MUSCATINE, Iowa (Jan. 28, 2004) — Despite lower sales in both the fourth quarter and for the year, Bandag Inc. ended both periods with higher net income in part from improved margins.
Bandag reported net income of $29.1 million in the fourth quarter, up from $17.5 million a year ago. Both figures included favorable tax adjustments of about $3 million. For 2003, net income rose to $60.2 million. This compares with net income of $2.8 million in 2002, which was impacted by an accounting change of $47.3 million recorded in the first quarter of that year.
For the fourth quarter, the Muscatine-based company reported consolidated net sales of $225.7 million, down 2 percent from $231.0 million for the year-ago period. Bandag attributed the decline primarily to lower sales from its Tire Distribution Systems (TDS) Inc. subsidiary, which was impacted by several divestitures and closures in 2002 and 2003.
Bandag said fourth quarter sales for TDS fell 39 percent to $49.3 million. The divested and closed locations had sales of about $33.6 million in the fourth quarter of 2002.
In the 2003 fourth quarter, TDS reported an operating profit of $1.6 million, compared with an operating loss of $3.0 million a year ago. Higher gross margins and the divestiture of less profitable locations positively affected profit in 2003, according to Bandag.
Bandag's net sales for the year were down 9 percent to $816.4 million from $900.5 million in 2002.
“Bandag improved its margins in both the traditional business and TDS during the final three months of 2003,” said Martin Carver, chairman and CEO. “Our investments in capabilities to provide customized solutions to our customers served us well during a year that proved to be challenging for the transportation industry.”
Also affecting sales was a 2-percent dip in North American business unit volume from 2002. Net sales in the segment were up about $14 million primarily from a price increase that took effect Jan. 1, 2003, and a shift in sales from TDS to independent dealers.
“Financial results have improved at our European, International and most particularly our TDS operations for the fourth quarter of 2003,” Mr. Carver said. “Even though economic recovery remains in the early stages, our progress during 2003 positions Bandag well to benefit from new revenue opportunities and continued economic improvement.”