Tire retreader Bandag Inc. took a $47.3 million charge this quarter to cover accounting rule changes that affect its tire distribution subsidiary Tire Distribution Systems (TDS). The charge negated Bandag's $1.2 million worth of earnings in the first quarter, forcing it to post a $46 million loss.
Muscatine, IA-based Bandag said sales for first quarter dropped 6% to $192.5 million, down from sales of $205.1 million in the same period last year.
Chairman & CEO Martin Carver added that worldwide commercial retread truck tire markets remained soft, resulting in a 6% reduction in the company's global traditional business tread volume. Difficult market conditions were also evident in the results of TDS, which lost $6 million as sales dropped 2% to $80.9 million this quarter, he said.
North American traditional business sales decreased by 4%, on a 5% decrease in retread material volume, and operating profit decreased by 5%. Improved pricing and lower raw material costs partially offset a 15% increase in operating and other expenses, which included lower pension income, higher marketing costs and approximately $2 million in expense related to converting SystemBandag users to the RoadWare software system, Carver said.
"Current rising energy prices and uncertainty in the Middle East continue to complicate the near term economic outlook worldwide," he added. "Energy prices impact not only the operating cost structure of our fleet customers, but also the costs of our oil-derived raw materials and tread production."