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 September 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
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The number of shares outstanding of Registrant's common stock, par value
$.375 on September 30, 1995, was 9,934,882 (after adjustment for two-for one
stock split effective April 26, 1995).
Page 2 of 8
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 NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
EARNINGS (note 1) 1995 1994 1995 1994
---- ---- ---- ----
Net sales $77,761 $71,309 $234,702 $200,534
Less:
Cost of sales (note 2) 44,279 41,501 133,934 116,154
Selling and administrative (note 2) 26,208 23,570 80,103 67,783
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Profit from operations 7,274 6,238 20,665 16,597
Other income (expense)
Net foreign currency gain (loss) (199) 21 (78) (161)
Interest income 1,045 952 3,109 2,829
Interest expense (715) (572) (1,853) (1,180)
Miscellaneous income (expense), net (411) (558) (1,142) (1,478)
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Total other income (expense) (280) (157) 36 10
------- ------- -------- --------
Earnings before income taxes 6,994 6,081 20,701 16,607
Taxes on Income 2,360 2,179 6,920 5,820
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Net earnings $ 4,634 $ 3,902 $ 13,781 $ 10,787
PER SHARE
Net earnings $ .47 $ .40 $ 1.39 $ 1.10
Dividends $ .17 $ .16 $ .51 $ .48
Average number of shares 9,923,200 9,819,800 9,907,900 9,823,600
Page 3 of 8
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 SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ ----------------------
Cash and cash equivalents $ 1,826 $ 1,851
Receivables 66,111 63,411
Less deferred income from sales finance charges (1,768) (1,592)
Less allowance for doubtful accounts (2,791) (2,609)
-------- --------
Net receivables 61,552 59,210
Inventories (note 3) 42,206 30,985
Prepaid expenses 1,237 696
Deferred income taxes, current portion 6,384 6,068
-------- --------
Total current assets 113,205 98,810
Property, plant, and equipment 133,635 122,384
Less allowance for depreciation (71,294) (65,832)
-------- --------
Net property, plant, and equipment 62,341 56,552
Net noncurrent installment accounts receivable 7,185 6,353
Deferred income taxes, long-term portion 944 944
Intangible assets 18,417 19,287
Other assets 677 888
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Total assets $202,769 $182,834
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-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
(CONDENSED FROM AUDITED
(UNAUDITED) FINANCIAL STATEMENTS)
LIABILITIES SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ ----------------------
Current debt $ 13,819 $ 23,008
Accounts payable 18,479 17,925
Accrued expenses 25,293 25,132
-------- --------
Total current liabilities 57,591 66,065
Long-term debt 22,071 6,300
Employee retirement-related benefits 14,431 13,460
Other long-term liabilities 570 760
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Total liabilities 94,663 86,585
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,726 3,690
Additional paid-in capital (note 5) 2,756 396
Equity adjustment from foreign currency translation 3,231 2,743
Common stock subscribed 0 525
Unearned restricted shares (404) (424)
Retained earnings 112,009 103,281
Receivable from ESOP (13,212) (13,962)
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Total shareholders' equity 108,106 96,249
-------- --------
Total liabilities and shareholders' equity $202,769 $182,834
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Page 4 of 8
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) NINE MONTHS ENDED SEPTEMBER 30
------------------------------
1995 1994
---- ----
Net cash flow related to operating activities $12,280 $17,140
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (16,048) (13,230)
Acquisition of Castex and Eagle (1,126) (27,610)
Proceeds from disposals of property, plant, and equipment 2,685 1,068
Settlement of foreign currency hedging contracts (691) (465)
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Net cash flow related to investing activities (15,180) (40,237)
Cash flow related to financing activities:
Net changes in current debt (9,322) 28,961
Issuance of long-term debt 15,727 --
Principal payment from ESOP 450 409
Proceeds from employee stock issues 1,249 1,120
Repurchase of common stock 0 (1,760)
Dividends paid (5,052) (4,715)
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Net cash flow related to financing activities 3,052 24,015
Effect of exchange rate changes on cash (177) (131)
-------- -------
Net increase (decrease) in cash and cash equivalents (25) 787
Cash and cash equivalents at beginning of year 1,851 2,675
-------- -------
Cash and cash equivalents at end of third quarter $ 1,826 $ 3,462
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Page 5 of 8
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 nine months
ended September 30, 1995 and 1994, as follows:
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
(In Thousands)
Engineering, research and development $3,146 $2,670 $9,193 $8,319
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------ ------ ------ ------
Bad debts $ 84 $ 141 $ 591 $ 548
------ ------ ------ ------
------ ------ ------ ------
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.
1995 Engineering, Research and Development restated to
exclude warranty administration expense, consistent with
previous years.
(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 September 30, 1995, and December 31, 1994, is
as follows:
SEPTEMBER 30 DECEMBER 31
1995 1994
------------ -----------
(In Thousands)
FIFO Inventories:
Finished Goods $27,995 $21,491
All Other 32,363 26,174
LIFO Adjustment (18,152) (16,680)
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LIFO Inventories $42,206 $30,985
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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.
Page 6 of 8
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Cash Flow
Income taxes paid during the nine months ended September 30,
1995 and 1994, were $8,316,000 and $4,092,000, respectively.
Interest costs paid during the nine months ended September
30, 1995 and 1994, were $2,048,000 and $1,092,000,
respectively.
(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 OPERATIONS
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 Nine Months Ended September 30, 1995, and is
incorporated in this Form 10-Q by reference.
Page 7 of 8
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 Incorporated by reference to
Exhibit 3i to the Company's
Registration Statement No.
000-04804, 1995 Second
Quarter 10Q Filing, dated
August 8, 1995.
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.
13.1 Text Portion of Report to Filed herewith electronically.
Shareholders for the Nine
Months Ended September 30,
1995
27.1 Financial Data Schedule Filed herewith electronically.
(b) Reports on Form 8-K
A Form S-8 was filed August 22, 1995, reporting 1995 Stock Incentive Plan.
Page 8 of 8
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: 11-9-95 /s/ RICHARD A. SNYDER
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Richard A. Snyder
Vice President, Treasurer and
Principal Financial Officer
Date: 11-9-95 /s/ MAHEDI A. JIWANI
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Mahedi A. Jiwani
Corporate Controller and
Principal Accounting Officer