AKRON—Competitive pressures in the marketplace had varying effects on two tire-related companies reporting first-quarter financials. Bandag
Muscatine, Iowa-based Bandag's consolidated net earnings were up 9.7 percent in the first quarter despite a decline in sales from the same 1998 period.
The earnings improvement reflected the company's progress in returning operating expenses to ``more traditional levels after three years of heavy investment in new technologies and capabilities,'' said Bandag Chairman and CEO Martin G. Carver.
Consolidated net earnings for the quarter ended March 31 were $10 million, up from $9.15 million for the year-earlier period. Net sales, including those of the company's Tire Distribution Systems (TDS) subsidiary, were $224.1 million, down 5 percent from $235.9 million the previous year.
Bandag attributed the quarter's sales decline to continued industry consolidation and intense competitive pressures that appear likely to continue throughout 1999.
Although these factors reduced the actual number of Bandag dealers, Mr. Carver said, ``our distribution network remains strong, and we are fully committed to assuring that our strategic coverage continues to meet fleet customer needs.''
Bandag's traditional business—sales of tread rubber, retreading supplies and equipment—fell 10.7 percent in the period to $139.5 million.
TDS experienced a net loss before interest and taxes for the quarter of $1.9 million compared with a loss of $1.1 million for the 1998 period. Quarterly net sales of $84.6 million were up 6.2 percent from the $79.7 million reported a year earlier.
Despite the subsidiary's first-quarter loss, Mr. Carver said Bandag remains satisfied with the performance of TDS. He pointed out that first-quarter sales are seasonally slow for many commercial and retail sales operations, suggesting it's not unusual for them to show a loss during that three-month period.
He noted that during the first quarter, Bandag's recently formed Tire Management Solutions Inc. subsidiary signed its first major outsourcing contract, agreeing to furnish all the new and retreaded tire needs of Roadway Express Inc., one of the nation's three largest less-than-truckload trucking fleets.
Separately, Bandag has started training classes at its $10 million, 84,000-sq.-ft. training center in Muscatine. Some detail work remains to be done before a June inauguration ceremony, but the company is using the facility to nearly full capacity, according to the Muscatine Journal.
The center houses 15 classrooms, 13 offices, 96 work stations and a 14,000-sq.-ft. hands-on learning lab. Bandag said it intends to use the center for training both its own employees and dealer personnel.
TBC posted record sales for the first quarter of 1998, ended March 31, due in large measure to the inclusion of Carroll's Inc., a wholesale distributor with annual sales of about $150 million that TBC acquired last November.
Memphis, Tenn.-based TBC's sales for the quarter grew $21.5 million—or 15.3 percent—to $162.2 million, resulting in a 20.8-percent jump in net earnings to $3.81 million.
Not only did its financials improve, compared with the 1998 quarter, but unit shipments of tires grew 6 percent, said CEO Louis S. DiPasqua.
TBC's Big O chain of retail tire outlets also has continued to grow, adding 20 stores over the past year for a current total of 434, Mr. DiPasqua said. ``Plans are to continue expanding this successful business unit,'' he added.
Speaking at the annual meeting of TBC stockholders April 28, Mr. DiPasqua predicted ``noteworthy growth'' in both sales and earnings throughout 1999, due in part to TBC's ``strong competitive presence.''
``We are more than twice the size of the second-largest factor in the private-brand segment of the replacement tire market,'' he said.