- Net sales of $263.3 million, increase of 3.1 percent
organically
- First-quarter net income of $25.7 million, or $1.37 diluted
earnings per share; adjusted diluted EPS of $1.17 per share
- Adjusted EBITDA of $40.7 million, or 15.5 percent of sales
- Company raises 2021 guidance for net sales, adjusted EBITDA and
EPS
Tennant Company (“Tennant”) (NYSE: TNC), a world leader in the
design, manufacture and marketing of solutions that help create a
cleaner, safer and healthier world, today reported its
first-quarter results for 2021. First quarter net sales totaled
$263.3 million, representing a year-over-year increase of 3.1
percent on an organic basis, with growth across all regions. Net
income for the first quarter of 2021 was $25.7 million, or $1.37
per diluted share, compared with $5.2 million, or $0.28 per diluted
share, in the year-ago period. Adjusted diluted earnings per share,
which exclude certain non-operational items and amortization
expense, were $1.17, compared with $0.57 in the first quarter of
2020. Excluding non-operational items, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) for the
first quarter of 2021 were $40.7 million, or 15.5 percent of sales,
compared with $26.1 million, or 10.4 percent of sales, in the
year-ago period. In the first quarter of 2021, cash flow from
operations provided $18.4 million, compared to $8.7 million in the
prior-year first quarter. (See the Supplemental Non-GAAP Financial
Table.)
“Tennant’s strong first-quarter performance exceeded our
expectations thanks in large part to increasing demand and
bolstered by our actions in managing costs and cash flow,” said
Dave Huml, Tennant Company’s President and Chief Executive Officer.
“At the same time, we have positioned Tennant to ramp up quickly as
markets began to recover from the pandemic-related slowdown. The
team’s tremendous efforts in meeting the operational challenges of
the past year, our prudent expense management, and our unwavering
commitment to our long-term growth strategy produced solid,
bottom-line results. While we have not yet reached pre-pandemic
sales levels, we achieved organic growth in all regions and remain
optimistic for the year ahead.”
"I'm proud of the resilience and commitment our Tennant team has
demonstrated since the onset of the pandemic. In 2020, we
maintained investments and resourcing across a broad number of
initiatives, including product development, operations and
simplifying our product offering, all of which are designed to
better help meet the needs of our customers. Going forward, we will
continue to execute against our enterprise strategy and will
provide our customers with innovative products and superior service
to maintain our industry leadership," said Huml.
First-Quarter Revenue
In the first quarter of 2021, Tennant’s consolidated net sales
of $263.3 million were up 4.4 percent over the same period last
year, or 3.1 percent on an organic basis, including a favorable
foreign-currency effect of 3.0 percent and a divestiture impact of
-1.7 percent.
- Americas – Sales in the Americas declined 3.0 percent,
reflecting the divestiture of the Company’s coatings business and
the foreign currency impact, which impacted results by -2.6 percent
and -0.8 percent, respectively. Organically, the region grew 0.4
percent, driven by solid growth in direct and distribution sales
channels in North America, along with growth in Brazil. Sales for
strategic accounts were down from the year-ago period due to the
lapping of large orders in Q1 of 2020.
- Europe, the Middle East, and Africa (EMEA) – Sales in EMEA
increased 12.4 percent, or 2.3 percent organically, driven by
performance in France, Italy and Germany, while also benefiting
from a foreign-currency effect of 10.1 percent. Pandemic-related
restrictions continued to have an impact in some markets,
particularly in the United Kingdom and Central and Eastern Europe,
the Middle East and Africa (CEEMEA).
- Asia-Pacific (APAC) – Sales in APAC rose 40.6 percent, or 31.8
percent organically, reflecting organic growth across all
countries, product categories and channels, as the region recovered
strongly from the pandemic-related slowdowns of 2020. Results
during the quarter were also favorably impacted by 8.8 percent of
foreign currency effect.
First-Quarter Profitability
Measures
- Gross Margin – Gross margin in the first quarter of 2021 was
43.0 percent, compared with 40.8 percent in the year-ago period.
Adjusted gross margins during the first quarter of 2021 and 2020
were 43.0 percent and 41.5 percent, respectively, primarily
reflecting increased productivity, product mix and actions related
to the Company’s enterprise strategy, including pricing and
cost-reduction initiatives, which more than offset commodity and
freight cost pressures.
- Net Income/Adjusted EBITDA – Net income increased to $25.7
million, or $1.37 per diluted share, compared with $5.2 million, or
$0.28 per diluted share, in the year-ago period. Adjusted earnings
per diluted share, excluding non-operational items and amortization
expense, were $1.17 compared with $0.57 in the year-ago period.
Adjusted EBITDA in the first quarter of 2021 increased to $40.7
million, or 15.5 percent of sales, compared with $26.1 million, or
10.4 percent of sales, in the first quarter of 2020. Adjusted
results within the quarter excluded the gain on sale from the
divestiture of our Coatings business.
Cash Flow, Capital Allocation and
Liquidity
During the first quarter of 2021, Tennant generated $18.4
million in cash flow from operations, primarily driven by strong
business performance. As of March 31, 2021, the Company had $175.2
million in cash and cash equivalents. Subsequent to the end of the
quarter, the Company restructured its existing credit agreement to
optimize its debt structure and enhance its flexibility, while
reducing future interest expense.
2021 Business Outlook
“We were very pleased with our performance in the second half of
2020 and the momentum we experienced coming into this year,” said
Huml. “While we continue to navigate through existing market
conditions, we are encouraged by our outperformance in the first
quarter of 2021. We are optimistic that this represents the
beginning of a market recovery and are confident in our ability to
continue to execute against our strategic initiatives. We have
taken this into account in raising our full-year guidance.”
For 2021, Tennant provides the following updated guidance:
- Net sales of $1.090 billion to $1.110 billion, reflecting
organic sales growth of 9 to 11 percent;
- Full-year reported GAAP earnings in the range of $3.45 to $3.85
per diluted share;
- Adjusted EPS of $4.10 to $4.50 per diluted share, which
excludes certain non-operational items and amortization
expense;
- Adjusted EBITDA of $140 million to $150 million;
- Capital expenditures of $20 to $25 million; and
- An adjusted effective tax rate of approximately 20 percent,
which excludes the amortization expense adjustment.
Conference Call
Tennant will host a conference call to discuss its 2021
first-quarter results today, May 4, 2021, 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.
Company Profile
Founded in 1870, Tennant Company (TNC), headquartered in
Minneapolis, Minnesota, is a world leader in designing,
manufacturing and marketing solutions that empower customers to
achieve quality cleaning performance, 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; detergent-free and other
sustainable cleaning technologies; and cleaning tools and supplies.
Tennant's global field service network is the most extensive in the
industry. Tennant Company had sales of $1.0 billion in 2020 and has
approximately 4,300 employees. Tennant has manufacturing operations
throughout the world and sells products directly in 15 countries
and through distributors in more than 100 countries. For more
information, visit www.tennantco.com and www.ipcworldwide.com. The
Tennant Company logo and other trademarks designated with the
symbol “®” are trademarks of Tennant Company registered in the
United States and/or other countries.
Forward-Looking
Statements
Certain statements contained in this document 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: geopolitical and economic uncertainty throughout the
world; uncertainty surrounding the impacts and duration of the
COVID-19 pandemic; our ability to comply with global laws and
regulations; our ability to adapt to customer pricing
sensitivities; the competition in our business; fluctuations in the
cost, quality or availability of raw materials and purchased
components; our ability to adjust pricing to respond to cost
pressures; unforeseen product liability claims or product quality
issues; our ability to attract, retain and develop key personnel
and create effective succession planning strategies; our ability to
effectively develop and manage strategic planning and growth
processes and the related operational plans; our ability to
successfully upgrade and evolve our information technology systems;
our ability to successfully protect our information technology
systems from cybersecurity risks; the occurrence of a significant
business interruption; our ability to maintain the health and
safety of our workers; our ability to integrate acquisitions; and
our ability to develop and commercialize new innovative products
and services.
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. Information
about factors that could materially affect our results can be found
in our 2020 Form 10-K. 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.
We undertake no obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by law. Investors
are advised to consult any further disclosures by us in our filings
with the Securities and Exchange Commission and in other written
statements on related subjects. 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.
Non-GAAP Financial
Measures
This news release and the related conference call include
presentation of Non-GAAP measures that include or exclude special
items of a nonrecurring and/or non-operational nature (hereinafter
referred to as “special items”). Management believes that the
Non-GAAP measures provide useful information to investors regarding
the Company’s results of operations and financial condition because
they permit a more meaningful comparison and understanding of
Tennant Company’s operating performance for the current, past or
future periods. Management uses these Non-GAAP measures to monitor
and evaluate ongoing operating results and trends and to gain an
understanding of the comparative operating performance of the
Company.
We believe that disclosing Gross Profit – as adjusted, Gross
Margin – as adjusted, Selling and Administrative Expense – as
adjusted, Selling and Administrative Expense as a percent of Net
Sales – as adjusted, Operating Income – as adjusted, Operating
Margin – as adjusted, Income Before Taxes – as adjusted, Income Tax
Expense – as adjusted, Net Income Attributable to Tennant Company –
as adjusted, Net Income Attributable to Tennant Company per Share –
as adjusted, Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) – as adjusted, and EBITDA Margin – as
adjusted (collectively, the “Non-GAAP Measures”), excluding the
impacts from special items, is useful to investors as a measure of
operating performance. We use these as one measure to monitor and
evaluate operating performance. The Non-GAAP measures are financial
measures that do not reflect United States Generally Accepted
Accounting Principles (GAAP). We calculate Gross Profit – as
adjusted and Gross Margin – as adjusted by adding back the
discontinuation of product lines. We calculate Selling and
Administrative Expense – as adjusted, and Selling and
Administrative Expense as a percent of Net Sales – as adjusted by
adding back restructuring charges recorded in S&A, and a gain
on sale of business. We calculate Operating Income – as adjusted
and Operating Margin – as adjusted by adding back the pre-tax
effect of the discontinuation of product lines, restructuring
charges, and a gain on sale of business. We calculate Income Before
Taxes – as adjusted by adding back the pre-tax effect of the
discontinuation of product lines, restructuring charges, a gain on
sale of business and amortization expense. We calculate Income Tax
Expense – as adjusted by adding back the tax effect of the
discontinuation of product lines, restructuring charges, a gain on
sale of business and amortization expense. We calculate Net Income
Attributable to Tennant Company – as adjusted by adding back the
after-tax effect of the discontinuation of product lines,
restructuring charges, a gain on sale of business and amortization
expense. We calculate Net Income Attributable to Tennant Company
per Share – as adjusted by adding back the after-tax effect of the
discontinuation of product lines, restructuring charges, a gain on
sale of business and amortization expense and dividing the result
by the diluted weighted average shares outstanding. We calculate
EBITDA – as adjusted by adding back the pre-tax effect of the
discontinuation of product lines, restructuring charges, a gain on
sale of business, Interest Income, Interest Expense, Income Tax
Expense, Depreciation Expense and Amortization Expense to Net
Income Including Noncontrolling Interest – as reported. We
calculate EBITDA Margin – as adjusted by dividing EBITDA – as
adjusted by Net Sales.
Investors should consider these Non-GAAP financial measures in
addition to, not as a substitute for, or better than, financial
measures prepared in accordance with GAAP. Reconciliations of the
components of these measures to the most directly comparable GAAP
financial measures are included in the Supplemental Non-GAAP
Financial Table to this earnings release.
TENNANT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except shares and per share
data)
Three Months Ended
March 31
2021
2020
Net Sales
$
263.3
$
252.1
Cost of Sales
150.0
149.3
Gross Profit
113.3
102.8
Gross Margin
43.0
%
40.8
%
Operating Expense:
Research and Development Expense
7.4
7.4
Selling and Administrative Expense(1)
69.6
81.0
Total Operating Expense
77.0
88.4
Operating Income
36.3
14.4
Operating Margin
13.8
%
5.7
%
Other Income (Expense):
Interest Income
0.7
0.9
Interest Expense
(4.6
)
(5.1
)
Net Foreign Currency Transaction Gain
(Loss)
0.5
(4.1
)
Other Income, Net
0.1
0.2
Total Other Expense, Net
(3.3
)
(8.1
)
Income Before Taxes
33.0
6.3
Income Tax Expense
7.3
1.1
Net Income Including Noncontrolling
Interest
25.7
5.2
Net Income Attributable to Tennant
Company
$
25.7
$
5.2
Net Income Attributable to Tennant Company
per Share:
Basic
$
1.39
$
0.28
Diluted
$
1.37
$
0.28
Weighted Average Shares Outstanding:
Basic
18,456,079
18,286,816
Diluted
18,831,423
18,666,238
(1) Includes $9.8 million gain on sale of
the Coatings business.
GEOGRAPHICAL NET SALES(2)
(Unaudited)
Three Months Ended
March 31
2021
2020
%
Americas
$
157.8
$
162.6
(3.0
)%
Europe, Middle East and Africa
80.9
72.0
12.4
%
Asia Pacific
24.6
17.5
40.6
%
Total
$
263.3
$
252.1
4.4
%
(2) Net of intercompany sales.
TENNANT COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
March 31
December 31
2021
2020
ASSETS
Current Assets:
Cash, Cash Equivalents and Restricted
Cash
$
175.2
$
141.0
Receivables:
Trade, less Allowances of $4.9 and $4.6,
respectively
190.1
195.4
Other
4.5
4.5
Net Receivables
194.6
199.9
Inventories
137.5
127.7
Prepaid and Other Current Assets
23.2
25.0
Total Current Assets
530.5
493.6
Property, Plant and Equipment
425.6
437.5
Accumulated Depreciation
(254.7
)
(252.0
)
Property, Plant and Equipment, Net
170.9
185.5
Operating Lease Assets
43.3
44.5
Goodwill
199.2
207.8
Intangible Assets, Net
114.6
126.2
Other Assets
22.3
25.0
Total Assets
$
1,080.8
$
1,082.6
LIABILITIES AND TOTAL EQUITY
Current Liabilities:
Current Portion of Long-Term Debt
$
36.4
$
10.9
Accounts Payable
104.8
106.3
Employee Compensation and Benefits
49.0
53.7
Other Current Liabilities
87.0
83.4
Total Current Liabilities
277.2
254.3
Long-Term Liabilities:
Long-Term Debt
271.9
297.6
Long-Term Operating Lease Liabilities
27.7
28.7
Employee-Related Benefits
17.5
17.9
Deferred Income Taxes
33.8
39.1
Other Liabilities
31.3
38.9
Total Long-Term Liabilities
382.2
422.2
Total Liabilities
659.4
676.5
Equity:
Common Stock
7.0
6.9
Additional Paid-In Capital
59.1
54.7
Retained Earnings
384.8
363.3
Accumulated Other Comprehensive Loss
(30.8
)
(20.1
)
Total Tennant Company Shareholders’
Equity
420.1
404.8
Noncontrolling Interest
1.3
1.3
Total Equity
421.4
406.1
Total Liabilities and Total Equity
$
1,080.8
$
1,082.6
TENNANT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
(In millions)
March 31
2021
2020
OPERATING ACTIVITIES
Net Income Including Noncontrolling
Interest
$
25.7
$
5.2
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation
8.3
8.1
Amortization of Intangible Assets
5.3
5.0
Deferred Income Taxes
(1.5
)
(2.5
)
Share-Based Compensation Expense
3.1
2.8
Allowance for Doubtful Accounts and
Returns
0.6
0.1
Gain on Sale of Business
(9.8
)
—
Other, Net
1.4
0.7
Changes in Operating Assets and
Liabilities:
Receivables, Net
(0.7
)
15.9
Inventories
(18.3
)
(11.6
)
Accounts Payable
3.2
4.3
Employee Compensation and Benefits
(5.7
)
(20.8
)
Other Current Liabilities
5.6
2.6
Other Assets and Liabilities
1.2
(1.1
)
Net Cash Provided by Operating
Activities
18.4
8.7
INVESTING ACTIVITIES
Purchases of Property, Plant and
Equipment
(4.8
)
(12.4
)
Proceeds from Disposals of Property, Plant
and Equipment
—
0.1
Proceeds from Sale of Business, Net of
Cash Divested
24.7
—
Purchase of Intangible Assets
(0.1
)
(0.1
)
Net Cash Provided by (Used in) Investing
Activities
19.8
(12.4
)
FINANCING ACTIVITIES
Proceeds from Borrowings
—
125.0
Repayments of Debt
(0.2
)
(0.3
)
Contingent Consideration Payment
(0.5
)
—
Change in Finance Lease Obligations
—
(0.1
)
Proceeds from Issuance of Common Stock
3.1
2.4
Dividends Paid
(4.2
)
(4.0
)
Net Cash (Used in) Provided by Financing
Activities
(1.8
)
123.0
Effect of Exchange Rate Changes on Cash,
Cash Equivalents and Restricted Cash
(2.2
)
(1.8
)
Net Increase in Cash, Cash Equivalents
and Restricted Cash
34.2
117.5
Cash, Cash Equivalents and Restricted Cash
at Beginning of Period
141.0
74.6
Cash, Cash Equivalents and Restricted
Cash at End of Period
$
175.2
$
192.1
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2021
2020
Gross Profit - as reported
$
113.3
$
102.8
Gross Margin - as reported
43.0
%
40.8
%
Adjustments:
Discontinuation of Product Lines
—
1.7
Gross Profit - as adjusted
$
113.3
$
104.5
Gross Margin - as adjusted
43.0
%
41.5
%
Selling and Administrative Expense - as
reported
$
69.6
$
81.0
Selling and Administrative Expense as a
percent of Net Sales - as reported
26.4
%
32.1
%
Adjustments:
Restructuring Charge (S&A Expense)
—
(0.8
)
Gain on Sale of Business
9.8
—
Selling and Administrative Expense - as
adjusted
$
79.4
$
80.2
Selling and Administrative Expense as a
percent of Net Sales - as adjusted
30.2
%
31.8
%
Operating Income - as reported
$
36.3
$
14.4
Operating Margin - as reported
13.8
%
5.7
%
Adjustments:
Discontinuation of Product Lines
—
1.7
Restructuring Charge (S&A Expense)
—
0.8
Gain on Sale of Business
(9.8
)
—
Operating Income - as adjusted
$
26.5
$
16.9
10.1
%
6.7
%
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2021
2020
Income Before Taxes - as reported
$
33.0
$
6.3
Adjustments:
Discontinuation of Product Lines
—
1.7
Restructuring Charge (S&A Expense)
—
0.8
Amortization Expense
5.3
5.0
Gain on Sale of Business
(9.8
)
—
Income Before Taxes - as adjusted
$
28.5
$
13.8
Income Tax Expense - as reported
$
7.3
$
1.1
Adjustments:
Discontinuation of Product Lines(1)
—
0.4
Restructuring Charge (S&A
Expense)(1)
—
0.3
Amortization Expense(1)
1.5
1.4
Gain on Sale of Business(1)
(2.3
)
—
Income Tax Expense - as adjusted
$
6.5
$
3.2
(1) In determining the tax impact, we
applied the statutory rate in effect for each jurisdiction where
income or expenses were generated.
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2021
2020
Net Income Attributable to Tennant Company
- as reported
$
25.7
$
5.2
Adjustments:
Discontinuation of Product Lines
—
1.3
Restructuring Charge (S&A Expense)
—
0.5
Amortization Expense
3.8
3.6
Gain on Sale of Business
(7.5
)
—
Net Income Attributable to Tennant Company
- as adjusted
$
22.0
$
10.6
Net Income Attributable to Tennant Company
per Share - as reported:
Diluted
$
1.37
$
0.28
Adjustments:
Discontinuation of Product Lines
—
0.07
Restructuring Charge (S&A Expense)
—
0.03
Amortization Expense
0.19
0.19
Gain on Sale of Business
(0.40
)
—
Net Income Attributable to Tennant Company
per Share - as adjusted
$
1.17
$
0.57
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2021
2020
Net Income Including Noncontrolling
Interest - as reported
$
25.7
$
5.2
Less:
Interest Income
(0.7
)
(0.9
)
Interest Expense
4.6
5.1
Income Tax Expense
7.3
1.1
Depreciation Expense
8.3
8.1
Amortization Expense
5.3
5.0
Earnings Before Interest, Taxes,
Depreciation & Amortization
50.5
23.6
Adjustments:
Discontinuation of Product Lines
—
1.7
Restructuring Charge (S&A Expense)
—
0.8
Gain on Sale of Business
(9.8
)
—
Earnings Before Interest, Taxes,
Depreciation & Amortization - as adjusted
$
40.7
$
26.1
EBITDA Margin - as adjusted
15.5
%
10.4
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210504005120/en/
INVESTOR CONTACT: William Prate Senior Director, Investor
Relations william.prate@tennantco.com 763-540-1547
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