UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement
Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by
a Party other than the Registrant [ ]
Check the appropriate box:
| [ ] | Preliminary Proxy Statement |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| [ ] | Definitive Proxy Statement |
| [ ] | Definitive Additional Materials |
| [X] | Soliciting Material Pursuant to §240.14a-12 |
| BANDAG, INCORPORATED |
| (Name of Registrant as Specified in its Charter) |
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box):
| [X] | No fee required. |
| [ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) | Title of each class of securities to which transaction applies: |
| 2) | Aggregate number of securities to which transaction applies: |
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) | Proposed maximum aggregate value of transaction: |
| 5) | Total fee paid: |
| [ ] | Fee paid previously with preliminary materials. |
| [ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) | Amount Previously Paid: |
| 2) | Form, Schedule or Registration Statement No.: |
| 3) | Filing Party: |
| 4) | Date Filed: |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13
or 15(d) of
the Securities Exchange Act of 1934
_________________
| Date of Report | ||
| (Date of earliest | ||
| event reported): | February 7, 2007 |
| Bandag, Incorporated |
| (Exact name of registrant as specified in its charter) |
| Iowa |
1-7007 |
42-0802143 |
| (State or other | (Commission File | (IRS Employer |
| jurisdiction of | Number) | Identification No.) |
| incorporation) |
| 2905 North Highway 61, Muscatine, Iowa 52761-5886 |
| (Address of principal executive offices, including zip code) |
(563) 262-1400 |
| (Registrant’s telephone number, including area code) |
Not Applicable |
| (Former name or former address, if changed since last report) |
_________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [X] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On February 7, 2007, Bandag, Incorporated (the “Company”) issued a press release announcing its annual and quarterly financial results for the reporting period ended December 31, 2006. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Form 8-K by reference.
Additional Information
On December 5, 2006, the Company entered into an Agreement and Plan of Merger with Bridgestone Americas Holding, Inc., a Nevada corporation, and Grip Acquisition Corporation, an Iowa corporation and a wholly owned subsidiary of Bridgestone, pursuant to which Grip Acquisition will merge with and into the Company. The Company has filed a preliminary proxy statement and other documents regarding the proposed merger with the U.S. Securities and Exchange Commission (“SEC”). The definitive proxy statement will be sent to shareholders of the Company seeking their approval of the proposed merger agreement at a special meeting of shareholders. Shareholders are urged to read the definitive proxy statement and any other relevant document when they become available, because they will contain important information about the Company, the proposed merger and related matters. Shareholders will be able to obtain, free of charge, a copy of the definitive proxy statement (when available) and other relevant documents filed with the SEC from the SEC’s website at www.sec.gov. Shareholders will also be able to obtain a free copy of the definitive proxy statement and other relevant documents (when available) by directing a request by mail or telephone to the Company, 2905 N. Hwy. 61 Muscatine, IA 52761, Attention: Corporate Secretary, telephone (563) 262-1260, or from the Company’s website, www.bandag.com.
The Company and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be “participants” in the solicitation of proxies from shareholders of the Company in favor of the proposed merger. Information regarding the persons who may be considered “participants” in the solicitation of proxies will be set forth in the Company’s definitive proxy statement. Information regarding certain of these persons and their beneficial ownership of the Company’s stock as of January 31, 2006, is also set forth in the Schedule 14A filed by the Company with the SEC on April 17, 2006.
Item 9.01. Financial Statements and Exhibits.
| (a) | Financial Statements of Business Acquired. |
| Not applicable. |
| (b) | Pro Forma Financial Information. |
| Not applicable. |
| (c) | Shell Company Transactions. |
| Not applicable. |
| (d) | Exhibits. The following exhibit is being furnished herewith: |
| 99.1 | Press Release of Bandag, Incorporated, dated February 7, 2007. |
-1-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BANDAG, INCORPORATED | |
| (Registrant) | |
| By: /s/ Warren W. Heidbreder | |
| Warren W. Heidbreder | |
| Vice President, Chief Financial Officer |
Date: February 8, 2007
Signature Page
BANDAG, INCORPORATED
Exhibit Index to Current Report on Form 8-K
Exhibit
Number
| 99.1 | Press Release of Bandag, Incorporated, dated February 7, 2007. |
Exhibit Index
| NEWS RELEASE | CONTACT: | Warren W. Heidbreder |
| FOR IMMEDIATE RELEASE | PHONE: | 563-262-1260 |
| DATE: February 7, 2007 | URL: | www.bandag.com |
BANDAG, INCORPORATED
REPORTS 4th QUARTER EPS OF $0.57
Bandag, Incorporated (NYSE: BDG and BDGA)
Flash Results
| (Numbers in Millions, Except Per Share Data) |
| Q4 2006 | Q4 2005 | 12 Months 2006 |
12 Months 2005 | |
|---|---|---|---|---|
Net sales |
$253.7 | $252.3 | $973.6 | $914.6 |
Earnings from continuing operations |
$11.2 | $12.1 | $36.6* | $49.5 |
Diluted EPS from continuing operations |
$0.57 | $0.62 | $1.87* | $2.52 |
| *Before loss from discontinued operations of $16.6 million, or $0.85 per diluted share. |
MUSCATINE, IOWA, February 7, 2007 – Bandag, Incorporated (NYSE: BDG and BDGA) today reported consolidated net sales for fourth quarter 2006 of $253.7 million compared to consolidated net sales of $252.3 million in fourth quarter 2005, an increase of 1 percent. Consolidated net sales were positively impacted by approximately $2.6 million due to the effect of translating foreign currency denominated net sales into U.S. dollars. Consolidated earnings from continuing operations were $11.2 million, or $0.57 per diluted share, for fourth quarter 2006, compared to fourth quarter 2005 consolidated net earnings of $12.1 million, or $0.62 per diluted share. During fourth quarter 2006, Bandag incurred pre-tax restructuring expenses of $6.3 million, or $0.20 per diluted share, primarily associated with the European business unit reduction in workforce.
On December 5, 2006, Bandag announced that it had entered into a definitive merger agreement with Bridgestone Americas Holding, Inc. (BSAH) pursuant to which BSAH will acquire the outstanding shares of each class of stock of Bandag for US $50.75 per share in cash. This proposed merger remains subject to the receipt of shareholder approval and other regulatory approvals, as well as the satisfaction of customary closing conditions. The transaction is expected to be completed in the second quarter of 2007.
For full year 2006, Bandag reported consolidated net sales of $973.6 million, an increase of 6 percent from consolidated net sales in 2005 of $914.6 million. Consolidated earnings from continuing operations for 2006 were $36.6 million, or $1.87 per diluted share, compared to consolidated net earnings of $49.5 million, or $2.52 per diluted share, in 2005. During 2006, Bandag recorded the previously announced deferred loss on the sale of its business in South Africa. As a result, Bandag recorded a net loss on discontinued operations of $16.6 million, or $0.85 per diluted share, resulting in consolidated net earnings
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BANDAG, Incorporated
2905
N. Hwy. 61, Muscatine, IA 52761-5886
Tel 563.262.1400 - url www.bandag.com
of $20.0 million, or $1.02 per diluted share. During 2006, Bandag incurred pre-tax expenses of $19.8 million, or $0.65 per diluted share, associated with the closing of its manufacturing plant in Shawinigan, Quebec, the employment reduction programs in North America, as well as an employee reduction program in Europe and International.
In announcing earnings, Martin G. Carver, Bandag chairman, president and chief executive officer said, “The combined effects of the buildup of new trucking equipment capacity, on-going uncertainty in energy and raw material prices, and continued slow freight volumes particularly early in the fourth quarter suppressed unit and sales volume in Bandag’s traditional retread business. Both Tire Distribution Systems, Inc. (TDS), Bandag’s tire distribution subsidiary, and our Vehicle Services business unit, which includes Speedco’s on-highway truck lubrication business, delivered solid sales improvements. In Bandag’s traditional businesses, our 2006 business simplification efforts set the stage to contain operating costs and help counter generally slow growth in trucking freight volumes, particularly in North America.”
Financial Highlights
| • | Factors that affected consolidated net sales for fourth quarter 2006 were: |
| ° | North American business unit volume decreased 12 percent compared to fourth quarter 2005 and net sales decreased 8 percent. The sales decline was partially offset by a sales increase of approximately $0.5 million due to the effect of translating foreign currency denominated net sales into U.S. dollars and by a price increase in January 2006. |
| ° | European business unit volume and net sales increased 1 percent. Net sales were negatively impacted by lower fleet sales and an increase in sales incentive programs. Net sales were positively impacted by approximately $1.3 million due to the effect of translating foreign currency denominated net sales. |
| ° | International business unit volume decreased 7 percent and net sales decreased 8 percent. Excluding South Africa, unit volume increased 8 percent and net sales increased 6 percent. Net sales were positively impacted by approximately $0.8 million due to the effect of translating foreign currency denominated net sales into U.S. dollars. |
| ° | TDS net sales increased $6.7 million, or 15 percent, from the prior year period. Net sales were positively impacted by increased unit sales and higher prices. |
| ° | Vehicle Services business unit net sales increased $6.9 million, or 31 percent, primarily due to an increase in Speedco net sales of $4.3 million compared to the prior year period. Same store Speedco lube sales increased $0.5 million, or 3 percent, but same store tire sales decreased $0.1 million, or 5 percent. Same store revenue is comprised of locations that have operated for twelve full months. As of December 31, 2006, same store lube sales included 35 locations and same store tire sales included 21 locations. Overall, Speedco had 47 locations, 39 with tire service capabilities, as of December 31, 2006, compared to 35 locations, 23 with tire service capabilities, at the same time last year. Truck Lube 1 which provides light truck maintenance was purchased in April 2006 and contributed $2.3 million to fourth quarter net sales. |
| • | Fourth quarter 2006 consolidated gross margin declined by 0.5 percentage points. Traditional Business gross margin remained even primarily due to an increase in the North America business unit gross margin of 2.1 percentage points. North America business unit gross margin was positively impacted by a decrease in sales incentive programs which was partially offset by higher raw material prices. International business unit and European business unit gross margin each declined 3.9 percentage points, primarily due to higher raw material costs. Vehicle Services gross margin increased 1.1 percentage points. |
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| • | Consolidated operating and other expenses for fourth quarter 2006 decreased $6.5 million, or 10 percent, compared to the prior year period. Operating and other expenses decreased in all business units with the exception of Vehicle Services. North America, International and European business units operating and other expenses decreased due to reductions in workforce and spending decreases. |
| • | Consolidated restructuring expenses of $6.3 million were recorded in the fourth quarter of 2006. The European business unit recorded $5.8 million in restructuring expenses and the North America business unit recorded $0.5 million. |
| • | Capital expenditures were $74.1 million through December 31, 2006, compared to $63.4 million for the same period last year. The increase in capital expenditures is primarily due to expenditures made by Speedco for new facilities and expansions of tire lanes at existing facilities. |
Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 900 franchised dealers that produce and market retread tires and provide tire management services. Bandag’s traditional business serves end-users through a wide variety of products offered by dealers, ranging from tire retreading and repairing to tire management systems outsourcing for commercial truck fleets. TDS, a wholly-owned subsidiary, sells and services new and retread tires. In addition, Bandag has an 87.5% interest in Speedco, Inc., a provider of on-highway truck lubrication and routine tire services to commercial truck owner-operators and fleets.
This press release contains “forward-looking” statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on certain assumptions, describe future expectations of Bandag, and are identifiable by the use of words like “estimated” and “expects.” These statements are based on management’s current projections, beliefs and opinions as of the date of this press release. They involve known and unknown risk and uncertainties, which may cause the actual results in the future to differ materially from expected results. Bandag’s ability to predict results of the actual effect of future events is inherently uncertain. Factors which could affect the “forward-looking” statements include unanticipated issues associated with obtaining approvals to complete the proposed merger or other unexpected issues that could impact the closing of the proposed merger; unanticipated delays or difficulties in achieving and sustaining the expected cost savings from Bandag’s employee reduction programs; and Bandag’s ability to achieve and sustain expected improvements in its competitive position and management of its business.
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Bandag,
Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)
| Fourth Quarter Ended December 31, |
Twelve Months Ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statements of Earnings |
2006 |
2005 |
2006 |
2005 | ||||||||||
Income |
||||||||||||||
| Net sales | $ | 253,734 | $ | 252,278 | $ | 973,570 | $ | 914,640 | ||||||
| Other | 2,810 | 1,639 | 10,540 | 6,299 | ||||||||||
| 256,544 | 253,917 | 984,110 | 920,939 | |||||||||||
Costs and expenses | ||||||||||||||
| Cost of products sold | 171,654 | 169,387 | 661,655 | 598,433 | ||||||||||
| Operating & other expenses | 61,862 | 68,383 | 252,842 | 252,191 | ||||||||||
| Restructuring | 6,258 | 3,100 | 19,762 | 3,100 | ||||||||||
| 239,774 | 240,870 | 934,259 | 853,724 | |||||||||||
Income from operations | 16,770 | 13,047 | 49,851 | 67,215 | ||||||||||
| Interest income | 1,708 | 1,963 | 7,971 | 8,090 | ||||||||||
| Interest expense | (388 | ) | (435 | ) | (1,433 | ) | (1,951 | ) | ||||||
| Earnings before income taxes, minority interest and discontinued | 18,090 | 14,575 | 56,389 | 73,354 | ||||||||||
| operations | ||||||||||||||
| Income taxes | 6,961 | 1,994 | 20,229 | 22,954 | ||||||||||
| Minority interest | (41 | ) | 527 | (396 | ) | 921 | ||||||||
| Earnings from continuing operations | 11,170 | 12,054 | 36,556 | 49,479 | ||||||||||
| Net loss on discontinued operations | (248 | ) | -- | (16,604 | ) | -- | ||||||||
| Net earnings | $ | 10,922 | $ | 12,054 | $ | 19,952 | $ | 49,479 | ||||||
Basic earnings (loss) per share | ||||||||||||||
| Earnings from continuing operations | $ | 0.58 | $ | 0.62 | $ | 1.89 | $ | 2.55 | ||||||
| Net loss on discontinued operations | (0.01 | ) | -- | (0.86 | ) | -- | ||||||||
| Net earnings | $ | 0.57 | $ | 0.62 | $ | 1.03 | $ | 2.55 | ||||||
Diluted earnings (loss) per share | ||||||||||||||
| Earnings from continuing operations | $ | 0.57 | $ | 0.62 | $ | 1.87 | $ | 2.52 | ||||||
| Net loss on discontinued operations | (0.01 | ) | -- | (0.85 | ) | -- | ||||||||
| Net earnings | $ | 0.56 | $ | 0.62 | $ | 1.02 | $ | 2.52 | ||||||
Weighted average shares outstanding | ||||||||||||||
| Basic | 19,368 | 19,350 | 19,342 | 19,393 | ||||||||||
| Diluted | 19,615 | 19,591 | 19,536 | 19,671 | ||||||||||
| Fourth Quarter Ended December 31, |
Twelve Months Ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Information |
2006 |
2005 |
2006 |
2005 | ||||||||||
Net Sales |
||||||||||||||
Traditional Business | ||||||||||||||
| North America | $ | 112,233 | $ | 122,198 | $ | 453,354 | $ | 447,434 | ||||||
| Europe | 29,546 | 29,221 | 87,445 | 91,398 | ||||||||||
| International | 30,132 | 32,666 | 114,291 | 124,578 | ||||||||||
| TDS | 52,375 | 45,659 | 204,739 | 168,522 | ||||||||||
| Vehicle Services | 29,448 | 22,534 | 113,741 | 82,708 | ||||||||||
| Total net sales | $ | 253,734 | $ | 252,278 | $ | 973,570 | $ | 914,640 | ||||||
Segment Operating Profit (Loss) | ||||||||||||||
Traditional Business | ||||||||||||||
| North America | $ | 18,788 | $ | 15,137 | $ | 49,384 | $ | 63,026 | ||||||
| Europe | (4,330 | ) | (1,038 | ) | (6,880 | ) | (262 | ) | ||||||
| International | 3,739 | 3,834 | 11,568 | 14,821 | ||||||||||
| TDS | 3,819 | 1,670 | 11,719 | 6,584 | ||||||||||
| Vehicle Services | 985 | (1,152 | ) | (512 | ) | 581 | ||||||||
| Corporate expenses & other | (6,230 | ) | (5,404 | ) | (15,427 | ) | (17,535 | ) | ||||||
| Net interest income | 1,319 | 1,528 | 6,537 | 6,139 | ||||||||||
| Earnings before income taxes and minority interest | $ | 18,090 | $ | 14,575 | $ | 56,389 | $ | 73,354 | ||||||
Note: Certain prior year amounts have been reclassified to conform with the current year presentation.
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Bandag,
Incorporated
Unaudited Financial Highlights
(In thousands)
| Condensed Consolidated Balance Sheets |
Dec. 31, 2006 |
Dec. 31, 2005 | ||||||
Assets: |
||||||||
| Cash and cash equivalents | $ | 45,900 | $ | 97,071 | ||||
| Investments | 80,300 | 60,150 | ||||||
| Accounts receivable - net | 163,160 | 174,017 | ||||||
| Inventories | 84,607 | 84,668 | ||||||
| Other current assets | 53,132 | 59,960 | ||||||
| Total current assets | 427,099 | 475,866 | ||||||
Property, plant, and equipment - net | 253,996 | 209,640 | ||||||
| Other assets | 71,853 | 69,531 | ||||||
| Total assets | $ | 752,948 | $ | 755,037 | ||||
Liabilities & shareholders’ equity: | ||||||||
| Accounts payable | $ | 38,839 | $ | 45,794 | ||||
| Income taxes payable | 1,611 | 2,477 | ||||||
| Accrued liabilities | 91,841 | 100,647 | ||||||
| Short-term notes payable and current portion of other obligations | 14,600 | 15,351 | ||||||
| Total current liabilities | 146,891 | 164,269 | ||||||
Long-term debt and other obligations | 22,964 | 24,061 | ||||||
| Deferred income tax liabilities | 5,838 | 4,771 | ||||||
| Minority interest | 1,750 | 2,779 | ||||||
| Shareholders' equity | ||||||||
| Common stock | 19,501 | 19,436 | ||||||
| Additional paid-in capital | 47,670 | 37,191 | ||||||
| Retained earnings | 515,883 | 529,372 | ||||||
| Accumulated other comprehensive loss | (7,549 | ) | (26,842 | ) | ||||
| Total shareholders' equity | 575,505 | 559,157 | ||||||
| Total liabilities & shareholders' equity | $ | 752,948 | $ | 755,037 | ||||
| Twelve Months Ended December 31, | ||||||||
| Condensed Consolidated Statements of Cash Flows |
2006 |
2005 | ||||||
Operating Activities |
||||||||
| Net earnings | $ | 19,952 | $ | 49,479 | ||||
| Non-cash translation adjustment due to sale of South Africa | 14,212 | -- | ||||||
| Provision for depreciation | 26,877 | 26,302 | ||||||
| Decrease (increase) in operating assets and liabilities - net | 20,536 | (18,798 | ) | |||||
| Net cash provided by operating activities | 81,577 | 56,983 | ||||||
| Investing Activities | ||||||||
| Additions to property, plant and equipment | (74,064 | ) | (63,428 | ) | ||||
| (Purchases) maturities of investments - net | (20,150 | ) | 75,965 | |||||
| Payments for acquisitions of businesses | (8,094 | ) | (2,978 | ) | ||||
| Proceeds from divestiture of businesses | 460 | 2,251 | ||||||
| Net cash (used in) provided by investing activities | (101,848 | ) | 11,810 | |||||
| Financing Activities | ||||||||
| Principal payments on short-term notes payable & other long-term liabilities | (12,551 | ) | (16,938 | ) | ||||
| Proceeds from short-term notes payable | 5,487 | 6,645 | ||||||
| Cash dividends | (26,053 | ) | (25,774 | ) | ||||
| Purchases of common stock | (8,076 | ) | (8,053 | ) | ||||
| Stock options exercised | 8,027 | 2,235 | ||||||
| Excess tax benefits from share-based compensation expense | 380 | -- | ||||||
| Net cash used in financing activities | (32,786 | ) | (41,885 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 1,886 | 3,517 | ||||||
| (Decrease) increase in cash and cash equivalents | (51,171 | ) | 30,425 | |||||
| Cash and cash equivalents at beginning of year | 97,071 | 66,646 | ||||||
| Cash and cash equivalents at end of year | $ | 45,900 | $ | 97,071 | ||||