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, 1996
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, 1996, was 10,022,459.
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) 1996 1995 1996 1995
------- ------- -------- --------
Net sales $83,816 $77,761 $247,433 $234,702
Less:
Cost of sales (note 2) 49,619 44,279 144,679 133,934
Selling and administrative (note 2) 26,691 26,208 81,831 80,103
------- ------- -------- --------
Profit from operations 7,506 7,274 20,923 20,665
Other income (expense)
Net foreign currency gain (loss) -- (199) 40 (78)
Interest income 1,059 1,045 3,161 3,109
Interest expense (575) (715) (1,927) (1,853)
Miscellaneous income (expense), net (311) (411) (625) (1,142)
------- ------- -------- --------
Total other income (expense) 173 (280) 649 36
------- ------- -------- --------
Earnings before income taxes 7,679 6,994 21,572 20,701
Taxes on Income 2,669 2,360 7,413 6,920
------- ------- -------- --------
Net earnings $ 5,010 $ 4,634 $ 14,159 $ 13,781
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------- ------- -------- --------
PER SHARE (note 5)
Net earnings $ .50 $ .47 $ 1.41 $ 1.39
Dividends $ .17 $ .17 $ .51 $ .51
Average number of shares 10,044,900 9,923,200 10,030,000 9,907,900
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, 1996 December 31, 1995
------------------ ----------------------
Cash and cash equivalents $ 5,941 $ 4,247
Receivables 68,706 76,961
Less deferred income from sales finance charges (1,781) (1,840)
Less allowance for doubtful accounts (2,341) (2,610)
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Net receivables 64,584 72,511
Inventories (note 3) 39,168 40,702
Prepaid expenses 990 944
Deferred income taxes, current portion 5,099 5,104
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Total current assets 115,782 123,508
Property, plant, and equipment 146,459 137,213
Less allowance for depreciation (81,003) (73,489)
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Net property, plant, and equipment 65,456 63,724
Net noncurrent installment accounts receivable 7,350 7,510
Deferred income taxes, long-term portion 1,546 1,545
Intangible assets 18,089 18,859
Other assets 627 604
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Total assets $ 208,850 $ 215,750
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LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
September 30, 1996 December 31, 1995
------------------ ----------------------
Current debt $ 4,063 $ 17,349
Accounts payable 14,853 21,436
Accrued expenses 24,003 22,938
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Total current liabilities 42,919 61,723
Long-term debt 23,134 23,149
Employee retirement-related benefits 17,525 16,177
Other long-term liabilities 380 570
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Total liabilities 83,958 101,619
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,758 3,732
Additional paid-in capital (note 5) 4,932 3,166
Equity adjustment from foreign currency translation 3,451 3,532
Common stock subscribed 204 694
Unearned restricted shares (541) (276)
Retained earnings 125,443 116,396
Receivable from ESOP (12,355) (13,113)
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Total shareholders' equity 124,892 114,131
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Total liabilities and shareholders' equity $ 208,850 $ 215,750
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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
------------------------------
1996 1995
----------- ----------
Net cash flow related to operating activities $ 31,870 $ 12,280
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (15,862) (16,048)
Acquisition of intangible assets (180)
Acquisition of Castex and Eagle -- (1,126)
Proceeds from disposals of property, plant, and equipment 2,715 2,685
Settlement of foreign currency hedging contracts 396 (691)
---------- ----------
Net cash flow related to investing activities (12,931) (15,180)
Cash flow related to financing activities:
Net changes in current debt (13,086) (9,322)
Issuance of long-term debt -- 15,727
Principal payment from ESOP 495 450
Proceeds from employee stock issues 1,336 1,249
Repurchase of common stock (963) 0
Dividends paid (5,112) (5,052)
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Net cash flow related to financing activities (17,330) 3,052
Effect of exchange rate changes on cash 86 (177)
---------- ----------
Net increase (decrease) in cash and cash equivalents 1,695 (25)
Cash and cash equivalents at beginning of year 4,247 1,851
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Cash and cash equivalents at end of third quarter $ 5,942 $ 1,826
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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
In the opinion of management, financial statements include all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the interim periods presented.
The results of operations for interim periods are not necessarily indicative of
results which will be realized for the full fiscal year.
(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 1995 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, 1996 and
1995, as follows:
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
(In Thousands)
Engineering, research and development $ 2,962 $ 3,146 $ 9,238 $ 9,193
------- ------- ------- -------
------- ------- ------- -------
Bad debts $ 146 $ 84 $ 667 $ 591
------- ------- ------- -------
------- ------- ------- -------
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
September 30, 1996, and December 31, 1995, is as follows:
September 30 December 31
1996 1995
------------ -----------
(In Thousands)
FIFO Inventories:
Finished Goods $ 28,879 $ 28,146
All Other 28,793 30,406
LIFO Adjustment (18,504) (17,850)
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LIFO Inventories $ 39,168 $ 40,702
--------- ----------
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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, 1996 and 1995,
were $5,848,000 and $8,316,000, respectively. Interest costs paid during
the nine months ended September 30, 1996 and 1995, were $1,900,686 and
$2,048,000, 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, 1996, 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 4.1 to the Company's
Registration Statement No.
33-62003, Form S-8,
dated August 22, 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,
1996
27.1 Financial Data Schedule Filed herewith electronically.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
September 30, 1996.
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:
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Richard A. Snyder
Vice President, Treasurer and
Principal Financial Officer
Date:
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Mahedi A. Jiwani
Corporate Controller and
Principal Accounting Officer