MUSCATINE, Iowa-On the heels of a respectable fourth quarter financial report and record consolidated net sales for 1995, Bandag Inc. is embarking on a period of ``strategic expansion.'' But the retreading materials and equipment manufacturer is playing it close to the vest about just what that expansion may involve and how it will accomplish its goals.
Bandag reported its 1995 fourth quarter net sales of $198.9 million grew by 8 percent over the same period the previous year.
However, net earnings for the three months ended last Dec. 31 were down by that same percentage, to $25.5 million.
Consolidated net sales for 1995 finished at a record $740.4 million, an increase of 14 percent over 1994. The firm's 1995 net earnings were $97 million, compared with net income of $94 million in 1994.
Bandag Chairman and CEO Martin Carver said the company ``is entering a period of strategic expansion which will require investment in new distribution, training, sales and marketing initiatives that, for the time being, will disproportionately raise'' Bandag's level of operating expenses over the near term.
He said that while pleased with the firm's performance, ``we experienced softness in unit volume during the last three quarters of the year-a trend that is expected to continue into 1996.''
Continued soft sales, coupled with an expected significant increase in operating expenses, ``will unfavorably impact 1996 results, and earnings in the first two quarters will probably be less than a year ago,'' he continued.
Then, in a somewhat cryptic description of the company's expansion plans, Mr. Carver said: ``The transportation industry is going through a period of rapid, fundamental change. As in any time of significant change, there are profit opportunities available to organizations with foresight and willingness to invest in the resources necessary to capitalize on major industry shifts.''
Asked what plans the Muscatine-based firm has in the way of expansion, a spokesman said ``there is little we care to discuss publicly, because if we share with everyone, there's no longer any strategic advantage to Bandag.''
Concerning training, the spokesman said Bandag has reorganized its training department and is bringing in ``professionals to assess needs and develop curriculum that will result in training for our dealers and employees that is unmatched in the industry.''
Thomas E. Dvorchak, senior vice president and CFO, would not indicate what ``profit opportunities'' exist for Bandag.
The near-term increase in expenses to which Mr. Carver referred concern training, Mr. Dvorchak explained, as well as some ``extraordinary distribution costs'' in regard to what he called ``the Treadco situation.''
Bandag and Treadco Inc.-its largest customer-are currently embroiled in litigation over a number of issues, including the cancellation by Bandag of franchise agreements with eight Treadco shops.
``We're going to incur higher distribution costs,'' he said, ``because we have to replace that (Treadco) distribution.''
He said Bandag is ``getting set up to either add new or expand existing distribution. But we're not able to do anything until the individual Treadco franchises expire in a given market.''