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, 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 September 30, 1997, was 9,834,275.
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) 1997 1996 1997 1996
---- ---- ---- ----
Net sales $ 90,570 $ 83,816 $ 266,955 $ 247,433
Less:
Cost of sales (note 2) 52,272 49,619 154,738 144,679
Selling and administrative (note 2) 29,621 26,691 87,489 81,831
---------- ---------- ---------- -----------
Profit from operations 8,677 7,506 24,728 20,923
Other income (expense)
Net foreign currency gain (loss) (77) -- (105) 40
Interest income 1,236 1,059 3,470 3,161
Interest expense (518) (575) (1,504) (1,927)
Miscellaneous income (expense), net (103) (311) (585) (625)
---------- ---------- ---------- -----------
Total other income (expense) 538 173 1,276 649
---------- ---------- ---------- -----------
Earnings before income taxes 9,215 7,679 26,004 21,572
Taxes on Income 3,243 2,669 9,208 7,413
---------- ---------- ---------- -----------
Net earnings $ 5,972 $ 5,010 $ 16,796 $ 14,159
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
PER SHARE (note 5)
Net earnings $ .60 $ .50 $ 1.69 $ 1.41
Dividends $ .18 $ .17 $ .54 $ .51
Average number of shares 9,885,200 10,044,900 9,955,700 10,030,000
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, 1997 December 31, 1996
------------------- -----------------------
Cash and cash equivalents $ 17,198 $ 9,881
Receivables 72,999 78,855
Less deferred income from sales
finance charges (1,749) (1,831)
Less allowance for doubtful accounts (2,466) (2,506)
-------- --------
Net receivables 68,784 74,518
Inventories (note 3) 43,270 35,264
Prepaid expenses 1,074 934
Deferred income taxes, current portion 5,728 5,884
-------- --------
Total current assets 136,054 126,481
Property, plant, and equipment 151,675 148,922
Less allowance for depreciation (88,181) (83,538)
-------- --------
Net property, plant, and equipment 63,494 65,384
Net noncurrent installment accounts
receivable 6,697 7,448
Deferred income taxes, long-term portion 1,468 1,524
Intangible assets 16,763 17,752
Other assets 464 591
-------- --------
Total assets $224,940 $219,180
-------- --------
-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
LIABILITIES September 30, 1997 December 31, 1996
------------------- -----------------------
Current debt $ 91 $ 3,864
Accounts payable 17,112 17,485
Accrued expenses 32,376 28,239
-------- --------
Total current liabilities 49,579 49,588
Long-term debt 22,830 21,824
Employee retirement-related benefits 19,732 18,528
Other long-term liabilities 190 380
-------- --------
Total liabilities 92,331 90,320
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,688 3,737
Additional paid-in capital (note 5) -- 3,547
Equity adjustment from foreign
currency translation (19) 2,877
Common stock subscribed 115 703
Unearned restricted shares (530) (440)
Retained earnings 140,855 130,703
Receivable from ESOP (11,500) (12,267)
-------- --------
Total shareholders' equity 132,609 128,860
-------- --------
Total liabilities and
shareholders' equity $224,940 $219,180
-------- --------
-------- --------
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
------------------------------
1997 1996
---- ----
Net cash flow related to operating activities $ 30,384 $ 31,870
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (14,417) (15,862)
Acquisition of intangible assets -- (180)
Acquisition of Castex and Eagle -- --
Proceeds from disposals of property,
plant, and equipment 3,269 2,715
Settlement of foreign currency hedging
contracts 935 396
--------- ----------
Net cash flow related to investing activities (10,213) (12,931)
Cash flow related to financing activities:
Net changes in current debt (2,136) (13,086)
Issuance of long-term debt 13 --
Payments to settle long-term debt (16)
Principal payment from ESOP 545 495
Proceeds from employee stock issues 1,374 1,336
Repurchase of common stock (7,635) (963)
Dividends paid (5,367) (5,112)
-------- --------
Net cash flow related to financing activities (13,222) (17,330)
Effect of exchange rate changes on cash 368 86
-------- --------
Net increase (decrease) in cash and cash equivalents 7,317 1,695
Cash and cash equivalents at beginning of year 9,881 4,247
-------- --------
Cash and cash equivalents at end of third quarter $ 17,198 $ 5,942
-------- --------
-------- --------
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 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 nine
months ended September 30, 1997 and 1996, as follows:
Three Months Nine Months
Ended September 30 Ended September 30
------------------- ------------------
1997 1996* 1997 1996*
---- ---- ---- ----
(In Thousands)
Engineering, research and development $3,489 $2,962 $10,185 $9,238
Maintenance and repairs 1,258 (5,475) 4,144 125
Warranty 1,150 751 3,280 2,998
Bad debts $ 338 $ 146 $ 676 $ 667
*Restated to conform with current year presentation.
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, 1997, and December 31, 1996, is as follows:
September 30 December 31
1997 1996
------------ -------------
(In Thousands)
FIFO Inventories:
Finished Goods $30,094 $26,317
All Other 32,207 26,879
LIFO Adjustment (19,031) (17,932)
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LIFO Inventories $43,270 $35,264
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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, 1997 and 1996,
were $10,454,600 and $5,848,000, respectively. Interest costs paid during
the nine months ended September 30, 1997 and 1996, were $1,226,318 and
$1,900,686, 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, 1997, 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, 1997
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,
1997.
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:
-------------------------- ------------------------------
Richard A. Snyder
Vice President, Treasurer and
Principal Financial Officer
Date:
-------------------------- ------------------------------
John T. Pain
Corporate Controller and
Principal Accounting Officer