TENNANT COMPANY(Exact Name of Registrant as Specified in Its Charter)
701 North Lilac DriveP.O. Box 1452Minneapolis, Minnesota 55440(Address of Principal Executive Offices)
(763) 540-1200(Registrant’s Telephone Number, Including Area Code)
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.Yesx No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).Yes x No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
The number of shares outstanding of Registrant’s common stock, par value $.375 on October 31, 2005, was 8,980,688.
TENNANT COMPANYQuarterly Report – Form 10-Q
ITEM 1 – Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)(In thousands, except per share data)
See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(In thousands)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(In thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(In thousands, except per share data)
Tennant Company is referred to as “Tennant,” “us,” “we,” or “our” in these notes to the condensed consolidated financial statements.
In our opinion, the accompanying unaudited, condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the condensed consolidated financial statements) necessary to present fairly our financial position as of September 30, 2005, the results of our operations and cash flows for the three and nine months ended September 30, 2005 and 2004. These statements are condensed and, therefore, do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the three and nine months ended September 30, 2005 are not necessarily indicative of the results to be expected for the full year.
During January 2004, we acquired Walter-Broadley Machines Limited, a cleaning equipment company based in the United Kingdom, with annual sales of $13,000. We paid $6,491 in the form of cash and debt for all the stock of Walter-Broadley and assumed $2,576 in outstanding debt, of which $2,516 was immediately retired. The acquisition was not material to our operations or financial position. The operations of Walter-Broadley have been included in our results of operations since the date of acquisition.
Management approved actions during the third quarter of 2004 to reduce costs as part of a continuing effort to improve profitability. These actions included the elimination of a net 64 management and administrative positions company-wide and were substantially completed by the end of the first quarter of 2005. The workforce reductions resulted in the recognition of a pretax charge of $2,301 ($1,458 after-tax, or $0.16 per diluted share) in our 2004 results for the full year. The charge consisted primarily of severance and outplacement benefits and was included within Selling and Administrative (S&A) expenses in the Consolidated Statements of Earnings. The severance and outplacement benefits were accounted for under the Financial Accounting Standards Board Statement (SFAS) No. 112, “Employers’ Accounting for Postemployment Benefits.”
The cash and non-cash applications against this accrual during the nine months ended September 30, 2005 were as follows:
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Inventories are valued at the lower of cost (principally on a last-in, first-out basis) or market. Inventories at September 30, 2005 and December 31, 2004 consisted of the following:
The LIFO reserve approximates the difference between LIFO carrying cost and replacement cost.
As of September 30, 2005 and December 31, 2004, FIFO-based inventories in Europe totaled $26,897 and $25,456, respectively.
Income taxes paid during the nine months ended September 30, 2005 and 2004 were $4,696 and $3,326 respectively. Interest costs paid during the nine months ended September 30, 2005 and 2004 were $504 and $742, respectively.
We report accumulated other comprehensive income (loss) as a separate item in the shareholders’ equity section of the balance sheet. Comprehensive income (loss) is comprised of net earnings and other comprehensive income (loss). Other comprehensive income (loss) consists solely of foreign currency translation adjustments. The reconciliations of net earnings to comprehensive income are as follows:
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We operate in one reportable segment that consists of the design, manufacture and sale of products used primarily in the maintenance of nonresidential surfaces. Our products are sold in North America, Europe, and other international markets including the Middle East, Asia, Japan, Latin America and Australia. The following table sets forth net sales by geographic area (net of intercompany sales):
The components of goodwill and other intangible assets are as follows:
The addition to other intangibles during the first nine months of 2005 consists of an acquired customer list, which will be amortized over a useful life of seven years based on the provisions of SFAS No. 142, “Goodwill and other Intangible Assets.”
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As of September 30, 2005, we had six stock-based employee compensation plans, which are described in Note 13 of the 2004 Annual Report on Form 10-K. We account for stock-based compensation for employees under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” APB No. 25 requires compensation cost to be recorded on the date of the grant only if the current market price of the underlying stock exceeds the exercise price. Accordingly, no compensation cost has been recognized for stock option plans.
During 2005, we modified our management compensation program which discontinued employee stock option grants. The modified program includes a performance-based share component that is expensed over the performance period.
We have adopted the disclosure-only provisions of SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”(“SFAS No. 148”). SFAS No. 148 amends the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). In accordance with SFAS No. 123, the fair value of options at the date of grant in 2005 and 2004 was estimated using the Black-Scholes option pricing model with the following assumptions:
Had stock-based compensation cost been determined using the fair value-based method of accounting under SFAS No. 123, net earnings would have been reduced to the pro forma amounts indicated below:
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We record a liability for warranty claims at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. Warranty periods on machines range from one to four years. The changes in warranty reserve balances for the nine months ended September 30, 2005 and 2004 were as follows:
Certain operating leases for our sales and service vehicles contain residual value guarantee provisions, which would become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. Of those leases that contain residual value guarantees, the aggregate residual value at lease expiration is approximately $9,700, of which we have guaranteed approximately $7,400. As of September 30, 2005, we have recorded a liability for the fair value of this residual value guarantee of $686.
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As of September 30, 2005, we had four defined benefit retirement plans and a postretirement medical plan, which are described in Note 9 of the 2004 Annual Report on Form 10-K.
We contributed $48 and $199 during the third quarter and $214 and $576 for the first nine months of 2005 to our pension benefit plans and to our postretirement medical benefit plan, respectively. We expect to contribute approximately $300 and $900 to our pension benefit plans and to our postretirement medical benefit plan in 2005, respectively.
We amended our postretirement medical plan during August 2004, which reduced our net periodic cost associated with this plan by $56 and $550 in the third quarter and first nine months of 2005.
The components of the net periodic cost (benefit) for the three and nine months ended September 30, 2005 and 2004 were as follows:
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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Tennant Company is a world leader in designing, manufacturing and marketing products that help create a cleaner, safer world. We provide equipment, parts and consumables and floor coatings to contract cleaners, end-user businesses, healthcare facilities, schools and local, state and federal governments. We sell our products through our direct sales and service organization and a network of authorized distributors worldwide. Geographically, our customers are primarily located in North America, Europe and other international markets including the Middle East, Asia, Japan, Latin America and Australia. We strive to be an innovator in our industry through our commitment to understanding our customers’ needs and using our expertise to create innovative solutions.
Net earnings increased $5.2 million to $6.3 million or $0.69 per diluted share during the third quarter of 2005 and more than doubled to $16.5 million or $1.82 per diluted share during the first nine months of 2005 compared to the same periods in 2004. These increases were driven by sales growth of 14.4% in the third quarter and 8.8% for the nine-month period and gross profit margin improvements of 3.5 percentage points in the third quarter and 3.0 percentage points in the nine-month period. Partially offsetting these increases were higher selling and administrative expenses in both the third quarter and nine-month period primarily due to higher performance-based compensation expense.
Results for the third quarter of 2004 included a workforce reduction charge of $2.6 million pretax ($1.8 million after-tax, or $0.20 per diluted share) related to actions to reduce costs as part of a continuing effort to improve profitability.
During the third quarter and first nine months of 2005, our results continued to be favorably impacted by weakness of the U.S. dollar against the Australian and Canadian dollars, the British pound and the Japanese yen. We began to see the unfavorable impact of the strengthening of the U.S. dollar against the Euro in our third quarter 2005 results; however, the direct Euro impact on net earnings remained favorable overall for both the quarter and nine-month period. We can estimate the direct financial impact of foreign currency exchange on net sales and earnings; however, it is difficult to estimate the indirect financial impact. The indirect financial impact would include such factors as the effect on sales volumes within local economies and the impact of pricing actions taken as a result of foreign exchange rate fluctuations. Foreign currency risk and its impact on our business is discussed further in “Quantitative and Qualitative Disclosures about Market Risk and Other Matters.”
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Historical Results
The following compares the historical results of operations for the three- and nine-month periods ended September 30, 2005 and 2004 in dollars and as a percentage of net sales (dollars in thousands, except earnings per diluted share):
Net Sales
Consolidated net sales increased 14.4% to $137.8 million for the third quarter of 2005 while net sales increased 8.8% to $400.9 million for the nine months ended September 30, 2005. The growth in net sales was driven by increases in all three geographic regions and all product categories (equipment; service, parts and consumables; and floor coatings) in both the quarter and the nine-month period. Growth in equipment sales was attributable to volume growth, in part from new products, as well as price increases in certain geographic regions. Positive direct foreign currency exchange fluctuations increased net sales by approximately 1% in the both the third quarter and the first nine months of 2005.
The following table sets forth the net sales by geographic area for the three- and nine-month periods ended September 30, 2005 and 2004 and the percentage change from the prior year (dollars in thousands):
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North America
North American sales increased 12.2% to $93.9 million for the third quarter of 2005 and 7.5% to $269.1 million for the nine months ended September 30, 2005. The growth in net sales was driven by increases in all product categories in both the quarter and the nine-month periods. Growth in equipment sales was primarily attributable to volume increases due to continued success with new products launched in the latter part of 2004 and price increases.
Europe
In Europe, net sales for the third quarter of 2005 increased 18.8% to $29.4 million versus the comparable 2004 period. This increase was driven by growth in service, parts and consumables and growth in equipment sales resulting from new products and price increases during the third quarter of 2005. In addition, the continued expansion of our sales and service coverage in Europe also contributed to our overall growth in the third quarter. Negative direct foreign currency translation effects decreased European net sales by approximately 1% in the 2005 third quarter.
Europe’s net sales for the nine months ended September 30, 2005 increased 10.8% to $90.9 million versus the comparable 2004 period. The growth in year-to-date sales was primarily driven by growth in service, parts and consumables and equipment sales, which was due to volume increases resulting from new products, price increases and expanded market coverage, offset by continued economic weakness in Europe. Positive direct foreign currency translation effects increased European net sales by approximately 2% during the first nine months of 2005. Year-to-date 2005 sales increased over the prior year period, even though the first half of 2004 included the shipment of a large order.
Other International
In Other International markets, net sales for the third quarter of 2005 totaled $14.5 million, up 20.8% from the third quarter of 2004 while net sales were up 13.6% to $40.9 million during the first nine months of 2005. Overall growth in net sales in both the quarter and the nine month period was primarily driven by volume growth in the Middle East, Latin America, Asia and Australia resulting from strengthening economies and new products. Positive direct foreign currency translation exchange effects increased sales in Other International markets by approximately 3% in the 2005 third quarter and 2% in the first nine months of 2005.
Gross Profit
Gross profit margin improved 3.5 percentage points to 42.9% for the third quarter of 2005 while gross profit margins for the first nine months of 2005 were up 3.0 percentage points to 42.8%. Gross profit margins were favorably impacted by operating efficiencies including cost-reduction actions taken in 2004, improved overhead absorption and decreased net logistics costs, as well as favorable foreign currency exchange in both the third quarter and first nine months of 2005. Also contributing to gross margin improvement was a favorable sales mix of products sold that included a higher percentage of direct sales that have higher gross margins. In addition, price increases implemented earlier in 2005 have helped neutralize the impact of higher steel costs that adversely affected 2004 gross margins.
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Operating Expenses
Research & Development
Research and development (R&D) expenses in the third quarter of 2005 increased 15.5% to $4.9 million from $4.3 million in 2004. R&D expenses as a percentage of net sales were 3.6% for the third quarter of 2005 compared to 3.5% in the comparable quarter last year.
R&D expenses for the nine months ending September 30, 2005 were $13.9 million, up 9.5% from $12.7 million in 2004. R&D expenses as a percentage of net sales were 3.5% year-to-date 2005 compared to 3.4% in the comparable period last year, which is in line with our target of investing 3–4% of net sales annually on R&D.
Selling & Administrative
Selling and administrative (S&A) expenses in the third quarter of 2005 increased 10.4% to $45.6 million from $41.3 million in 2004. The increase in S&A expenses is due primarily to an increase in performance-based incentive compensation expense, including additional expense resulting from modifications to our management compensation program which discontinued employee stock option grants. Our modified program is primarily comprised of performance-based shares that are expensed over the performance period instead of stock option grants, for which there is currently no associated expense. Previously issued but unvested stock options will be expensed beginning in 2006 as discussed under “New Accounting Pronouncements.” Our expanded sales and service market coverage, primarily in Europe, also contributed to the increase.
S&A expenses for the third quarter of 2004 included a workforce reduction charge of $2.6 million pretax related to actions to reduce costs as a part of a continuing effort to improve profitability. S&A expenses for the third quarter and first nine months of 2005 benefited from the lower cost structure resulting from these actions.
For the nine months ended September 30, 2005, S&A expenses increased 9.0% to $132.2 million from $121.2 million in the comparable period last year. The increase in S&A expenses during the first nine months of 2005 was primarily due to an increase in performance-based incentive compensation expense, including additional expense resulting from modifications to our management compensation program as discussed above. Our expanded sales and service market coverage, primarily in Europe, the unfavorable effect of direct foreign currency exchange and Sarbanes-Oxley compliance costs also contributed to the increase. Partially offsetting these increases were decreases in health care costs resulting from lower medical claims experience.
S&A expenses as a percentage of net sales were 33.1% for the third quarter of 2005, down from 34.3% in the comparable quarter last year. The decrease as a percent of net sales during the quarter is primarily a result of the workforce reduction charge taken in the third quarter of 2004 and leveraging our fixed costs against strong sales growth in the quarter, partially offset by additional expense for performance-based compensation. S&A expenses as a percentage of net sales for the nine months ending September 30, 2005 were 33.0%, up slightly from 32.9% in the comparable period last year.
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Income Taxes
The effective tax rates for the third quarter were 29.7% for 2005 and 31.7% for 2004. The year-to-date effective tax rates were 35.3% for 2005 and 39.0% for 2004. The decreases in the effective tax rate between quarters and on a year-to-date basis are primarily related to the mix in expected full-year taxable earnings by country and the resolution of various outstanding state and federal tax matters.
On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law. The new law included a provision to phase out the ETI Act tax benefit over the next two years. In addition, the new law established a manufacturing deduction for profits on U.S. manufactured product to be phased in over six years. For 2005, we expect the phase-out of the ETI Act tax benefit to be substantially offset by the phase-in of the U.S. manufacturing deduction. For 2006 to 2009, we expect that the change in the U.S. tax law will have a negative impact on our effective tax rate since the ETI Act is phased out more quickly than the phase-in of the U.S. manufacturing deduction.
Our effective tax rate for the full year is subject to change to the extent the forecasts of full-year taxable earnings by country change in total, or by taxing jurisdiction, or to changes in the tax laws and regulations.
Liquidity and Capital Resources
The debt-to-total-capitalization ratio was 1.7% at September 30, 2005 versus 4.8% at December 31, 2004. Cash, cash equivalents and short-term investments totaled $28.5 million at September 30, 2005, compared to $22.9 million at December 31, 2004. We believe that the combination of cash, internally generated funds and available financing sources are more than sufficient to meet our cash requirements for the next year.
OPERATING ACTIVITIES — Operating activities provided $30.0 million of cash during the nine months ended September 30, 2005. Cash provided by operating activities was driven by strong year-to-date net earnings, an increase in accrued expenses and a decrease in receivables. The increase in accrued expenses was primarily attributable to timing of tax payments and accruals for annual performance-based incentive payments. The decrease in receivables was primarily due to seasonality of sales volumes. Partially offsetting these sources of cash was an increase in inventory levels and decreases in other current/noncurrent assets and liabilities. The inventory level increases were primarily due to a build-up of inventory in Europe to support new products launched and to support fourth quarter 2005 expected shipments. The decrease in other current/noncurrent assets and liabilities is primarily a result of a large, lump-sum payment of deferred compensation.
In the comparable 2004 period, operating activities provided cash of $29.8 million. Cash provided by operating activities for the nine months ended September 30, 2004 was driven by an increase in accrued expenses and a decrease in receivables. The increase in accrued expenses was primarily related to the workforce reduction charge accrued during the third quarter of 2004 and timing of payroll payments and other payments between periods while the decrease in receivables is driven by improved cash collections.
Management evaluates how effectively we utilize two of our key operating assets, receivables and inventories, using Accounts Receivable “Days Sales Outstanding” (DSO) and “Days Inventory on Hand” (DIOH), on a FIFO basis. These metrics are as follows (in days):
INVESTING ACTIVITIES — Capital expenditures were $12.9 million during the first nine months of 2005, compared to $14.8 million in the same period of 2004. We currently anticipate full-year capital spending to be in the range of $15 to $20 million.
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In January 2004, we acquired all of the stock of Walter-Broadley for $6.5 million in the form of cash and debt, as well as assuming $2.6 million in outstanding debt, of which $2.5 million was immediately retired. The cost of the acquisition was paid in cash with funds provided by operations.
FINANCING ACTIVITIES — Net cash used by financing activities was $13.2 million during the first nine months of 2005 and $10.5 million in the comparable 2004 period. During the first nine months of 2005, significant uses of cash included a $5.0 million scheduled debt repayment and $3.5 million in repurchases of common stock related to our share repurchase program. During the first nine months of 2004, $2.5 million in assumed Walter-Broadley debt was retired.
New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments at the time of issuance. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The effect of the standard will be to require companies to measure the cost of employee services received in exchange for stock awards based on its grant-date fair value and to recognize the cost over the period the employee is required to provide services for the award.
We plan to adopt the provisions of SFAS No. 123(R) effective January 1, 2006, as required, using the modified prospective transition method for our existing stock-based compensation plans.
Quantitative and Qualitative Disclosures About Market Risk and Other Matters
Foreign Currency Risk
Due to the global nature of our operations, we are subject to exposures resulting from foreign currency exchange fluctuations in the normal course of business. Our primary exchange rate exposure is with the Euro, the Canadian dollar, the Australian dollar, the British pound and the Japanese yen against the U.S. dollar. The direct financial impact of foreign currency exchange includes the effect of translating profits from local currencies to U.S. dollars, the impact of currency fluctuations on the transfers and purchases of goods between Tennant operations and third parties in the United States and abroad and transaction gains and losses. In addition to the direct financial impact, foreign currency exchange has a indirect financial impact on our results, including the effect on sales volumes within local economies and the impact of pricing actions taken as a result of foreign exchange rate fluctuations. We could experience favorable or unfavorable foreign exchange effects for the remainder of 2005, compared with prior year results.
Because our products are manufactured or sourced primarily from the United States, a stronger dollar generally has a negative impact on results from operations outside the United States while a weaker dollar generally has a positive effect. Our objective in managing the exposure to foreign currency fluctuations is to minimize the earnings effects associated with foreign exchange rate changes on certain of our foreign currency-denominated assets and liabilities. We periodically enter into various contracts, principally forward exchange contracts, to protect the value of certain of our foreign currency-denominated assets and liabilities. The gains and losses on these contracts generally approximate changes in the value of the related assets and liabilities.
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Commodity Risk
We are subject to exposures resulting from potential cost increases related to our purchases of raw materials or other product components. We do not use derivative commodity instruments to manage our exposures to changes in commodity prices such as steel or oil and gas.
In the past year, increases in worldwide demand and other factors have caused prices for steel and related products to increase. Given the worldwide steel market conditions, we have experienced cost increases in our steel-based raw materials and component parts in 2004 and 2005. We purchase approximately $55–$60 million of raw and fabricated steel and steel-based component parts annually. We do not maintain an inventory of raw or fabricated steel in excess of our near-term production requirements. We continue to focus on mitigating the impact of the anticipated steel cost increases through product pricing and negotiations with our vendors.
Various factors beyond our control affect the price of oil and gas, including but not limited to worldwide and domestic supplies of oil and gas, political instability or armed conflict in oil-producing regions, the price and level of foreign imports, the level of consumer demand, the price and availability of alternative fuels, domestic and foreign governmental regulation, weather-related factors and the overall economic environment. We purchase petroleum-related component parts for use in our manufacturing operations. In addition, our freight costs associated with shipping and receiving product and sales and service vehicle fuel costs are impacted by fluctuations in the cost of oil and gas. The current price of oil and gas is expected to unfavorably impact our results in the remainder of 2005.
Successful mitigation of the impact will depend upon our ability to increase our selling prices in a competitive market.
Additional information on market risk is included in the Management’s Discussion and Analysis section of our Form 10-K filing for the year ended December 31, 2004.
Other Matters
Management regularly reviews our business operations with the objective of improving financial performance and maximizing our return on investment. In this regard, we continue to consider actions to improve financial performance which, if taken, could result in material nonrecurring charges.
One of Tennant’s key strategies to improve profitability is leveraging our cost structure. In support of this strategy, we plan to reallocate production activities among our manufacturing plants to reduce facilities, logistics, labor and other costs. We plan to exit a manufacturing facility in Minnesota in 2007 at an expected gain. An estimated 32 positions will be affected, which we expect to absorb through normal attrition and reassignments within the Company. We expect to incur pretax costs of approximately $1 million in both 2006 and 2007, while yielding pretax savings of approximately $1.5 million annually in 2008 and beyond.
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Cautionary Statement Relevant to Forward-Looking Information
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:
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.
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 that any list of such factors to be an exhaustive or complete list of all risks or uncertainties.
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ITEM 4 – Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure procedures only provide reasonable assurance that the controls will meet their objectives. There can be no assurance that the controls will be effective in all circumstances. Management believes disclosure controls and procedures are operating and effective at the reasonable assurance level.
(b) Changes in internal controls. There were no changes in our internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 2 – Changes in Securities, and Use of Proceeds and Issuer Purchases of Equity Securities
(e) In November 2004, Tennant Company’s Board of Directors authorized the repurchase of 400,000 shares of our common stock. These share repurchases are made from time to time in the open market or through privately negotiated transactions, primarily to offset the dilutive effect of shares issued through our stock-based compensation programs.
(1) Includes 5,405 shares delivered or attested to in satisfaction of the exercise price and/or withholding obligations by employees who exercised stock options and restricted stock under employee stock compensation plans.
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ITEM 6 – Exhibits
Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
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