FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ________ to ________
Commission file number 1-7007
BANDAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Iowa 42-0802143
(State of incorporation) (I.R.S Employer Identification No.)
2905 N HWY 61, Muscatine, Iowa 52761-5886
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: 319/262-1400
Not Applicable
(Former name, address, or fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes _X_ No ___.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $1 par value; 9,685,136 shares as of July 31, 1998.
Class A Common Stock, $1 par value; 11,001,299 shares as of July 31, 1998.
Class B Common Stock, $1 par value; 2,047,550 shares as of July 31, 1998.
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
INDEX
Part I : FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Statements of Earnings 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II : OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
EXHIBITS :
Exhibit 27 Financial Data Schedule (EDGAR filing only) 19
Exhibit 27.1 Restated June 1997 Financial Data Schedule
(EDGAR filing only) 20
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements:
Unaudited Condensed Consolidated Statements of Earnings
(In thousands except per share data)
Three Months Ended Six Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Net sales $266,127 $195,748 $502,058 $365,266
Other income 3,210 2,571 7,051 5,578
-------- -------- -------- --------
269,337 198,319 509,109 370,844
Cost of products sold 163,556 115,302 303,805 215,851
Engineering, selling,
administrative and other expenses 76,460 53,989 157,988 103,268
Interest expense 3,295 550 5,676 957
-------- -------- -------- --------
243,311 169,841 467,469 320,076
-------- -------- -------- --------
Earnings before income taxes 26,026 28,478 41,640 50,768
Income taxes 11,858 10,918 18,322 19,468
-------- -------- -------- --------
Net earnings $ 14,168 $ 17,560 $ 23,318 $ 31,300
======== ======== ======== ========
Net earnings per share Basic $ 0.62 $ 0.77 $ 1.02 $ 1.37
Net earnings per share Diluted $ 0.62 $ 0.77 $ 1.02 $ 1.37
Comprehensive net earnings $ 14,703 $ 34,051 $ 25,348 $ 49,035
Cash dividends per share $ 0.2750 $ 0.2500 $ 0.5500 $ 0.5000
Depreciation included in expense $ 8,470 $ 8,590 $ 19,370 $ 16,784
Goodwill amortization included
in expense $ 2,200 $ 250 $ 4,440 $ 499
Weighted average shares outstanding:
Basic 22,784 22,760 22,784 22,816
Diluted 22,907 22,895 22,903 22,952
See notes to condensed consolidated financial statements.
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
1998 1997
ASSETS:
Cash and cash equivalents $ 85,902 $196,400
Investments 17,268 1,575
Accounts receivable - net 220,250 231,648
Inventories:
Finished products 103,682 90,228
Materials & work-in-process 19,187 17,295
-------- --------
122,869 107,523
Other current assets 58,197 61,848
-------- --------
Total current assets 504,486 598,994
Property, plant, and equipment 485,183 459,446
Less accumulated depreciation & amortization (277,310) (261,846)
-------- --------
207,873 197,600
Other assets 94,136 103,310
-------- --------
Total assets $806,495 $899,904
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY:
Accounts payable $ 48,430 $ 52,100
Income taxes payable 22,719 20,039
Accrued employee compensation and benefits 27,139 28,874
Accrued marketing expenses 29,195 32,608
Other accrued expenses 69,932 73,195
Short-term notes payable and other liabilities 5,678 99,726
-------- --------
Total current liabilities 203,093 306,542
Deferred income tax and other liabilities 127,291 129,948
Stockholders' equity:
Common stock; $1 par value;
authorized - 21,500,000 shares;
Issued and outstanding - 9,754,891 shares
in 1998; 9,751,063 in 1997 9,755 9,751
Class A Common stock; $1 par value;
authorized - 50,000,000 shares;
Issued and outstanding - 11,006,199 shares
in 1998; 11,013,561 in 1997 11,006 11,014
Class B Common stock; $1 par value;
authorized - 8,500,000 shares;
Issued and outstanding - 2,047,595 shares
in 1998; 2,048,785 in 1997 2,048 2,049
Additional paid-in capital 6,344 6,052
Retained earnings 456,267 445,887
Equity adjustment from foreign currency
translation (9,309) (11,339)
-------- --------
Total equity 476,111 463,414
-------- --------
Total liabilities & stockholders' equity $806,495 $899,904
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
6/30/98 6/30/97
Operating Activities
Net earnings $ 23,318 $ 31,300
Depreciation and amortization 23,810 17,283
Decrease in operating assets and
liabilities-net (2,743) (11,283)
-------- --------
Net cash provided by operating activities 44,385 37,300
Investing Activities
Additions to property, plant and equipment (29,643) (17,797)
Purchases of investments (19,206) (2,570)
Maturities of investments 3,513 1,398
-------- --------
Net cash used in investing activities (45,336) (18,969)
Financing Activities
Proceeds from short-term notes payable 2,576 3,768
Principal payments on short-term notes payable
and other liabilities (98,335) (1,234)
Cash dividends (12,548) (11,427)
Purchases of Common Stock (405) (7,320)
-------- --------
Net cash used in financing activities (108,712) (16,213)
Effect of exchange rate changes on cash and
cash equivalents (835) (685)
-------- --------
Increase (decrease) in cash and cash equivalents (110,498) 1,433
Cash and cash equivalents at beginning of year 196,400 31,453
-------- --------
Cash and cash equivalents at end of period $ 85,902 $ 32,886
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Comprehensive Net Earnings
Comprehensive net earnings for the three-month period ended June 30, 1998
and 1997 and the six-month period ended June 30, 1998 and 1997 were as
follows (in thousands):
Three Months Ended Six Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Net earnings $14,168 $17,560 $23,318 $31,300
Other comprehensive income items:
Foreign currency translation 535 (654) 2,030 (5,454)
Unrealized appreciation on
marketable securities - 17,145 - 23,189
------- ------- ------- -------
Comprehensive net earnings $14,703 $34,051 $25,348 $49,035
======= ======= ======= =======
Tire Distributions Systems, Inc. Acquisitions
The second quarter and year-to-date 1998 consolidated results include Tire
Distribution Systems, Inc. (TDS), the Company's newly formed subsidiary,
which acquired five tire dealerships effective November 1, 1997. TDS
results include net sales of $96,600,000 and $176,300,000 and pretax
income of $1,900,000 and $700,000, including $1,900,000 and $3,900,000 of
goodwill amortization for the second quarter and year-to-date,
respectively. Intercompany sales from Bandag to TDS, which have been
eliminated in consolidation, totaled $12,900,000 and $25,300,000 for the
second quarter and year-to-date, respectively.
Results in 1997 on a pro forma basis for second quarter and six month to-
date include net sales of $99,500,000 and $182,000,000 and pretax income
of $4,400,000 and $5,400,000 including $2,000,000 and $4,000,000 of
goodwill amortization, respectively. Intercompany sales on a pro forma
basis from Bandag to TDS, which would have been eliminated in
consolidation, totaled $13,000,000 and $23,900,000 for the second quarter
and year-to-date, respectively.
BANDAG, INCORPORATED AND SUBSIDIARIES
Earnings Per Share
Per share and weighted average share outstanding amounts for the three
months and six months ended June 30, 1997 have been restated to conform
with the requirements of Statement of Financial Accounting Standards No.
128, "Earnings per Share", issued in February 1997.
The following table sets forth the computation of basic and diluted
earnings per share:
(In thousands except per share data)
For The Three For The Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
Numerator:
Net Earnings $14,168 $17,560 $23,318 $31,300
Denominator:
Denominator for basic earnings
per share-weighted-average shares 22,784 22,760 22,784 22,816
Effect of dilutive securities:
Non-vested restricted stock 33 32 32 32
Stock options 90 103 87 104
------ ------ ------ ------
Dilutive potential common shares 123 135 119 136
------ ------ ------ ------
Denominator for diluted earnings
per share-weighted-average
shares and dilutive potential
common shares 22,907 22,895 22,903 22,952
====== ====== ====== ======
Net Earnings Per Share:
Basic $ 0.62 $ 0.77 $ 1.02 $ 1.37
====== ====== ====== ======
Diluted $ 0.62 $ 0.77 $ 1.02 $ 1.37
====== ====== ====== ======
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
Item 2 -Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Consolidated net sales for the second quarter ended June 30, 1998, were
36% higher than the same period last year. The increase was a result of
the Company's fourth quarter 1997 acquisition of the five Bandag
dealerships, now comprising the Company's TDS subsidiary. The acquired
dealerships added $96,600,000 and $176,300,000 in sales before elimination
of $12,900,000 and $25,300,000 of intercompany sales from Bandag, Inc. to
TDS in consolidation for the second quarter and six months to-date,
respectively. Excluding TDS sales, sales for Bandag's traditional business
for the second quarter and six months to-date decreased 6% and 3%,
respectively, on a unit volume decrease of 1% for the second quarter and a
unit volume increase of 3% for the six months to-date. The spread between
unit volume and traditional business sales was due to the unfavorable
impact of the strong U.S. dollar on the translated value of foreign
currency denominated sales, and lower equipment sales.
Consolidated gross margins for the second quarter and six months to-date
were two percentage points and one percentage point lower, respectively,
than the same periods last year. The consolidated gross margins for the
second quarter and six months to-date were impacted by TDS subsidiaries'
lower margins. Excluding TDS, Bandag's traditional business gross margin
for the second quarter and six months to-date were both approximately
three percentage points higher than the same periods last year due to
decreases in raw material, manufacturing and distribution costs, and
better manufacturing absorption from higher production levels.
Consolidated operating expenses (engineering, selling, and administrative)
for the second quarter and six months ended June 30, 1998 were
substantially higher than the same period last year because of the
addition of TDS. Excluding the effect of TDS, operating expenses for the
second quarter and six months to-date would have been 6% and 8% higher,
respectively, compared to the same periods last year. The increased
expenses reflect the Company's continuing efforts to build people and
process capabilities in the Company's domestic operations to meet the
Company's goals to bring value-added tire management services to large
fleet customers. Consolidated other expenses were substantially higher
than last year due to the impact of unfavorable changes to foreign
exchange rates, primarily on results for the Company's Asian operations,
and the goodwill amortization related to the TDS acquisitions.
Consolidated net earnings and diluted net earnings per share for the
quarter and six months to-date were both 19% and 25% lower, respectively,
than the same periods last year due to higher operating expenses, combined
with a five and a half percentage point increase in the Company's
effective tax rate.
Given the outlook for continued, unfavorable currency exchange rates,
higher operating costs, and tighter inventory management at the dealer
level, the Company expects its traditional business to perform well below
1997 levels, resulting in earnings per share to be in the $2.40 to $2.60
range for the year, compared to $3.32 per diluted share in 1997, exclusive
of 1997's one-time gain from the sale of securities and the effect of non-
recurring charges. Sales revenue has not kept pace with the growth in
operating expenses as the Company continues to increase expenditures to
improve sales capabilities, invest in the training of employees and
dealers, develop information systems and build capability with its dealers
to provide tire management services for fleet customers.
On April 1, 1998 the Company issued a news release announcing that it had
signed an agreement with Tire Centers, Inc. (TCI) to end their franchise
relationship through an orderly transition process to be completed by mid-
1999. TCI, with 16 franchise locations, represented approximately 3% of
the Company's consolidated net sales in 1997. The Company expects minimal
disruption to fleet customers because it believes alternative Bandag
dealer capability already exists in most markets covered by the agreement.
Domestic Traditional Business Operations
Sales for the Company's domestic operations for the second quarter, which
include export shipments to various Latin and South American countries and
some Asian areas, were 8% lower than the same period last year on a 7%
decrease in unit volume. For the six months, sales were 4% lower than the
same period last year on a 2% decrease in unit volume. The sales decreases
for the quarter and six months were higher than the respective shortfall
in volume primarily due to product mix with lower equipment sales a
contributing factor.
Gross margin for the Company's domestic traditional business for the
second quarter and six months was approximately three percentage points
higher than the same periods last year, which was about a half percentage
point higher than the first quarter comparison. The increase was
primarily due to an approximate 2.5% decrease in raw material costs, with
favorable manufacturing absorption basically accounting for the rest of
the increase.
Operating expenses for the second quarter were 8% higher than the same
period last year and 18% higher for the six months. The increase in
spending for both the quarter and six months was primarily due to
increased sales and marketing staffing and other costs related to
expanding dealer and customer capabilities. Other expenses for both the
second quarter and six months were approximately 50% lower than the same
periods last year primarily due to foreign exchange hedging gains related
to and partially offsetting unfavorable exchange adjustments recorded by
the Company's Asian operations.
Earnings before income taxes for the second quarter and six months were 4%
and 5% lower, respectively, than the same periods last year. The lower
earnings were primarily due to the increased operating expenses.
Tire Distribution Systems.
Second quarter and six months to-date 1998 results include net sales of
$96,600,000 and $176,300,000 and pretax income of $1,900,000 and $700,000
including $1,900,000 and $3,900,000 of goodwill amortization,
respectively, for the Company's TDS operations. Since TDS commenced
operations during the fourth quarter of 1997, there is no prior year
comparison.
Results in 1997 on a pro forma basis for second quarter and six month to-
date include net sales of $99,500,000 and $182,000,000 and pretax income
of $4,400,000 and $5,400,000 including $2,000,000 and $4,000,000 of
goodwill amortization, respectively. Sales for both the second quarter
and six months to-date were 3% lower than pro forma results over the same
periods last year. Same-store sales were basically even with what the
acquired dealerships recorded during the prior year period under separate
ownership despite disruptions caused by changing major new tire suppliers.
TDS' second quarter profitability improved significantly over first
quarter 1998, benefiting from business seasonality.
European Operations
Sales for the Company's European operations for the second quarter were
13% lower than the same period last year on a 2% decrease in unit volume.
Unit volume for the six months to-date was 3% higher than the volume for
the same period last year, although sales decreased by 12%. When stated
in local currency, total sales for the second quarter and six months to-
date were 7% and 3% lower, respectively, than the same periods last year.
Sales of retread material in local currency for the second quarter and six
months to-date were 3% lower and 3% higher, respectively, than the same
periods last year. The relatively strong performance of the U.S. dollar
is reflected in the negative effect of exchange rates used to translate
local currency denominated results into U.S. dollars. Sales for the second
quarter and six months to-date were also negatively affected by the 43%
and 48% drop in equipment sales, respectively.
Gross margin for the Company's European operations for the second quarter
was approximately four percentage points higher than the same period last
year. The higher gross margin was due to lower manufacturing and
distribution costs, and lower raw material costs in the quarter. Gross
margin for six months to-date was three percentage points higher than the
same period last year for the same reasons stated above.
Operating expenses for the second quarter decreased 13% over the same
period last year and were 20% lower for the six months to-date. These
expenses, when stated in local currency, were 8% and 12% lower than the
same periods last year. The decrease in operating expenses was primarily
due to lower spending related to marketing and promotional programs. The
percentage differences between the U.S. dollar and local currency reflect
the impact of changes in exchange rates on the translation of local
currencies into US dollars.
Earnings before income taxes for the second quarter increased 56% over the
same period last year and was 96% higher for the six months to-date due to
lower operating expenses.
Other Foreign Operations
Combined sales for the Company's other foreign operations increased 2% for
both the second quarter and six months to-date over the same periods last
year on unit volume increases of 16% for both the second quarter and six
months to-date. The increase in sales was primarily due to unit volume
increases in Brazil, Mexico, and South Africa. Sales for the Company's
Brazil operations for the second quarter and six months to-date were 18%
and 16% higher, respectively, than the same periods last year on
respective unit volume increases of 25% and 20%. Sales for the Company's
Mexico operations for the quarter and six months to-date were 25% and 20%
higher, respectively, than the same periods last year on respective unit
volume increases of 17% and 24%. Sales for the Company's South African
operations for the quarter and six months to-date were 13% higher than and
even with, respectively, the same periods last year on respective unit
volume increases of 33% and 19%. The 14% point difference between unit
volume and combined sales for foreign operations was a result of the lower
translated value of foreign-currency-denominated sales and lower equipment
sales.
Unit volume for the Company's Asian operations decreased 25% and 14% for
the second quarter and six months to-date, respectively, over the same
periods last year. Asian operations include Malaysia and Indonesia, whose
results are included in Other Foreign Operations, and US Exports to Asia,
whose results are included in Domestic operations.
Combined second quarter gross margin for the Company's other foreign
operations was approximately three percentage points higher than last year
for both the quarter and six months to-date due to higher equipment sales
in the prior year, which carry lower gross margins than retread rubber
products, and higher export sales out of Malaysia. Malaysia's gross
profit for the second quarter and six months to-date increased 23
percentage points and 21% points, respectively, over the same periods last
year.
Combined operating expenses for the quarter and six months for the
Company's other foreign operations were 25% and 9% higher, respectively,
than the same periods last year. The higher operating expenses for both
the quarter and six months resulted from higher spending on sales and
marketing promotional programs, and increased staffing. Other expenses
were significantly higher than last year. The majority of the increase
was due to unfavorable foreign exchange adjustments, primarily in the
Company's Asian operations. These unfavorable foreign exchange
adjustments were partially offset on a consolidated basis through gains on
related hedges entered into by the Company's domestic operations.
Earnings before income taxes for the second quarter and six months were
34% and 62% lower than the same periods last year due to the economic
conditions in Asia, which produced the unfavorable foreign exchange
adjustment included in expenses.
Impact of Year 2000
The Company operates with a combination of purchased and internally
developed software systems. Many of the older computer systems were
written using two digits rather than four to define the applicable year.
As a result, those computer programs have time-sensitive software that
recognizes a date using "00" as the year 1900 rather than the year 2000.
This could cause a system failure or miscalculations causing disruptions
of operations. The Company will be required to modify or replace software
that is not Year 2000 compliant so that its computer systems will function
properly with respect to dates in the Year 2000 and thereafter.
Purchased software systems account for a significant portion of the
Company's software environment, especially for date sensitive applications
such as Payroll and Accounts Receivable. The Company has performed
assessments in recent years to identify clearly non-compliant software
systems and to initiate replacement activities. Most of those activities
are completed or well underway. The Company anticipates completing the
Year 2000 project by mid-1999 giving priority to those systems likely to
encounter problems and those having more significant potential impact to
operations. The costs related to the Year 2000 Issue are expected to total
approximately $8,800,000 of which $4,500,000 has been spent or committed
to date.
The Company presently believes that with a combination of actions,
including modification of existing software, conversions to newer versions
of purchased software and replacement with new systems, the Year 2000
Issue will not pose significant operational problems for its computer
systems. On the other hand, if such modifications and conversions are
not made or not completed on a timely basis, the Year 2000 Issue could
have a material impact on the operations of the Company. In addition to
remediation actions, the Company's contingency plans will be reviewed
and updated to address Year 2000 risks.
During the year, the Company will continue to have formal communications
with its significant suppliers and large customers to determine the extent
to which the Company's activities would be impacted by those third
parties' failure to remediate their own Year 2000 Issues. However, there
can be no guarantee that the systems of other companies on which the
Company relies will be corrected on a timely basis and therefore have no
adverse effect on the Company.
The Company has assessed its own products to determine if it has exposure
to contingencies related to the Year 2000 Issue and it believes that any
such exposure will not be material.
Forward-Looking Information - Safe Harbor Statement.
In addition to historical information, this quarterly report on Form 10-Q
contains forward-looking statements regarding events and trends which may
affect the Company's future operating results and financial position.
Such statements are identified by the use of such words as "believes" and
"expects". Future operations are subject to certain risks and
uncertainties that could cause actual results to differ materially from
those reflected in the forward-looking statements. Such uncertainties and
risks include, but are not limited to, changes in economic conditions in
the market areas served by the Company's operations, increased competitive
activity, fluctuations in the price paid for raw materials, monetary
policy changes in the various countries where the Company has significant
operations, continued spending in sales, training, development of
information systems and expenses related to developing capabilities to
provide tire management services for fleet customers, and the risk that
dealer capabilities in the markets affected by the TCI agreement may not
prove sufficient for adequate fleet coverage.
The cost of the Year 2000 Issue and the date on which the Company believes
it will complete Year 2000 modifications are based on management's best
estimates which are based on numerous assumptions of future events,
including the continued availability of certain resources, third party
plans and other factors. There can be no guarantee that these estimates
will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to purchase Year 2000 systems, the
ability to locate and correct all relevant computer codes, the complexity
of the Year 2000 Issue due to dispersed operating units and geographic
locations and similar uncertainties.
Financial Condition:
Operating Activities.
Net cash provided by operating activities for the six months ended June
30, 1998, was $7,085,000 more than the amount for the same period last
year primarily due to lower accounts receivable and other noncurrent
assets, which was partially offset by increases in inventory.
Investing Activities.
The Company spent $29,643,000 on capital expenditures for the six months
ended June 30, 1998, compared to $17,797,000 spent for the same period
last year. The Company typically funds its capital expenditures from
operating cash flow.
The Company's excess funds are invested in financial instruments with
various maturities, but only instruments with an original maturity date of
over 90 days are classified as investments for balance sheet purposes.
The Company's purchases of investments exceeded maturities by $15,693,000
during the six months, leaving total investments at approximately
$17,268,000 as of June 30, 1998.
Financing Activities.
Cash dividends totaled $6,273,000 and $12,548,000 for the quarter and six
months, respectively, compared to totals of $5,695,000 and $11,427,000 for
the same periods last year. The Company purchased 10,400 shares of its
outstanding Common and Class A Common stock, at prevailing market prices,
for $405,000 during the six months ended June 30, 1998. Cash dividends
and stock purchases were funded from operational cash flows. During the
first quarter, the Company paid off $87,224,000 in short-term notes that
it had issued in conjunction with the November 1997 TDS acquisitions, and
approximately $12,700,000 in various other TDS notes payable assumed in
the acquisitions.
The Company continues to have $111,000,000 in funds available under unused
lines of credit.
PART II
OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the shareholders of the Company was held on
May 5, 1998.
(c) Three matters were voted upon at the annual meeting. First, the
following four nominees, all of whom were incumbent directors,
were elected as directors for a three-year term ending in 2001
except for Gary E. Dewel who was elected for a two year term ending in
2000 by the following vote:
Votes Broker
Name Votes For Against Abstentions Non-Votes
Roy J. Carver Jr. 29,123,137 84,510 14,552 - 0 -
James R. Everline 29,119,729 84,578 17,891 - 0 -
Gary E. Dewel 29,120,380 87,271 14,547 - 0 -
Phillip J. Hanrahan 29,127,634 84,421 10,143 - 0 -
A vote was held to act upon a proposal to approve and adopt the
Bandag, Incorporated Employee Stock Purchase Plan. The shareholders
ratified the proposal by the following vote:
Votes For Votes Against Abstentions Broker Non-Votes
29,133,655 47,568 40,974 2
Shareholders also voted upon a proposal to ratify the selection of Ernst
& Young LLP as independent auditors of the Company for the year ending
December 31, 1998. The shareholders ratified the selection by the
following vote:
Votes For Votes Against Abstentions Broker Non-Votes
29,206,017 7,701 8,481 - 0 -
Item 5 Other Information
The deadline for submission of shareholder proposals pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, for
inclusion in the Company's proxy statement for its 1999 Annual Meeting of
Shareholders is December 7, 1998. Additionally, if the Company receives
notice of a shareholder proposal after February 20, 1999, the persons
named in proxies solicited by the Board of Directors of the Company for
its 1999 Annual Meeting of Shareholders may exercise discretionary voting
power with respect to such proposal.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (EDGAR filing only)
27.1 Restated June 1997 Financial Data Schedule
(EDGAR filing only)
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANDAG, INCORPORATED
(Registrant)
Date: August 12, 1998 \S\ Martin G. Carver
Martin G. Carver
Chairman and Chief Executive Officer
Date: August 12, 1998 \S\ Warren W. Heidbreder
Warren W. Heidbreder
Vice President, Chief Financial Officer
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit Page
27 Financial Data Schedule (EDGAR filing only) 19
27.1 Restated June 1997 Financial Data Schedule
(EDGAR filing only) 20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND THE UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEET OF THE REGISTRANT AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1998, RESPECTIVELY, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. AMOUNTS ARE IN
THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 85,902
<SECURITIES> 17,268
<RECEIVABLES> 234,089
<ALLOWANCES> 13,839
<INVENTORY> 122,869
<CURRENT-ASSETS> 504,486
<PP&E> 485,183
<DEPRECIATION> 277,310
<TOTAL-ASSETS> 806,495
<CURRENT-LIABILITIES> 203,093
<BONDS> 121,399
0
0
<COMMON> 22,809
<OTHER-SE> 453,302
<TOTAL-LIABILITY-AND-EQUITY> 806,495
<SALES> 502,058
<TOTAL-REVENUES> 509,109
<CGS> 303,805
<TOTAL-COSTS> 303,805
<OTHER-EXPENSES> 157,988
<LOSS-PROVISION> 2,499
<INTEREST-EXPENSE> 5,676
<INCOME-PRETAX> 41,640
<INCOME-TAX> 18,322
<INCOME-CONTINUING> 23,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,318
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND THE UNAUDITED
CONSOLIDATED CONDENSED BALANCE SHEETS OF THE REGISTRANT AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. AMOUNTS ARE IN THOUSANDS OF
DOLLARS EXCEPT PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 32,886
<SECURITIES> 3,261
<RECEIVABLES> 219,270
<ALLOWANCES> 13,056
<INVENTORY> 62,788
<CURRENT-ASSETS> 349,602
<PP&E> 402,270
<DEPRECIATION> 256,122
<TOTAL-ASSETS> 618,405
<CURRENT-LIABILITIES> 132,489
<BONDS> 12,686
0
0
<COMMON> 22,780
<OTHER-SE> 418,585
<TOTAL-LIABILITY-AND-EQUITY> 618,405
<SALES> 365,266
<TOTAL-REVENUES> 370,844
<CGS> 215,851
<TOTAL-COSTS> 215,851
<OTHER-EXPENSES> 103,268
<LOSS-PROVISION> 825
<INTEREST-EXPENSE> 957
<INCOME-PRETAX> 50,768
<INCOME-TAX> 19,468
<INCOME-CONTINUING> 31,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,300
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
