SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997. COMMISSION FILE NUMBER 0-4804 TENNANT COMPANY INCORPORATED IN THE STATE OF MINNESOTA EMPLOYER IDENTIFICATION NUMBER 41-0572550 701 NORTH LILAC DRIVE, P.O. BOX 1452, MINNEAPOLIS, MINNESOTA 55440 TELEPHONE NUMBER 612-540-1208 SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: COMMON STOCK, PAR VALUE $.375 PER SHARE AND PREFERRED SHARE PURCHASE RIGHTS 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] $362,300,138 is aggregate market value of common stock held by non-affiliates as of March 9, 1998. 9,661,337 shares outstanding at March 9, 1998 DOCUMENTS INCORPORATED BY REFERENCE 1997 Annual Report to Shareholders - Part I (Partial), Part II (Partial), and Part IV (Partial) 1998 Proxy - Part III (Partial)
TENNANT COMPANY 1997 ANNUAL REPORT FORM 10-K (PURSUANT TO SECURITIES EXCHANGE ACT OF 1934) PART I Part I is included in the Tennant Company 1997 Annual Report to Shareholders (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 3 -"Legal Proceedings," of which there were no material legal proceedings pending, and Item 4 - "Submission of Matters to a Vote of Security Holders" during the fourth quarter, of which there were none. GENERAL DEVELOPMENT OF BUSINESS Tennant Company, a Minnesota corporation incorporated in 1909, is a Minneapolis-based company that specializes in the design, manufacture, and sale of non-residential floor maintenance equipment and related products. On February 1, 1994, the Company acquired the business and assets of Castex Industries, Inc., a privately owned manufacturer of commercial floor maintenance equipment. INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS, AND EXPORT SALES The Company, as described under "General Development of Business," has one business segment. The Company sells its products domestically and internationally. Appropriate financial information is provided in the Company's 1997 Annual Report to Shareholders, page 24, footnote 2. Nearly all of the Company's foreign investment in assets reside within Australia, Canada, Japan, Spain, The Netherlands, the United Kingdom, France, and Germany. While subject to increases or decreases in value over time due to foreign exchange rate movements, these investments are considered to be of low business risk. PRINCIPAL PRODUCTS, MARKETS, AND DISTRIBUTION Products consisting mainly of motorized cleaning equipment and related products, including floor cleaning and preservation products, are sold through a direct sales organization and independent distributors in North America, primarily through a direct sales organization in Australia, France, Spain, The Netherlands, Germany, and the United Kingdom, and through independent distributors in more than 40 foreign countries. Additional information pertaining to products and marketing methods is included in the 1997 Annual Report to Shareholders, pages 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13. RAW MATERIALS AND PURCHASED COMPONENTS The Company has not experienced any significant or unusual problems in the purchase of raw materials or other product components and is not disproportionately dependent upon any single source or supply. The Company has some sole-source vendors for certain components, primarily for automotive and plastic parts. A disruption in supply from such vendors may cause a short-term disruption in the Company's operations. However, the Company believes that it can find alternate sources in the event there is a disruption in supply from such vendors. PATENTS AND TRADEMARKS The Company applies for and is granted United States and foreign patents and trademarks in the ordinary course of business, no one of which is of material importance in relation to the business as a whole. SEASONALITY Although the Company's business is not seasonal in the traditional sense, revenues and earnings tend to concentrate in the fourth quarter of each year reflecting the tendency of customers to increase capital spending during such quarter, and the Company's efforts to close orders and reduce order backlogs. 1
WORKING CAPITAL PRACTICES The Company's working capital practices are described in the 1997 Annual Report to Shareholders, Management's Financial Discussion and Analysis, Financial Position section on pages 15, 16 and 17. MAJOR CUSTOMERS The Company sells its products to a wide variety of customers, no one of which is of material importance in relation to the business as a whole. BACKLOG The Company routinely fills orders within 30 days on the average. Consequently, order backlogs are not indicative of future sales levels. COMPETITIVE POSITION While there is no industry association or industry data, the Company believes, through its own market research, that it is a world-leading manufacturer of floor maintenance equipment. Active competition exists in most geographic areas; however, it tends to originate from different sources in each area, and the Company's market share is believed to exceed that of the leading competitor in many areas. The Company competes primarily on the basis of offering a broad line of high-quality, innovative products supported by an extensive sales/service network in major markets. PRODUCT RESEARCH AND DEVELOPMENT The Company regularly commits what is believed to be an above-average amount of resources to product research and development. These amounts are reported on the Company's 1997 Annual Report to Shareholders, page 24, footnote 3. A description of product development is included in the 1997 Annual Report to Shareholders on pages 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13. ENVIRONMENTAL PROTECTION Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, and is not expected to have, a material effect upon the Company's capital expenditures, earnings or competitive position. EMPLOYMENT Year-end employment is reported in the 1997 Annual Report to Shareholders on page 30. EXECUTIVE OFFICERS OF THE REGISTRANT Richard M. Adams, Vice President Richard M. Adams (50) joined the Company in 1974. He was elected Assistant Controller in 1983 and was named Corporate Controller in 1986. Mr. Adams was named Vice President, Global Accounts in 1993. Mr. Adams is a Certified Public Accountant. The President and Chief Executive Officer of the Company, Roger L. Hale, is the first cousin of Mr. Adams. Mr. Adams is a director of Tennant UK Limited, Holding B.V., Tennant Europe B.V., Tennant Japan, and Castex Incorporated. Bruce J. Borgerding, Deputy General Counsel and Corporate Secretary Bruce J. Borgerding (47) joined the Company in 1988 as Assistant General Counsel. He was named Deputy General Counsel and Corporate Secretary in 1995. Mr. Borgerding is a director of Tennant UK Limited, Tennant Holding B.V., Tennant Europe B.V., Tennant N.V., Tennant Japan, and Tennant Company Far East Headquarters Pte Ltd. Paul E. Brunelle, Vice President Paul E. Brunelle (57) joined the Company in 1965. In 1987 he was elected Vice President of Personnel Resources. Prior to joining the Personnel Resources Department in 1985, he was General Manager of the Company's former Brazilian operations. Mr. Brunelle is the President of the Tennant Company Foundation and a director of Tennant N.V. 2
Janet M. Dolan, Executive Vice President Janet M. Dolan (48) joined the Company in 1986. Ms. Dolan was appointed General Counsel and Secretary in 1987, Vice President in 1990, Senior Vice President in 1995, and Executive Vice President in 1996. She is a director of Castex Incorporated. She is also a director of Donaldson Company, Inc. Roger L. Hale, President and Chief Executive Officer Roger L. Hale (63) joined the Company in 1961. Mr. Hale was named Vice President in 1969 and elected a director in 1969. Mr. Hale was named President and Chief Operating Officer in 1975, and subsequently named Chief Executive Officer in 1976. He also is a director of U.S. Bancorp. Douglas R. Hoelscher, Senior Vice President Douglas R. Hoelscher (59) joined the Company in 1973. He was named Vice President in 1978 and Senior Vice President in 1995. He is a Registered Professional Engineer. John T. Pain, Corporate Controller and Principal Accounting Officer John T. Pain (49) joined the Company in 1984 as Corporate Tax Manager. He was named Assistant Treasurer in 1986 and Corporate Controller and Principal Accounting Officer in 1997. Mr. Pain is a Certified Public Accountant. He is a director of Castex Incorporated and Tennant Company Far East Headquarters Pte Ltd. Keith D. Payden, Vice President Keith D. Payden (50) joined the Company in 1981. He was named Director, Information Services in 1987, Chief Information Officer in 1992, and Vice President in 1993. Richard A. Snyder, Vice President, Treasurer and Chief Financial Officer Richard A. Snyder (58) joined the Company in 1981 as Controller. He was elected Treasurer and Chief Financial Officer in 1982 and named Vice President in 1985. Mr. Snyder is a Certified Public Accountant. He is a director of Tennant N.V. William R. Strang, Vice President William R. Strang (61) joined the Company in 1969. He was named Director, Corporate Marketing in 1987 and Vice President, Corporate Marketing in 1992. Mr. Strang is a director of Tennant Europe B.V., Tennant Holding B.V., Tennant Japan, and Tennant Company Far East Headquarters Pte Ltd. Steven K. Weeks, Vice President Steven K. Weeks (42) joined the Company in 1984. He was named Manager, Global New Business and Marketing Development in 1993, Director of Marketing in 1994, and Vice President, Customer Solutions in 1996. PART II Part II is included in the Tennant Company 1997 Annual Report to Shareholders (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 9, "Changes in and Disagreements with Accountants on Accounting and Financial Disclosure," of which there were none. PART III Part III is included in the Tennant Company 1998 Proxy (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 13 - "Certain Relationships and Related Transactions," of which there were none, and Item 10 - "Directors and Executive Officers of the Registrant" as it relates to executive officers. Identification of executive officers is included in Part I of this Form 10-K Annual Report. 3
PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K. A. The following documents are filed as a part of this report: 1. Financial Statements The following consolidated financial statements and independent auditors' report are included on pages 18 through 29 of the Tennant Company 1997 Annual Report to Shareholders and are incorporated in this Form 10-K Annual Report by reference: a. Consolidated Statements of Earnings for each of the years in the three-year period ended December 31, 1997 - page 18. b. Consolidated Balance Sheets as of December 31, 1997 and 1996 - page 19. c. Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 1997 - page 20. d. Consolidated Statements of Shareholders' Equity for each of the years in the three-year period ended December 31, 1997 - page 21. e. Independent Auditors' Report of KPMG Peat Marwick LLP - page 22. f. Notes to Consolidated Financial Statements - pages 23 through 29. 2. Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts (Dollars in Thousands) <TABLE> <CAPTION> Additions Balance at charged to Deductions beginning costs and from Balance at Allowance for doubtful accounts of year expenses reserves (1) end of year --------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Year ended December 31, 1997 2,506 1,901 1,105 3,302 Year ended December 31, 1996 2,611 1,160 1,265 2,506 Year ended December 31, 1995 2,609 803 801 2,611 </TABLE> (1) Accounts determined to be uncollectible and charged against reserve, net of collections on accounts previously charged against reserves. All other schedules are omitted as the required information is inapplicable or because the required information is presented in the Consolidated Financial Statements in the Tennant Company 1997 Annual Report to Shareholders. 3. Exhibits <TABLE> <CAPTION> Item # Description Method of Filing ------ ----------- ---------------- <S> <C> <C> 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. 4
10.1 Tennant Company 1988 Stock Incorporated by reference to Exhibit b.1 to the Incentive Plan Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10.2 Tennant Company 1992 Stock Incorporated by reference to Exhibit 4.4 to the Incentive Plan Company's Registration Statement No. 33-59054, Form S-8 dated March 2, 1993. 10.3 Tennant Company Restricted Incorporated by reference to Exhibit 4.5 to the Stock Plan for Nonemployee Company's Registration Statement No. 33-59054, Directors Form S-8, dated March 2, 1993. 10.4 Tennant Company 1995 Stock Incorporated by reference to Exhibit 4.4 to the Incentive Plan Company's Registration Statement No. 33-62003, Form S-8, dated August 22, 1995. 10.5 Tennant Company Restricted Incorporated by reference to Exhibit 10.2 to the Stock Plan for Nonemployee Company's 1995 Second Quarter 10-Q filing dated Directors, as amended and August 8, 1995. restated effective January 1, 1995 10.6 Tennant Company Excess Incorporated by reference to Exhibit 10.4 to the Benefit Plan, as amended Company's Annual Report on Form 10-K for the fiscal and restated effective year ended December 31, 1994. January 1, 1994 10.7 Management Agreement with Incorporated by reference to Exhibit 10.7 to the Steven K. Weeks dated Company's Annual Report on Form 10-K for the fiscal November 19, 1996 year ended December 31, 1996. 10.8 Management Agreement with Incorporated by reference to Exhibit 10.8 to the Tom Vander Bie dated Company's Annual Report on Form 10-K for the November 19, 1996 fiscal year ended December 31, 1996. 10.9 Management Agreement with Incorporated by reference to Exhibit 10.6 to the Richard M. Adams dated Company's Annual Report on Form 10-K for the fiscal December 10, 1993 year ended December 31, 1993. 10.10 Management Agreement with Incorporated by reference to Exhibit 10.7 to the Paul E. Brunelle dated Company's Annual Report on Form 10-K for the fiscal December 8, 1987 year ended December 31, 1993. 10.11 Amendment to Management Incorporated by reference to Exhibit 10.8 to the Agreement with Company's Annual Report on Form 10-K for the fiscal Paul E. Brunelle dated year ended December 31, 1993. June 21, 1989 10.12 1993 Amendment to Management Incorporated by reference to Exhibit 10.9 to the Agreement with Company's Annual Report on Form 10-K for the fiscal Paul E. Brunelle dated year ended December 31, 1993. December 10, 1993 10.13 Management Agreement with Incorporated by reference to Exhibit b.5 to the Janet M. Dolan dated Company's Annual Report on Form 10-K for the fiscal June 21, 1989 year ended December 31, 1992. 10.14 1993 Amendment to Management Incorporated by reference to Exhibit 10.11 to the Agreement with Janet M. Dolan Company's Annual Report on Form 10-K for the fiscal dated December 10, 1993 year ended December 31, 1993. 10.15 Management Agreement with Incorporated by reference to Exhibit b.8 to the Roger L. Hale dated Company's Annual Report on Form 10-K for the fiscal March 10, 1987 year ended December 31, 1992. 10.16 Amendment to Management Incorporated by reference to Exhibit b.9 to the Agreement with Roger L. Hale Company's Annual Report on Form 10-K for the fiscal dated June 21, 1989 year ended December 31, 1992. 5
10.17 1993 Amendment to Management Incorporated by reference to Exhibit 10.14 to the Agreement with Roger L. Hale Company's Annual Report on Form 10-K for the fiscal dated December 10, 1993 year ended December 31, 1993. 10.18 Management Agreement with Incorporated by reference to Exhibit b.10 to the Douglas R. Hoelscher dated Company's Annual Report on Form 10-K for the fiscal March 10, 1987 year ended December 31, 1992. 10.19 Amendment to Management Incorporated by reference to Exhibit b.11 to the Agreement with Douglas R. Company's Annual Report on Form 10-K for the fiscal Hoelscher dated June 21, 1989 year ended December 31, 1992. 10.20 1993 Amendment to Management Incorporated by reference to Exhibit 10.18 to the Agreement with Douglas R. Company's Annual Report on Form 10-K for the fiscal Hoelscher dated year ended December 31, 1993. December 10, 1993 10.21 Management Agreement with Incorporated by reference to Exhibit 10.19 to the Keith D. Payden dated Company's Annual Report on Form 10-K for the fiscal December 10, 1993 year ended December 31, 1993. 10.22 Management Agreement with Incorporated by reference to Exhibit b.12 to the Richard A. Snyder dated Company's Annual Report on Form 10-K for the fiscal March 10, 1987 year ended December 31, 1992. 10.23 Amendment to Management Incorporated by reference to Exhibit b.13 to the Agreement with Richard A. Company's Annual Report on Form 10-K for the fiscal Snyder dated June 22, 1989 year ended December 31, 1992. 10.24 1993 Amendment to Management Incorporated by reference to Exhibit 10.22 to the Agreement with Richard A. Company's Annual Report on Form 10-K for the fiscal Snyder dated year ended December 31, 1993. December 10, 1993 10.25 Management Agreement with Incorporated by reference to Exhibit 10.23 to the William R. Strang dated Company's Annual Report on Form 10-K for the fiscal December 10, 1993 year ended December 31, 1993. 10.26 Asset Purchase Agreement Incorporated by reference to Exhibit 2.1 to the dated January 27, 1994, Company's Current Report on Form 8-K dated between Tennant Company, February 15, 1994. Castex Industries, Inc., Wayne Investment Corp. and Wayne A. Streuer 13.1 Portions of 1997 Annual Filed herewith electronically. Report to Shareholders 6
21.1 Subsidiaries of the Registrant Tennant Company has the following subsidiaries: Tennant Holding B.V. is a wholly owned subsidiary organized under the laws of the Netherlands in 1991. A legal reorganization occurred in 1991 whereby Tennant N.V. became a participating interest of Tennant Holding B.V. Tennant N.V. had previously been a wholly owned subsidiary organized under the laws of the Netherlands in 1970. Tennant Maintenance Systems, Limited, was a wholly owned subsidiary, organized under the laws of the United Kingdom until October 29, 1992, at which time Tennant Holding B.V. acquired 100% of its stock from Tennant Company. The name was formally changed to Tennant UK Limited on or about October 16, 1996. Castex Incorporated, is a wholly owned subsidiary organized under the laws of the state of Michigan. The results of these operations have been consolidated into the financial statements, as indicated therein. 23.1 Independent Auditors' Filed herewith electronically. Report and Consent 27.1 Financial Data Schedule Filed herewith electronically. </TABLE> B. Reports on Form 8-K There were no reports filed on Form 8-K during the quarter ended December 31, 1997. 7
CROSS REFERENCE SHEET <TABLE> <CAPTION> FORM 10-K REFERENCED LOCATION - --------- ---------- -------- <S> <C> <C> Part I, Item 1 - Business 1997 Annual Report to Shareholders Exhibit 13.1 Pages 2, 3, 4, 5, 6, 7, 8, 9, 10, a. General 11, 12 and 13 b Lines of business, industry segments and Page 24, footnote 2 foreign and domestic operations c. Working capital practices Pages 15, 16 and 17 d. Product research and development Pages 4, 5, 7, 8, 10, 11 and 13 Page 24, footnote 3 e. Employment Page 30 Part I, Item 2 - Properties 1997 Annual Report to Shareholders Exhibit 13.1 Page 25, footnote 7 Page 26, footnote 9 Inside back cover Part II, Item 5 - Market for 1997 Annual Report to Shareholders Exhibit 13.1 the Registrant's Common a. Principal market Inside back cover Equity and Related b. Quarterly data Page 24, footnote 4 Shareholder Matters Inside back cover c. Number of shareholders Inside back cover d. Dividends Page 24, footnote 4 Inside back cover Part II, Item 6 - Selected 1997 Annual Report to Shareholders Exhibit 13.1 Financial Data Pages 30 and 31 Part II, Item 7 - Management's 1997 Annual Report to Shareholders Exhibit 13.1 Discussion and Analysis of Pages 14 to 17 Financial Condition and Results of Operations Part II, Item 8 - Financial 1997 Annual Report to Shareholders Exhibit 13.1 Statements and Supplementary Pages 18 to 29 Data Part III, Item 10 - Directors 1998 Proxy Pages 3 to 7 and Executive Officers of the Registrant Part III, Item 11 - Executive 1998 Proxy Pages 8 to 14 Compensation Part III, Item 12 - Security 1998 Proxy Pages 2 and 5 Ownership of Certain Beneficial Owners and Management </TABLE> 8
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By - /s/ Roger L. Hale By - /s/ William A. Hodder Roger L. Hale, President, William A. Hodder Chief Executive Officer, Board of Directors and Board of Directors Date - March 26, 1998 Date - March 26, 1998 By - /s/ Delbert W. Johnson By - /s/ Richard A. Snyder Delbert W. Johnson Richard A. Snyder Board of Directors Vice President, Treasurer, and Chief Financial Officer Date - March 26, 1998 Date - March 26, 1998 By - /s/ William I. Miller William I. Miller By - /s/ John Pain Board of Directors John T. Pain Corporate Controller and Date - March 26, 1998 Principal Accounting Officer By - /s/ Edwin L. Russel Date - March 26, 1998 Edwin L. Russell Board of Directors By - /s/ Arthur D. Collins, Jr. Arthur D. Collins, Jr. Date - March 26, 1998 Board of Directors Date - March 26, 1998 By - /s/ Davic C. Cox David C. Cox Board of Directors Date - March 26, 1998 By - /s/ Andrew P. Czajkowski Andrew P. Czajkowski Board of Directors Date - March 26, 1998 9