FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1995 Commission File No. 04804 TENNANT COMPANY Incorporated in Minnesota IRS Emp Id No. 410572550 701 North Lilac Drive P.O. Box 1452 Minneapolis, Minnesota 55440 Telephone No. 612-540-1200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- The number of shares outstanding of Registrant's common stock, par value $.375 on September 30, 1995, was 9,934,882 (after adjustment for two-for one stock split effective April 26, 1995).
Page 2 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (Unaudited) - ---------------------------------------------------------------------- (Dollars in thousands) <TABLE> <CAPTION> THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------ ------------------ EARNINGS (note 1) 1995 1994 1995 1994 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales $77,761 $71,309 $234,702 $200,534 Less: Cost of sales (note 2) 44,279 41,501 133,934 116,154 Selling and administrative (note 2) 26,208 23,570 80,103 67,783 ------- ------- -------- -------- Profit from operations 7,274 6,238 20,665 16,597 Other income (expense) Net foreign currency gain (loss) (199) 21 (78) (161) Interest income 1,045 952 3,109 2,829 Interest expense (715) (572) (1,853) (1,180) Miscellaneous income (expense), net (411) (558) (1,142) (1,478) ------- ------- -------- -------- Total other income (expense) (280) (157) 36 10 ------- ------- -------- -------- Earnings before income taxes 6,994 6,081 20,701 16,607 Taxes on Income 2,360 2,179 6,920 5,820 ------- ------- -------- -------- Net earnings $ 4,634 $ 3,902 $ 13,781 $ 10,787 PER SHARE Net earnings $ .47 $ .40 $ 1.39 $ 1.10 Dividends $ .17 $ .16 $ .51 $ .48 Average number of shares 9,923,200 9,819,800 9,907,900 9,823,600 </TABLE>
Page 3 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS - ---------------------------------------------------------- (Dollars in thousands) BALANCE SHEET <TABLE> <CAPTION> (CONDENSED FROM AUDITED (UNAUDITED) FINANCIAL STATEMENTS) ASSETS SEPTEMBER 30, 1995 DECEMBER 31, 1994 ------------------ ---------------------- <S> <C> <C> Cash and cash equivalents $ 1,826 $ 1,851 Receivables 66,111 63,411 Less deferred income from sales finance charges (1,768) (1,592) Less allowance for doubtful accounts (2,791) (2,609) -------- -------- Net receivables 61,552 59,210 Inventories (note 3) 42,206 30,985 Prepaid expenses 1,237 696 Deferred income taxes, current portion 6,384 6,068 -------- -------- Total current assets 113,205 98,810 Property, plant, and equipment 133,635 122,384 Less allowance for depreciation (71,294) (65,832) -------- -------- Net property, plant, and equipment 62,341 56,552 Net noncurrent installment accounts receivable 7,185 6,353 Deferred income taxes, long-term portion 944 944 Intangible assets 18,417 19,287 Other assets 677 888 -------- -------- Total assets $202,769 $182,834 -------- -------- -------- -------- </TABLE> <TABLE> <CAPTION> LIABILITIES & SHAREHOLDERS' EQUITY (CONDENSED FROM AUDITED (UNAUDITED) FINANCIAL STATEMENTS) LIABILITIES SEPTEMBER 30, 1995 DECEMBER 31, 1994 ------------------ ---------------------- <S> <C> <C> Current debt $ 13,819 $ 23,008 Accounts payable 18,479 17,925 Accrued expenses 25,293 25,132 -------- -------- Total current liabilities 57,591 66,065 Long-term debt 22,071 6,300 Employee retirement-related benefits 14,431 13,460 Other long-term liabilities 570 760 -------- -------- Total liabilities 94,663 86,585 SHAREHOLDERS' EQUITY Common stock (note 5) 3,726 3,690 Additional paid-in capital (note 5) 2,756 396 Equity adjustment from foreign currency translation 3,231 2,743 Common stock subscribed 0 525 Unearned restricted shares (404) (424) Retained earnings 112,009 103,281 Receivable from ESOP (13,212) (13,962) -------- -------- Total shareholders' equity 108,106 96,249 -------- -------- Total liabilities and shareholders' equity $202,769 $182,834 -------- -------- -------- -------- </TABLE>
Page 4 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED) - ---------------------------------------------------------------------- (Dollars in thousands) <TABLE> <CAPTION> STATEMENTS OF CASH FLOWS (NOTE 4) NINE MONTHS ENDED SEPTEMBER 30 ------------------------------ 1995 1994 ---- ---- <S> <C> <C> Net cash flow related to operating activities $12,280 $17,140 Cash flow related to investing activities: Acquisition of property, plant, and equipment (16,048) (13,230) Acquisition of Castex and Eagle (1,126) (27,610) Proceeds from disposals of property, plant, and equipment 2,685 1,068 Settlement of foreign currency hedging contracts (691) (465) ------- ------- Net cash flow related to investing activities (15,180) (40,237) Cash flow related to financing activities: Net changes in current debt (9,322) 28,961 Issuance of long-term debt 15,727 -- Principal payment from ESOP 450 409 Proceeds from employee stock issues 1,249 1,120 Repurchase of common stock 0 (1,760) Dividends paid (5,052) (4,715) -------- ------- Net cash flow related to financing activities 3,052 24,015 Effect of exchange rate changes on cash (177) (131) -------- ------- Net increase (decrease) in cash and cash equivalents (25) 787 Cash and cash equivalents at beginning of year 1,851 2,675 -------- ------- Cash and cash equivalents at end of third quarter $ 1,826 $ 3,462 -------- ------- -------- ------- </TABLE>
Page 5 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) The Company's Summary of Significant Accounting Policies and other Related Data and Summary of Stock Plans, Bonuses, and Profit Sharing is included in the Company's 1994 Annual Report filed as Exhibit 13.1 to the Company's annual filing on Form 10-K and is incorporated in this Form 10-Q by reference. (2) Expenses Engineering, research and development, and bad debt expenses were charged to operations for the three and nine months ended September 30, 1995 and 1994, as follows: <TABLE> <CAPTION> THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> Engineering, research and development $3,146 $2,670 $9,193 $8,319 ------ ------ ------ ------ ------ ------ ------ ------ Bad debts $ 84 $ 141 $ 591 $ 548 ------ ------ ------ ------ ------ ------ ------ ------ </TABLE> The Company also makes accrual adjustments on a regular monthly basis for bonus and profit sharing expenses which are settled at year-end. This allows for a fair statement of the results for the interim periods presented. 1995 Engineering, Research and Development restated to exclude warranty administration expense, consistent with previous years. (3) Inventories Inventories are valued at the lower of cost (principally on a last-in, first-out basis) or market. The composition of inventories at September 30, 1995, and December 31, 1994, is as follows: <TABLE> <CAPTION> SEPTEMBER 30 DECEMBER 31 1995 1994 ------------ ----------- (In Thousands) <S> <C> <C> FIFO Inventories: Finished Goods $27,995 $21,491 All Other 32,363 26,174 LIFO Adjustment (18,152) (16,680) ------- ------- LIFO Inventories $42,206 $30,985 ------- ------- ------- ------- </TABLE> The category "All Other" includes production-related raw materials, parts and supplies, and work-in-process. The Company's accounting system does not permit a further breakdown of this category of inventories.
Page 6 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Cash Flow Income taxes paid during the nine months ended September 30, 1995 and 1994, were $8,316,000 and $4,092,000, respectively. Interest costs paid during the nine months ended September 30, 1995 and 1994, were $2,048,000 and $1,092,000, respectively. (5) Stock Split On February 16, 1995, the Board of Directors declared a two-for- one stock split effective April 26, 1995, for shareholders of record on April 12, 1995. For each share to be issued in connection with the stock split, an amount equal to the par value of $.375 was transferred to the common stock amount from additional paid-in capital retroactive to December 31, 1994. All share and per share data in this report have been retroactively adjusted to reflect this stock split. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations is included in Exhibit 13.1, attached, text portion of Report to Shareholders for the Nine Months Ended September 30, 1995, and is incorporated in this Form 10-Q by reference.
Page 7 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Item # Description Method of Filing 3i Articles of Incorporation Incorporated by reference to Exhibit 3i to the Company's Registration Statement No. 000-04804, 1995 Second Quarter 10Q Filing, dated August 8, 1995. 3ii By-Laws Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement No. 33-59054, Form S-8, dated March 2, 1993. 13.1 Text Portion of Report to Filed herewith electronically. Shareholders for the Nine Months Ended September 30, 1995 27.1 Financial Data Schedule Filed herewith electronically. (b) Reports on Form 8-K A Form S-8 was filed August 22, 1995, reporting 1995 Stock Incentive Plan.
Page 8 of 8 TENNANT COMPANY Quarterly Report - Form 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TENNANT COMPANY Date: 11-9-95 /s/ RICHARD A. SNYDER --------------------------- ------------------------------- Richard A. Snyder Vice President, Treasurer and Principal Financial Officer Date: 11-9-95 /s/ MAHEDI A. JIWANI --------------------------- ------------------------------- Mahedi A. Jiwani Corporate Controller and Principal Accounting Officer