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Treadco is the nation’s largest independent tire retreader for the trucking industry and the second largest commercial truck tire dealer. Treadco’s revenues currently account for approximately 11% of the Company’s consolidated revenues and are divided approximately 55% and 45% between retread sales and new tire sales, respectively. In 1994, Treadco sold approximately 612,000 retreaded truck tires, which were manufactured at its production facilities in Arizona, Arkansas, Florida, Georgia, Louisiana, Missouri, Ohio, Oklahoma and Texas, and sold approximately 353,000 new tires. Retreaded truck tires are significantly less expensive than new truck tires (about one-third of the cost) and generally last as long as new tires used in similar applications. Moreover, most tire casings can be retreaded one or two times. The retail selling price of Treadco’s retread tires ranges from about $80 to $110 with an average retail selling price of $85, compared to $260 to $325 for a new tire. Treadco also sells retreads including casings not supplied by the customer for $150 to $180, averaging about $169 per tire. Since tire expenses are a significant operating cost for the trucking industry, many truck fleet operators develop comprehensive periodic tire replacement and retread management programs. On its weekly sales routes, Treadco picks up a fleet’s casings and returns them the following week, thus providing a continuous supply of both retreads and new tires as needed. In order to fully service its customers, Treadco also sells new truck tires manufactured by Bridgestone, Michelin, General, Dunlop, Sumitomo, Kumho, and other manufacturers. According to Bridgestone and Dunlop, Treadco is their largest domestic truck tire dealer, and according to Michelin, Treadco is one of its largest domestic truck tire dealers. Treadco retreads truck tires in 26 locations pursuant to multi-year franchise agreements with Bandag Incorporated ("Bandag"). Each of Treadco’s production facilities is covered by a separate Bandag franchise agreement that grants Treadco the non-exclusive right to retread truck tires at the facility using Bandag’s retreading process, materials and equipment and to sell such retread tires, using the "Bandag" trademark, without any territorial restrictions. Treadco is exploring alternatives in retreading processes in some new geographical markets. In the second quarter of 1995, Treadco has plans to open a precure production facility in Las Vegas, Nevada which will initially purchase its tread rubber from Hercules Tire and Rubber Co. The Company has the option of purchasing tread rubber and supplies from suppliers other than Hercules for the Las Vegas facility. The Company plans to open an additional retreading facility in the second half of 1995. This production facility will be a mold cure retread facility. The facility will use tread rubber compounds provided by Bridgestone/Firestone, Inc. and Bridgestone/Firestone, Inc. will also provide technical support. The process will produce quality retreads with the Bridgestone-Treadco name molded into the tread. Sales and Marketing Treadco’s sales and marketing strategy is based on its service strengths, network of production and sales facilities and strong regional reputation. In addition to excellent service, Treadco offers broad geographical coverage across the South, Southwest and the lower Midwest. This coverage is important for customers because they are able to establish uniform pricing, utilize national account billing processes of the major new tire suppliers, and generally reduce the risk of price fluctuations when service is needed. None of Treadco’s customers for retreads and new tires, including ABF or other
affiliates, represented more than 4% of Treadco’s revenues for 1994. ABF accounted
for approximately $2.0 million of Treadco’s revenues in 1994 (1.4%), and has not
accounted for more than 6% of Treadco’s revenues in the last ten years.
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