MUSCATINE, Iowa (Feb. 1, 2000)—Costs of restructuring, combined with lower sales of tread rubber and higher operating costs at a major subsidiary, sent Bandag Inc.´s net earnings plummeting 56.3 percent for the fourth quarter of 1999.
For the three months ended Dec. 31, Bandag´s net earnings plunged to $8.11 million from $18.6 million in the year-earlier quarter, while net sales slipped 4.3 percent to $263.2 million.
The fourth-quarter results included a one-time charge of $13.5 million for restructuring costs, primarily in North America in the company´s traditional tread rubber and retreading equipment business. After tax benefits, this charge took approximately $7.7 million off the company´s bottom line. Without it, Bandag´s net earnings would have slid only about 14.7 percent.
For the full year, net earnings skidded 11.8 percent to $52.3 million on a 4.4-percent drop in sales to $1.01 billion. Again, without the one-time charge in the fourth quarter, the company´s net earnings for the year would have risen by slightly more than 1 percent.
While costly in the short run, the restructuring program has left Bandag with a streamlined organization focused on "key initiatives," said Chairman and CEO Martin G. Carver.
Globally, the company´s sales of tread rubber dropped 6 percent for both the fourth quarter and full year, Mr. Carver said.
Within the company´s commercial tire dealership subsidiary, Tire Distribution Systems Inc., a 20.5-percent increase in operating expenses combined with the costs of acquisitions to increase the unit´s fourth-quarter operating loss nearly fivefold to $3.17 million.
Sales for the quarter rose 3.7 percent to $98.3 million, but the increase was entirely attributable to acquisitions, Mr. Carver said. Without them, TDS´ sales were off 2 percent, he said—primarily the result of discontinuing the sale of certain off-the-road tires.
For the year, TDS posted an operating loss of $2.51 million, compared with operating earnings of $2.52 million in 1998, as sales rose 4.4 percent to $393.1 million.
Mr. Carver said the unit´s operating expense levels "reflect the cost of consolidation of certain operations and implementation on common systems across the organization, which should provide the basis for future profitability improvements."