MUSCATINE, Iowa (Oct. 24, 2002) — Bandag Inc.'s net income rose 34 percent in the third quarter as costs fell more than sales did, improving margins. Raw materials costs, however, are expected to rise throughout the fourth quarter, putting pressure on further margin improvements, the company said.
Separately, Bandag agreed to sell five Tire Distribution Systems (TDS) outlets in Alabama to McGriff Industries Inc. of Cullman, Ala.
Net income in the quarter ended Sept. 30 hit $19.6 million as operating expenses fell $4 million from a year ago. Sales fell 5 percent to $245.9 million, primarily due to a 10-percent drop in sales by the TDS commercial tire and retreading unit, Bandag said. TDS's sales were affected by the loss of several significant customers—most notably the bankruptcy of Consolidated Freightways—and the general impact of the economy, Bandag said.
The earnings improvement is largely attributable to a $4.8 million decrease in litigation costs and $2.2 million in net foreign exchange gains, offset by a $1 million decrease in pension income and a $1.8 million increase in TDS operating expenses. TDS ended the quarter $959,000 in the red on an operating basis.
Bandag's tread rubber volume in the U.S., which accounts for the majority of its North American revenues, was essentially unchanged from a year ago, but this compares favorably with industry shipments that are estimated to be down nearly 2 percent, the company said.
"Looking forward, we are hopeful that what we saw in the third quarter represents stabilizing market forces in the commercial tire industry and will serve as a base for commercial tire industry recovery beginning in 2003," Bandag CEO Martin G. Carver said in a prepared statement.
For the nine-month period, Bandag reported a consolidated net loss of $14.7 million. That loss includes the write-off of $47.3 million net of income tax, resulting from the adoption of new accounting rules as of Jan. 1. Net income before the charges was $32.5 million, a slight improvement over the adjusted 2001 figure.
Consolidated net sales for the nine months fell 5 percent to $669.5 million.