FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
Commission File No. 04804
TENNANT COMPANY
Incorporated in Minnesota IRS Emp Id No. 410572550
701 North Lilac Drive
P.O. Box 1452
Minneapolis, Minnesota 55440
Telephone No. 612-540-1200
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 period 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
--- ---
The number of shares outstanding of Registrant's common stock, par value $.375
on June 30, 1995, was 9,918,631 (after adjustment for two-for-one stock split
effective April 26, 1995).
Page 2 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED)
(Dollars in thousands)
Three Months Six Months
Ended June 30 Ended June 30
-------------------- ----------------------
EARNINGS (note 1) 1995 1994 1995 1994
---- ---- ---- ----
Net sales $82,797 $70,784 $156,941 $129,225
Less:
Cost of sales (note 2) 47,130 41,096 89,891 74,653
Selling and administrative (note 2) 27,895 23,032 53,659 44,213
------- ------- ------- -------
Profit from operations 7,772 6,656 13,391 10,359
Other income and (expense)
Net foreign currency gain (loss) (21) (98) 123 (182)
Interest income 1,068 974 2,066 1,877
Interest expense (569) (451) (1,141) (608)
Miscellaneous income (expense), net (325) (601) (732) (920)
------- ------- ------- -------
Total other income (expense) 153 (176) 316 167
------- ------- ------- -------
Earnings before income taxes 7,925 6,480 13,707 10,526
Taxes on income 2,647 2,255 4,560 3,641
------- ------- ------- -------
Net earnings $ 5,278 $ 4,225 $ 9,147 $ 6,885
------- ------- ------- -------
------- ------- ------- -------
PER SHARE (note 5)
Net earnings $ .53 $ .43 $ .92 $ .70
Dividends $ .17 $ .16 $ .34 $ .32
Average number of shares 9,907,700 9,824,400 9,900,000 9,825,800
Page 3 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS
(Dollars in thousands)
BALANCE SHEET
(Condensed from Audited
(Unaudited) Financial Statements)
ASSETS June 30,1995 December 31, 1994
------------ -----------------
Cash and cash equivalents $ 2,298 $ 1,851
Receivables 67,523 63,411
Less deferred income from sales finance charges (1,703) (1,592)
Less allowance for doubtful accounts (2,998) (2,609)
-------- --------
Net receivables 62,822 59,210
Inventories (note 3) 39,206 30,985
Prepaid expenses 1,317 696
Deferred income taxes, current portion 6,456 6,068
-------- --------
Total current assets 112,099 98,810
Property, plant, and equipment 131,960 122,384
Less allowance for depreciation (70,658) (65,832)
-------- --------
Net property, plant, and equipment 61,302 56,552
Net noncurrent installment accounts receivable 6,878 6,353
Deferred income taxes, long-term portion 944 944
Intangible assets 18,726 19,287
Other assets 1,206 888
-------- --------
Total assets $201,155 $182,834
-------- --------
-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
LIABILITIES June 30, 1995 December 31, 1994
------------- -----------------
Current debt $ 18,036 $ 23,008
Accounts payable 17,403 17,925
Accrued expenses 23,835 25,132
-------- --------
Total current liabilities 59,274 66,065
Long-term debt 22,113 6,300
Employee retirement-related benefits 14,127 13,460
Other long-term liabilities 570 760
-------- --------
Total liabilities 96,084 86,585
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,719 3,690
Additional paid-in capital (note 5) 2,340 396
Equity adjustment from foreign currency translation 3,792 2,743
Common stock subscribed -- 525
Unearned restricted shares (531) (424)
Retained earnings 109,064 103,281
Receivable from ESOP (13,313) (13,962)
-------- --------
Total shareholders' equity 105,071 96,249
-------- --------
Total liabilities and shareholders' equity $201,155 $182,834
-------- --------
Page 4 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED)
(Dollars in thousands)
STATEMENTS OF CASH FLOWS (note 4) Six Months Ended June 30
------------------------
1995 1994
---- ----
Net cash flow related to operating activities $ 3,259 $11,731
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (11,295) (7,893)
Acquisition of Castex and Eagle (1,125) (27,610)
Proceeds from disposals of property, plant, and equipment 2,204 781
Settlement of foreign currency hedging contracts (681) (122)
------- -------
Net cash flow related to investing activities (10,897) (34,844)
Cash flow related to financing activities:
Net changes in current debt (5,339) 27,360
Issuance of long-term debt 15,727 --
Principal payment from ESOP 450 409
Proceeds from employee stock issues 826 751
Repurchase of common stock -- (1,622)
Dividends paid (3,364) (3,145)
------- -------
Net cash flow related to financing activities 8,300 23,753
Effect of exchange rate changes on cash (215) (33)
------- -------
Net increase (decrease) in cash and cash equivalents 447 607
Cash and cash equivalents at beginning of year 1,851 2,675
------- -------
Cash and cash equivalents at end of second quarter $2,298 $3,282
------- -------
------- -------
Page 5 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The Company's Summary of Significant Accounting Policies and other Related
Data and Summary of Stock Plans, Bonuses, and Profit Sharing is included in
the Company's 1994 Annual Report filed as Exhibit 13.1 to the Company's
annual filing on Form 10-K and is incorporated in this Form 10-Q by
reference.
(2) Expenses
Engineering, research and development, and bad debt expenses were charged
to operations for the three and six months ended June 30, 1995 and 1994,
as follows:
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(In Thousands)
Engineering, research and development $3,268 $2,954 $6,283 $5,649
------ ------ ------ ------
------ ------ ------ ------
Bad debts $ 13 $ 290 $ 507 $ 407
------ ------ ------ ------
------ ------ ------ ------
The Company also makes accrual adjustments on a regular monthly basis for
bonus and profit sharing expenses which are settled at year-end. This
allows for a fair statement of the results for the interim periods
presented.
(3) Inventories
Inventories are valued at the lower of cost (principally on a last-in,
first-out basis) or market. The composition of inventories at June 30,
1995, and December 31, 1994, is as follows:
June 30 December 31
1995 1994
------- -----------
(In Thousands)
FIFO Inventories:
Finished Goods $23,799 $21,491
All Other 33,559 26,174
LIFO Adjustment (18,152) (16,680)
-------- --------
LIFO Inventories $39,206 $30,985
------- -------
------- -------
The category "All Other" includes production-related raw materials, parts
and supplies, and work-in-process. The Company's accounting system does
not permit a further breakdown of this category of inventories.
(4) Cash Flow
Income taxes paid during the six months ended June 30, 1995 and 1994, were
$3,736,000 and $1,478,000, respectively. Interest costs paid during the
six months ended June 30, 1995 and 1994, were $1,204,000 and $540,000,
respectively.
Page 6 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Stock Split
On February 16, 1995, the Board of Directors declared a two-for-one stock
split effective April 26, 1995, for shareholders of record on April 12,
1995. For each share to be issued in connection with the stock split, an
amount equal to the par value of $.375 was transferred to the common stock
amount from additional paid-in capital retroactive to December 31, 1994.
All share and per share data in this report have been retroactively
adjusted to reflect this stock split.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Management's discussion and analysis of financial condition and results of
operations is included in Exhibit 13.1, attached, text portion of Report to
Shareholders for the Six Months Ended June 30, 1995, and is incorporated in this
Form 10-Q by reference.
Page 7 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Shareholders' Meeting held on May 4, 1995, the following
matters were submitted to vote:
(a) Election of Directors
Andrew P. Czajkowski was elected to serve a three-year term as a director
of the Company. Out of 4,071,692 common shares represented, 3,979,108
voted in favor and 92,584 withheld.
William A. Hodder was elected to serve a three-year term as a director of
the Company. Out of 4,071,692 common shares represented, 3,983,697 voted
in favor and 87,995 withheld.
Arthur D. Collins, Jr., was elected to serve a three-year term as a
director of the Company. Out of 4,071,692 common shares represented,
3,913,412 voted in favor and 158,280 withheld.
The following directors each continued their term of office after the
meeting:
David C. Cox
Roger L. Hale
Delbert W. Johnson
William I. Miller
Arthur R. Schulze, Jr.
(b) 1995 Stock Incentive Plan
The approval and ratification of the Tennant Company 1995 Stock Incentive
Plan was approved. Out of 4,071,692 common shares represented, 3,685,960
voted in favor, 142,336 against, 39,174 abstained, and 204,222 broker non-
votes.
(c) Restricted Stock Plan for Nonemployee Directors
The approval and ratification of the amendments to and restatement of the
Restricted Stock Plan for Nonemployee Directors. Out of 4,071,692 common
shares represented, 3,694,034 voted in favor, 132,411 against, 110,542
abstained, and 134,705 broker non-votes.
(d) Appointment of KPMG Peat Marwick as Auditors
The appointment of KPMG Peat Marwick as independent auditors of the Company
was approved. Out of 4,071,692 common shares represented, 4,016,901 voted
in favor, 18,461 against, and 36,330 abstained.
Page 8 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item # Description Method of Filing
------ ----------- ----------------
3i Articles of Incorporation Filed herewith electronically.
3ii By-Laws Incorporated by reference to
Exhibit 4.2 to the Company's
Registration Statement No.
33-59054, Form S-8, dated
March 2, 1993.
10.1 1995 Stock Incentive Plan Filed herewith electronically.
10.2 Restricted Stock Plan For Filed herewith electronically.
Nonemployee Directors
13.1 Text Portion of Report to Filed herewith electronically.
Shareholders the Six Months
Ended June 30, 1995
27.1 Financial Data Schedule Filed herewith electronically.
(b) Reports on Form 8-K
There were no reports filed on Form 8K filed for the quarter ended
June 30, 1995.
Page 9 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
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 thereunto duly authorized.
TENNANT COMPANY
Date: August 9, 1995 /s/ Richard A. Snyder
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Richard A. Snyder
Vice President, Treasurer and
Chief Financial Officer
Date: August 9, 1995 /s/ Mahedi A. Jiwani
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Mahedi A. Jiwani
Corporate Controller and
Principal Accounting Officer