Bandag (BDG) said Thursday it is closing its pension plans to new hires in the U.S. and Canada, and freezing existing pension plans for salaried and hourly U.S employees and for salaried Canadian employees, effective Dec. 31.
The retreading materials manufacturer is offering an early retirement program for eligible employees and is considering terminating the pension plans within the next 18 months.
Bandag anticipates that freezing its pension plans will help in controlling retirement benefit expenses.
"The North American markets for commercial replacement tires have changed irreversibly over the past several years, a situation exacerbated by record-high raw material prices and intensified competition," CEO Martin G. Carver said in a statement. "To stimulate growth in Bandag's traditional retread business, we are taking steps to simplify our operations and lower our operating costs."The company said it expects to record a net curtailment pre-tax gain of $1.9 million, or 6 cents a share, in the second quarter ending June 30 and estimates pension expense of $4.9 million in 2006. Pre-tax expenses associated with the early retirement, voluntary and involuntary separation programs are estimated to be $12 million to $17 million, or 39 cents a share to 56 cents a share, which is expected to be recorded in third quarter. Bandag estimates pre-tax cost savings from the above programs to be $5 million to $7 million, or 16 cents a share to 23 cents a share, for 2006, and an annualized net pre-tax savings of $16 million to $20 million, or 52 cents a share to 65 cents a share. The company's shares were trading up $1.15, or 3.2%, at $37.59 Thursday.