later than
120 days after December 31, 1993. In accordance with General Instruction
G (3) to Form 10-K, the information with respect to executive officers of
the Corporation required by Item 10 has been included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information called for by Item 12 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following consolidated financial statements are included in
Part II, Item 8:
Page
Consolidated Balance Sheets as of December 31,
1993, 1992 and 1991 23 - 24
Consolidated Statements of Income for the Years
Ended December 31, 1993, 1992 and 1991 25
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1993, 1992 and
1991 26
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1993, 1992 and 1991 27
Notes to Consolidated Financial Statements 28 - 36
(2) Financial Statements Schedules
Page
Schedule I Marketable securities - other
investments. 39
Schedule V Property, plant and equipment. 40
Schedule VI Accumulated depreciation, depletion
and amortization of property, plant
and equipment. 41
Schedule VIII Valuation and qualifying accounts
and reserves. 42
Schedule IX Short-term borrowings. 43
Schedule X Supplementary income statement
information.
44
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
<PAGE>
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
BANDAG, INCORPORATED AND SUBSIDIARIES
December 31, 1993
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Amount at Which Each
Portfolio of Equity
Number of Shares Security Issues and
or Units-Principal Market Value of Each Other Security
Name of Issuer and Amount of Bonds Each Issue at Issue Carried in the
Title of Each Issue and Notes Cost of Each Issue Balance Sheet Date Balance Sheet
<S> <C> <C> <C> <C>
Marketable Security Investments:
Obligations of States and
Political Subdivisions $24,945,000 $25,168,000 $25,057,000 $25,043,000
Marketable Equity Securities:
HON INDUSTRIES INC.
Common Stock 2,482,000 shares $25,303,000 $69,496,000 $69,496,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
BANDAG, INCORPORATED AND SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
For the Year Balance Retirements Balance
Ended Beginning Additions and Other at End of
December 31 Classification of Period at Cost (A) Disposals Changes (B) Period
<S> <C> <C> <C> <C> <C> <C>
1993 Land $3,421,000 ($89,000) $3,332,000
Building & Improvements 68,697,000 6,069,000 (645,000) (1,105,000) 73,016,000
Machinery & Equipment 191,727,000 51,728,000 (7,299,000) (3,013,000) 233,143,000
Construction in Process 28,072,000 (17,325,000) (96,000) 10,651,000
___________ ___________ __________ __________ ___________
Total $291,917,000 $40,472,000 ($7,944,000) ($4,303,000) $320,142,000
============ =========== =========== =========== ============
1992 Land $3,400,000 $21,000 $3,421,000
Building & Improvements 60,101,000 8,934,000 (221,000) (117,000) 68,697,000
Machinery & Equipment 153,406,000 43,064,000 (4,785,000) 42,000 191,727,000
Construction in Process 20,603,000 8,593,000 (287,000) (837,000) 28,072,000
___________ ___________ __________ __________ ___________
Total $237,510,000 $60,591,000 ($5,293,000) ($891,000) $291,917,000
============ =========== =========== =========== ============
1991 Land $2,846,000 $919,000 ($268,000) ($97,000) $3,400,000
Building & Improvements 59,681,000 3,329,000 (1,908,000) (1,001,000) 60,101,000
Machinery & Equipment 140,937,000 22,052,000 (6,035,000) (3,548,000) 153,406,000
Construction in Process 7,699,000 12,924,000 (15,000) (5,000) 20,603,000
___________ ___________ __________ __________ ___________
Total $211,163,000 $39,224,000 ($8,226,000) ($4,651,000) $237,510,000
============ =========== =========== =========== ============
<FN>
(A) Additions principally represent expenditures to expand existing manufacturing facilities and the acquisition of additional
manufacturing equipment.
(B) Other changes represent fluctuations in foreign exchange rates.
(C) The annual provisions for depreciation have been computed principally using the following estimated useful lives:
Buildings & Improvements 5-50 YEARS
Machinery & Equipment 2-11 YEARS
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
BANDAG, INCORPORATED AND SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
For the Year Balance Additions Retirements Balance
Ended Beginning Charged to and Other at End of
December 31 Classification of Period Cost & Expense Disposals Changes (A) Period
<S> <C> <C> <C> <C> <C> <C>
1993 Building & Improvements $25,125,000 $3,423,000 ($340,000) ($634,000) $27,574,000
Machinery & Equipment 124,497,000 29,516,000 (5,460,000) (2,606,000) 145,947,000
____________ ___________ ___________ ___________ ____________
Total $149,622,000 $32,939,000 ($5,800,000) ($3,240,000) $173,521,000
============ =========== =========== =========== ============
1992 Building & Improvements $22,384,000 $3,006,000 ($162,000) ($103,000) $25,125,000
Machinery & Equipment 104,026,000 24,544,000 (3,358,000) (715,000) 124,497,000
____________ ___________ ___________ ___________ ____________
Total $126,410,000 $27,550,000 ($3,520,000) ($818,000) $149,622,000
============ =========== =========== =========== ============
1991 Building & Improvements $21,240,000 $3,041,000 ($1,469,000) ($428,000) $22,384,000
Machinery & Equipment 91,928,000 18,772,000 (4,754,000) (1,920,000) 104,026,000
____________ ___________ ___________ ___________ ____________
Total $113,168,000 $21,813,000 ($6,223,000) ($2,348,000) $126,410,000
============ =========== =========== =========== ============
<FN>
(A) Other changes represent fluctuations in foreign exchange rates.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
BANDAG, INCORPORATED AND SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
1 2
Balance at Charged to Charged to Balance
Beginning Cost and Other Accounts Deductions - at end of
DESCRIPTION of Period Expenses -Describe Describe Period
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts $10,415,000 $2,816,000 $2,014,000 (A) $11,217,000
Year ended December 31, 1992:
Allowance for doubtful accounts $9,176,000 $3,207,000 $1,968,000 (A) $10,415,000
Year ended December 31, 1991:
Allowance for doubtful accounts $8,572,000 $4,747,000 $4,143,000 (A) $9,176,000
<FN>
(A) - Uncollectible accounts written off, net of recoveries and foreign exchange fluctuations.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
BANDAG, INCORPORATED AND SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Amount Average Amount Weighted Average
Outstanding Outstanding Interest Rate
Category of Aggregate Balance at Weighted Average During the During the During the
Short-term Borrowings End of Period Interest Rate Period Period (A) Period (B)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Payable to banks (C) $10,756,000 6.5% $18,002,000 $13,449,000 8.3%
Year ended December 31, 1992:
Payable to banks (C) $17,023,000 10.3% $19,115,000 $11,541,000 8.1%
Commercial Paper (C) 9,000,000 750,000 3.6%
Year ended December 31, 1991:
Payable to banks (C) $2,445,000 11.3% $23,860,000 $12,335,000 12.6%
<FN>
(A) Total of month-end short-term principal balances outstanding divided by 12.
(B) Actual interest expense on short-term borrowings divided by the average short-term debt outstanding during the period.
The weighted average interest rates include borrowings of the Corporation's foreign subsidiaries and, therefore, are at higher
rates than for comparable borrowings in the U.S.
(C) Borrowings outstanding in 1993 include short-term borrowings from banks for the Company's foreign subsidiaries, primarily
Western Europe, to provide working capital funds. Borrowings outstanding in 1992 and 1991 include commercial paper
obligations and notes payable to banks to fund purchases of the Corporation's common stock during 1992 and to provide working
capital and funds for expansions in the U.S. and in Europe and Brazil in 1991 and 1992.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
BANDAG, INCORPORATED AND SUBSIDIARIES
<CAPTION>
COL. A COL. B
ITEM Charged to Costs and Expenses
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $14,361,000 $16,223,000 $9,519,000
Advertising $9,483,000 $12,748,000 $11,361,000
</TABLE>
Amounts for other items have been omitted as such amounts are less
than 1% of total sales and revenues in the respective year.
<PAGE>
Item 14 (Cont.)
(3) Exhibits
Exhibit No. Description
3.1 Bylaws: As amended November 13,
1987. (Incorporated by reference
to Exhibit No. 3.1 to the
Corporation's Form 10-K for the
year ended December 31, 1987.)
3.2 Restated Articles of
Incorporation, effective December
30, 1986. (Incorporated by
reference to Exhibit No. 3.2 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
3.3 Articles of Amendment to Bandag,
Incorporated's Articles of
Incorporation, effective May 6,
1992. (Incorporated by reference
to Exhibit No. 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
4 Instruments defining the rights of
security holders. (Incorporated
by reference to Exhibit Nos. 3.2
and 3.3 to the Corporation's Form
10-K for the year ended December
31, 1992.)
The Corporation agrees to furnish
copies of its long-term debt
agreements to the Commission on
request.
10.1 *1984 Bandag, Incorporated
Restricted Stock Grant Plan, as
amended May 6, 1992.
(Incorporated by reference to
Exhibit No. 10.1 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.2 U. S. Bandag System Franchise
Agreement Truck and Bus Tires.
10.3 Agreement of Lease dated June 27,
1975 and Amendment dated November
14, 1982 by and between Bandag,
Incorporated and Macomb Motel,
Inc. (Incorporated by reference as
Exhibit No. 10.5 to the
Corporation's Form 10-K for the
year ended December 31, 1985.)
10.4 *Miscellaneous Fringe Benefits for
Executives.
10.5 *Nonqualified Stock Option Plan,
as amended May 6, 1992.
(Incorporated by reference as
Exhibit No. 10.6 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.6 *Nonqualified Stock Option
Agreement of Martin G. Carver
dated November 13, 1987, as
amended by an Addendum dated June
12, 1992. (Incorporated by
reference as Exhibit No. 10.7 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
10.7 *Form of Participation Agreement
under the 1984 Bandag,
Incorporated Restricted Stock
Grant Plan. (Incorporated by
reference as Exhibit No. 10.8 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
10.8 *Employment Agreement with Michel
Petiot effective January 1, 1994,
dated December 20, 1993.
11 Computation of earnings per share.
21 Subsidiaries of Registrant.
*Represents a management compensatory plan or arrangement.
(b) Reports on Form 8-K: No report on Form 8-K was filed during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Martin G. Carver
Martin G. Carver
Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By /s/ Stephen A. Keller By /s/ Stanley E. G. Hillman
Stephen A. Keller Stanley E. G. Hillman
Director Director
By ______________________ By /s/ R. Stephen Newman
Edgar D. Jannotta R. Stephen Newman
Director Director
By /s/ James R. Everline By /s/ Martin G. Carver
James R. Everline Martin G. Carver
Director Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
By /s/ Thomas E. Dvorchak
Thomas E. Dvorchak
Senior Vice President and
Chief Financial Officer
(Chief Accounting Officer)
Date: March 29, 1994
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No. Description
3.1 Bylaws: As amended November 13,
1987. (Incorporated by reference
to Exhibit No. 3.1 to the
Corporation's Form 10-K for the
year ended December 31, 1987.)
3.2 Restated Articles of
Incorporation, effective December
30, 1986. (Incorporated by
reference to Exhibit No. 3.2 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
3.3 Articles of Amendment to Bandag,
Incorporated's Articles of
Incorporation, effective May 6,
1992. (Incorporated by reference
to Exhibit No. 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
4 Instruments defining the rights
of Security Holders.
(Incorporated by reference to
Exhibit Nos. 3.2 and 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
The Corporation agrees to furnish
copies of its long-term debt
agreements to the Commission on
request.
10.1 *1984 Bandag, Incorporated
Restricted Stock Grant Plan, as
amended May 6, 1992.
(Incorporated by reference to
Exhibit No. 10.1 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.2 50 U. S. Bandag System Franchise
Agreement Truck and Bus Tires.
10.3 Agreement of Lease dated June 27,
1975 and Amendment dated November
14, 1982 by and between Bandag,
Incorporated and Macomb Motel,
Inc. (Incorporated by reference
as Exhibit No. 10.5 to the
Corporation's Form 10-K for the
year ended December 31, 1985.)
10.4 *Miscellaneous Fringe Benefits
for Executives.
10.5 *Nonqualified Stock Option Plan,
as amended May 6, 1992.
(Incorporated by reference as
Exhibit No. 10.6 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.6 *Nonqualified Stock Option
Agreement of Martin G. Carver
dated November 13, 1987, as
amended by an Addendum dated June
12, 1992. (Incorporated by
reference as Exhibit No. 10.7 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
10.7 *Form of Participation Agreement
under the 1984 Bandag,
Incorporated Restricted Stock
Grant Plan. (Incorporated by
reference as Exhibit No. 10.8 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
10.8 68 *Employment Agreement with Michel
Petiot effective January 1, 1994,
dated December 20, 1993.
11 69 Computation of earnings per
share.
21 71 Subsidiaries of Registrant.
* Represents a management compensatory plan or arrangement.
Exhibit 10.2
BANDAG SYSTEM FRANCHISE AGREEMENT
TABLE OF CONTENTS
Introduction ............................................... 1
I. BANDAG Method and Grant of Franchise ................. 1
II. Materials Provided by BANDAG; Obligations of
FRANCHISEE ........................................... 2
III. Maintenance of Quality and Reputation ................ 3
IV. Records and Inspection ............................... 4
V. Relationship of Parties .............................. 4
VI. Use of the Marks, Display, Advertising and
Promotion of BANDAG Name ............................. 4
VII. Best Efforts ......................................... 4
VIII. Duration ............................................. 4
IX. Termination of the Agreement by BANDAG ............... 4
X. Effect of Termination ................................ 5
XI. Transfer of Control .................................. 5
XII. General and Product Liability; Warranties;
Insurance and Indemnification ........................ 6
XIII. Security Interest .................................... 7
XIV. Force Majeure ........................................ 7
XV. Notices; Litigation .................................. 7
XVI. Assignment and Subfranchising ........................ 7
XVII. Improvements by FRANCHISEE ........................... 7
XVIII. Execution; Representations and Warranties ............ 8
XIX. Miscellaneous ........................................ 8
UNDERTAKING BY THE PRINCIPALS OF BANDAG FRANCHISEE ..........10
ANNEX A General Terms and Conditions of Sale ................
ANNEX B BANDAG[R] Logo and Trademark Usage Requirements and
Policy ..............................................
<PAGE>
BANDAG SYSTEM FRANCHISE AGREEMENT
THIS AGREEMENT is made by and between Bandag, Incorporated, an Iowa
corporation ("BANDAG") and __________________________________________
_____________________________________________ ("FRANCHISEE"), a
____ corporation organized under the laws of the state of
________________________________________,
____ sole proprietorship owned by __________________________________
______________________________,
____ partnership organized under the laws of the state of
________________________________________,
doing business under the name: ________________________
___________________________________________,
whose mailing address is: _________________________________________
___________________________________________________________________
__________________________________________________________________,
employer federal identification number ________________________
___________________________________.
Introduction
Over many years and at substantial expense, BANDAG has developed, promoted
and improved for its franchises, and continues to improve, a unique method
of retreading tires with pre-cured rubber. This method utilizes
manufacturing technology, engineering and know-how, other proprietary
processes, and specialized equipment made by or for BANDAG or one of its
corporate affiliates for use in the process of inspecting and preparing
casings for retreading, affixing and bonding the tread rubber to the
casing, and repairing casings (herein, such equipment, as modified,
improved and supplemented by BANDAG from time to time, to be called
"BANDAG Equipment"). BANDAG has also developed for use in this unique
retreading method BANDAG[R] tread rubber, BANDAG[R] cushion gum, other
tread materials and other materials used between the tread materials and
the casing (including without limitation cushion rubber, cushion gum and
other adhesives, repair gums, filling materials, special extrusions, re-
belting materials, cements and other rubber items) (herein, such items, as
modified, improved and supplemented by BANDAG from time to time, to be
called "BANDAG Rubber Products"). In addition, BANDAG has developed at
substantial expense valuable market research, proprietary rights
(including patents, trademarks, confidential know-how and copyrights),
expertise in managing retread facilities, and programs for the marketing
and sale of retreaded tires, for the technical and sales training of
personnel, and for customer service. In this Agreement, all the foregoing
described in this Introduction, as they may be modified from time to time
by BANDAG, shall be referred to as the "BANDAG Method".
FRANCHISEE desires to acquire the right to practice the BANDAG Method, and
BANDAG is pleased to grant this valuable right to FRANCHISEE on the terms
stated in this Agreement.
In consideration of the mutual agreements herein and other good and
valuable consideration, BANDAG and FRANCHISEE agree as follows:
I. BANDAG Method and Grant of Franchise
(a) BANDAG hereby grants to FRANCHISEE the non-exclusive right to make
and sell those truck and bus tires (but excluding aircraft, agricultural
and passenger tires) retreaded by the BANDAG Method (as improved by BANDAG
during the term of this Agreement) marked below:
_____ Retreading tire sizes up to and including
14.00-25 and 17.5-25.
_____ Retreading tire sizes from LT 185/75R14 up
to and including 9R17.5 including all sizes
of Wide Base, Low Profile and High Flotation
Light Truck Tires within that size range.
_____ Retreading tire sizes from 12.00-24 up to
and including 29.5-29 including all sizes of
Wide Base, Low Profile and High Flotation
Light OTR Tires within that size range.
[Check applicable program(s)]
(b) FRANCHISEE may make retreaded tires by the BANDAG Method only at the
facility located at: __________________________________________
__________________________________________________________________________
__________________________________________________________________________
("Authorized Location").
(c) FRANCHISEE's non-exclusive Territory shall be: ______________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________
FRANCHISEE may sell tires retreaded by the BANDAG Method wherever and to
whomever and at any price FRANCHISEE may choose, in or outside the
Territory (as is the case with other BANDAG franchisees).
(d) FRANCHISEE may not resell BANDAG Rubber Products purchased from
BANDAG or from any other franchisee of BANDAG other than to (i) end users
(and in that instance, only if such items are incorporated into tires
retreaded by the BANDAG Method) and (ii) other BANDAG franchisees
authorized to retread tires by the BANDAG Method in the United States.
(e) While this Agreement is in effect, FRANCHISEE may not, in the
Territory, sell tires of the size and use checked above retreaded by any
method using pre-cured rubber other than the BANDAG Method, or operate,
effectively control or be employed by any entity or undertaking in the
business of selling such tires in the Territory. FRANCHISEE further
agrees not to allow any of its Affiliates or Controlling Persons to engage
in these activities while this Agreement is in effect.
(f) For the purposes of this Agreement,
(1) "Affiliate" shall mean any natural person or legal entity that,
directly or indirectly, controls, is controlled by or is under common
control with either FRANCHISEE or any Controlling Person; and
(2) "Controlling Person" shall be any natural person or other legal
entity with a 5% or greater interest in FRANCHISEE or in another
entity that has, directly or indirectly, a 5% or greater interest in
FRANCHISEE, or otherwise having the power to control, directly or
indirectly, the management, direction or day-to-day operations of
FRANCHISEE. Without limiting the generality of the foregoing, a
natural person or legal entity shall be a "Controlling Person" of
FRANCHISEE if it owns a 5% or greater interest in another entity that
either is itself a Controlling Person of FRANCHISEE or has an
indirect ownership interest in FRANCHISEE through one or more
intervening levels of direct or indirect subsidiaries. For example,
if FRANCHISEE is a wholly-owned subsidiary of another corporation
that is, in turn, owned equally by three other corporations, each of
these three corporations shall be considered a Controlling Person for
purposes of this Agreement.
II. Materials Provided by BANDAG; Obligations of FRANCHISEE
(a) To assist its franchisees, BANDAG has developed materials relating to
the BANDAG Method and to production engineering (including technical
bulletins), public relations, and advertising, merchandising and promotion
of the BANDAG Method and of tires retreaded by the BANDAG Method. BANDAG
will provide to FRANCHISEE from time to time such materials as are
provided by BANDAG to its franchisees generally. BANDAG may amend and
revise such materials and charge for materials in excess of those normally
provided.
(b) All proprietary and other information obtained directly or indirectly
by FRANCHISEE with respect to BANDAG's business plans, policies, and
modified or new methods, processes or products, and all written matter
furnished to FRANCHISEE by BANDAG or its affiliates (whether or not
FRANCHISEE shall be charged for same), shall remain BANDAG's property and
shall be deemed confidential information. Such information and materials
(including any translation) shall not be reproduced or disclosed to others
or used for any purpose other than performance of FRANCHISEE's obligations
under this Agreement. FRANCHISEE shall cause its employees to comply with
this provision.
If there is any claim or litigation involving the confidential
information, and if BANDAG in its sole discretion undertakes the
negotiation, settlement, defense or prosecution, FRANCHISEE shall execute
any documents and render assistance (exclusive of out-of-pocket
expenditures) as may be reasonably requested to carry out the same. If
any confidential information is sought by discovery procedures, FRANCHISEE
shall (i) notify BANDAG within three (3) days after receipt of such
discovery request, (ii) seek appropriate protective orders for such
information and (iii) join in any motion BANDAG may file to protect
against disclosure of such materials.
(c) FRANCHISEE agrees that, at its Authorized Location and within a 480-
mile radius thereof, during the term of this Agreement, (i) it will not,
and will not allow any Controlling Person or any Affiliate to, retread
tires by any method using pre-cured rubber other than the BANDAG Method or
directly or indirectly operate, effectively control or be employed by any
entity or undertaking in the business of retreading such tires; and (ii)
it will not refer any customers or potential customers of retreaded tires
to other entities or shops using any pre-cured method other than the
BANDAG Method.
III. Maintenance of Quality and Reputation
(a) FRANCHISEE acknowledges the superior quality, performance and
reputation of BANDAG Equipment, BANDAG Rubber Products, and the other
items and services that constitute part of the BANDAG Method. FRANCHISEE
further acknowledges that it is essential to the reputation of the BANDAG
Method and to the maintenance of the BANDAG trademarks and logos, and to
avoid misleading the public with respect to the quality of the tires
retreaded by FRANCHISEE, that the retreaded tires sold by FRANCHISEE be
retreaded strictly in accordance with the BANDAG Method and with BANDAG
Equipment and BANDAG Rubber Products, including BANDAG[R] tread rubber and
BANDAG[R] cushion gum. Accordingly, FRANCHISEE shall utilize in the
retreading of tires with pre-cured rubber at the Authorized Location only
BANDAG Rubber Products and BANDAG Equipment. FRANCHISEE shall also follow
such procedures for retreading tires with pre-cured rubber as are
established by BANDAG from time to time and shall maintain standards and
procedures required to comply with the BANDAG Quality Certification
Program, as revised by BANDAG from time to time. BANDAG may from time to
time require additional certifications for production and marketing of
particular products or utilization of particular technology, and require
FRANCHISEE's continued adherence to the same, if FRANCHISEE desires to
produce such particular products or utilize such technology associated
with the Bandag Method. In addition, FRANCHISEE shall not engage in any
business conduct reasonably likely to affect adversely the reputation or
goodwill of BANDAG or the BANDAG Method.
(b) Representative samples of any and all materials used in retreading
tires by the BANDAG Method and not falling under Section III(a) of this
Agreement must be submitted for testing and inspection to BANDAG (at
FRANCHISEE's expense) and must be approved by BANDAG in writing prior to
such use by FRANCHISEE; BANDAG will not unreasonably withhold its approval
of such materials if they meet BANDAG's standards for quality and
performance.
(c) All purchases from BANDAG or one of its corporate affiliates shall be
at the prices established by BANDAG from time to time, and shall be
subject to the seller's Standard Terms and Conditions of Sale, as revised
from time to time. These terms and conditions (as supplemented by this
Agreement) shall constitute the entire and only agreement between the
parties with respect to the sale of such products to FRANCHISEE. No
additional or different terms set forth in FRANCHISEE'S purchase order,
acknowledgment or other forms or correspondence shall govern any sales of
such products to FRANCHISEE, and BANDAG hereby objects to any such
additional or different terms contained in any communication from
FRANCHISEE. A copy of the Standard Terms and Conditions of Sale at the
effective date of this Agreement is attached hereto as Annex A. A breach
of such Terms shall be a breach of this Agreement.
(d) FRANCHISEE shall maintain its Authorized Location in accordance with
standards and procedures prescribed by BANDAG from time to time.
FRANCHISEE shall maintain BANDAG Equipment in satisfactory operating
condition and incorporate all modifications prescribed by BANDAG.
(e) FRANCHISEE warrants that all required inspections of equipment used
in retreading tires by the BANDAG Method will be undertaken and that, to
the extent required by local law, FRANCHISEE shall post on such equipment
appropriate certificates of inspection or other evidence of approval.
FRANCHISEE further agrees: (1) to maintain and/or install such safety
features on BANDAG Equipment as are originally installed or are thereafter
recommended by BANDAG and in conformity with all applicable safety codes
and regulations; (2) not to alter any safety features on BANDAG Equipment,
whether such equipment was purchased from BANDAG or a third party; and (3)
to rework or authorize BANDAG to rework any BANDAG Equipment to
reestablish or retrofit any safety feature for the BANDAG Equipment.
If BANDAG determines that any of FRANCHISEE's equipment used in retreading
tires by the BANDAG Method is unsafe or does not comply with current
safety standards used by BANDAG or applicable safety codes and
regulations, BANDAG may give FRANCHISEE written notification thereof, and
FRANCHISEE shall, within one month thereafter at its expense, either (y)
rework, or authorize BANDAG to rework, such equipment, or (z) remove such
equipment from service and sell it back to BANDAG, or trade it in for new
BANDAG Equipment, in either case, at its then-current fair market value,
all without prejudice to the right of BANDAG to remove certificates of
inspection or nameplates from equipment not found in compliance with
applicable safety codes or standards and to notify appropriate
governmental officials that the equipment in question no longer meets
applicable safety requirements.
(f) FRANCHISEE acknowledges that it will, in the operation of its
business of retreading tires with pre-cured rubber, comply with all
applicable federal, state and local laws, ordinances, regulations and
orders. FRANCHISEE shall also refrain from taking any action that prevents
BANDAG from realizing the benefits of this Agreement.
(g) FRANCHISEE shall not sell, lease or in any other way transfer title
or possession of any BANDAG Equipment to third parties other than BANDAG
franchisees, without first offering such Equipment in writing free and
clear of all claims and encumbrances for purchase by BANDAG at fair market
value. "Fair market value", as used in this Agreement, means the cash
purchase price that would apply in an arm's-length transaction between an
informed and willing BANDAG franchisee under no compulsion to purchase and
an informed and willing BANDAG franchisee under no compulsion to sell.
IV. Records and Inspection
FRANCHISEE shall maintain and provide to BANDAG financial statements,
books of account, and supply, purchasing, inventory, production and sales
records (including the date of purchase, weight and source of BANDAG
Rubber Products used by FRANCHISEE and records showing the identity and
address of all purchasers of BANDAG Rubber Products and of tires retreaded
by the BANDAG Method), together with any other business records or
information records that BANDAG may request in order to determine whether
FRANCHISEE is performing its obligations under this Agreement. FRANCHISEE
shall permit BANDAG to examine FRANCHISEE's records, premises and samples
of tires made by the BANDAG Method during regular business hours.
V. Relationship of Parties
The relationship of the parties is that of franchisor and franchisee, and
seller and buyer only, and FRANCHISEE acknowledges that this Agreement
does not create a fiduciary relationship between FRANCHISEE and BANDAG.
The parties are independent contractors, and exercise sole control over
their businesses at their own risk.
VI. Use of the Marks, Display, Advertising and Promotion of BANDAG Name
FRANCHISEE shall have the non-exclusive right to use the "BANDAG" name and
mark, including BANDAG's trademarks, service marks and logos
(collectively, the "Marks") in the Territory in connection with the
manufacture and sale of tires retreaded by the BANDAG Method, subject to
BANDAG's Logo and Trademark Usage Requirements and Policy, as revised from
time to time by BANDAG. FRANCHISEE shall at all times comply with such
Requirements and Policy, which is attached in its current form as Annex B.
VII. Best Efforts
FRANCHISEE shall at all times while this Agreement remains in effect exert
its best efforts to produce and sell tires retreaded by the BANDAG Method.
VIII. Duration
This Agreement shall continue in effect for five years unless terminated
as provided elsewhere in this Agreement.
IX. Termination of the Agreement by BANDAG
BANDAG shall have the right to terminate this Agreement:
(a) Effective upon notice to FRANCHISEE, in the event of any breach
of Section I(d) or (e), II(b) or (c), III(a), XI, XII or XVI of this
Agreement, or
(b) Effective upon notice to FRANCHISEE, in the event FRANCHISEE
shall fail to pay all amounts due to BANDAG within ten (10) days
after BANDAG notifies FRANCHISEE that payment is due, or
(c) Effective upon notice to FRANCHISEE, in the event FRANCHISEE
shall fail to operate the business of retreading tires by the BANDAG
Method at the location authorized in Section I for more than sixty
(60) consecutive days or otherwise abandons the franchise granted
herein, or
(d) Effective upon notice to FRANCHISEE, in the event FRANCHISEE
introduces and/or supports any proceedings challenging the validity
of any trademarks or other unpatented proprietary rights, whether
registered or not, under which BANDAG derives its licensing power
hereunder, or
(e) Effective upon notice to FRANCHISEE, in the event of (1) any
breach or non-compliance with any term or provision of this Agreement
other than those described in subsections (a) through (d) above, or
any breach or non-compliance with any other agreement between BANDAG
and FRANCHISEE, and in either such case the breach or non-compliance
is not remedied within thirty (30) days of notice thereof from
BANDAG, or (2) the repeated breach or non-compliance with one or more
term or provision of this Agreement, whether or not such breach or
non-compliance is corrected after notice, or
(f) Immediately, in the event FRANCHISEE becomes insolvent or is
subject to any bankruptcy, insolvency, or similar proceeding, makes
an assignment for the benefit of creditors, becomes unable to pay its
debts as they become due, goes into liquidation or winding up, or in
the event a receiver is appointed for substantial part of
FRANCHISEE's assets, or
(g) Effective upon thirty (30) days' notice, in the event of (1) a
decision by a court or government agency that invalidates any
significant provision of this Agreement, or (2) the failure of the
heirs or successors of FRANCHISEE or a Controlling Person to apply
for approval of a transfer of the pre-cured retreading business or
the assets of such business in accordance with Section XI(c), or
BANDAG's disapproval of such transfer.
X. Effect of Termination
(a) In the event of termination of this Agreement for any reason:
(1) FRANCHISEE shall surrender and cease to exercise all rights
granted under this Agreement, shall cease all use of the BANDAG
Method, shall cease all use of BANDAG Equipment, and shall cease
selling tires retreaded after date of termination with pre-cured
rubber on BANDAG Equipment. In addition, no officer, director,
relative, manager, shareholder, partner or other owner of FRANCHISEE
or any Affiliate or Controlling Person, or any business enterprise in
which any of them is engaged or to which any of them is related, may
directly or indirectly operate such BANDAG Equipment or sell tires
retreaded after date of termination with pre-cured rubber on BANDAG
Equipment. FRANCHISEE shall also, at its own expense, cease all use
of BANDAG's name and Marks in any and all connections, and refrain
from representing any of its products produced after termination as
"BANDAG products" or as being the "same as BANDAG" or "similar to
BANDAG" or represent itself as a BANDAG franchisee or otherwise
identify itself with BANDAG. Without limiting the foregoing,
FRANCHISEE shall change the corporate name to eliminate use of any
BANDAG Marks and change all stationary, envelopes, business cards,
other advertisements and other items and file such documents in all
federal, state and local offices as may be considered appropriate by
BANDAG to change the corporate name of record in such offices.
(2) Termination of this Agreement shall not relieve FRANCHISEE from
its obligation to pay to BANDAG all moneys that may be due, and all
amounts yet unpaid and not yet due for equipment, materials and
supplies shall become due and payable within ten (10) days of the
date of termination.
(3) FRANCHISEE shall immediately cease using, and return within a
period of ten (10) days following termination, all property of
BANDAG, including but not limited to all confidential and proprietary
written materials (and all copies thereof) received from BANDAG and
all translations thereof. Such materials will be delivered in person
to a BANDAG designee or returned via courier service, to be signed
for by the recipient.
(4) BANDAG shall have the option, exercisable by notice within sixty
(60) days following the effective date of termination of this
Agreement, to purchase (i) any or all BANDAG Rubber Products at the
price paid by FRANCHISEE and/or (ii) any or all BANDAG Equipment at
its 10-year straight line depreciated value, with a minimum of 15
percent of the purchase price paid by FRANCHISEE for such Equipment.
This option extends to all BANDAG Equipment and BANDAG Rubber
Products used in the business of FRANCHISEE prior to the effective
date of termination. From the purchase price shall be deducted the
amount of any set off or counterclaim that BANDAG may have against
FRANCHISEE. Within two (2) days of receipt of notice from BANDAG,
FRANCHISEE shall prepare for immediate return all such items.
(b) After receipt of BANDAG's notice of termination, FRANCHISEE shall not
commit itself to further advertising contracts or other agreements by
which it represents itself as a franchisee of BANDAG.
XI. Transfer of Control
(a) FRANCHISEE acknowledges that, to assure BANDAG that FRANCHISEE's
obligations herein will be performed fully and that customers of tires
retreaded by the BANDAG Method will receive adequate service, BANDAG must
know and approve who in fact controls FRANCHISEE. Accordingly, neither
FRANCHISEE nor any Controlling Person, nor any holder or owner of any
equity interest in FRANCHISEE, may enter into any agreement pertaining to,
causing or resulting in a Transfer of Control, or consummate or permit the
consummation thereof, without in each case obtaining BANDAG's prior
written approval. To provide BANDAG an opportunity to consider whether or
not to approve a proposed Transfer of Control, a written request for such
approval shall be submitted to BANDAG at least one hundred twenty (120)
days prior to the proposed or intended date for the Transfer of Control,
which request shall describe the proposed Transfer of Control and give the
identity of the proposed transferee. FRANCHISEE shall also submit such
other information regarding the proposed Transfer of Control as may be
requested by BANDAG.
(b) For the purposes of this Agreement, "Transfer of Control" shall mean
(i) if FRANCHISEE or any direct or indirect Controlling Person is a
partnership, any change in the identity or respective ownership of the
partners of any of them, (ii) if FRANCHISEE or any direct or indirect
Controlling Person is a corporation, any sale, gift or other transfer of
ownership or possession of shares comprising 5% or more of the total
number of issued and outstanding shares of FRANCHISEE or such Controlling
Person or (iii) the transfer of or change in the direct or indirect
control of, or the transfer or change in the power to control, directly or
indirectly, the management, direction or day-to-day operations of
FRANCHISEE or of any direct or indirect Controlling Person; provided,
however, that the death or determination of incompetency of a partner or
any natural person constituting a Controlling Person of FRANCHISEE shall
not be a "Transfer of Control".
(c) If a partner or Controlling Person of FRANCHISEE dies or is
determined to be incompetent, the transfer of the business or assets of
FRANCHISEE's business of retreading tires with pre-cured rubber operated
at the Authorized Location to any heirs or successors of the deceased or
the incompetent, whether by bequest or otherwise, shall be subject to
BANDAG's prior written approval. Such heirs or successors shall apply to
BANDAG for such approval within 60 days after such death or determination,
providing BANDAG with such information as is then customarily requested by
BANDAG with respect to new franchisees.
XII. General and Product Liability; Warranties; Insurance and
Indemnification
(a) FRANCHISEE shall purchase and maintain in full force and effect
comprehensive general liability insurance (including but not limited to
product liability, completed operations and contractual liability,
including FRANCHISEE's obligations under the indemnity provisions of this
Agreement) adequate to insure its undertakings herein and shall furnish a
certificate of such insurance upon request by BANDAG.
(b) FRANCHISEE shall defend indemnify and hold BANDAG harmless from and
against all liabilities, recoveries of judgment, claims and demands on
account of personal injury, including death or property loss or damage to
others (including FRANCHISEE's employees or customers) arising out of or
in any manner connected with (i) FRANCHISEE's business operations, (ii)
FRANCHISEE's operations as a BANDAG franchisee, (iii) the retreading of
any tires, (iv) the sale of any retreaded tires, (v) the performance by
FRANCHISEE of this Agreement, (vi) the breach of any of FRANCHISEE's
obligations herein, or (vii) the use by any person who is not a BANDAG
franchisee of BANDAG Equipment sold, transferred or otherwise provided to
such person or his employer by FRANCHISEE. FRANCHISEE shall at its own
expense defend any and all such claims and demands and hold BANDAG
harmless from and against all charges of attorneys incurred thereby and
all costs and other expenses arising therefrom. FRANCHISEE, on its behalf
and on behalf of anyone claiming through or by it, including its
employees, agents, subcontractors and insurers, hereby waives its rights
of recovery against BANDAG for loss covered by insurance maintained by
FRANCHISEE or for FRANCHISEE's benefit. It is the intent of the parties
that BANDAG shall not be subject to subrogation by anyone, including any
insurer, as a result of any such loss.
(c) BANDAG MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
WITH RESPECT TO THE MERCHANTABILITY OR SUITABILITY OF TIRES RETREADED BY
FRANCHISEE. FRANCHISEE has no authority to make any kind of warranty or
representation to others on behalf of BANDAG.
(d) (i) Except as BANDAG may otherwise expressly agree in writing,
FRANCHISEE, acting on its own behalf only, shall execute and deliver to
each purchaser from FRANCHISEE of a tire retreaded by the BANDAG Method a
BANDAG Dealer National Warranty on a form then currently furnished by
BANDAG. BANDAG may also require FRANCHISEE to execute and deliver to each
purchaser from FRANCHISEE of a tire retreaded by particular technology
associated with the BANDAG Method a special warranty on a form then
currently furnished by BANDAG. FRANCHISEE shall perform and fulfill
promptly all of the terms and conditions of all such warranties.
FRANCHISEE shall have the sole and complete responsibility for all such
warranties (even though wording may have been provided by BANDAG) and for
performance of any other warranties provided by FRANCHISEE to buyers of
tires retreaded by the BANDAG Method and/or sold or distributed as
contemplated by this Agreement. FRANCHISEE will perform all warranty and
other services hereunder as an independent contractor and not as the agent
of BANDAG and will assume responsibility for and hold BANDAG harmless from
all claims (including but not limited to claims resulting from the
negligent or willful acts or omissions of FRANCHISEE, and including
attorneys' fees) against either of them arising out of or in connection
with FRANCHISEE's performance of such service.
(ii) FRANCHISEE agrees to comply with all policies and procedures
described in the BANDAG Dealer National Warranty or such other special
warranty that may be required by BANDAG, as any thereof may be revised by
BANDAG from time to time, including but not limited to performing warranty
service on tires retreaded by the BANDAG Method that FRANCHISEE did not
manufacture or sell, and policies and procedures established by BANDAG
from time to time relating to the keeping of books and records respecting
claims FRANCHISEE may make for reimbursement for costs incurred by
FRANCHISEE. BANDAG will reimburse FRANCHISEE for costs incurred for
service FRANCHISEE performs for retreaded tires that the FRANCHISEE did
not manufacture or sell in accordance with the policies and procedures of
BANDAG described in the BANDAG Dealer National Warranty or such other
special warranty. FRANCHISEE agrees that BANDAG may inspect FRANCHISEE's
books and records respecting any warranty service or other claims
FRANCHISEE may submit to BANDAG.
(iii) FRANCHISEE hereby authorizes BANDAG to charge its account with
BANDAG for each adjustment on a BANDAG retread sold by FRANCHISEE,
performed by another franchisee under a BANDAG Dealer National Warranty or
other special warranty required by BANDAG, in such amount as may be
provided therefor in the applicable warranty, and to credit FRANCHISEE's
account for each adjustment on a BANDAG retread sold by another
franchisee, performed by the FRANCHISEE under a BANDAG Dealer National
Warranty or such other special warranty, in such amount as may be provided
therefor in the warranty, all in accordance with BANDAG's then-current
practices under the BANDAG Dealer National Warranty Program or any other
special warranty program BANDAG may require in connection with a
particular technology.
XIII. Security Interest
(a) FRANCHISEE agrees to execute and deliver to BANDAG BANDAG's then-
current standard form security agreement to secure all of FRANCHISEE's
obligations to BANDAG (as more fully described in such agreement), and to
cause those persons or entities that own the BANDAG Equipment used in
FRANCHISEE's retread business from time to time to execute and deliver a
similar security agreement to secure FRANCHISEE's and their respective
obligations to BANDAG.
(b) BANDAG agrees, upon written request from the holder of a properly
perfected Bank Lien, to subordinate the security interest granted to
BANDAG by FRANCHISEE, to the extent it secures the rights and options of
BANDAG hereunder to purchase certain assets used in FRANCHISEE's business
of retreading tires with pre-cured rubber (but not any security interest
granted in connection with purchases by FRANCHISEE, or purchase money
financing by BANDAG of any items purchased by FRANCHISEE), to such Bank
Lien. FRANCHISEE hereby covenants and agrees to execute and deliver to
BANDAG any deeds, documents, instruments and other writings requested by
BANDAG to grant or create a lien for the purposes described in this
section, and to take any actions reasonably deemed advisable by BANDAG or
its counsel to create, establish, preserve, perfect, continue perfected,
record, register, protect, determine priority of and enforce such lien and
BANDAG's rights, and FRANCHISEE shall pay all expenses relating to the
foregoing.
(c) For the purposes of this Agreement, "Bank Lien" shall mean a security
interest, lien, charge or encumbrance granted by FRANCHISEE to a financial
institution to secure indebtedness for borrowed money.
XIV. Force Majeure
Performance of their respective obligations hereunder (other than any
obligation for the payment of money) by either BANDAG or FRANCHISEE may be
interrupted without liability to the extent the interruption is due to a
force majeure. The term "force majeure" shall include an Act of God, war,
civil commotion, fire, explosion, flood, strike, lock-out, or any other
cause beyond the reasonable control of BANDAG or FRANCHISEE.
XV. Notices; Litigation
Any notice or demand hereunder must be in writing and shall be deemed
given when personally delivered by hand, when telecopied or telexed and
acknowledged by appropriate means, or one (1) day after delivery to a
courier service, prepaid, addressed to the party's address shown in this
Agreement or as modified in writing pursuant to this Agreement, or three
(3) days after deposited in the U.S. mails, first class mail, postage
prepaid, addressed as above. In this regard, FRANCHISEE shall notify
BANDAG within ten (10) days of institution of a lawsuit by way of the
service of a complaint, cross-claim, counterclaim or the like against
FRANCHISEE if such lawsuit involves issues relating to rights granted
hereunder and shall permit BANDAG to intervene and control the lawsuit
with regard to such issues.
XVI. Assignment and Subfranchising
BANDAG may assign part or all of this Agreement and may delegate any or
all of its obligations hereunder to affiliates. No assignment, sublicense
or subfranchise may be made by FRANCHISEE without the prior written
consent of BANDAG.
XVII. Improvements by FRANCHISEE
In return for the inclusion within Section I hereof of improvements to the
BANDAG Method made by BANDAG, all inventions, patents and patent
applications which are conceived, made or acquired by FRANCHISEE in
performing under this Agreement or that relate to BANDAG's proprietary
rights or equipment shall automatically be irrevocably licensed on a
royalty-free and non-exclusive basis to BANDAG, giving BANDAG the non-
exclusive right to make, have made, use and sell such improvements, along
with the right to sublicense such inventions, patents and patent
applications to any and all BANDAG franchisees.
XVIII. Execution; Representations and Warranties
If FRANCHISEE has ten (10) or fewer shareholders and/or partners,
FRANCHISEE represents and warrants that the names of all its shareholders
and/or partners at the time of execution of this Agreement are listed
below, and FRANCHISEE agrees to notify BANDAG immediately of any change of
its shareholders or partners. If FRANCHISEE has more than ten (10)
shareholders and/or partners, FRANCHISEE represents and warrants that all
Controlling Persons and all persons with an interest in any BANDAG
Equipment at the time of execution of this Agreement are listed below, and
FRANCHISEE agrees to notify BANDAG immediately of any change in any of
these. FRANCHISEE further represents and warrants that the signatures
below on behalf of FRANCHISEE are duly authorized, and that the persons
signing have full power and authority to bind FRANCHISEE.
XIX. Miscellaneous
(a) It is recognized and agreed that BANDAG will confront a material risk
of severe and irreparable injury for which it will not have an adequate
remedy at law if FRANCHISEE breaches any of its obligations under Sections
I(b), (d) or (e), II(b), or (c), III(g), VI, X, XI, XIII, XVI or XVII and
that such obligations shall therefore be specifically enforceable.
(b) This is the entire Agreement and supersedes all prior agreements and
communications, either oral or in writing between the parties hereto with
respect to the subject matter hereof, except that the execution hereof
does not relieve FRANCHISEE from any obligations with respect to
materials, equipment or supplies sold or delivered by BANDAG to
FRANCHISEE, or to maintain the confidentiality of confidential information
delivered or communicated by BANDAG to FRANCHISEE, prior to the effective
date of this Agreement. Except for (i) the above-described obligations,
(ii) any product warranties made by FRANCHISEE, and (iii) FRANCHISEE's
indemnification obligations hereunder and its responsibility for product
liability on products manufactured by it at any time, BANDAG and
FRANCHISEE, each on behalf of themselves and of every company directly or
indirectly controlled by, controlling or under common control with them,
and the agents, officers, employees, successors and assigns of all of
them, release each other and the above-described persons and entities from
any and all claims, purported claims, liabilities and defaults arising
from the actions of the other under any and all prior agreements or
otherwise prior to the effective date of this Agreement. Any amendment,
addition or variation to this Agreement must be in writing and duly
executed by both BANDAG and FRANCHISEE.
(c) The representations, obligations and covenants of FRANCHISEE in
Sections II(b), III(g), V, X, XII, XVII, XIX(a) and XIX(b) (with respect
to the release) shall survive termination of this Agreement.
(d) The parties intend that all provisions will be enforceable to the
maximum extent permitted under law.
(e) FRANCHISEE acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that
the business venture contemplated by this Agreement involves certain
business risks and that its success will be largely dependent on the
ability of FRANCHISEE and its Controlling Persons as independent
businessmen. BANDAG expressly disclaims the making of, and FRANCHISEE
acknowledges that it has not received, any warranty or guarantee, express
or implied, as to the potential volume, profits or success of the business
venture contemplated by this Agreement, nor has FRANCHISEE relied on any
separate written or oral communications or understanding or on any
warranty or representation by or with BANDAG. In addition, except for any
express warranties that may be contained in manuals provided by BANDAG to
FRANCHISEE from time to time describing the capabilities of the BANDAG
Method, BANDAG expressly disclaims any warranties or representations,
express or implied, with respect to the BANDAG Method, including
merchantability and fitness for purpose. FRANCHISEE acknowledges and
agrees that it has read and understood this Agreement and the attachments
hereto, if any, that BANDAG has fully and adequately explained the
provisions of each to FRANCHISEE's satisfaction, and that BANDAG has
accorded FRANCHISEE ample time and opportunity to consult with advisors of
FRANCHISEE's own choosing about the potential benefits and risks of
entering into this Agreement.
(f) BANDAG may permit FRANCHISEE to remedy any default hereunder without
waiving the default so remedied, and a waiver of any default shall not be
a waiver of any other subsequent or prior default. BANDAG's failure to
enforce any of its rights shall not be a waiver thereof. The exercise of
any right does not limit BANDAG's right to exercise any other right; every
right of BANDAG under this Agreement is cumulative with every other right
BANDAG may have under this Agreement, under any other agreement or
otherwise.
(g) With respect to any provisions in this Agreement where BANDAG is
permitted to make certain modifications, determinations and exceptions,
they shall be within BANDAG's sole and absolute discretion unless
otherwise expressly provided in this Agreement.
IN WITNESS WHEREOF, BANDAG and FRANCHISEE have caused this Agreement to be
executed in two originals, effective as of the date of execution by
BANDAG.
FRANCHISEE BANDAG, INCORPORATED
___________________________ By: ________________________
Print Name of Corporation,
Partnership, or Individual Title: _____________________
Date: ______________________
By: _______________________
Title: ____________________ Address:
Bandag World Headquarters
Date: _____________________ 2905 North Highway 61
Muscatine, IA 52761-5886
U.S.A.
List of all partners (if a partnership) or shareholders (if a corporation)
of FRANCHISEE:
___________________________ _________________________
Print Name Print Name
___________________________ _________________________
Print Name Print Name
___________________________ _________________________
Print Name Print Name
___________________________ _________________________
Print Name Print Name
___________________________ _________________________
Print Name Print Name
<PAGE>
UNDERTAKING BY THE PRINCIPALS OF BANDAG FRANCHISEE
I (we) understand that the BANDAG SYSTEM FRANCHISE AGREEMENT between
Bandag, Incorporated ("BANDAG") and __________________________________
___________________________________________________, ("FRANCHISEE")
executed by FRANCHISEE on the _______ day of __________ 19____, provides
that upon termination of the Agreement FRANCHISEE must:
1. cease using and return to BANDAG all confidential
and proprietary written materials and all translations;
2. cease using all BANDAG trademarks and logos;
3. cease using the Bandag Method and equipment made by or for
BANDAG, and cease selling tires retreaded after date of termination with
pre-cured rubber on equipment made by or for BANDAG; and
4. cease using the word BANDAG in its corporate, trade or
business name, any assumed name, and in any other way.
In consideration of the grant of a franchise by BANDAG, other good and
valuable consideration, and my (our) access to confidential information
and the Bandag Method and Equipment, I (we) agree that in the event of
termination of the Franchise Agreement I (we) shall honor the above
understandings personally and in any undertaking in which I (we) might be
involved.
____________________ ___________________ __________
Print Name Signature Date
____________________ ___________________ __________
Print Name Signature Date
____________________ ___________________ __________
Print Name Signature Date
____________________ ___________________ __________
Print Name Signature Date
____________________ ___________________ __________
Print Name Signature Date
<PAGE>
ANNEX LISTING
ANNEX A GENERAL TERMS AND CONDITIONS OF SALE
ANNEX B BANDAG[R] LOGO AND TRADEMARK USAGE REQUIREMENTS AND POLICY
<PAGE>
ANNEX A
BANDAG, INCORPORATED ("Seller")
TERMS AND CONDITIONS OF SALE
1. OFFER, GOVERNING PROVISIONS AND CANCELLATION. THESE TERMS AND
CONDITIONS SHALL CONSTITUTE THE ENTIRE AGREEMENT BETWEEN SELLER AND BUYER,
AND SHALL BE GOVERNED BY AND SHALL BE CONSTRUED ACCORDING TO INTERNAL LAWS
OF THE STATE OF IOWA. The rights and obligations of the parties hereunder
shall not be governed by the provisions of the 1980 U.N. Convention on
Contracts for the International Sale of Goods. No order may be canceled
or altered by the Buyer except upon terms and conditions acceptable to
Seller, as evidenced by Seller's written consent. In the event of such an
approved cancellation by Buyer, Seller shall be entitled to payment of the
full price, less the amount of any expenses saved by Seller by reason of
the cancellation.
2. PRICES AND PAYMENT. All prices listed are payable in United
States Dollars. All prices are subject to change without notice, and the
price of products on order but unshipped will be adjusted to the price in
effect at the time of shipment. With respect to goods sold hereunder
other than equipment, payment is due on the terms agreed by Seller in
writing, or, if there is no such written agreement, in accordance with the
applicable price list, or, if no price list is applicable, upon Buyer's
receipt of Seller's invoice. With respect to equipment sold hereunder,
payment is due in accordance with an applicable written purchase agree-
ment, or, if none, on delivery. Notwithstanding the foregoing, at its
sole option at any time, Seller may require Buyer to make payment in
advance or by irrevocable letter of credit, and may defer shipment or
cancel any order if the Buyer does not promptly provide such payment or a
letter of credit. Any such letter of credit shall be issued for Seller's
benefit by a prime U.S. bank, shall be subject to and governed by the
Uniform Customs and Practice for Documentary Credits (ICC Publication No.
400, 1983 Revision), shall provide for payment against Seller's invoice
and bill of lading, and shall be in form and substance satisfactory to
Seller.
3. TAXES AND OTHER CHARGES. Any tax, duty, custom, inspection or
testing fee, or any other tax, fee or charge of any nature whatsoever
imposed by any governmental authority, on or measured by the transaction
between Seller and the Buyer shall be paid by the Buyer in addition to the
prices invoiced. Buyer shall provide Seller at the time the order is
submitted with any applicable exemption certificate or other document
acceptable to the authority imposing such tax, fee or charge. In the
event the Seller is required to pay any such tax, fee or charge, the Buyer
shall reimburse Seller therefor.
4. DELIVERY, CLAIMS AND FORCE MAJEURE. (a) Equipment. With
respect to equipment sold by Seller hereunder, the method and route of
shipment shall be at the sole discretion of Seller. If Seller elects to
ship by carrier: (i) sales of equipment shall be F.O.B. Seller's plant in
Muscatine, Iowa; (ii) all risk of loss or damage in transit shall be
borne by Buyer after delivery to the carrier; and (iii) all costs of
shipping shall be borne by Buyer. If Seller elects to ship by trucks or
other vehicles owned, leased or operated by Seller, sales of equipment
shall be F.O.B. Buyer's facility, except that shipping will be charged to
Buyer at standard common carrier rates then in effect. Seller will notify
Buyer of the method of shipment prior to shipment.
(b) Rubber Products. With respect to orders for less than 500
pounds of Rubber Products sold by Seller hereunder: (i) shipments will be
F.O.B. point of shipment; (ii) all risk of loss or damage in transit shall
be borne by the Buyer after delivery to the carrier; and (iii) all costs
of shipping shall be borne by Buyer. With respect to orders for 500
pounds or more of Rubber Products, shipments will be F.O.B. Buyer's plant,
and all costs of shipping shall be borne by Seller. As used herein,
"Rubber Products" shall mean any and all tread rubber, tread materials and
all other materials used between the tread materials and the casing
(including without limitation all cushion rubber, cushion gum and other
adhesives, repair gums, filled materials, special extrusions, rebelting
materials, cements and other rubber items).
(c) Promotional Materials. With respect to items other than
equipment and Rubber Products, and intended primarily for promotional or
publicity purposes: (i) sales by Seller hereunder will be F.O.B. point
of manufacture or point of shipment; (ii) all risk of loss or damage in
transit shall be borne by Buyer after delivery by the manufacturer to a
carrier; and (iii) all costs of shipping shall be borne by Buyer.
(d) Other Terms.
(i) Any additional expense arising from the use of a method or route
of shipment requested by Buyer shall be borne entirely by Buyer. Seller
reserves the right to make delivery in installments, unless otherwise
agreed in writing by Seller; all such installments are to be separately
invoiced and paid for when due per invoice, without regard to subsequent
deliveries, and any deliveries not in dispute shall be paid for regardless
of other controversies relating to other delivered or undelivered merchan-
dise. Delay in delivery of any installment shall not relieve buyer of its
obligations to accept remaining deliveries. In any case where Buyer is to
bear the cost of shipping, Buyer shall bear all costs of bags, barrels,
boxes, pallets or other containers used to ship goods hereunder. No
shipping containers may be returned to Seller unless Seller has agreed to
such return in advance and all return freight is prepaid by Buyer. Seller
may, at any time, require any or all costs of shipping for which Buyer is
responsible under the terms hereof to be prepaid by Buyer.
(ii) Claims for shortages or other errors in delivery must be
made in writing to Seller within 10 days after receipt of shipment.
Failure to give such notice shall constitute unqualified acceptance and a
waiver of all such claims by Buyer. Claims for loss or damage to goods in
transit, in cases where the goods are delivered by a carrier, shall be
made to the carrier and not to Seller.
(iii) All delivery dates are approximate. Seller shall not
be liable for any damage as a result of any delay or failure to deliver
due to any act of God, act of the Buyer, embargo or other governmental
act, regulation or request, fire, accident, strike, slow down or other
labor difficulties, war, riot, delay in transportation, defaults of common
carriers, inability to obtain necessary labor, materials or manufacturing
facilities or, without limiting the foregoing, any other event beyond the
Seller's control. In the event of any such delay the date of delivery
shall be extended for a period equal to the length of the delay. Buyer's
exclusive remedy for other delays and for Seller's inability to deliver
for any reason, including Buyer's inability to produce goods which meet
the requirements of this contract, shall be rescission of this agreement.
5. STORAGE. If the products are not shipped within fifteen (15)
days after notification to the Buyer that they are ready for shipping, for
any reason beyond Seller's reasonable control, including the Buyer's
failure to give shipping instructions, Seller may store such products at
the Buyer's risk in a warehouse or yard or upon Seller's premises, and the
Buyer shall pay all handling, transportation and storage charges at the
prevailing commercial rates upon submission of invoices therefor.
6. CHANGES. Seller may at any time make such changes in design and
construction of products as Seller deems appropriate, without notice to
Buyer. Seller may furnish suitable substitutes for materials unobtainable
because of priorities or regulations established by governmental authority
or nonavailability of materials from suppliers.
7. WARRANTIES.
(a) The NDI. With respect to any equipment that is the subject of a
lease agreement between Buyer and Seller (whether or not a true lease)
(the "NDI"), Seller warrants that each machine, model upgrade or feature
of the NDI will be in good working order on the day it is installed. If
it is proven to Seller's satisfaction not to have been in good working
order at the time of installation, the machine, model upgrade or feature
will be repaired or replaced at Seller's option.
(b) Other Products. Seller warrants that the original purchaser of
equipment manufactured by Seller other than the NDI will have the right to
enjoy the equipment free and clear of claims of third persons against
Seller. Seller warrants products manufactured by it and supplied hereun-
der other than the NDI to be free from defects in materials and workman-
ship under normal use and service for a period of six months from date of
shipment (nine months for equipment manufactured by Seller if such equip-
ment is exported from country of manufacture when shipped to Buyer),
except that the following components of the repair gum extruder are so
warranted only for 90 days from date of shipment: the circuit boards,
barrels, barrel adapters and air motors, four months on cushion gum. This
warranty is only applicable to products properly maintained and used
according to Seller's instructions. If, within the applicable period, any
such product shall be proved to Seller's satisfaction to be defective,
such product shall be repaired or replaced at Seller's option, or, also at
Seller's option, the purchase price shall be refunded.
(c) Other Terms. (i) In the case of the NDI, such repair or
replacement, and, in the case of products other than the NDI, such repair,
replacement or refund, shall be Seller's sole obligation and Buyer's
exclusive remedy hereunder. With respect to the NDI, such remedy is
conditioned upon Seller's receiving written notice of any alleged malfunc-
tioning within ten (10) days of installation, and, at Seller's option,
return of the NDI to Seller, F.O.B. its factory. With respect to products
other than the NDI, such remedy shall be conditioned upon Seller's
receiving written notice of any alleged defect within ten (10) days after
its discovery and, at Seller's option, return of such products to Seller,
F.O.B. its factory. This warranty does not apply to products that Seller
determines have been damaged by misuse, neglect, improper operation,
accident or alteration, or that Seller determines have been tampered with
or repaired in a manner not authorized by Seller. Products supplied by
Seller hereunder that are manufactured by someone else are not warranted
by Seller in any way, but Seller agrees to assign to Buyer any warranty
rights in such products that Seller may have from the original manufactur-
er.
(ii) THE WARRANTY CONTAINED IN THIS SECTION 7 IS EXCLUSIVE AND IN
LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AND
SELLER EXPRESSLY DISCLAIMS AND EXCLUDES ANY IMPLIED WARRANTY OF MERCHANT-
ABILITY OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
The exclusive remedy stated in this Section 7 shall not be deemed to have
failed of its essential purpose so long as, (1) with respect to the NDI,
Seller is willing and able to repair or replace the malfunctioning item
within ninety (90) days of the date on which Seller determines a
malfunction to exist, or (2) with respect to products other than the NDI,
Seller is willing and able to repair or replace defective products, or
refund the purchase price, within ninety (90) days of the date on which
Seller determines a defect to exist.
(iii) Any description of the products, whether in writing or
made orally by Seller or Seller's agents, specifications, samples, models,
bulletins, drawings, diagrams, engineering sheets or similar materials
used in connection with Buyer's order are for the sole purpose of identi-
fying the products and shall not be construed as an express warranty. Any
suggestions by Seller or Seller's agents regarding use, application or
suitability of the products shall not be construed as an express warranty
unless confirmed to be such in writing by Seller.
8. COMPLIANCE WITH LAWS. Seller certifies that these goods were
produced in compliance with all applicable requirements of sections 6, 7
and 12 of the Fair Labor Standards Act, as amended, and all regulations
and orders of the United States Department of Labor issued under section
14 thereof. Seller does not warrant, however, that any materials,
equipment and features meet the requirements of any local, state or
federal laws or regulations (other than those specifically enumerated
above) applicable to Buyer, including those issued under OSHA. The
equipment described herein is provided only with the safety devices and
features shown in the applicable specifications. Should the customer
require any additional devices or features, they should be specifically
identified, and Seller will adjust the price accordingly.
9. RETURNS. Products may be returned to Seller only when Seller's
written permission, signed by duly authorized personnel of Seller, shall
be obtained by Buyer in advance. Goods may not be returned unless they
are in marketable condition. Returned products must be securely packaged
and reach Seller without damage. Any cost incurred by Seller to put
products in marketable condition will be charged to Buyer.
10. PATENTS, TRADEMARKS AND COPYRIGHTS. Seller will, at its own
expense, defend any suits that may be instituted by anyone against Buyer
for alleged infringement of any United States patent, trademark, or
copyright relating to any products manufactured and furnished by Seller
hereunder, if such alleged infringement consists of the use of such
products, or parts thereof, in Buyer's business, and if Buyer shall have
made all payments then due hereunder, provided, however, that Buyer shall
give Seller immediate notice in writing of any such suit, shall transmit
to Seller immediately upon receipt all processes and papers served upon
Buyer, shall permit Seller through its counsel, either in the name of
Buyer or in the name of Seller, to defend the same and shall give all
needed information, assistance and authority to enable Seller to do so.
If such products are in such suit held in and of themselves to infringe
any valid United States patent, trademark or copyright, then: (a) Seller
will pay any final award of damages in such suit attributable to such
infringement, and (b) if in such suit use of such products by Buyer is
permanently enjoined by reason of such infringement, Seller shall, at its
own expense and at its sole option, either (i) procure for Buyer the right
to continue using the products, (ii) modify the products to render them
noninfringing, (iii) replace the products with noninfringing goods, or
(iv) refund the purchase price and the transportation costs paid by Buyer
for the products.
Notwithstanding the foregoing, Seller shall not be responsible for
any compromise or settlement made without its written consent, or for
infringements of combination or process patents covering the use of the
products in combination with other goods or materials not furnished by
Seller. The foregoing states the entire liability of Seller for infringe-
ment, and in no event shall Seller be liable for consequential damages
attributable to an infringement.
As to any products furnished by Seller to Buyer manufactured in
accordance with drawings, designs or specifications proposed or furnished
by Buyer, or any claim of contributory infringement resulting from the
use or resale by Buyer of products sold hereunder, Seller shall not be
liable, and Buyer shall indemnify Seller and hold Seller harmless from and
against any and all loss, liability, damage, claim or expense (including
but not limited to Seller's reasonable attorneys' fees and other costs of
defense) incurred by Seller as a result of any claim of patent, trademark,
copyright or trade secret infringements, or infringements of any other
proprietary rights of third parties.
The purchase of any products hereunder does not entitle Buyer to
employ the same in any patented process.
11. EXCLUSION OF CONSEQUENTIAL DAMAGES AND DISCLAIMER OF LIABILITY;
BUYER'S INDEMNITY.
Seller's liability with respect to breaches of warranty shall be limited
as provided in Section 7 hereof. With respect to other breaches of this
contract, Seller's liability shall in no event exceed the contract price.
SELLER SHALL NOT BE SUBJECT TO AND DISCLAIMS: (1) ANY OTHER OBLIGATIONS
OR LIABILITIES ARISING OUT OF BREACH OF CONTRACT OR OF WARRANTY, (2) ANY
OBLIGATIONS WHATSOEVER ARISING FROM TORT CLAIMS (INCLUDING NEGLIGENCE AND
STRICT LIABILITY) OR ARISING UNDER OTHER THEORIES OF LAW WITH RESPECT TO
PRODUCTS SOLD OR SERVICES RENDERED BY SELLER, OR ANY UNDERTAKINGS, ACTS OR
OMISSIONS RELATING THERETO, AND (3) ALL CONSEQUENTIAL, INCIDENTAL AND
CONTINGENT DAMAGES WHATSOEVER. Without limiting the generality of the
foregoing, Seller specifically disclaims any liability for penalties
(including administrative penalties), special or punitive damages, damages
for lost profits or revenues, loss of use of products or any associated
equipment, cost of capital, facilities or services, downtime, shut-down or
slowdown costs, spoilage of material, or for any other types of economic
loss. All the limitations and disclaimers contained in this paragraph and
in the rest of this contract shall apply to claims of Buyer's customers or
any third party asserted by Buyer against Seller for indemnity or
contribution, as well as direct claims of Buyer against Seller.
Buyer shall indemnify Seller against any and all losses, liabilities,
damages and expenses (including, without limitation, attorneys' fees and
other costs of defending any action) that Seller may incur as a result of
any claim by Buyer or others arising out of or in connection with the
products and/or services sold hereunder and based on product or service
defects not proven to have been caused solely by Seller's negligence.
12. MANUALS, BROCHURES, INSTRUCTIONS. Any and all operating
manuals, instructions, brochures, warnings or the like concerning the
goods supplied hereunder shall be written in the English language, and are
supplied as an aid to Buyer and are not represented to be accurate,
complete or sufficient. Buyer warrants that it will accurately transcribe
such manuals, instructions, brochures or warnings to appropriate
languages and dialects to comply with all applicable laws and so that its
employees and all third party users of the goods will be properly informed
of all the contents thereof. Buyer will indemnify and hold harmless
Seller against all liabilities and expenses (including attorneys' fees)
arising out of the use of the goods by the Buyer or a third party in any
case where the Buyer fails to make available adequate warnings, labels,
manuals and instructions concerning the proper and normal use of the
goods.
13. SEVERABILITY. If any provisions of these terms and conditions
of sale shall be deemed illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of any
legal and enforceable provision hereof, which shall be construed as if
such illegal and unenforceable provision(s) had not been inserted herein.
<PAGE>
ANNEX B
BANDAG[R] LOGO AND TRADEMARK USAGE REQUIREMENTS AND POLICY
(a) BANDAG shall have the exclusive right to register BANDAG's trademarks,
service marks and logos (collectively, the "Marks") with governmental
authorities. All use of the Marks by Franchisee and goodwill arising
therefrom shall inure exclusively to BANDAG's benefit. Franchisee shall
assign to BANDAG any rights acquired in the Marks or any registration
thereof.
(b) Franchisee shall: (i) not impair the value of BANDAG's Marks,
whether registered or not; (ii) use only the Marks designated by BANDAG;
(iii) not use trademarks, service marks, symbols, slogans, logos or the
like that are confusingly similar to the Marks; (iv) not use the Marks, or
any word, name or other symbol tending to be confusingly similar to the
Marks, in the name of any bank account of Franchisee or in any other way
tending to create liability of BANDAG or other than in connection with the
BANDAG Method and the sale of tires retreaded by the BANDAG Method; and
(v) immediately cease any pre-existing use of the Marks that conflicts
with the terms of this Agreement. Franchisee shall promptly report any
unauthorized use of the Marks to BANDAG. Unless BANDAG objects in writing
to Franchisee at any time, Franchisee may, but is not required to, include
the Mark "BANDAG" in its corporate or trade name and use such name in the
business of making and selling tires retreaded by the BANDAG Method. If
Franchisee elects to use the name BANDAG in its corporate or trade name,
Franchisee shall not: (1) use the word BANDAG as the first word in its
corporate name (e.g., "Bandag Retreads, Inc." is prohibited), (2) use the
name BANDAG in a corporate name with the name of any state, province,
county, city, governmental or political unit or subdivision, (e.g., "San
Francisco Bandag, Inc.", "Texas Bandag", etc. would be prohibited), or (3)
use the name BANDAG in a corporate name being used by any other BANDAG
franchisee (wherever located). In addition, Franchisee must comply with
all policies and procedures adopted by BANDAG from time to time regarding
use of the Mark BANDAG in the names of its franchisees. Franchisee shall,
immediately upon request by BANDAG, consent in writing, in such form as
may be requested by BANDAG, to the use of the "BANDAG" Mark by third
parties in their corporate or trade name.
(c) Franchisee shall display the name "BANDAG" in its Territory on its
buildings, signs and trucks used in the business of retreading tires by
the BANDAG Method, and shall reasonably advertise and promote the name
"BANDAG" in connection with such business subject, however, at all times,
to the restrictions set forth below. Every use of the name "BANDAG" in
any display, advertisement, promotion or otherwise by Franchisee shall be
in a form and character approved by BANDAG.
BANDAG encourages franchisees to use the BANDAG logo for all kinds of
approved advertising and identification within its Territory. However, to
protect the integrity of BANDAG's Marks, BANDAG restricts the usage of the
BANDAG Marks by areas.
The following is a list of authorized uses of the BANDAG Marks within
Franchisee's Territory:
1. Building and standing signs on property used by Franchisee.
2. Vehicles used in Franchisee's business.
3. Yellow-page advertising.
4. Newspaper advertising.
5. Electronic media advertising (radio and/or television).
6. Envelope and letterhead.
7. Business cards.
8. Collateral materials (leaflets, handouts, price lists, calendars
etc.)
9. Billboards.
10. Community service program sponsorship.
The following is a listing of unauthorized uses of the BANDAG Marks:
1. Building and/or standing signs located outside Franchisee's
Territory.
2. Vehicles used exclusively outside Franchisee's Territory.
3. Yellow-page advertising which does not cover part of
Franchisee's Territory.
4. Newspapers not generally distributed within Franchisee's
Territory.
5. Electronic media not servicing Franchisee's Territory.
6. Envelope and letterheads having addresses outside Franchisee's
Territory.
7. Business cards having an address outside Franchisee's Territory.
8. Sales and informational materials using an address outside
Franchisee's Territory.
9. Billboards located outside Franchisee's Territory.
10. Community service program sponsorship of groups not utilized by
the citizens within Franchisee's Territory.
EXHIBIT 10.4
MISCELLANEOUS FRINGE BENEFITS FOR EXECUTIVES
BLANKET TRAVEL ACCIDENT INSURANCE
For those employees who are required to travel in carrying out their job
responsibilities, the Corporation provides at no cost a travel accident
insurance plan. The coverage is based on position title with Senior Vice
Presidents insured for $200,000 and the Chairman of the Board for
$400,000. This plan provides coverage for accidental death while
traveling and while away from home on Corporation business.
PERSONAL EXCESS LIABILITY POLICIES
The Corporation reimburses certain executive officers for the cost of
personal excess liability policies.
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement is made by and between Bandag, Incorporated
("Bandag") and Michel L. Petiot ("Petiot").
WHEREAS, Bandag is desirous of continuing the employment of Petiot and has
requested he accept the position of Senior Vice President - Development;
and
WHEREAS, Petiot desires to continue employment with Bandag and has agreed
to accept the position of Senior Vice President - Development;
NOW, THEREFORE, the parties agree as follows:
1. Effective January 1, 1994, Petiot as Senior Vice President -
Development shall be transferred back to the United States and shall
no longer participate in the corporation's expatriate program of
compensation. As an employee of Bandag located in the United States,
commencing January 1, 1994, and for a period of three years
thereafter, Petiot shall receive a minimum salary of U.S. $90,000
with upward adjustment within the sole discretion of the Board of
Directors of Bandag. Petiot shall continue to participate,
commensurate with the above-stated compensation, in the United States
fringe benefit programs, including the Bandag Restricted Stock Plan,
for the like term. The award of additional shares shall continue to
be within the sole discretion of the committee established by the
Board of Directors of Bandag for such purpose, but nothing in this
agreement shall adversely affect the right of Petiot to previously
awarded shares upon attainment of age 60.
2. In accordance with established Bandag practice, Bandag shall pay
the relocation expenses of Petiot back to the United States and shall
pay for tax preparation expenses for calendar year 1993.
3. Petiot agrees that for a period of two years following any
termination of employment with Bandag, he shall not, within North
America or Western Europe, directly compete with Bandag by engaging
in executive employment directly related to the manufacture of
retreading truck tires utilizing precured tread rubber. This
covenant not to compete does not extend to Petiot's employment with
any tire manufacturer or other business concern which operates a
division engaged in the manufacture of pre-cured tread rubber as long
as Petiot does not assume major executive responsibilities for the
manufacture of pre-cured tread rubber.
Dated at Muscatine, Iowa this 20 date of December, 1993.
BANDAG, INCORPORATED
By: /s/ Mel Hershey /s/ Michel Petiot
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
BANDAG, INCORPORATED AND SUBSIDIARIES
Year Ended December 31
1993 1992 1991
(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. 27,226 27,617 27,732
Additional shares assuming exercise
of dilutive stock options - based
on the treasury stock method
using average market price 111 126 110
----- ----- ----
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 27,337 27,743 27,842
====== ====== ======
Net earnings before cumulative
effect of changes in accounting
methods $78,734 $83,023 $79,599
Cumulative effect of changes in
accounting methods, net of
related tax effect --- (220) ---
------ ------ ------
Net Earnings $78,734 $82,803 $79,599
======= ====== ======
Net earnings per Common and Common
equivalent share:
Before cumulative effect of
changes in accounting methods $2.88 $2.99 $2.86
Cumulative effect of changes in
accounting methods, net of
related tax effect --- (.01) ---
----- ----- -----
Net Earnings $2.88 $2.98 $2.86
===== ===== ====
Net earnings per Common share -
assuming full dilution:
Average shares outstanding 27,226 27,617 27,732
Additional shares assuming
exercise of dilutive stock
options - based on the treasury
stock method using the year-end
price if higher than the average
market price 113 119 122
------ ----- ------
FULLY DILUTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES 27,339 27,736 27,854
====== ====== ======
Net earnings before cumulative
effect of changes in accounting
methods $78,734 $83,023 $79,599
Cumulative effect of changes in
accounting methods, net of
related tax effect --- (220) ---
------ ------ ------
Net earnings $78,734 $82,803 $79,599
====== ======= ======
Net earnings per Common and
Common equivalent share:
Before cumulative effect of
changes in accounting methods $2.88 $2.99 $2.86
Cumulative effect of changes in
accounting methods, net of
related tax effect --- (.01) ---
----- ------ -----
Net earnings 2.88 $2.98 $2.86
==== ===== =====
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
The Corporation has the following subsidiaries including significant
subsidiaries as defined in Regulation S-X, each incorporated in the
jurisdiction stated opposite its name. All of the following subsidiaries
are 100% owned by the Corporation. The Corporation has additional
subsidiaries which, if considered in the aggregate as a single subsidiary,
would not constitute a "significant subsidiary" as such term is defined in
Regulation S-X.
Jurisdiction of
Name of Subsidiary Incorporation
Bandag A.G..........................................Switzerland
Bandag Canada Ltd...................................Canada
Bandag Europe N.V...................................Belgium
VV-System AG........................................Switzerland
Bandag Licensing Corporation........................Iowa
Bandag Incorporated of S.A. (Proprietary) Limited...South Africa
Bandag Group Limited................................New Zealand
Bandag do Brasil Ltda...............................Brazil
Bandag B.V..........................................Netherlands
Bandag de Mexico, S.A. de C.V.......................Mexico
