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, 1997
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, 1997, was 9,926,356.
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) 1997 1996 1997 1996
------ ------ ------ ------
Net sales $93,359 $86,794 $176,385 $163,617
Less:
Cost of sales (note 2) 53,589 51,004 102,466 95,060
Selling and administrative (note 2) 30,306 28,020 57,868 55,140
-------- -------- -------- --------
Profit from operations 9,464 7,770 16,051 13,417
Other income and (expense)
Net foreign currency gain (loss) 8 (148) (28) 40
Interest income 1,113 1,068 2,234 2,102
Interest expense (459) (640) (986) (1,352)
Miscellaneous income (expense), net (181) (200) (482) (314)
-------- -------- -------- --------
Total other income (expense) 481 80 738 476
-------- -------- -------- --------
Earnings before income taxes 9,945 7,850 16,789 13,893
Taxes on income 3,528 2,685 5,965 4,744
-------- -------- -------- --------
Net earnings $ 6,417 $ 5,165 $ 10,824 $ 9,149
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE (note 5)
Net earnings $ .64 $ .51 $ 1.08 $ .91
Dividends $ .18 $ .17 $ .36 $ .34
Average number of shares 9,968,700 10,036,300 9,991,600 10,022,300
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, 1997 December 31, 1996
------------- -----------------
Cash and cash equivalents $ 10,674 $ 9,881
Receivables 76,833 78,855
Less deferred income from sales finance charges (1,701) (1,831)
Less allowance for doubtful accounts (2,486) (2,506)
-------- --------
Net receivables 72,646 74,518
Inventories (note 3) 39,342 35,264
Prepaid expenses 663 934
Deferred income taxes, current portion 5,759 5,884
-------- --------
Total current assets 129,084 126,481
Property, plant, and equipment 153,421 148,922
Less allowance for depreciation (88,658) (83,538)
-------- --------
Net property, plant, and equipment 64,763 65,384
Net noncurrent installment accounts receivable 6,938 7,448
Deferred income taxes, long-term portion 1,468 1,524
Intangible assets 17,023 17,752
Other assets 470 591
-------- --------
Total assets $219,746 $219,180
-------- --------
-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
LIABILITIES June 30, 1997 December 31, 1996
------------- -----------------
Current debt $ 337 $ 3,864
Accounts payable 16,481 17,485
Accrued expenses 27,776 28,239
-------- --------
Total current liabilities 44,594 49,588
Long-term debt 22,941 21,824
Employee retirement-related benefits 19,422 18,528
Other long-term liabilities 190 380
-------- --------
Total liabilities 87,147 90,320
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,722 3,737
Additional paid-in capital (note 5) 1,917 3,547
Equity adjustment from foreign currency translation 1,130 2,877
Common stock subscribed 118 703
Unearned restricted shares (650) (440)
Retained earnings 137,936 130,703
Receivable from ESOP (11,574) (12,267)
-------- --------
Total shareholders' equity 132,599 128,860
-------- --------
Total liabilities and shareholders' equity $219,746 $219,180
-------- --------
-------- --------
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
------------------------
1997 1996
------ ------
Net cash flow related to operating activities $ 16,819 $ 16,015
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (9,985) (11,093)
Acquisition of intangible assets -- (179)
Proceeds from disposals of property, plant, and equipment 1,401 1,920
Settlement of foreign currency hedging contracts 470 313
--------- ---------
Net cash flow related to investing activities (8,114) (9,039)
Cash flow related to financing activities:
Net changes in current debt (2,126) (6,712)
Issuance of long-term debt 8 --
Payments to settle long-term debt (12) --
Principal payment from ESOP 545 495
Proceeds from employee stock issues 920 895
Repurchase of common stock (3,874) --
Dividends paid (3,590) (3,406)
--------- ---------
Net cash flow related to financing activities (8,129) (8,728)
Effect of exchange rate changes on cash 217 191
--------- ---------
Net increase (decrease) in cash and cash equivalents 793 (1,561)
Cash and cash equivalents at beginning of year 9,881 4,247
--------- ---------
Cash and cash equivalents at end of second quarter $10,674 $2,686
--------- ---------
--------- ---------
Page 5 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, financial satements 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 1996 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, maintenance and repairs,
warranty, and bad debt expenses were charged to operations for
the three and six months ended June 30, 1997 and 1996, as
follows:
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996* 1997 1996*
---- ----- ---- -----
(In Thousands)
Engineering, research and development $3,459 $3,190 $6,696 $6,492
Maintenance and Repairs $1,396 $1,435 $2,886 $2,787
Warranty $1,096 $1,024 $2,130 $2,247
Bad debts $ 203 $ 322 $ 338 $ 521
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.
*Restated to conform with current year presentation.
(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, 1997, and December 31, 1996, is as
follows:
June 30 December 31
1997 1996
------- -----------
(In Thousands)
FIFO Inventories:
Finished Goods $26,931 $26,317
All Other 30,925 26,879
LIFO Adjustment (18,514) (17,932)
------- -------
LIFO Inventories $39,342 $35,264
------- -------
------- -------
Page 6 of 9
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 six months ended June 30, 1997 and
1996, were $7,187,000 and $3,137,000, respectively. Interest
costs paid during the six months ended June 30, 1997 and 1996,
were $984,000 and $1,337,000, 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 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,
1997, 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 1, 1997, the
following matters were submitted to vote:
(a) Election of Directors
David C. Cox was elected to serve a three-year term as a director
of the Company. Out of 7,258,230 common shares represented,
7,001,216 voted in favor and 257,014 withheld.
William I. Miller was elected to serve a three-year term as a
director of the Company. Out of 7,258,230 common shares
represented, 6,990,138 voted in favor and 268,092 withheld.
Edwin L. Russell was elected to serve a three-year term as a
director of the Company. Out of 7,258,230 common shares
represented, 6,994,497 voted in favor and 263,733 withheld.
The following directors each continued their term of office after
the meeting:
Arthur D. Collins, Jr.
Andrew P. Czajkowski
Roger L. Hale
William A. Hodder
Delbert W. Johnson
(b) Non-Employee Director Stock Option Plan
The Non-Employee Director Stock Option Plan was approved and
ratified. Out of 7,258,230 common shares represented, 6,649,441
voted in favor, 419,184 against, and 189,605 abstained.
(c) Appointment of KPMG Peat Marwick as Auditors
The appointment of KPMG Peat Marwick as independent auditors of
the Company was approved. Out of 7,258,230 common shares
represented, 7,177,407 voted in favor, 41,310 against, and 39,513
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 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.
10.1 Non Employee Director Incorporated by reference to
Stock Option Plan Exhibit 99 to the Company's
Registration Statement No.
333-28641, Form S-8, dated
June 6, 1997
13.1 Text Portion of Report to Shareholders for Filed herewith electronically.
the Six Months Ended June 30, 1997
27.1 Financial Data Schedule Filed herewith electronically.
(b) Reports on Form 8-K
A Form S-8 was filed June 6, 1997, reporting the Non-Employee Director Stock
Option Plan.
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 8, 1997 /s/ Richard A. Snyder
----------------------------- -------------------------------
Richard A. Snyder
Vice President, Treasurer and
Chief Financial Officer
Date: August 8, 1997 /s/ Mahedi A. Jiwani
----------------------------- -------------------------------
Mahedi A. Jiwani
Corporate Controller and
Principal Accounting Officer