MUSCATINE, Iowa (Jan. 29, 2003) — Bandag Inc. reported consolidated net income of $2.8 million in 2002 vs. earnings of $43.8 million a year ago as consolidated net sales fell 5.1 percent to $949.3 million.
The year-end earnings figures were impacted by an accounting change that took effect at the beginning of 2002 in which the company discontinued the amortization of goodwill. Income before the accounting change in 2002 would have been $50.1 million, Bandag said, compared with $51.8 million in 2001.
For the year, Bandag said consolidated sales and cost of products sold fell by 5 percent and 8 percent, respectively, from 2001. Consolidated gross margin improved 2 percent points from the prior year.
Sales in the company's Tire Distribution Systems commercial distribution network also fell for the year, declining 8.5 percent to $364.9 million largely due to soft market conditions and the loss of several significant customers, most notably the bankruptcy of Consolidated Freightways during 2002. TDS also divested nine commercial locations and two retail outlets, and closed several other locations during the year that contributed approximately $34 million in sales during 2002 and $42 million in 2001, Bandag said.
TDS reported an operating loss of $11.4 million for the year ended Dec. 31 compared with a reported loss of $11.1 million in 2001, which included amortization of goodwill. Excluding the amortization of goodwill, TDS's loss in 2001 was $2.8 million, Bandag said.
“Even though Bandag's distribution subsidiary, Tire Distribution Systems Inc., faced several challenges during the year, as a result of divestitures and other strategic actions, it emerged by year-end as a smaller, more efficient operation within the Bandag Stragetic Alliance,” said Martin Carver, chairman and CEO.
In the fourth quarter, Bandag said its net sales fell 6.2 percent to $231 million, while net income grew slightly to $17.5 million vs. $17.5 in the same 2001 period. Fourth quarter 2001 net income included $2 million of goodwill amortization, the company said.
TDS posted an operating loss of $3 million in 2002's fourth quarter vs. an operating loss of $5.7 million in the year-ago period.
The company said its litigation costs dropped from $18.3 million in 2001 to $10.7 million for last year, and for the fourth quarter were $0.7 million vs. $5.2 million in the same period in 2001.