UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
_____________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

                    
 
 Date of Report (Date of earliest event reported) 
July 23, 2015
 

 
 TENNANT COMPANY
 (Exact name of registrant as specified in its charter)

Minnesota
1-16191
41-0572550
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
 
701 North Lilac Drive, P.O. Box 1452
Minneapolis, Minnesota
 
 
55440
(Address of principal executive offices)
 
(Zip Code)

 Registrant’s telephone number, including area code
(763) 540-1200
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 o
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 o
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 o
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 o
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02.                                Results of Operations and Financial Condition.
 
On July 23, 2015, the Company issued the news release attached hereto as Exhibit 99 and incorporated herein by reference.
 
 
Item 9.01.
 
(d)           Exhibits.  The following exhibits are furnished herewith:
                    
          99           News Release dated July 23, 2015.

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 hereunto duly authorized.
 
 
 
Tennant Company
 
 
 
 
 
Date:  July 23, 2015
By:
/s/ Heidi M. Wilson
 
 
 
Heidi M. Wilson
 
 
 
Senior Vice President, General Counsel and Secretary
 
 
 
 
 





Exhibit 99

INVESTOR CONTACT:
 
MEDIA CONTACT:
Tom Paulson
 
Kathryn Lovik
Senior Vice President and
 
Global Communications Director
Chief Financial Officer
 
763-540-1212
763-540-1204
 
 

Tennant Company Reports 2015 Second Quarter Results

Company posts second quarter net sales of $215.4 million;
Organic net sales rose 3.8 percent;
Second quarter diluted EPS totaled $0.79;
Company reaffirms 2015 full year earnings guidance range and
lowers high end of sales guidance range

MINNEAPOLIS, July 23, 2015 - Tennant Company (NYSE:TNC), a world leader in designing, manufacturing and marketing of solutions that help create a cleaner, safer, healthier world, today reported net earnings of $14.8 million, or $0.79 per diluted share, on net sales of $215.4 million for the second quarter ended June 30, 2015. On a “Constant Currency” basis (assuming no change in foreign exchange rates from the prior year), Tennant would have reported 2015 second quarter net sales of $227.4 million and net earnings per diluted share of $0.92, which would have been an increase of 10.8 percent over the prior year quarter. In the 2014 second quarter, Tennant reported net earnings of $15.5 million, or $0.83 per diluted share, on net sales of $219.1 million.
Commented Chris Killingstad, Tennant Company's president and chief executive officer: “Tennant posted another solid quarter, led by robust sales to strategic accounts in North America and global sales of new products. We are pleased with our continued strong performance in Tennant’s largest market, North America, which was the chief driver of our organic sales growth.”
Added Killingstad: “Overall, we remain pleased with the company’s progress against our organic sales growth goals during the 2015 second quarter and first half, as we strive to reach $1 billion in revenues by 2017. We continue to anticipate organic sales gains and improved profitability for the full year, despite ongoing global economic uncertainty and foreign currency headwinds.”
Tennant plans to meet its $1 billion strategic growth goal through a strong new product pipeline in both the core business and in the Orbio Technologies Group, continued gains in emerging markets, growth in Europe, focus on strategic accounts and an enhanced go-to-market strategy designed to significantly expand its global market coverage and customer base.

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Page 2 – Tennant Company Reports 2015 Second Quarter Results

Second Quarter Operating Review
The company's 2015 second quarter consolidated net sales of $215.4 million decreased 1.7 percent compared to the prior year quarter. Unfavorable foreign currency exchange reduced consolidated net sales by approximately 5.5 percent. Organic net sales, which exclude the impact of foreign currency exchange (and acquisitions when applicable), increased approximately 3.8 percent.
In addition to higher sales to strategic accounts in North America in the 2015 second quarter, Tennant saw continued strong global demand for new products, especially the T12 and T17, the company’s new modular rider scrubbers for the industrial market.
Geographically, sales rose 5.0 percent in Tennant’s largest region, the Americas, or grew approximately 7.5 percent organically, excluding an unfavorable foreign currency exchange impact of about 2.5 percent. Sales in Europe, Middle East and Africa (EMEA) were down 18.2 percent, or decreased approximately 1.7 percent organically, excluding an unfavorable foreign currency exchange impact of about 16.5 percent. Organic sales growth in Western Europe was more than offset by lower sales of outdoor equipment. Sales in the Asia Pacific region (APAC) declined 16.1 percent, or down approximately 8.1 percent organically, excluding an unfavorable foreign currency exchange impact of about 8.0 percent. Tennant’s organic sales in China rose approximately 15 percent in the 2015 second quarter, although this was not enough to offset continued economic weakness, primarily in Australia, compared to the prior year quarter. For both EMEA and APAC, the company continues to anticipate organic sales growth for the 2015 full year.
Tennant's gross margin in the 2015 second quarter was 44.1 percent versus 43.5 percent in the prior year quarter. Several factors led to the gross margin improvement, including improved operating efficiencies in the direct service organization and manufacturing operations, and also a greater mix of higher margin business. The company anticipates gross margin for the 2015 full year will be at its target range of approximately 43 percent.
Research and development (R&D) expense for the 2015 second quarter totaled $8.4 million, or 3.9 percent of sales, compared to $7.7 million, or 3.5 percent of sales, in the same quarter last year. The company continued to invest in developing innovative new products for its traditional core business, as well as in its Orbio Technologies Group, which is focused on advancing a suite of sustainable cleaning technologies.
Selling and administrative (S&A) expense in the 2015 second quarter totaled $64.0 million, or 29.7 percent of sales, which was in line with the company’s expectations, as Tennant continued to invest in its sales growth initiatives. S&A in the 2014 second quarter was $64.5 million, or 29.4 percent of sales.
Tennant's 2015 second quarter operating profit was $22.6 million, or 10.5 percent of sales, versus an operating profit of $23.1 million, or 10.6 percent of sales, in the year ago quarter. Due to the strength of the U.S. dollar in the 2015 second quarter, foreign currency exchange reduced operating profit by approximately $3.4 million. Tennant remains committed to the goal of a 12 percent or above operating profit margin.

(more)

Page 3 – Tennant Company Reports 2015 Second Quarter Results

New Product and Technology Pipeline
Commented Killingstad: “We are excited about the steady launch cadence of Tennant’s new core equipment offerings and continued progress with sustainable cleaning solutions from our Orbio Technologies Group. The introduction of new products and technologies is important to our revenue growth. We remain committed to being an industry innovation leader and raising the standard for sustainable cleaning around the world.”
Tennant Company continues to execute against the strongest new product pipeline in its history. Year to date in 2015, Tennant has introduced 33 new products and product variants and plans to introduce three additional new products in the second half of 2015, on top of 55 new products launched from 2012 to 2014.
In the 2015 second quarter, Tennant introduced the T300 Walk-Behind Scrubber-adding to its broad portfolio of commercial floor scrubbers in one of the largest unit categories in the floor cleaning industry. The T300 is the first scrubber equipped with Tennant’s next generation of sustainable cleaning technology, ec-H2O NanoClean™. The name NanoClean refers to the creation of nano-scale bubbles that are an important part of the cleaning mechanism. Like the original ec-H2O, the next generation ec-H2O NanoClean technology electrically converts water into an innovative cleaning solution that cleans effectively, saves money and reduces environmental impact compared to daily floor cleaning chemicals. This converted water is created by an on-board e-cell that generates millions of microscopic bubbles nanobubbles per milliliter of solution.
The new ec-H2O NanoClean technology will soon be available on the company’s full line of commercial scrubbers.
In addition, the new Orbio® os3, which delivers on-site generation of an anti-microbial solution, as well as an effective multi-surface cleaner, continues to receive positive response from customers across a variety of industries.

2015 First Half Results
For the six months ended June 30, 2015, Tennant’s net earnings totaled $19.8 million, or $1.06 per diluted share, on net sales of $401.1 million. In the prior year first six months, Tennant reported net earnings of $21.3 million, or $1.14 per diluted share, on net sales of $403.1 million. Net sales declined 0.5 percent, or grew approximately 5.0 percent organically, excluding an unfavorable foreign currency exchange impact of about 5.5 percent.
Year-to-date 2015 gross margin was 43.2 percent versus 42.7 percent in the prior year period. R&D expense in the 2015 first half was $16.1 million, or 4.0 percent of sales, compared to $15.1 million, or 3.8 percent of sales, in the prior year period. S&A expense in the 2015 first half was $126.2 million, or 31.4 percent of sales, versus $124.7 million, or 30.9 percent of sales, in the first six months of 2014.

(more)

Page 4 – Tennant Company Reports 2015 Second Quarter Results

Operating profit in the 2015 first half was $30.8 million, or 7.7 percent of sales, compared to $32.4 million, or 8.0 percent of sales, in the prior year first six months. Due to the strength of the U.S. dollar in the 2015 first half, foreign currency exchange reduced operating profit by approximately $5.3 million.
Tennant generated $6.6 million in cash from operations in the 2015 first half. Cash on the balance sheet at June 30, 2015, totaled $67.6 million, up from $62.6 million a year ago. The company's total debt was $24.6 million, down from $28.2 million at the end of the 2014 first half. During the first six months of 2015, Tennant paid a total of $7.3 million in cash dividends to shareholders and repurchased 220,120 shares at a cost of $14.2 million.

Business Outlook
Based on its year-to-date results and expectations of performance for the remainder of the year, Tennant Company now estimates 2015 full year net sales in the range of $825 million to $845 million, up 0.4 percent to 2.8 percent, or up approximately 5 percent to 9 percent organically, assuming an unfavorable foreign currency exchange impact on sales in the range of 4 percent to 6 percent. Previously, Tennant anticipated 2015 full year net sales in the range of $825 million to $855 million. The company continues to expect 2015 full year earnings in the range of $2.40 to $2.70 per diluted share. As stated previously, foreign currency exchange headwinds in 2015 are estimated to negatively impact operating profit in the range of $10 million to $12 million, or approximately $0.37 to $0.44 earnings per diluted share. The estimated higher effective tax rate in 2015 is anticipated to negatively impact earnings per diluted share by approximately $0.14. The company expects its 2015 financial results to be stronger in the second half of the year. For the 2014 full year, diluted earnings per share totaled $2.70 on net sales of $822 million.
Tennant’s 2015 annual financial outlook includes the following assumptions:
Economic strength in North America and modest improvement in Europe, and growth in emerging markets;
Increased foreign currency impact on sales for the full year in the range of an unfavorable 4 percent to 6 percent, with a $10 million to $12 million negative effect on operating profit;
Gross margin performance of approximately 43 percent;
R&D expense of approximately 4 percent of sales, as the company continues to invest in its core products and in water-based cleaning technologies;
Capital expenditures in the range of $25 million to $28 million; and
An effective tax rate of approximately 31 percent, including the anticipated enactment of the 2015 Federal R&D tax credit.

(more)

Page 5 – Tennant Company Reports 2015 Second Quarter Results

Commented Killingstad: “We are continuing to invest in our growth agenda, and we remain on track to deliver gains in organic sales and operating profit margin in 2015. We expect Tennant’s financial performance to be stronger in the second half of 2015, despite foreign currency headwinds. We are focused on creating value through new product introductions, and expanding our global sales and marketing initiatives to increase our global market share, while concurrently running a more efficient business to raise productivity.”
    
Conference Call
Tennant will host a conference call to discuss the 2015 second quarter results today, July 23, 2015, at 10 a.m. Central Time (11 a.m. Eastern Time). The conference call and accompanying slides will be available via webcast on Tennant's investor website. To listen to the call live and view the slide presentation, go to investors.tennantco.com and click on the link at the bottom of the Home page. A taped replay of the conference call with slides will be available at investors.tennantco.com for approximately three months after the call.

About Tennant Company
Minneapolis-based Tennant Company (TNC) is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, significantly reduce their environmental impact and help create a cleaner, safer, healthier world. Its products include equipment for maintaining surfaces in industrial, commercial and outdoor environments; chemical-free and other sustainable cleaning technologies; and coatings for protecting, repairing and upgrading surfaces. Tennant's global field service network is the most extensive in the industry. Tennant has manufacturing operations in Minneapolis, Minn.; Holland, Mich.; Louisville, Ky.; Uden, The Netherlands; the United Kingdom; São Paulo, Brazil; and Shanghai, China; and sells products directly in 15 countries and through distributors in more than 80 countries. For more information, visit www.tennantco.com.

Forward-Looking Statements
Certain statements contained in this document, as well as other written and oral statements made by us from time to time, are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These statements do not relate to strictly historical or current facts and provide current expectations or forecasts of future events. Any such expectations or forecasts of future events are subject to a variety of factors. These include factors that affect all businesses operating in a global market as well as matters specific to us and the markets we serve. Particular risks and uncertainties presently facing us include: the competition in our business, foreign currency exchange rate fluctuations, particularly the relative strength of the U.S. dollar against other major currencies; geopolitical and economic uncertainty throughout the world; our ability to attract and retain key personnel; our ability to successfully upgrade, evolve and protect our information technology systems; fluctuations in the cost, quality, or availability of raw materials and purchased components; our ability to effectively manage organizational changes; our ability to comply with laws and regulations; the occurrence of a significant business interruption; our ability to develop and commercialize new innovative products and services; and unforeseen product liability claims or product quality issues.

(more)

Page 6 – Tennant Company Reports 2015 Second Quarter Results

We caution that forward-looking statements must be considered carefully and that actual results may differ in material ways due to risks and uncertainties both known and unknown. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. For additional information about factors that could materially affect Tennant's results, please see our other Securities and Exchange Commission filings, including disclosures under “Risk Factors.”
We do not undertake to update any forward-looking statement, and investors are advised to consult any further disclosures by us on this matter in our filings with the Securities and Exchange Commission and in other written statements we make from time to time. It is not possible to anticipate or foresee all risk factors, and investors should not consider any list of such factors to be an exhaustive or complete list of all risks or uncertainties.

FINANCIAL TABLES FOLLOW

(more)

Page 7 – Tennant Company Reports 2015 Second Quarter Results

TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands, except shares and per share data)
 
Three Months Ended
 
Six Months Ended
 
 
June 30
 
June 30
 
 
2015
 
2014
 
2015
 
2014
Net Sales
 
$
215,404

 
$
219,084

 
$
401,144

 
$
403,063

Cost of Sales
 
120,371

 
123,821

 
228,030

 
230,883

Gross Profit
 
95,033

 
95,263

 
173,114

 
172,180

Gross Margin
 
44.1
%
 
43.5
%
 
43.2
%
 
42.7
%
Operating Expense:
 
 
 
 
 
 
 
 
Research and Development Expense
 
8,404

 
7,651

 
16,114

 
15,132

Selling and Administrative Expense
 
64,042

 
64,471

 
126,159

 
124,670

Total Operating Expense
 
72,446

 
72,122

 
142,273

 
139,802

Profit from Operations
 
22,587

 
23,141

 
30,841

 
32,378

Operating Margin
 
10.5
%
 
10.6
%
 
7.7
%
 
8.0
%
Other Income (Expense):
 
 
 
 
 
 
 
 
Interest Income
 
53

 
95

 
103

 
170

Interest Expense
 
(419
)
 
(419
)
 
(796
)
 
(905
)
Net Foreign Currency Transaction (Losses) Gains
 
(225
)
 
328

 
(668
)
 
120

Other Expense, Net
 
(185
)
 
(89
)
 
(237
)
 
(120
)
Total Other Expense, Net
 
(776
)
 
(85
)
 
(1,598
)
 
(735
)
 
 
 
 
 
 
 
 
 
Profit Before Income Taxes
 
21,811

 
23,056

 
29,243

 
31,643

Income Tax Expense
 
6,994

 
7,533

 
9,400

 
10,325

Net Earnings
 
$
14,817

 
$
15,523

 
$
19,843

 
$
21,318

 
 
 
 
 
 
 
 
 
Net Earnings per Share:
 
 
 
 
 
 
 
 
Basic
 
$
0.81

 
$
0.85

 
$
1.09

 
$
1.17

Diluted
 
$
0.79

 
$
0.83

 
$
1.06

 
$
1.14

 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
18,197,431

 
18,167,054

 
18,240,027

 
18,242,240

Diluted
 
18,672,040

 
18,675,607

 
18,724,859

 
18,776,369

 
 
 
 
 
 
 
 
 
Cash Dividends Declared per Common Share
 
$
0.20

 
$
0.20

 
$
0.40

 
$
0.38


GEOGRAPHICAL NET SALES(1) (Unaudited)
(In thousands)
 
Three Months Ended
 
Six Months Ended
 
 
June 30
 
June 30
 
 
2015
 
2014
 
%
 
2015
 
2014
 
%
Americas
 
$
161,429

 
$
153,698

 
5.0
 
$
295,432

 
$
276,087

 
7.0
Europe, Middle East and Africa
 
33,741

 
41,273

 
(18.2)
 
68,388

 
84,336

 
(18.9)
Asia Pacific
 
20,234

 
24,113

 
(16.1)
 
37,324

 
42,640

 
(12.5)
Total
 
$
215,404

 
$
219,084

 
(1.7)
 
$
401,144

 
$
403,063

 
(0.5)
(1) Net of intercompany sales.

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Page 8 – Tennant Company Reports 2015 Second Quarter Results

TENNANT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
June 30,
 
December 31,
 
June 30,
 
2015
 
2014
 
2014
ASSETS
 
 
 
 
 
Current Assets:
 
 
 
 
 
Cash and Cash Equivalents
$
67,638

 
$
92,962

 
$
62,603

Restricted Cash
349

 
352

 
427

Net Receivables
151,146

 
152,383

 
158,338

Inventories
86,534

 
80,511

 
79,034

Prepaid Expenses
11,357

 
9,552

 
9,150

Deferred Income Taxes, Current Portion
9,747

 
9,738

 
9,390

Other Current Assets
1,844

 
1,591

 
1,716

Total Current Assets
328,615

 
347,089

 
320,658

Property, Plant and Equipment
269,368

 
262,214

 
310,703

Accumulated Depreciation
(180,207
)
 
(175,671
)
 
(226,233
)
Property, Plant and Equipment, Net
89,161

 
86,543

 
84,470

Deferred Income Taxes, Long-Term Portion
7,625

 
8,165

 
6,507

Goodwill
17,670

 
18,355

 
19,295

Intangible Assets, Net
14,292

 
15,588

 
18,136

Other Assets
12,379

 
11,192

 
16,962

Total Assets
$
469,742

 
$
486,932

 
$
466,028

 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
Short-Term Borrowings and Current Portion of Long-Term Debt
$
3,435

 
$
3,566

 
$
3,640

Accounts Payable
59,735

 
61,627

 
60,122

Employee Compensation and Benefits
28,566

 
33,842

 
27,101

Income Taxes Payable
3,579

 
1,087

 
968

Other Current Liabilities
41,494

 
45,508

 
43,456

Total Current Liabilities
136,809

 
145,630

 
135,287

Long-Term Liabilities:
 
 
 
 
 
Long-Term Debt
21,143

 
24,571

 
24,572

Employee-Related Benefits
24,800

 
25,711

 
24,958

Deferred Income Taxes, Long-Term Portion
4,343

 
5,989

 
6,542

Other Liabilities
4,543

 
4,380

 
5,281

Total Long-Term Liabilities
54,829

 
60,651

 
61,353

Total Liabilities
191,638

 
206,281

 
196,640

Shareholders’ Equity:
 
 
 
 
 
Preferred Stock

 

 

Common Stock
6,848

 
6,906

 
6,894

Additional Paid-In Capital
17,185

 
26,247

 
21,470

Retained Earnings
298,586

 
286,091

 
264,073

Accumulated Other Comprehensive Loss
(44,515
)
 
(38,593
)
 
(23,049
)
Total Shareholders’ Equity
278,104

 
280,651

 
269,388

Total Liabilities and Shareholders’ Equity
$
469,742

 
$
486,932

 
$
466,028



(more)

Page 9 – Tennant Company Reports 2015 Second Quarter Results

TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended
 
June 30
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
Net Earnings
$
19,843

 
$
21,318

Adjustments to reconcile Net Earnings to Net Cash Provided by Operating Activities:
 
 
 
Depreciation
8,155

 
8,818

Amortization
1,036

 
1,223

Deferred Income Taxes
(1,754
)
 
3,964

Share-Based Compensation Expense
4,889

 
3,756

Allowance for Doubtful Accounts and Returns
1,246

 
776

Other, Net
(74
)
 
13

Changes in Operating Assets and Liabilities:
 
 
 
Receivables
(1,717
)
 
(18,649
)
Inventories
(11,002
)
 
(13,208
)
Accounts Payable
(3,440
)
 
7,540

Employee Compensation and Benefits
(5,970
)
 
(5,471
)
Other Current Liabilities
(3,174
)
 
(2,238
)
Income Taxes
1,668

 
2,819

Other Assets and Liabilities
(3,133
)
 
(153
)
Net Cash Provided by Operating Activities
6,573

 
10,508

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Purchases of Property, Plant and Equipment
(7,594
)
 
(7,411
)
Proceeds from Disposals of Property, Plant and Equipment
190

 
118

Increase in Restricted Cash
(18
)
 
(12
)
Net Cash Used in Investing Activities
(7,422
)
 
(7,305
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Payments of Short-Term Debt

 
(1,500
)
Payments of Long-Term Debt
(3,429
)
 
(2,013
)
Purchases of Common Stock
(14,229
)
 
(13,609
)
Proceeds from Issuances of Common Stock
802

 
705

Excess Tax Benefit on Stock Plans
669

 
1,329

Dividends Paid
(7,348
)
 
(7,172
)
Net Cash Used in Financing Activities
(23,535
)
 
(22,260
)
 
 
 
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(940
)
 
676

 
 
 
 
Net Decrease in Cash and Cash Equivalents
(25,324
)
 
(18,381
)
 
 
 
 
Cash and Cash Equivalents at Beginning of Period
92,962

 
80,984

 
 
 
 
Cash and Cash Equivalents at End of Period
$
67,638

 
$
62,603



###
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