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 March 31, 1998
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 March 31, 1998, was 9,657,608.
Page 1 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, except per share amounts)
Three Months Ended March 31
----------------------------
EARNINGS (note 1) 1998 1997
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Net sales $88,721 $83,026
Less:
Cost of sales (note 2) 51,445 48,877
Selling and administrative (note 2) 29,893 27,562
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Profit from operations 7,383 6,587
Other income and (expense)
Net foreign currency gain (loss) (128) (36)
Interest income 1,142 1,121
Interest expense (564) (527)
Miscellaneous income (expense), net 339 (301)
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Total other income (expense) 789 257
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Earnings before income taxes 8,172 6,844
Taxes on income 2,929 2,437
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Net earnings $ 5,243 $ 4,407
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Comprehensive earnings adjustment for foreign
currency translation, net of tax (674) (1,734)
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Comprehensive earnings $ 4,569 $ 2,673
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PER SHARE
Basic net earnings $ .54 $ .44
Diluted net earnings $ .54 $ .44
Dividends $ .18 $ .18
Average number of shares (diluted) 9,758,000 10,121,700
See Accompanying Notes
Page 2 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 Financial
(Unaudited) Statements)
ASSETS March 31, 1998 December 31, 1997
-------------- -----------------
Cash and cash equivalents $ 26,962 $ 16,279
Receivables 76,429 83,099
Less deferred income from sales finance
charges (1,636) (1,636)
Less allowance for doubtful accounts (3,334) (3,302)
--------- ---------
Net receivables 71,459 78,161
Inventories (note 3) 42,166 40,323
Prepaid expenses 947 985
Deferred income taxes, current portion 7,393 7,357
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Total current assets 148,927 143,105
Property, plant, and equipment 158,250 156,602
Less allowance for depreciation (94,023) (91,491)
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Net property, plant, and equipment 64,227 65,111
Net noncurrent installment accounts receivable 7,026 6,337
Deferred income taxes, long-term portion 2,339 2,257
Intangible assets 16,267 16,525
Other assets 509 535
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Total assets $ 239,295 $ 233,870
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LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from
Audited Financial
(Unaudited) Statements)
LIABILITIES March 31, 1998 December 31, 1997
-------------- -----------------
Current debt $ 6,711 $ 2,377
Accounts payable 22,712 19,078
Accrued expenses 24,795 35,694
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Total current liabilities 54,218 57,149
Long-term debt 28,104 20,678
Employee retirement-related benefits 22,426 21,767
Other long-term liabilities -- 190
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Total liabilities 104,748 99,784
SHAREHOLDERS' EQUITY
Common stock (note 6) 3,619 3,637
Additional paid-in capital (note 5) -- --
Common stock subscribed 231 444
Unearned restricted shares (866) (789)
Retained earnings 142,441 141,656
Receivable from ESOP (10,767) (11,425)
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Accumulated other comprehensive income
(equity adjustment from foreign
currency translation) (111) 563
Total shareholders' equity 134,547 134,086
--------- ---------
Total liabilities and shareholders'
equity $ 239,295 $ 233,870
--------- ---------
--------- ---------
See Accompanying Notes
Page 3 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) Three Months Ended March 31
---------------------------
1998 1997
---- ----
Net cash flow related to operating activities $ 6,734 $ 3,508
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (4,577) (3,032)
Proceeds from disposals of property, plant, and equipment 1,195 319
Settlement of foreign currency hedging contracts -- 326
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Net cash flow related to investing activities (3,382) (2,387)
Cash flow related to financing activities:
Net changes in current debt 599 524
Issuance of long-term debt 6,061 4
Payments to settle long-term debt 5,777 (6)
Principal payment from ESOP -- 545
Proceeds from employee stock issues 497 462
Repurchase of common stock (3,876) (1,316)
Dividends paid (1,739) (1,800)
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Net cash flow related to financing activities 7,319 (1,587)
Effect of exchange rate changes on cash 12 157
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Net increase (decrease) in cash and cash equivalents 10,683 (309)
Cash and cash equivalents at beginning of year 16,279 9,881
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Cash and cash equivalents at end of first quarter $ 26,962 $ 9,572
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See Accompanying Notes
Page 4 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 1997 Annual Report filed as Exhibit 13.1 to the Company's
annual report 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 months ended
March 31, 1998 and 1997, as follows:
1998 1997
---- ----
(In Thousands)
Engineering, research and development $4,451 $3,237
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Maintenance and repairs $1,560 $1,490
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Warranty $1,108 $1,034
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Bad debts $ 189 $ 135
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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 March 31,
1998, and December 31, 1997, is as follows:
March 31 December 31
1998 1997
-------- -----------
(In Thousands)
FIFO Inventories:
Finished Goods $31,194 $27,028
All Other 30,353 31,832
LIFO Adjustment (19,381) (18,538)
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LIFO Inventories $42,166 $40,323
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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
(4) Cash Flow
Income taxes paid during the three months ended March 31, 1998 and 1997,
were $3,063,000 and $2,361,000, respectively. Interest costs paid during
the three months ended March 31, 1998, and 1997, were $555,000 and
$529,000, 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.
(6) Earnings Per Share
(In thousands, except per share amounts)
For the Quarter Ending March 31, 1998
---------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Basic EPS
Income available to common
stockholders $5,243 9,726 $ 0.54
Effect of Dilutive Securities
Fixed stock options 32
Performance-related shares 0
Diluted EPS
Income available to common
stockholders
+ assumed conversions $5,243 9,758 $ 0.54
For the Quarter Ending March 31, 1997
---------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Basic EPS
Income available to common
stockholders $4,407 10,058 $ 0.44
Effect of Dilutive Securities
Fixed stock options 21
Performance-related shares 43
Diluted EPS
Income available to common
stockholders
+ assumed conversions $4,407 10,122 $ 0.44
Page 6 of 8
TENNANT COMPANY
Quarterly Report - Form 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Comprehensive Income
(In thousands)
Beginning the first quarter 1998, the Company is adopting SFAS No. 130,
REPORTING COMPREHENSIVE INCOME, which establishes standards for reporting
and displaying the components of comprehensive income. The Company has
retroactively restated comprehensive income to meet this compliance.
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 Three Months Ended March 31, 1998, 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
Three Months Ended
March 31, 1997.
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 March
31, 1998.
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
Chief Financial Officer
Date:
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John T. Pain
Corporate Controller and
Principal Accounting Officer