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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1993;
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-7007
BANDAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Iowa 42-0802143
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2905 North Highway 61, Muscatine, Iowa 52761-5886
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 319/262-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock - $1 Par Value New York Stock Exchange and
Class A Common Stock - $1 Par Value Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock - $1 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
periods that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 21, 1994: Common Stock,
$745,467,306; Class A Common Stock (non-voting), $954,797,012; Class B
Common Stock, $253,273,608.
The number of shares outstanding of the issuer's classes of common
stock as of March 21, 1994: Common Stock, 11,216,176 shares. Class A
Common Stock, 13,541,971 shares. Class B Common Stock, 2,359,345 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's Proxy Statement for the Annual Meeting of
the Shareholders to be held May 5, 1994 are incorporated by reference in
Part III.
PART I
ITEM 1. BUSINESS
All references herein to the "Corporation" or "Bandag" refer to
Bandag, Incorporated and its subsidiaries unless the context indicates
otherwise.
Bandag is engaged in the production and sale of precured tread rubber
and equipment used by its franchisees for the retreading of tires for
trucks, buses, light commercial trucks, industrial equipment, off-the-road
equipment and passenger cars. Bandag specializes in a patented
cold-bonding retreading process which it introduced to the United States
in 1957. The Bandag Method, as it is called, separates the process of
vulcanizing the tread rubber from the process of bonding the tread rubber
to the tire casing, allowing for optimization of temperature and pressure
levels at each stage of the retreading process. Although a Bandag retread
is typically sold at a higher unit price than the alternative "hot-capped"
process, as well as retreads sold using competitive precured systems, the
Bandag product is considered to be superior, resulting in a longer lasting
retread and lower user cost per mile.
The Corporation and its licensees have 1,325 franchisees worldwide,
with 38% located in the United States and 62% internationally. The
majority of Bandag's franchisees are independent operators of full service
tire distributorships. Bandag's revenues primarily come from the sale of
retread material and equipment to its franchisees. Bandag's products
compete with new tire sales, as well as retreads produced using other
retread processes. The Corporation concentrates its marketing effort on
existing franchisees and on expanding their respective market penetration.
Due to its strong distribution system, marketing efforts, and leading
technology, Bandag, through its independent franchisee network, has been
able to maintain the largest market presence in the retreading industry.
The Company as a tread rubber supplier to its independent network of
franchisees competes in the light and heavy truck tire replacement market.
Both new tire manufacturers and tread rubber suppliers compete in this
market. While the Company has independent franchisees in over 110
countries, and competes in all of these geographic markets, its largest
market is the United States. Truck tires retreaded by the Company's
franchisees make up approximately 16% of the U.S. light and heavy truck
tire replacement market. The Company's primary competitors are new tire
manufacturers such as Goodyear Tire and Rubber Company, Bridgestone
Corporation and Groupe Michelin. Goodyear Tire and Rubber Company also
competes in the U.S. market as a tread rubber supplier to a combination of
company owned and independent retreaders.
As a result of a recapitalization of the Corporation approved by the
Corporation's shareholders on December 30, 1986, and substantially
completed in February 1987, the Carver Family (as hereinafter defined)
obtained absolute voting control of the Corporation. As of March 21, 1994
the Carver Family beneficially owned shares of Common Stock and Class B
Common Stock constituting 73% of the votes entitled to be cast in the
election of directors and other corporate matters. The "Carver Family" is
composed of (i) Lucille A. Carver, a director and widow of Roy J. Carver,
(ii) the lineal descendants of Roy J. Carver and their spouses, and (iii)
certain trusts and other entities for the benefit of the Carver Family
members.
Description of Business
The Corporation's business consists of the franchising of patented
processes for the retreading of tires for trucks, buses, light commercial
trucks, industrial equipment, off-the-road equipment, and passenger cars,
and the production and sale of precured tread rubber and related products
used in connection with these processes.
The Bandag retreading process can be divided into two steps: (i)
manufacturing the tread rubber and (ii) bonding the tread to a tire
casing. Bandag manufactures over 500 separate tread designs and sizes,
treads specifically designed for various applications, allowing fleet
managers to fine-tune their tire program. Bandag tread rubber is
vulcanized prior to shipment to its independent franchisees. The Bandag
franchisee performs the retreading process of bonding the cured tread to a
prepared tire casing. This two-step process allows utilization of the
optimum temperature and pressure levels at each step. Lower temperature
levels during the bonding process results in a more consistent, higher
quality finished retread with less damage to the casing. Bandag has
developed a totally integrated retreading system with the raw materials,
bonding process and manufacturing equipment specifically designed to work
together as a whole.
The Corporation also franchises the use of another cold process
precured retreading system, the Vakuum Vulk Method, for which the
Corporation owns worldwide rights. In connection with the Vakuum Vulk
Method, the Corporation currently sells tread rubber, equipment, and
supplies to franchisees located in certain European countries.
Markets and Distribution
The principal market categories for tire retreading are truck and
bus, with more than 90% of the tread rubber sold by the Corporation used
in the retreading of these tires. Additionally, the Corporation markets
tread rubber for the retreading of off-the-road equipment, industrial and
light commercial vehicle and passenger car tires; however, historically,
sales of tread rubber for these applications have not contributed
materially to the Corporation's results of operations.
Trucks and Buses Tread rubber, equipment, and supplies for
retreading and repairing truck and bus tires are sold primarily to
independent franchisees by the Corporation to use the Bandag Method for
that purpose. Bandag has 1,325 franchisees throughout North America,
Central America, South America, Europe, Africa, Far East, Australia and
New Zealand. These franchisees are owned and operated by independent
franchisees and corporations, some with multiple franchises and/or
locations. Of these franchisees 500 are located in the United States.
Additionally, the Corporation has approximately 65 franchisees in Europe
who retread tires using the Vakuum Vulk Method. One hundred twenty-three
of Bandag's foreign franchisees are franchised by licensees of the
Corporation in Australia and India. A limited number of franchisees are
trucking companies which operate retread shops essentially for their own
needs. A few franchisees also offer "hot-cap" retreading and most sell
one or more lines of new tires.
The current franchise agreement offered by the Corporation grants the
franchisee the non-exclusive retread manufacturing rights to use the
Bandag Method for one or more applications and the Bandag trademarks in
connection therewith within a specified territory, but the franchisee is
free to market Bandag products outside the territory. No initial
franchise fee is paid by a franchisee for his franchise.
Other Applications The Corporation continues to manufacture and
supply to its franchisees a limited amount of tread for Off-the-Road (OTR)
tires. The Corporation's program for retreading of industrial tires
includes all varieties, solid and pneumatic, and its light commercial
vehicle program is directed at the market of light trucks and recreational
vehicles.
Regulations
Various federal and state authorities have adopted safety and other
regulations with respect to motor vehicles and components, including
tires, and various states and the Federal Trade Commission enforce
statutes or regulations imposing obligations on franchisors, primarily a
duty to disclose material facts concerning a franchise to prospective
franchisees. Management is unaware of any present or proposed regulations
or statutes which would have a material adverse effect upon the
Corporation's business, but cannot predict what other regulations or
statutes might be adopted or what their effect on the Corporation's
business might be.
Competition
The Corporation faces strong competition in the market for
replacement truck and bus tires, the principal retreading market which it
serves. The competition comes not only from the major manufacturers of
new tires, but also from manufacturers of retread- ing materials.
Competitors include producers of "camelback", "strip stock", and "slab
stock" for "hot-cap" retreading, as well as a number of producers of
precured tread rubber. Various methods for bonding precured tread rubber
to tire casings are used by competitors.
Bandag retreads are often sold at a higher price than tires retreaded
by the "hot-cap" process. The Corporation believes that the superior
quality and greater mileage of Bandag retreads and expanded service
programs to franchisees and end users outweigh any price differential.
Bandag franchisees compete with many new tire dealers and retreading
operators of varying sizes, which include shops operated by the major new
tire manufacturers, large independent retread companies, retreading
operations of large trucking companies, and smaller commercial tire
dealers.
Sources of Supply
The Corporation manufactures the precured tread rubber, cushion gum,
and related supplies in Corporation-owned manufacturing plants in the
United States, Canada, Brazil, Belgium, South Africa, Mexico, Malaysia and
New Zealand. The Corporation has a 40% minority interest in its licensee
in India. The Corporation also manufactures pressure chambers, tire
casing analyzers, buffers, tire builders, tire handling systems, and other
items of equipment used in the Bandag and Vakuum Vulk retreading methods.
Curing rims, chucks, spreaders, rollers, certain miscellaneous equipment,
and various retreading supplies, such as repair patches sold by the
Corporation, are purchased from others.
The Corporation purchases rubber and other materials for the
production of tread rubber and other rubber products from a number of
suppliers. The rubber for tread is primarily synthetic and obtained
principally from sources which most conveniently serve the respective
areas in which the Corporation's plants are located. Although synthetic
rubber and other petrochemical products have periodically been in short
supply and significant cost fluctuations have been experienced in previous
years, the Corporation to date has not experienced any significant
difficulty in obtaining an adequate supply of such materials. However,
the effect on operations of future shortages will depend upon their
duration and severity and cannot presently be forecast.
The principal source of natural rubber, used for the Corporation's
cushion gum, is the Far East. The supply of natural rubber has
historically been adequate for the Corporation's purposes. Natural rubber
is a commodity subject to wide price fluctuations as a result of the
forces of supply and demand. Synthetic prices have historically been
related to the cost of petrochemical feedstocks which are relatively
stable. A relationship between natural rubber and synthetic rubber prices
exists, but it is by no means exact.
Patents
The Corporation owns or has licenses for the use of a number of
United States and foreign patents covering various elements of the Bandag
and Vakuum Vulk Methods. The Corporation has patents covering improved
features which began expiring in 1993, and the Corporation has
applications pending for additional patents.
The Corporation's patent counsel has advised the Corporation that the
United States patents are by law presumed valid and that the Corporation
does not infringe upon the patent rights of others. While the outcome of
litigation can never be predicted with certainty, such counsel has advised
the Corporation that, in his opinion, in the event of litigation placing
the validity of such patents at issue, the Corporation's United States
patent position should remain adequate.
The protection afforded the Bandag Method by foreign patents owned by
the Corporation, as well as those under which it is licensed, varies among
different countries depending mainly upon the extent to which the elements
of the Bandag Method are covered, the strength of the patent laws and the
degree to which patent rights are upheld by the courts. Patent counsel
for the Corporation is of the opinion that its patent position in the
foreign countries in which its principal sales are made is adequate and
does not infringe upon the rights of others. The Corporation has,
however, extended its foreign market penetration to some countries where
little or no patent protection exists.
The Corporation does not consider that patent protection is the
primary factor in its successful retreading operation, but rather, that
its proprietary technical "know-how", product quality, franchisee support
programs and effective marketing programs are more important to its
success.
The Corporation has secured registrations for its trademark and
service mark BANDAG, as well as other trademarks and service marks, in the
United States and most of the other important commercial countries.
Other Information
The Corporation conducts research and development of new products,
primarily in the tire retreading field, and the improvement of materials,
equipment, and retreading processes. The cost of this research and
development program was approximately $14,715,000 in 1991, $12,612,000 in
1992, and $12,321,000 in 1993.
The Company's business has seasonal characteristics which are tied
not only to the overall performance of the economy, but more specifically
to the level of activity in the trucking industry. Tire demand does,
however, lag the seasonality of the trucking industry. The Company's
third and fourth quarters have historically been the strongest in terms of
sales volume and earnings.
As stated in the Company's 13D filed pursuant to the acquisition of
the HON Industries common stock, "The shares of Common Stock purchased by
Bandag have been acquired for investment purposes. Bandag believes that
the Common Stock represents an attractive investment opportunity at this
time." The Company continues to believe that HON Industries' common stock
is a good, long-term investment consistent with the Company's overall
corporate strategy to maximize long term shareholder value. The Company
purchased the stock in 1987 and 1988 at a cost of $25.3 million and its
market value at the end of 1993 was $69.5 million.
The Corporation has sought to comply with all statutory and
administrative requirements concerning environmental quality. The
Corporation has made and will continue to make necessary capital
expenditures for environmental protection. It is not anticipated that
such expenditures will materially affect the Corporation's earnings or
competitive position.
As of December 31, 1993, the Corporation had 2,334 employees.
Financial Information about Industry Segments
As stated above, the Corporation's continuing operations are
conducted in one principal business and, accordingly, the Corporation's
financial statements contain information concerning a single industry
segment.
Revenues of Principal Product Groups
The following table sets forth (in millions of dollars), for each of
the last three fiscal years, revenues attributable to the Corporation's
principal product groups:
1993 1992 1991
Revenues:
Tread rubber, cushion gum,
and retreading supplies $555.9 $544.9 $524.4
Other products (1) 39.8 51.6 64.9
Corporate (2) 5.4 5.9 4.6
_____ _____ _____
Total $601.1 $602.4 $593.9
(1) Includes retreading equipment, rubber compounds, and the sale of
new and retreaded tires and related services.
(2) Consists of interest and dividend income.
Financial Information about Foreign and Domestic Operations
Financial Statement "Operations in Different Geographic Areas and Sales by
Principal Products" follows on page 10.
Operations in Different Geographic Areas and Sales by Principal Products
The Company's operations are conducted in one principal business, which
includes the manufacture of precured tread rubber, equipment and supplies
for retreading tires.
Information concerning the Company's operations by geographic area and
sales by principal product for the years ended December 31, 1993, 1992 and
1991 is shown below (in millions):
Information concerning operations in different geographic areas:
United States Western Europe Other
1993 1992 1991 1993 1992 1991 1993 1992 1991
Revenues:
Revenues from unaffiliated customers (1) (2) $376.1 $361.0 $372.8 $104.6 $119.4 $111.0 $115.0 $116.1 $105.5
Transfers between areas (3) 25.5 26.3 22.9 0.2 0.5 0.6 3.5 5.9 5.2
______ ______ ______ ______ ______ ______ ______ ______ ______
Geographic area totals $401.6 $387.3 $395.7 $104.8 $119.9 $111.6 $118.5 $122.0 $110.7
Elimination's (deduction)
Corporate revenues
Total Revenues
Earnings (Expenses):
Operations (4) $110.4 $110.6 $101.9 $1.9 $4.7 $15.5 $15.5 $17.7 $15.5
Interest income
Interest expense
General corporate expenses
Earnings Before Income Taxes
Assets at December 31:
Operations $258.2 $256.0 $251.2 $71.8 $85.9 $71.2 $66.2 $63.3 $55.0
Corporate (5)
Total Assets
Liabilities at December 31:
Operations $76.6 $64.5 $96.5 $19.5 $24.3 $24.8 $13.8 $16.3 $10.7
Corporate (5)
Total Liabilities
Sales information by principal product group:
Retread materials and supplies
Other
Consolidated
1993 1992 1991
Revenues:
Revenues from unaffiliated customers (1) (2) $595.7 $596.5 $589.3
Transfers between areas (3) 29.2 32.7 28.7
______ ______ ______
Geographic area totals $624.9 $629.2 $618.0
Elimination's (deduction) (29.2) (32.7) (28.7)
Corporate revenues 5.4 5.9 4.6
______ ______ ______
Total Revenues $601.1 $602.4 $593.9
Earnings (Expenses):
Operations (4) $127.8 $133.0 $132.9
Interest income 5.3 5.9 4.6
Interest expense (2.2) (2.2) (2.9)
General corporate expenses (5.9) (6.0) (6.2)
______ ______ ______
Earnings Before Income Taxes $125.0 $130.7 $128.4
Assets at December 31:
Operations $396.2 $405.2 $377.4
Corporate (5) 154.5 64.0 64.8
______ ______ ______
Total Assets $550.7 $469.2 $442.2
Liabilities at December 31:
Operations $109.9 $105.1 $132.0
Corporate (5) 27.7 29.5 13.1
______ ______ ______
Total Liabilities $137.6 $134.6 $145.1
Sales information by principal product group:
Retread materials and supplies 93% 91% 89%
Other 7% 9% 11%
___ ___ ___
100% 100% 100%
(1) No single customer accounted for 10% or more of the Company's sales to unaffiliated customers in each of the years 1993,
1992 or 1991.
(2) Export sales from the United States were less than 10% of sales to unaffiliated customers in each of the years 1993, 1992
or 1991.
(3) Transfers between geographic areas are made at the transferor's selling price to unaffiliated customers less a
predetermined discount to allow the transferee to recover it's costs and earn an operating profit.
(4) Aggregate foreign exchange losses included in determining net earnings amounted to approximately $611,000, $7,723,000 and
$1,818,000 in 1993, 1992 and 1991, respectively.
(5) Corporate assets are principally cash, investments, Corporate office and related equipment. Corporate liabilities are
principally dividends payable, short-term notes payable and other liabilities.
The Company does not have a formal continuous exchange risk hedging
program, but selectively hedges transactions which are believed to be
subject to unacceptable foreign currency exchange risk.
Executive Officers of the Corporation
The following table sets forth the names and ages of all executive
officers of the Corporation, the period of service of each with the
Corporation, positions and offices with the Corporation presently held by
each, and the period during which each officer has served in his present
office:
Period of Present Period in
Service with Position or Present
Name Age Corporation Office Office
Martin G. Carver* 45 15 Yrs. Chairman of the 13 Yrs.
Board, Chief
Executive Officer
and President
Lucille A. Carver* 76 36 Yrs. Treasurer 35 Yrs.
Gary L. Carlson 43 20 Yrs. Sr. Vice President 1 Mo.
and General Manager
Eastern Hemisphere
Retreading Division
(EHRD)
Donald F. Chester 58 11 Yrs. Sr. Vice President, 11 Yrs.
International
Nathaniel L. Derby II 51 22 Yrs. Vice President, 8 Yrs.
Engineering
Thomas E. Dvorchak 61 23 Yrs. Sr. Vice President 16 Yrs.
and Chief Financial
Officer
Stuart C. Green 52 2 Yrs. Sr. Vice President, 2 Yrs.
7 Mos. Manufacturing 7 Mos.
William D. Herd 50 16 Yrs. Sr. Vice President, 4 Yrs.
Sales & Marketing
Melvin P. Hershey 48 10 Yrs. Vice President, 5 Yrs.
Personnel
Administration
John A. Lodge 51 14 Yrs. Vice President, 2 Yrs.
Materials 8 Mos.
Dr. Floyd S. Myers 53 12 Yrs. Vice President, 8 Yrs.
Technical
* Denotes that officer is also a director of the Corporation.
Mr. Martin G. Carver was elected Chairman of the Board effective June
23, 1981, Chief Executive Officer effective May 18, 1982, and President
effective May 25, 1983. Prior to his present position, Mr. Carver was
also Vice Chairman of the Board from January 5, 1981 to June 23, 1981.
Mrs. Carver, has, for more than five years, served as a Director and
Treasurer of the Corporation.
Mr. Carlson joined Bandag in 1974. In 1985 he was appointed to Vice
President, Personnel Administration and in 1989 was appointed Vice
President, Planning and Development. In November 1993, he was named to
his current position of Sr. Vice President and General Manager EHRD.
Mr. Chester joined Bandag in 1983 and was elected Senior Vice
President, International. From 1969 to 1983, he was employed by the
Singer Corporation, serving as President, Singer Mexicana S.A. de C.V.
from 1981 to 1983.
Mr. Derby joined Bandag in 1971 and was appointed to his present
position in 1985 as Vice President, Engineering.
Mr. Dvorchak joined Bandag in 1971 and has held his present office
since January 1978.
Mr. Green joined Bandag in 1991 and was elected Senior Vice
President, Manufacturing. From 1981 to that date, he was employed by
Nissan Motor Manufacturing Corporation in various management positions in
manufacturing, the latest of which was Director, Manufacturing Vehicle
Assembly, Component Assembly and Paint Plants, Manufacturing Division.
Mr. Herd joined Bandag in 1977 as Canadian Division Manager and was
appointed to Vice President, North American Sales in August 1982. He was
elected to the position of Senior Vice President, North American Sales in
1983, and in 1990 he was elected to his current office of Senior Vice
President, Sales and Marketing.
Mr. Hershey joined Bandag in 1983 as Plant Manager and was appointed
to Vice President, Marketing in 1986. He was appointed to his present
position as Vice President, Personnel Administration in 1989.
Mr. Lodge joined Bandag in 1979 as a Systems Analyst. He was
promoted to Manager of Domestic Customer Service in 1984; in 1985 he was
promoted to the position of Personnel Manager; and in 1988 he became
Manager of Management Services. Mr Lodge served as Manager, Materials
since 1990 before being appointed to his current position in 1991.
Dr. Myers joined Bandag in 1982 as Vice President, Advanced Research
and was appointed to his present position as Vice President, Technical in
1985.
All of the above-named executive officers are elected annually by the
Board of Directors or are appointed by the Chairman of the Board and serve
at the pleasure of the Board of Directors, or the Chairman of the Board as
the case may be.
ITEM 2. PROPERTIES
The general offices of the Corporation are located in a seventeen-
year-old, 56,000 square foot leased office building in Muscatine, Iowa.
The tread rubber manufacturing plants of the Corporation are located
to service principal markets. The Corporation operates fourteen of such
plants, six of which are located in the United States, and the remainder
in Canada, Belgium, South Africa, Brazil, New Zealand, Mexico, Malaysia
and Venezuela. The plants vary in size from 9,600 square feet to 194,000
square feet with the first plant being placed into production during 1959.
All of the plants are owned in fee or under lease purchase contracts,
except for the plants located in New Zealand, Malaysia and Venezuela,
which are under standard lease contracts.
Retreading equipment is manufactured at a company-owned plant of
approximately 60,000 square feet in Muscatine. In addition, the
Corporation owns a research and development center in Muscatine of
approximately 58,400 square feet; a 26,000 square foot facility, used
primarily for training franchisees and franchisee personnel; and a 26,000
square foot office and warehouse facility.
In addition, the Corporation mixes rubber and produces cushion gum at
a company-owned 168,000 square foot plant in California. The Company owns
its European headquarters office in Belgium and a 129,000 square foot
warehouse in the Netherlands.
In the opinion of the Corporation, its properties are maintained in
good operating condition and the production capacity of its plants is
adequate for the near future. Because of the nature of the activities
conducted, necessary additions can be made within a reasonable period of
time.
At December 31, 1993, the net carrying amount of property, plant, and
equipment pledged as collateral on other liabilities was approximately
$16,047,000.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Information concerning cash dividends declared and market prices of
the Company's Common Stock and Class A Common Stock for the last three
fiscal years is as follows:
1993 % Change 1992 % Change 1991
Cash Dividends Per Share-Declared (A)
First Quarter $ 0.1625 $ 0.1500 $ 0.1375
Second Quarter 0.1625 0.1500 0.1375
Third Quarter 0.1625 0.1500 0.1375
Fourth Quarter 0.1750 0.1625 0.1500
______________ ______________ ________
Total Year 0.6625 8.2 0.6125 8.9 0.5625
Stock Price Comparison (B)
Common Stock
First Quarter $ 51.50 - 60.25 $ 58.75 - 67.25 $ 40.75 - 50.25
Second Quarter 44.75 - 57.88 62.00 - 70.00 46.50 - 52.75
Third Quarter 45.50 - 57.00 56.00 - 73.25 49.63 - 55.44
Fourth Quarter 52.88 - 56.63 56.50 - 63.75 51.75 - 60.00
Year-End Closing Price 55.38 58.13 59.94
Class A Common Stock
First Quarter $ 52.25 - 58.00 $ - -
Second Quarter 44.25 - 55.00 62.38 - 65.63
Third Quarter 44.63 - 54.00 55.75 - 71.00
Fourth Quarter 49.75 - 54.13 55.00 - 61.50
Year-End Closing Price 51.75 56.25
(A) Adjusted to give retroactive effect to the Company's June 10, 1992 stock dividend of Class A Common Stock.
(B) High and low composite prices in trading on the New York and Chicago Stock Exchanges (ticker symbol BDG for Common Stock
and BDGA for Class A Common Stock) as reported in The Wall Street Journal. Adjusted to give retroactive effect to the
Company's June 10, 1992 stock dividend of Class A Common Stock.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS (Cont.)
The approximate number of record holders of the Corporation's Common
Stock as of March 21, 1994, was 2,029, the number of holders of Class A
Common Stock was 1,990 and the number of holders of Class B Common Stock
was 351. The Common Stock and Class A Common Stock are traded on the New
York Stock Exchange and the Chicago Stock Exchange. There is no
established trading market for the Class B Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain Consolidated Selected
Financial Data for the periods and as of the dates indicated:
(In thousands, except per share data)
1993 1992 1991 1990 1989
________________________________________________
Net Sales $590,199 $591,374 $582,913 $586,223 $525,330
Earnings Before Cumulative Effect of Changes in
Accounting Methods $78,734 $83,023 $79,599 $78,783 $75,927
Cumulative Effect of Changes in Accounting
Methods, Net of Related Tax Effect - (220) - - -
_________ _______ _______ _______ _______
Net Earnings 78,734 82,803 79,599 78,783 75,927
_________ ______ _______ _______ _______
Total Assets (B) $550,731 $469,239 $442,157 $392,166 $347,247
Other Liabilities 11,039 7,366 5,586 6,497 7,923
Earnings Per Share Before Cumulative Effect of
Changes in Accounting Methods (A) $2.88 $2.99 $2.86 $2.75 $2.61
Cumulative Effect of Changes in Accounting
Methods, Net of Related Tax Effect - (0.01) - - -
_____ _____ _____ _______ _____
Earnings Per Share (A) 2.88 2.98 2.86 2.75 2.61
_____ _____ _____ _______ _____
Dividends Per Share (A) $0.6625 $0.6125 $0.5625 $0.5125 $0.4625
(A) Adjusted to give retroactive effect to the Company's June 10, 1992 stock dividend of Class A Common Stock.
(B) As described in Note B to the consolidated financial statements, the effect of the change in accounting for certain
investments increased stockholders' equity $27,693,000 (net of $16,500,000 of deferred tax) to reflect the unrealized holding
gain on securities classified as available-for-sale. Prior period financial data has not been restated.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1993-1992
Consolidated net sales were approximately equal with 1992, whereas
unit volume increased by 4%. Selling prices were generally stable, except
in some European markets, but the U.S. dollar strengthened during 1993 and
this had an unfavorable impact on the translated value of the Company's
foreign-currency-denominated sales. The Company's seasonal sales pattern,
which is closely related to trucking industry activity and shows the
highest activity during the third and fourth quarters, was similar to
previous years.
Because of stable selling prices, domestic unit volume and sales
showed 5% and 4% improvements, respectively, over the prior year. Western
Europe, while experiencing a relatively small 1% decrease in unit volume,
showed a 13% decrease in sales revenue. Contributing factors were the
unfavorable impact of currency rates and lower selling prices in some
European markets, with the currency rate having the greater impact. Unit
volume for the Company's other combined foreign operations improved 7%
over the previous year, but sales did not increase accordingly. This again
was due to the stronger U.S. dollar and the resulting unfavorable impact
when translating foreign-currency-denominated sales at lower rates and, to
a lesser extent, due to the discontinuance of sales in certain of the
Company's markets.
Consolidated net earnings decreased by 5% compared to 1992. The
Company's consolidated gross profit margin declined by 2.4 percentage
points, but this was partially offset by a 1.5 percentage point decline in
total operating expenses as a percent of sales because of generally lower
spending in many categories. The Company's decrease in gross margin was
primarily due to higher depreciation expense attributable to higher
capital spending in recent years and higher overall manufacturing costs
in line with generally higher cost levels.
Although total domestic revenues increased by 4%, domestic earnings
before income taxes was the same as the previous year, with higher product
costs only partially offset by decreased operating expenses.
The Company's foreign operations comprised 37% and 14% of this year's
revenues and earnings before income taxes, respectively. This represented
a two percentage point decline as a percent of total revenues and a three
percentage point decline as a percent of total earnings before income
taxes compared to the previous year.
The Western European operation's earnings before income taxes were
adversely impacted again this year, decreasing by 60% from the previous
year. The earnings decrease was due primarily to the lower translation
rate, combined with a five percentage point drop in gross profit margin.
The lower gross profit margin was due to higher raw material and
manufacturing costs, which the Company absorbed because of strong
competitive pressures, and non-recurring inventory valuation adjustments.
Earnings before income taxes for the combined other foreign
operations decreased 12% from last year primarily due to lower gross
margins in Brazil and Canada. Brazil's lower margin was primarily due to
a refinement in the methodology used to determine certain manufacturing
costs. Canada's lower gross margin was the result of a higher-than-usual
amount of finished goods imported from the U.S. this year and the plant
being shut down for an extended period in December in order to relocate
its finished goods inventory to a distribution center closer to major
markets in Southeastern Canada.
The Company's effective income tax rate increased from 36.5% in 1992
to 37% in 1993, reflecting the higher federal income tax rates enacted for
1993. This increase in tax rate reduced net earnings by $625,000 and
earnings per share by $.02 compared to the prior year.
Earnings per share were $.10 lower in 1993, which represents a 3%
decrease from the previous year. During the third quarter of 1993, the
Company acquired 144,200 shares of its outstanding Common Stock and Class
A Common Stock for $6,797,000 at prevailing market prices. There were
fewer shares outstanding in 1993 as a result of these purchases. The
cumulative current year impact of these purchases and those made in the
previous year had a $.02 favorable impact on earnings per share.
1992-1991
Consolidated net sales increased 1% from 1991, which was 4 percentage
points less than the unit volume increase due mainly to the impact of
discontinuing the sale of custom compounding services to outside
customers. Partially offsetting this decrease was the favorable impact of
the higher translated value of foreign-currency-denominated sales.
Domestic unit volume showed nominal improvement despite the soft North
American economy, with foreign markets, in total, showing a slightly
better performance than the domestic markets.
Consolidated net earnings increased 4% from 1991. The Company's
selling price increases were not sufficient to offset the increases in raw
material and plant costs during the year, which resulted in a slight drop
in gross profit margin. This was offset by a decrease in operating
expenses and higher interest income. The decrease in operating expenses
resulted primarily from reduced spending for R&D and marketing programs,
especially in the United States. R&D spending was lower in 1992 than the
previous year because the previous year included heavy spending on the
development of the Eclipse System, which is now substantially complete.
Earnings from foreign operations represented 17% and 24% of total
earnings before taxes in 1992 and 1991, respectively. Net earnings from
operations in Western Europe declined by 70% from 1991, even though net
sales were 7% higher on a 4% increase in unit volume. The percentage
differential between the net sales and volume increases was due primarily
to favorable foreign translation rates into U. S. dollars. Net earnings
for the year were adversely impacted by a substantial increase in
operating expenses and unusually high foreign exchange losses due to
devaluations of several European countries' currencies in which sales are
denominated. The Company has undertaken a concerted effort to increase
market share in Western Europe, and spending related to this effort is
primarily responsible for the substantial increase in operating expenses.
Net sales for the other combined foreign operations increased 10%
over last year, with the operations in Mexico and Brazil accounting for
the majority of the increase. Net earnings were 14% higher than last year
primarily due to improved gross margins in Brazil and slightly lower
operating expenses, as a percentage of net sales.
The Company's effective income tax rate decreased from 38% in 1991 to
36.5% in 1992, having a positive impact on net income. Earnings per share
before the cumulative effect of changes in accounting methods increased
$.13, a 5% increase from 1991. During the year, the Company acquired
451,300 shares of its outstanding Common Stock and Class A Common Stock.
These purchases took place during the latter half of the year and,
therefore, did not significantly affect the average shares outstanding.
The Company adopted, effective January 1, 1992, Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions" (FAS 106) and No. 109 "Accounting for Income Taxes" (FAS
109). The cumulative effect of adopting FAS 106 reduced net earnings by
$.09 per share. The cumulative effect of adopting FAS 109 increased net
earnings by $.08 per share. Adoption of FAS 106 and 109 did not
significantly impact operating results for 1992. See Notes D and G for
further details.
1991-1990
Consolidated net sales decreased 1% from 1990 due to a combination of
lower effective selling prices and flat unit volume. Volume in the United
States market was impacted by the depressed economy and the work-off of
dealer inventories accumulated late in 1990 during the uncertainty
surrounding the Gulf War. The effective selling price was also impacted
by the Gulf War as raw material costs rose sharply in late 1990, but
dropped back again to previous levels in 1991. Volume in foreign markets,
in total, showed a slight increase compared to the previous year.
Consolidated net earnings increased 1% from 1990. Lower effective
selling prices were offset by lower raw material costs, keeping gross
profit margin stable. Operating and other expenses increased only
slightly from 1990 as reduced spending on marketing programs offset higher
expenses in other categories. The Company's effective income tax rate
decreased from 38.5% in 1990 to 38% in 1991, having a positive impact on
net income.
Earnings per share increased $.11, a 4% increase from 1990. The
percentage increase in earnings per share was higher than the increase in
net earnings due to fewer average shares outstanding during 1991, as a
result of the full year impact of shares acquired in 1990.
Impact of Inflation and Changing Prices
Although the Company has generally been able to adjust its effective
selling prices in response to changes in product costs, during the past
two fiscal years the Company's gross profit margin has declined because
the Company, due to competitive conditions, has elected not to increase
its selling prices in response to increased product costs.
Replacement of fixed assets requires a greater investment than the
original asset cost due to the impact of increases in the general price
level over the useful lives of plant and equipment. This increased
capital investment would result in higher depreciation charges affecting
both inventories and cost of products sold.
However, for new assets, the replacement cost depreciation,
calculated on a straight-line basis, is not significantly greater than
historical depreciation that has principally been calculated by
accelerated methods resulting in higher depreciation charges in the early
years of an asset's life.
Capital Resources and Liquidity
Current assets exceeded current liabilities by $213,599,000 at the
end of 1993, while cash and cash equivalents increased by $24,187,000 from
December 31, 1992, and totaled $58,004,000 at year-end. The Company
invests excess funds over various terms, but only instruments with an
original maturity date of over 90 days are classified as investments. The
increase in cash flow from operating activities was primarily from higher
income taxes payable and reduced inventories.
No major changes in working capital requirements are foreseen, except
for those normally faced in the growth of the business.
The Company funds its capital expenditures from the cash flow
generated from operations. During 1993 the Company spent $40,472,000 for
capital additions, including a major expansion at its Oxford, North
Carolina plant.
As of December 31, 1993, the Company had available uncommitted lines
of credit totaling $86,000,000 in the United States for working capital
purposes. Also, the Company's foreign subsidiaries have approximately
$31,000,000 credit and overdraft facilities available to them. From time
to time during 1993, the Company's Western Europe subsidiary borrowed
funds to supplement its operational cash flow needs or to repay
intercompany transactions. The Company's other liabilities totaled
$11,039,000, which are 2.6% of the sum of other liabilities and
stockholders' equity. The Company has no plans at this time to undertake
additional other liabilities of any material amount.
During the year, the Company acquired 144,200 shares of its
outstanding Common Stock and Class A Common Stock for $6,797,000 at
prevailing market prices and paid cash dividends amounting to $18,033,000.
The Company generally funds its dividends and stock repurchases from the
cash flow generated from its operations, and the Company has historically
utilized excess funds to purchase its own shares, believing the
acquisition of the Company's stock to be a good investment.
In 1993, the Company adopted FAS 115 and recorded the related
non-cash effect to the Company's balance sheet. See Note B for further
details.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Report of Independent Auditors 22
Consolidated Balance Sheets as of December 31, 1993,
1992 and 1991 23 - 24
Consolidated Statements of Earnings for the Years
Ended December 31, 1993, 1992 and 1991 25
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1993, 1992
and 1991 26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991 27
Notes to Consolidated Financial Statements
28 - 36
Report of Independent Auditors
Stockholders and Board of Directors
Bandag, Incorporated
We have audited the accompanying consolidated balance sheets of Bandag,
Incorporated and subsidiaries as of December 31, 1993, 1992 and 1991, and
the related consolidated statements of changes of stockholders' equity,
earnings and cash flows for the years then ended. Our audits also
included the financial statement schedules listed in the Index at Item
14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform and audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Bandag, Incorporated and subsidiaries at December 31, 1993,
1992 and 1991, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note B to the consolidated financial statements, as of
December 31, 1993, the Company changed its method of accounting for
certain investments in debt and equity securities.
As discussed in Notes D and G to the consolidated financial statements, in
1992 the Company changed its method of accounting for income taxes and
postretirement employee benefits other than pensions.
ERNST & YOUNG
February 4, 1994
Consolidated Balance Sheets (In thousands)
December 31
Assets 1993 1992 1991
Current Assets
Cash and cash equivalents $58,004 $33,817 $37,183
Investments - Note B 25,043 2,950 -
Accounts receivable, less allowance
(1993 - $11,217; 1992 - $10,415; 1991 - $9,176) 161,506 166,225 172,815
Inventories:
Finished products 34,947 43,453 38,618
Material and work in process 8,186 10,018 12,842
______ ______ ______
43,133 53,471 51,460
Deferred income tax assets 20,210 21,061 26,848
Prepaid expenses and other current assets 8,245 7,069 5,440
_______ _______ _______
Total Current Assets 316,141 284,593 293,746
Property, Plant, and Equipment, on the basis of cost:
Land 3,332 3,421 3,400
Buildings and improvements 73,016 68,697 60,101
Machinery and equipment 233,143 191,727 153,406
Construction and equipment installation in progress 10,651 28,072 20,603
________ ________ ________
320,142 291,917 237,510
Less allowances for depreciation and amortization (173,521) (149,622) (126,410)
________ ________ ________
146,621 142,295 111,100
Marketable Equity Securities - Note B 69,496 25,303 25,303
Other Assets 18,473 17,048 12,008
________ ________ ________
Total Assets $550,731 $469,239 $442,157
________ ________ ________
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $15,757 $15,702 $19,981
Accrued employee compensation and benefits 15,391 16,846 17,434
Accrued marketing expenses 26,163 30,456 29,296
Other accrued expenses 16,833 20,187 25,999
Dividends payable 4,752 4,435 4,161
Income taxes payable 11,429 10,248 17,352
Short-term notes payable and other liabilities 12,217 17,759 3,394
_______ _______ _______
Total Current Liabilities 102,542 115,633 117,617
Other Liabilities 11,039 7,366 5,586
Deferred Income Tax Liabilities 24,058 11,630 21,902
Stockholders' Equity - Note E
Common Stock; $1.00 par value; authorized - 21,500,000 shares;
issued and outstanding - 11,215,008 shares in 1993; 11,233,382 shares
in 1992; 11,154,664 shares in 1991 11,215 11,233 11,155
Class A Common Stock; $1.00 par value; authorized - 50,000,000 shares;
issued and outstanding - 13,576,971 shares in 1993; 13,646,971 shares
in 1992; none in 1991 13,577 13,647 -
Class B Common Stock; $1.00 par value; authorized - 8,500,000 shares;
issued and outstanding - 2,360,513 shares in 1993; 2,411,189 shares
in 1992; 2,714,007 shares in 1991 2,361 2,411 2,714
Additional paid-in capital 2,859 2,631 2,535
Retained earnings 362,040 307,939 281,479
Unrealized gain on securities available-for-sale,
net of related tax effect 27,693 - -
Equity adjustment from foreign currency translation (6,653) (3,251) (831)
________ ________ ________
Total Stockholders' Equity 413,092 334,610 297,052
________ ________ ________
Total Liabilities and Stockholders' Equity $550,731 $469,239 $442,157
________ ________ ________
See notes to consolidated financial statements.
Consolidated Statements of Earnings
(In thousands, except per share data)
Year Ended December 31
1993 1992 1991
Income:
Net sales $590,199 $591,374 $582,913
Other income 10,860 11,014 11,004
________ ________ ________
601,059 602,388 593,917
Costs and expenses:
Cost of products sold 352,095 338,610 325,547
Engineering, selling, administrative and other expenses 121,823 130,834 137,073
Interest 2,166 2,198 2,912
_______ _______ _______
476,084 471,642 465,532
_______ _______ _______
Earnings Before Income Taxes 124,975 130,746 128,385
Income Taxes - Note D 46,241 47,723 48,786
_______ _______ _______
Earnings before cumulative effect of
changes in accounting methods 78,734 83,023 79,599
Cumulative effect of changes in accounting methods,
net of related tax effect of $1,400 - Notes D and G - (220) -
_______ _______ _______
Net Earnings $78,734 $82,803 $79,599
_______ _______ _______
Earnings per share before cumulative effect of
changes in accounting methods $2.88 $2.99 $2.86
Cumulative effect of changes in accounting methods,
net of related tax effect of $.05 - Notes D and G - (0.01) -
_____ _____ _____
Net earnings per share - Note E $2.88 $2.98 $2.86
_____ _____ _____
See notes to consolidated financial statements.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except per share data)
Class A Class B
Common Stock Common Stock Common Stock
Issued and Issued and Issued and Additional
Outstanding Outstanding Outstanding Paid-In
Shares Amount Shares Amount Shares Amount Capital
_________________________________________________________________________________________________________________
Balance at January 1, 1991 11,148,549 $11,148 2,717,572 $2,718 $2,232
Net earnings for the year
Cash Dividends - $.5625 per share
Conversion of Class B Common Stock
to Common Stock - Note E 3,565 4 (3,565) (4)
Common Stock issued under Restricted
Stock Grant Plan - Note E 2,550 3 303
Adjustment from foreign currency
translation
________________________________________________________________________________________________________________
Balance at December 31, 1991 11,154,664 11,155 2,714,007 2,714 2,535
Net earnings for the year
Cash Dividends - $.6125 per share
Class A Common Stock
Dividend - Note E 13,868,671 $13,869
Conversion of Class B Common Stock
to Common Stock - Note E 302,818 303 (302,818) (303)
Common Stock issued under Restricted
Stock Grant Plan - Note E 5,500 5 328
Purchases of Common Stock and
Class A Common Stock (229,600) (230) (221,700) (222) (232)
Adjustment from foreign currency
translation
_________________________________________________________________________________________________________________
Balance at December 31, 1992 11,233,382 11,233 13,646,971 13,647 2,411,189 2,411 2,631
Net earnings for the year
Cash Dividends - $.6625 per share
Conversion of Class B Common Stock
to Common Stock - Note E 50,676 51 (50,676) (50)
Common Stock issued under Restricted
Stock Grant Plan - Note E 5,150 5 281
Purchases of Common Stock and
Class A Common Stock (74,200) (74) (70,000) (70) (53)
Unrealized gain on securities
available-for-sale, net of deferred
income taxes of $16,500,000
Adjustment from foreign currency
translation
_________________________________________________________________________________________________________________
Balance at December 31, 1993 11,215,008 $11,215 13,576,971 $13,577 2,360,513 $2,361 $2,859
_________________________________________________________________________________________________________________
Unrealized Equity
Gain on Adjustment
Available- From Foreign
Retained for-Sale Currency
Earnings Securities Translation
__________________________________________________________________________________
Balance at January 1, 1991 $217,480 $2,375
Net earnings for the year 79,599
Cash Dividends - $.5625 per share (15,600)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Adjustment from foreign currency
translation (3,206)
_____________________________________________________________________________
Balance at December 31, 1991 281,479 (831)
Net earnings for the year 82,803
Cash Dividends - $.6125 per share (16,917)
Class A Common Stock
Dividend - Note E (13,869)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Purchases of Common Stock and
Class A Common Stock (25,557)
Adjustment from foreign currency
translation (2,420)
_____________________________________________________________________________
Balance at December 31, 1992 307,939 (3,251)
Net earnings for the year 78,734
Cash Dividends - $.6625 per share (18,033)
Conversion of Class B Common Stock
to Common Stock - Note E
Common Stock issued under Restricted
Stock Grant Plan - Note E
Purchases of Common Stock and
Class A Common Stock (6,600)
Unrealized gain on securities
available-for-sale, net of deferred
income taxes of $16,500,000 $27,693
Adjustment from foreign currency
translation (3,402)
_____________________________________________________________________________
Balance at December 31, 1993 $362,040 $27,693 $(6,653)
_____________________________________________________________________________
See notes to consolidated financial statements
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31
1993 1992 1991
Operating activities
Net earnings $78,734 $82,803 $79,599
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provisions for depreciation and amortization of property, plant and equipment 32,939 27,550 21,813
Amortization of intangible assets 383 - -
Change in deferred income taxes (3,129) (2,342) (10,767)
Cumulative effect of change in accounting methods - 220 -
Change in operating assets and liabilities:
Accounts receivable 567 5,470 (7,309)
Inventories 8,573 (2,820) 4,725
Prepaid expenses and other current assets (1,686) (1,624) (1,019)
Accounts payable and other accrued expenses (6,019) (8,648) 15,365
Income taxes payable 1,472 (7,058) 1,796
Other assets (1,978) (8,529) (3,328)
Net cash provided by operating activities 109,856 85,022 100,875
_______ ______ _______
Investing activities
Additions to property, plant and equipment (40,472) (60,591) (39,224)
Net disposition of property, plant and equipment 3,207 1,846 4,306
Purchase of investments (37,868) (2,950) -
Maturities of investments 15,775 - -
_______ _______ _______
Net cash used in investing activities (59,358) (61,695) (34,918)
Financing activities
Proceeds from short-term and long-term notes payable 75,094 100,023 49,960
Principal payments on short-term notes payable and other liabilities (75,623) (83,218) (73,953)
Cash dividends (18,033) (16,917) (15,600)
Purchases of Common Stock and Class A Common Stock (6,797) (26,241) -
_______ _______ _______
Net cash used in financing activities (25,359) (26,353) (39,593)
Effect of exchange rate changes on cash and cash equivalents (952) (340) (502)
______ ______ ______
Increase (decrease) in cash and cash equivalents 24,187 (3,366) 25,862
Cash and cash equivalents at beginning of year 33,817 37,183 11,321
_______ _______ _______
Cash and cash equivalents at end of year $58,004 $33,817 $37,183
_______ _______ _______
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts and
transactions of all subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash Equivalents:
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The
carrying amount reported in the consolidated balance sheet for cash and
cash equivalents approximates its fair value.
Accounts Receivable and Concentrations of Credit Risk:
Concentrations of credit risk with respect to accounts receivable are
limited due to the number of customers the Company has and their
geographic dispersion. The Company maintains close working relationships
with these customers and performs ongoing credit evaluations of their
financial condition. No one customer is large enough to pose a significant
financial risk to the Company. The Company maintains an allowance for
losses based upon the expected collectibility of accounts receivable.
Credit losses have been within management's expectations.
Inventories:
Inventories are valued at the lower of cost, determined by the last
in, first out (LIFO) method, or market.
The excess of current cost over the amount stated for inventories
valued by the LIFO method amounted to approximately $20,189,000,
$18,145,000, and $16,111,000 at December 31, 1993, 1992, and 1991,
respectively.
Property, Plant, and Equipment:
Provisions for depreciation and amortization of plant and equipment
are principally computed using declining-balance methods, based upon the
estimated useful lives of the various classes of depreciable assets.
Foreign Currency Translation:
Assets and liabilities of foreign subsidiaries are translated at the
current exchange rate and items of income and expense are translated at
the average exchange rate for the year. The effects of these translation
adjustments as well as gains and losses from certain hedges are reported
in a separate component of stockholders' equity. Exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the foreign subsidiary and translation adjustments
in countries with highly inflationary economies or in which operations are
directly and integrally linked to the Company's U.S. operations are
included in income.
Research and Development:
Expenditures for research and development are expensed as incurred.
Revenue Recognition:
Sales are recognized when products are shipped to dealers at which
time costs associated with the sale are recognized.
B. INVESTMENTS
In May 1993 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No.115, "Accounting for Certain
Investments in Debt and Equity Securities." As permitted under the
Statement, the Company elected to adopt the provisions of the new standard
as of December 31, 1993. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in
accounting principle. The effect of adopting the Statement increased
stockholders' equity $27,693,000 (net of $16,500,000 of deferred tax) to
reflect the net unrealized holding gain on securities classified as
available-for-sale.
Under Statement 115, management determines the appropriate
classification of debt securities at the time of purchase and reevaluates
such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity based upon the positive intent and ability
of the Company to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization and
accretion is included in investment income. Interest on securities
classified as held-to-maturity is included in investment income.
Marketable equity securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value with the
unrealized gains, net of tax, reported in a separate component of
stockholders' equity. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in investment income. The cost of securities sold is based on
the specific identification method. Dividends on securities classified as
available-for-sale are included in investment income.
The following is a summary of securities held-to-maturity and
available-for-sale:
(In thousands)
December 31, 1993
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Held-to-Maturity:
Obligations of states and political
subdivisions $27,343 $28 ($14) $27,357
Short-term corporate debt 16,500 - - 16,500
Investment in Eurodollar time deposits 33,050 - - 33,050
_______ ___ ____ _______
$76,893 $28 ($14) $76,907
_______ ___ ____ _______
Securities Available-for-Sale:
Marketable equity securities $25,303 $44,193 - $69,496
At December 31, 1993, securities held-to-maturity are due in one year
or less and include $51,850,000 reported as cash equivalents.
Prior to the adoption of Statement 115, investments other than
marketable equity securities were carried at cost and include short-term
investments with maturities greater than three months when purchased. The
carrying amount of such investments approximates its fair value.
Marketable equity securities, prior to the adoption of Statement 115, were
carried at lower of cost or market value. At December 31, 1992, and 1991,
the market value of the investment in marketable equity securities, based
on quoted market prices, ($58,327,000, and $47,779,000, respectively)
exceeded cost by $33,024,000, and $22,476,000, respectively.
C. SHORT-TERM NOTES PAYABLE
The carrying amount reported in the consolidated balance sheet of the
Company's short- term notes payable approximates its fair value.
Total available funds under unused lines of credit and foreign credit
and overdraft facilities at December 31, 1993 amounted to $117 million.
Interest paid on short-term notes payable and other obligations
amounted to $1,529,000, $1,598,000 and $2,421,000 in 1993, 1992, and 1991,
respectively.
D. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Effective January 1, 1992, the Company adopted the
provisions of Statement 109 and changed its method of accounting for
income taxes. As permitted by Statement 109, prior-year consolidated
financial statements have not been restated to reflect the change in
accounting method. The cumulative effect of adopting Statement 109 as of
January 1, 1992, was to increase net earnings by $2,215,000 or $.08 per
share. Other than the cumulative effect of adoption, Statement 109 did not
have a material effect on the remaining quarterly operating results for
1992.
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
Prior to the adoption of Statement 109, income tax expense was determined
using the deferred method. Deferred tax expense was based on items of
income and expense that were reported in different years in the financial
statements and tax returns and were measured at the tax rate in effect in
the year the difference originated.
Significant components of the Company's deferred tax assets
(liabilities) reflecting the net tax effects of temporary differences are
summarized as follows:
(In thousands)
December 31
1993 1992
Obligation to provide postretirement benefits $1,728 $2,242
Marketing programs 8,515 9,994
Accounts receivable valuation allowances 2,690 2,445
Unremitted earnings of foreign subsidiaries (3,886) (4,760)
Excess pension funding (2,761) (2,512)
Purchased tax benefits
Unrealized holding gain on marketable equity securities (16,500) -
Other, net 8,724 4,644
_______ ______
Net deferred tax assets (liabilities) ($3,848) $9,431
_______ ______
The components of earnings before income taxes are summarized as follows:
(In thousands)
Year Ended December 31
1993 1992 1991
Domestic $107,450 $107,094 $96,855
Foreign 17,525 23,652 31,530
________ ________ ________
$124,975 $130,746 $128,385
________ ________ ________
Significant components of the provision for income tax expense
(credit) attributable to continuing operations under the liability method
in 1993 and 1992 and the deferred method in 1991 are summarized as
follows:
(In thousands)
Year Ended December 31
1993 1992 1991
Current:
Federal $35,200 $32,048 $42,642
State 3,665 3,939 4,473
Foreign 6,260 13,444 10,009
Deferred 1,441 1,061 (6,259)
Equivalent credit relating to purchased income
tax benefits (325) (2,769) (2,079)
_______ _______ _______
$46,241 $47,723 $48,786
_______ _______ _______
The components of the provision (credit) for deferred income taxes
for the year ended December 31, 1991, principally relate to undistributed
earnings of certain subsidiaries, provisions for depreciation, and accrued
marketing expenses. No timing difference had a tax effect in excess of 5%
of the income tax expense computed at the statutory rate.
No item, other than state income taxes in 1993, 1992 and 1991,
affects the Company's effective income tax rate by an amount which exceeds
5% of the income tax expense computed at the statutory rate.
Undistributed earnings of subsidiaries on which deferred income taxes
have not been provided are not significant.
Income taxes paid amounted to $42,840,000, $56,319,000, and
$56,417,000 in 1993, 1992, and 1991, respectively.
E. STOCKHOLDERS' EQUITY
On May 6, 1992, the Company's stockholders adopted an amendment to
the Company's articles of incorporation establishing a new class of common
stock, Class A Common Stock, and the Board of Directors authorized a stock
dividend whereby one share of Class A Common Stock was distributed for
each share of Common Stock and Class B Common Stock outstanding at the
close of business on May 27,1992.
Class A Common Stock and Class B Common Stock have the same rights
regarding dividends and distributions upon liquidation as Common Stock.
However, Class A Common Stockholders are not entitled to vote, Class B
Common Stockholders are entitled to ten votes for each share held and
Common Stockholders are entitled to one vote for each share held. Transfer
of shares of Class B Common Stock is substantially restricted and must be
converted to Common Stock prior to sale. In certain instances, outstanding
shares of Class B Common Stock will be automatically converted to shares
of Common Stock. Unless extended for an additional period of five years by
the Board of Directors, all then-outstanding shares of Class B Common
Stock will be converted to shares of Common Stock on January 16, 2002.
Under the terms of the Bandag, Incorporated Restricted Stock Grant
Plan, the Company is authorized to grant up to an aggregate of 100,000
shares of Common Stock and 100,000 shares of Class A Common Stock to
certain key employees. The Shares granted under the plan will entitle the
grantee to all dividends and voting rights; however, such shares will not
vest until seven years after the date of grant. If a grantee's employment
is terminated prior to the end of the seven-year period for any reason
other than death, disability or termination of employment after age 60,
the shares will be forfeited and made available for future grants. A
grantee who has attained age 60 and employment is then terminated prior to
the end of the seven-year vesting period does not forfeit the nonvested
shares. During the years ended December 31, 1993, 1992, and 1991, 5,150
shares, 5,500 shares and 2,550 shares of Common Stock, respectively, were
granted under the Plan. The resulting charge to net earnings amounted to
$495,000, $532,000, and $493,000, in 1993, 1992, and 1991, respectively.
At December 31, 1993, 54,325 shares of Common Stock and 64,975 shares of
Class A Common Stock are available for grant under the Plan.
Under the terms of the Bandag, Incorporated Nonqualified Stock Option
Plan, the Company is authorized to grant options to purchase up to 500,000
shares of Common Stock and 500,000 shares of Class A Common Stock to
certain key employees. The option price is equal to the market value of
the shares on the date of grant. At December 31, 1993, options to purchase
100,000 shares of Common Stock and 100,000 shares of Class A Common Stock
are outstanding and exercisable at $23.458 per share for Common Stock
options and $22.792 per share for Class A Common Stock options. Options to
purchase 20,000 shares of Common Stock and 20,000 shares of Class A Common
Stock expire on November 13, 1997, and each of the four anniversaries
thereafter. At December 31, 1993, no options granted under this Plan have
been exercised and options to purchase 400,000 shares of Common Stock and
400,000 shares of Class A Common Stock are available for grant. No options
may be granted after November 13, 1997.
Earnings per share amounts are based upon the weighted average number
of shares of Common Stock, Class A Common Stock, Class B Common Stock, and
common stock equivalents (dilutive stock options) outstanding during each
year. The weighted average number of shares assumed outstanding was
27,337,000 in 1993, 27,743,000 in 1992, and 27,842,000 in 1991. These
amounts and the related earnings and cash dividend per share information
have been adjusted to reflect the 1992 stock dividend on a retroactive
basis.
F. EMPLOYEE PENSION PLANS
The Company sponsors defined-benefit pension plans covering
substantially all of its full-time employees in North America. Benefits
are based on years of service and, for salaried employees, the employee's
average annual compensation for the last five years of employment. The
Company's funding policy is to contribute annually the maximum amount that
can be deducted for income tax purposes. Contributions are intended to
provide for benefits attributed to service to date and those expected to
be earned in the future.
Aggregate accumulated benefit obligations and projected benefit
obligations, as estimated by consulting actuaries, and plan net assets and
funded status are as follows:
(In thousands)
December 31
1993 1992 1991
Actuarial present value of accumulated
benefit obligations:
Vested $29,463 $25,211 $18,212
Nonvested 2,932 3,017 2,660
_______ _______ _______
$32,395 $28,228 $20,872
_______ _______ _______
Plan net assets at fair value $60,723 $57,180 $53,942
Projected benefit obligations 50,947 42,711 32,732
_______ _______ _______
Plan net assets in excess of projected
benefit obligations 9,776 14,469 21,210
Unrecognized prior service cost 1,653 1,764 1,461
Unamortized actuarial net loss (gain) 481 (4,011) (8,985)
Unamortized net transition gain (7,939) (8,614) (9,454)
______ ______ ______
Prepaid pension cost included in the consolidated
balance sheet $3,971 $3,608 $4,232
______ ______ ______
Assumptions used in the determination of the actuarial present value
of the projected benefit obligation and net pension cost are as follows:
Weighted average discount rate 6.50% 6.50% 7.25%
Rate of increase in future compensation 5.25% 5.25% 6.00%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
Assets of the plans are principally invested in guaranteed interest
contracts and common stock.
The pension expense is composed of the following:
(In thousands)
Year Ended December 31
1993 1992 1991
Service cost for benefits earned during the year $2,957 $2,302 $2,047
Interest cost on projected benefit obligations 3,079 2,556 2,134
Investment return on plan assets (3,958) (4,500) (13,697)
Net amortization and deferral (1,269) 1,060 9,812
______ ______ ______
$809 $1,418 $296
______ ______ ______
The Company also sponsors defined-contribution plans, covering
substantially all salaried employees in the United States. The annual
contributions are made in such amounts as determined by the Company's
Board of Directors. Although employees may contribute up to 12% of their
annual compensation from the Company, they are generally not required to
make contributions in order to participate in the plans. The Company
recorded aggregate expense in connection with employee pension plans in
the amount of $2,921,000, $2,685,000, and $2,432,000 in 1993, 1992, and
1991, respectively.
G. OTHER POSTRETIREMENT EMPLOYEE BENEFITS
The Company provides certain medical benefits under its self-insured
health benefit plan to certain individuals who retired from employment
before January 1, 1993. The program is contributory, with retiree
contributions adjusted periodically. The program also contains
co-insurance provisions, which result in shared costs between the Company
and the retiree. In addition, the company provides post-termination
benefit continuation in accordance with the requirements of the Omnibus
Budget Reconciliation Act of 1989 ("OBRA"). The Company does not maintain
any separate fund to provide postretirement medical obligations.
Substantially all employees with the Company on and after January 1,
1993 are covered by the Bandag Security Program, which provides fully
vested benefits with only 5 years of service. Benefits under this program
are available upon retirement or separation for any other reason and may
be used in connection with medical expense or for any other purpose. The
periodic cost and benefit obligation information for the Bandag Security
Program is reflected in Note F.
In December 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Effective
January 1, 1992, the Company adopted the provisions of Statement 106 and,
as permitted by the Statement, elected to immediately recognize the
transition obligation. The cumulative effect of adopting Statement 106 was
to decrease net earnings by approximately $2,435,000 or $.09 per share
(net of the related tax effect of approximately $1,400,000 or $.05 per
share). Postretirement benefit costs for prior periods have not been
restated.
Other than the cumulative effect of adoption, Statement 106 did not
have a material effect on the remaining quarterly operating results for
1992.
The following table sets forth amounts recognized in the Company's
consolidated balance sheet:
(In thousands)
December 31
1993 1992
Accumulated postretirement benefit obligation:
Retirees ($1,998) ($2,080)
Fully eligible active plan participants (114) (120)
Other active plan participants (1,958) (2,470)
______ ______
Accumulated postretirement benefit obligation (4,070) (4,670)
Unrecognized net (gain) loss (443) 559
______ ______
Accrued postretirement benefit cost ($4,513) ($4,111)
______ ______
Net periodic postretirement benefit cost
includes the following components:
Service cost $195 $185
Interest cost on accumulated postretirement benefit
obligation 293 267
Net amortization and deferral 4 -
____ ____
Net periodic postretirement benefit cost $492 $452
____ ____
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits is 13% for 1994 and is assumed to decrease
gradually to 7% for 2001 and remain at that level thereafter. Increasing
the assumed health care cost trend rates by one percentage point in each
year would increase the accumulated postretirement benefit obligation as
of December 31, 1993, by $569,000, and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for
1993 by $114,000. The weighted-average discount rate used in determining
the accumulated postretirement benefit obligation was 6.5% at December 31,
1993 and 1992.
Employees in most foreign countries are covered by various
postretirement benefit arrangements generally sponsored by the foreign
governments. The Company's contributions to foreign plans were not
significant in 1993, 1992 and 1991.
H. BUSINESS INFORMATION BY GEOGRAPHIC AREA
The information regarding operations in different geographic areas is
presented on page 10 of this report and is included herein by reference.
I. SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS
Unaudited quarterly results of operations for the years ended
December 31, 1993 and 1992 are summarized as follows:
(In thousands, except per share data)
Quarter Ended
Mar. 31 Jun. 30 Sep. 30 Dec. 31
1993:
Net sales $126,592 $148,950 $154,300 $160,357
Gross profit 49,727 60,212 64,307 63,858
Net earnings 13,898 19,266 22,547 23,023
Net earnings per share $0.51 $0.70 $0.83 $0.84
1992:
Net sales $129,481 $146,724 $154,314 $160,855
Gross profit 55,981 64,277 65,180 67,326
Net earnings 16,369 21,597 22,401 22,436
Net earnings per share $0.59 $0.77 $0.81 $0.81
Results for the quarter ended March 31, 1992, have been restated to
retroactively reflect the changes in accounting methods described in
Notes D and G, which resulted in a decrease in previously reported net
earnings of $220,000 or $.01 per share. These changes in accounting
methods did not have a material effect on the remaining quarterly
operating results for 1992.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by Item 10 (with respect to the directors
of the registrant) is incorporated herein by reference from the
registrant's definitive Proxy Statement involving the election of
directors filed or to be filed pursuant to Regulation 14A not later than
120 days after December 31, 1993. In accordance with General Instruction
G (3) to Form 10-K, the information with respect to executive officers of
the Corporation required by Item 10 has been included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information called for by Item 12 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated herein by
reference from the registrant's definitive Proxy Statement involving the
election of directors filed or to be filed pursuant to Regulation 14A not
later than 120 days after December 31, 1993.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following consolidated financial statements are included in
Part II, Item 8:
Page
Consolidated Balance Sheets as of December 31,
1993, 1992 and 1991 23 - 24
Consolidated Statements of Income for the Years
Ended December 31, 1993, 1992 and 1991 25
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1993, 1992 and
1991 26
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1993, 1992 and 1991 27
Notes to Consolidated Financial Statements 28 - 36
(2) Financial Statements Schedules
Page
Schedule I Marketable securities - other
investments. 39
Schedule V Property, plant and equipment. 40
Schedule VI Accumulated depreciation, depletion
and amortization of property, plant
and equipment. 41
Schedule VIII Valuation and qualifying accounts
and reserves. 42
Schedule IX Short-term borrowings. 43
Schedule X Supplementary income statement
information.
44
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
BANDAG, INCORPORATED AND SUBSIDIARIES
December 31, 1993
COL. A COL. B COL. C COL. D COL. E
Amount at Which Each
Portfolio of Equity
Number of Shares Security Issues and
or Units-Principal Market Value of Each Other Security
Name of Issuer and Amount of Bonds Each Issue at Issue Carried in the
Title of Each Issue and Notes Cost of Each Issue Balance Sheet Date Balance Sheet
Marketable Security Investments:
Obligations of States and
Political Subdivisions $24,945,000 $25,168,000 $25,057,000 $25,043,000
Marketable Equity Securities:
HON INDUSTRIES INC.
Common Stock 2,482,000 shares $25,303,000 $69,496,000 $69,496,000
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
BANDAG, INCORPORATED AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F
For the Year Balance Retirements Balance
Ended Beginning Additions and Other at End of
December 31 Classification of Period at Cost (A) Disposals Changes (B) Period
1993 Land $3,421,000 ($89,000) $3,332,000
Building & Improvements 68,697,000 6,069,000 (645,000) (1,105,000) 73,016,000
Machinery & Equipment 191,727,000 51,728,000 (7,299,000) (3,013,000) 233,143,000
Construction in Process 28,072,000 (17,325,000) (96,000) 10,651,000
___________ ___________ __________ __________ ___________
Total $291,917,000 $40,472,000 ($7,944,000) ($4,303,000) $320,142,000
============ =========== =========== =========== ============
1992 Land $3,400,000 $21,000 $3,421,000
Building & Improvements 60,101,000 8,934,000 (221,000) (117,000) 68,697,000
Machinery & Equipment 153,406,000 43,064,000 (4,785,000) 42,000 191,727,000
Construction in Process 20,603,000 8,593,000 (287,000) (837,000) 28,072,000
___________ ___________ __________ __________ ___________
Total $237,510,000 $60,591,000 ($5,293,000) ($891,000) $291,917,000
============ =========== =========== =========== ============
1991 Land $2,846,000 $919,000 ($268,000) ($97,000) $3,400,000
Building & Improvements 59,681,000 3,329,000 (1,908,000) (1,001,000) 60,101,000
Machinery & Equipment 140,937,000 22,052,000 (6,035,000) (3,548,000) 153,406,000
Construction in Process 7,699,000 12,924,000 (15,000) (5,000) 20,603,000
___________ ___________ __________ __________ ___________
Total $211,163,000 $39,224,000 ($8,226,000) ($4,651,000) $237,510,000
============ =========== =========== =========== ============
(A) Additions principally represent expenditures to expand existing manufacturing facilities and the acquisition of additional
manufacturing equipment.
(B) Other changes represent fluctuations in foreign exchange rates.
(C) The annual provisions for depreciation have been computed principally using the following estimated useful lives:
Buildings & Improvements 5-50 YEARS
Machinery & Equipment 2-11 YEARS
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
BANDAG, INCORPORATED AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F
For the Year Balance Additions Retirements Balance
Ended Beginning Charged to and Other at End of
December 31 Classification of Period Cost & Expense Disposals Changes (A) Period
1993 Building & Improvements $25,125,000 $3,423,000 ($340,000) ($634,000) $27,574,000
Machinery & Equipment 124,497,000 29,516,000 (5,460,000) (2,606,000) 145,947,000
____________ ___________ ___________ ___________ ____________
Total $149,622,000 $32,939,000 ($5,800,000) ($3,240,000) $173,521,000
============ =========== =========== =========== ============
1992 Building & Improvements $22,384,000 $3,006,000 ($162,000) ($103,000) $25,125,000
Machinery & Equipment 104,026,000 24,544,000 (3,358,000) (715,000) 124,497,000
____________ ___________ ___________ ___________ ____________
Total $126,410,000 $27,550,000 ($3,520,000) ($818,000) $149,622,000
============ =========== =========== =========== ============
1991 Building & Improvements $21,240,000 $3,041,000 ($1,469,000) ($428,000) $22,384,000
Machinery & Equipment 91,928,000 18,772,000 (4,754,000) (1,920,000) 104,026,000
____________ ___________ ___________ ___________ ____________
Total $113,168,000 $21,813,000 ($6,223,000) ($2,348,000) $126,410,000
============ =========== =========== =========== ============
(A) Other changes represent fluctuations in foreign exchange rates.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
BANDAG, INCORPORATED AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
1 2
Balance at Charged to Charged to Balance
Beginning Cost and Other Accounts Deductions - at end of
DESCRIPTION of Period Expenses -Describe Describe Period
Year ended December 31, 1993:
Allowance for doubtful accounts $10,415,000 $2,816,000 $2,014,000 (A) $11,217,000
Year ended December 31, 1992:
Allowance for doubtful accounts $9,176,000 $3,207,000 $1,968,000 (A) $10,415,000
Year ended December 31, 1991:
Allowance for doubtful accounts $8,572,000 $4,747,000 $4,143,000 (A) $9,176,000
(A) - Uncollectible accounts written off, net of recoveries and foreign exchange fluctuations.
SCHEDULE IX - SHORT-TERM BORROWINGS
BANDAG, INCORPORATED AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Amount Average Amount Weighted Average
Outstanding Outstanding Interest Rate
Category of Aggregate Balance at Weighted Average During the During the During the
Short-term Borrowings End of Period Interest Rate Period Period (A) Period (B)
Year ended December 31, 1993:
Payable to banks (C) $10,756,000 6.5% $18,002,000 $13,449,000 8.3%
Year ended December 31, 1992:
Payable to banks (C) $17,023,000 10.3% $19,115,000 $11,541,000 8.1%
Commercial Paper (C) 9,000,000 750,000 3.6%
Year ended December 31, 1991:
Payable to banks (C) $2,445,000 11.3% $23,860,000 $12,335,000 12.6%
(A) Total of month-end short-term principal balances outstanding divided by 12.
(B) Actual interest expense on short-term borrowings divided by the average short-term debt outstanding during the period.
The weighted average interest rates include borrowings of the Corporation's foreign subsidiaries and, therefore, are at higher
rates than for comparable borrowings in the U.S.
(C) Borrowings outstanding in 1993 include short-term borrowings from banks for the Company's foreign subsidiaries, primarily
Western Europe, to provide working capital funds. Borrowings outstanding in 1992 and 1991 include commercial paper
obligations and notes payable to banks to fund purchases of the Corporation's common stock during 1992 and to provide working
capital and funds for expansions in the U.S. and in Europe and Brazil in 1991 and 1992.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
BANDAG, INCORPORATED AND SUBSIDIARIES
COL. A COL. B
ITEM Charged to Costs and Expenses
Year Ended December 31
1993 1992 1991
Maintenance and repairs $14,361,000 $16,223,000 $9,519,000
Advertising $9,483,000 $12,748,000 $11,361,000
Amounts for other items have been omitted as such amounts are less
than 1% of total sales and revenues in the respective year.
Item 14 (Cont.)
(3) Exhibits
Exhibit No. Description
3.1 Bylaws: As amended November 13,
1987. (Incorporated by reference
to Exhibit No. 3.1 to the
Corporation's Form 10-K for the
year ended December 31, 1987.)
3.2 Restated Articles of
Incorporation, effective December
30, 1986. (Incorporated by
reference to Exhibit No. 3.2 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
3.3 Articles of Amendment to Bandag,
Incorporated's Articles of
Incorporation, effective May 6,
1992. (Incorporated by reference
to Exhibit No. 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
4 Instruments defining the rights of
security holders. (Incorporated
by reference to Exhibit Nos. 3.2
and 3.3 to the Corporation's Form
10-K for the year ended December
31, 1992.)
The Corporation agrees to furnish
copies of its long-term debt
agreements to the Commission on
request.
10.1 *1984 Bandag, Incorporated
Restricted Stock Grant Plan, as
amended May 6, 1992.
(Incorporated by reference to
Exhibit No. 10.1 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.2 U. S. Bandag System Franchise
Agreement Truck and Bus Tires.
10.3 Agreement of Lease dated June 27,
1975 and Amendment dated November
14, 1982 by and between Bandag,
Incorporated and Macomb Motel,
Inc. (Incorporated by reference as
Exhibit No. 10.5 to the
Corporation's Form 10-K for the
year ended December 31, 1985.)
10.4 *Miscellaneous Fringe Benefits for
Executives.
10.5 *Nonqualified Stock Option Plan,
as amended May 6, 1992.
(Incorporated by reference as
Exhibit No. 10.6 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.6 *Nonqualified Stock Option
Agreement of Martin G. Carver
dated November 13, 1987, as
amended by an Addendum dated June
12, 1992. (Incorporated by
reference as Exhibit No. 10.7 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
10.7 *Form of Participation Agreement
under the 1984 Bandag,
Incorporated Restricted Stock
Grant Plan. (Incorporated by
reference as Exhibit No. 10.8 to
the Corporation's Form 10-K for
the year ended December 31, 1992.)
10.8 *Employment Agreement with Michel
Petiot effective January 1, 1994,
dated December 20, 1993.
11 Computation of earnings per share.
21 Subsidiaries of Registrant.
*Represents a management compensatory plan or arrangement.
(b) Reports on Form 8-K: No report on Form 8-K was filed during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BANDAG, INCORPORATED
By /s/ Martin G. Carver
Martin G. Carver
Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By /s/ Stephen A. Keller By /s/ Stanley E. G. Hillman
Stephen A. Keller Stanley E. G. Hillman
Director Director
By ______________________ By /s/ R. Stephen Newman
Edgar D. Jannotta R. Stephen Newman
Director Director
By /s/ James R. Everline By /s/ Martin G. Carver
James R. Everline Martin G. Carver
Director Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
By /s/ Thomas E. Dvorchak
Thomas E. Dvorchak
Senior Vice President and
Chief Financial Officer
(Chief Accounting Officer)
Date: March 29, 1994
EXHIBIT INDEX
Exhibit No. Page No. Description
3.1 Bylaws: As amended November 13,
1987. (Incorporated by reference
to Exhibit No. 3.1 to the
Corporation's Form 10-K for the
year ended December 31, 1987.)
3.2 Restated Articles of
Incorporation, effective December
30, 1986. (Incorporated by
reference to Exhibit No. 3.2 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
3.3 Articles of Amendment to Bandag,
Incorporated's Articles of
Incorporation, effective May 6,
1992. (Incorporated by reference
to Exhibit No. 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
4 Instruments defining the rights
of Security Holders.
(Incorporated by reference to
Exhibit Nos. 3.2 and 3.3 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
The Corporation agrees to furnish
copies of its long-term debt
agreements to the Commission on
request.
10.1 *1984 Bandag, Incorporated
Restricted Stock Grant Plan, as
amended May 6, 1992.
(Incorporated by reference to
Exhibit No. 10.1 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.2 50 U. S. Bandag System Franchise
Agreement Truck and Bus Tires.
10.3 Agreement of Lease dated June 27,
1975 and Amendment dated November
14, 1982 by and between Bandag,
Incorporated and Macomb Motel,
Inc. (Incorporated by reference
as Exhibit No. 10.5 to the
Corporation's Form 10-K for the
year ended December 31, 1985.)
10.4 *Miscellaneous Fringe Benefits
for Executives.
10.5 *Nonqualified Stock Option Plan,
as amended May 6, 1992.
(Incorporated by reference as
Exhibit No. 10.6 to the
Corporation's Form 10-K for the
year ended December 31, 1992.)
10.6 *Nonqualified Stock Option
Agreement of Martin G. Carver
dated November 13, 1987, as
amended by an Addendum dated June
12, 1992. (Incorporated by
reference as Exhibit No. 10.7 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
10.7 *Form of Participation Agreement
under the 1984 Bandag,
Incorporated Restricted Stock
Grant Plan. (Incorporated by
reference as Exhibit No. 10.8 to
the Corporation's Form 10-K for
the year ended December 31,
1992.)
10.8 68 *Employment Agreement with Michel
Petiot effective January 1, 1994,
dated December 20, 1993.
11 69 Computation of earnings per
share.
21 71 Subsidiaries of Registrant.
* Represents a management compensatory plan or arrangement.