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 March 31, 1996 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 March 31, 1996, was 10,021,292.
Page 1 of 7 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 Ended March 31 --------------------------- 1996 1995 ------- ------- <S> <C> <C> EARNINGS (note 1) Net sales $76,823 $74,144 Less: Cost of sales (note 2) 44,056 42,646 Selling and administrative (note 2) 27,120 25,879 ------- ------- Profit from operations 5,647 5,619 Other income and (expense) Net foreign currency gain (loss) 188 144 Interest income 1,034 997 Interest expense (712) (570) Miscellaneous income (expense), net (114) (408) ------- ------- Total other income (expense) 396 163 ------- ------- Earnings before income taxes 6,043 5,782 Taxes on income 2,059 1,913 ------- ------- Net earnings $ 3,984 $ 3,869 ------- ------- ------- ------- PER SHARE (note 5) Net earnings $ .40 $ .39 Dividends $ .17 $ .17 Average number of shares 10,008,300 9,892,200 </TABLE>
Page 2 of 7 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 March 31, 1996 December 31, 1995 -------------- ----------------------- <S> <C> <C> Cash and cash equivalents $ 2,676 $ 4,247 Receivables 68,909 76,961 Less deferred income from sales finance charges (1,811) (1,840) Less allowance for doubtful accounts (2,554) (2,610) ---------- ---------- Net receivables 64,544 72,511 Inventories (note 3) 45,014 40,702 Prepaid expenses 854 944 Deferred income taxes, current portion 5,281 5,104 ---------- ---------- Total current assets 118,369 123,508 Property, plant, and equipment 139,096 137,213 Less allowance for depreciation (76,279) (73,489) ---------- ---------- Net property, plant, and equipment 62,817 63,724 Net noncurrent installment accounts receivable 7,398 7,510 Deferred income taxes, long-term portion 1,545 1,545 Intangible assets 18,744 18,859 Other assets 681 604 ---------- ---------- Total assets $209,554 $215,750 ---------- ---------- ---------- ---------- <CAPTION> LIABILITIES & SHAREHOLDERS' EQUITY (Condensed from Audited (Unaudited) Financial Statements) LIABILITIES March 31, 1996 December 31, 1995 -------------- ----------------------- <S> <C> <C> Current debt $ 16,113 $ 17,349 Accounts payable 16,126 21,436 Accrued expenses 19,567 22,938 ---------- ---------- Total current liabilities 51,806 61,723 Long-term debt 23,118 23,149 Employee retirement-related benefits 16,592 16,177 Other long-term liabilities 380 570 ---------- ---------- Total liabilities 91,896 101,619 SHAREHOLDERS' EQUITY Common stock (note 5) 3,758 3,732 Additional paid-in capital (note 5) 4,822 3,166 Equity adjustment from foreign currency translation 3,316 3,532 Common stock subscribed -- 694 Unearned restricted shares (390) (276) Retained earnings 118,682 116,396 Receivable from ESOP (12,530) (13,113) ---------- ---------- Total shareholders' equity 117,658 114,131 ---------- ---------- Total liabilities and shareholders' equity $209,554 $215,750 ---------- ---------- ---------- ---------- </TABLE>
Page 3 of 7 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED) (Dollars in thousands) <TABLE> <CAPTION> Three Months Ended March 31 --------------------------- STATEMENTS OF CASH FLOWS (Note 4) 1996 1995 ------- ------- <S> <C> <C> Net cash flow related to operating activities $ 3,072 $ 737 Cash flow related to investing activities: Acquisition of property, plant, and equipment (3,882) (4,401) Acquisition of intangible assets (164) Acquisition of Castex and Eagle (925) Proceeds from disposals of property, plant, and equipment 1,043 1,825 Settlement of foreign currency hedging contracts 210 (261) ------- ------- Net cash flow related to investing activities (2,793) (3,762) Cash flow related to financing activities: Net changes in current debt (1,127) (772) Issuance of long-term debt -- 5,000 Principal payment from ESOP 495 450 Proceeds from employee stock issues 450 409 Repurchase of common stock -- -- Dividends paid (1,698) (1,679) ------- ------- Net cash flow related to financing activities (1,880) 3,408 Effect of exchange rate changes on cash 30 (121) ------- ------- Net increase (decrease) in cash and cash equivalents (1,571) 262 Cash and cash equivalents at beginning of year 4,247 1,851 ------- ------- Cash and cash equivalents at end of first quarter $ 2,676 $ 2,113 ------- ------- ------- ------- </TABLE>
Page 4 of 7 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 1995 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 months ended March 31, 1996 and 1995, as follows: <TABLE> <CAPTION> 1996 1995 ------ ------ (In Thousands) <S> <C> <C> Engineering, research and development $3,112 $2,900 ------ ------ ------ ------ Bad debts $ 199 $ 494 ------ ------ ------ ------ </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. Amounts differ from 1995 10-Q report due to the reclassification of expenses. (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 March 31, 1996, and December 31, 1995, is as follows: <TABLE> <CAPTION> March 31 December 31 1996 1995 -------- ----------- (In Thousands) <S> <C> <C> FIFO Inventories: Finished Goods $ 31,695 $ 28,146 All Other 31,824 30,406 LIFO Adjustment (18,505) (17,850) -------- -------- LIFO Inventories $ 45,014 $ 40,702 -------- -------- -------- -------- </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. (4) Cash Flow Income taxes paid during the three months ended March 31, 1996 and 1995, were $443,000 and $1,323,000, respectively. Interest costs paid during the three months ended March 31, 1996, and 1995, were $694,000 and $696,000, respectively.
Page 5 of 7 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 OPERATION 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 Three Months Ended March 31, 1996, and is incorporated in this Form 10-Q by reference.
Page 6 of 7 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 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. 13.1 Text Portion of Report to Filed herewith electronically. Shareholders for the Three Months Ended March 31, 1996. 27.1 Financial Data Schedule. Filed herewith electronically. (b) Reports on Form 8-K There were no reports filed on Form 8K filed for the quarter ended March 31, 1996.
Page 7 of 7 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: 5/14/96 /s/ Richard A. Snyder ------------------ -------------------------------- Richard A. Snyder Vice President, Treasurer and Chief Financial Officer Date: 5/14/96 /s/ Mahedi A. Jiwani ------------------ -------------------------------- Mahedi A. Jiwani Corporate Controller and Principal Accounting Officer