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, 1997 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, 1997, was 9,995,490.
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) Three Months Ended March 31 -------------------------------- EARNINGS (note 1) 1997 1996 ------- ------- Net sales $83,026 $76,823 Less: Cost of sales (note 2) 48,877 44,056 Selling and administrative (note 2) 27,562 27,120 ------- ------- Profit from operations 6,587 5,647 Other income and (expense) Net foreign currency gain (loss) (36) 188 Interest income 1,121 1,034 Interest expense (527) (712) Miscellaneous income (expense), net (301) (114) ------- ------- Total other income (expense) 257 396 ------- ------- Earnings before income taxes 6,844 6,043 Taxes on income 2,437 2,059 ------- ------- Net earnings $ 4,407 $ 3,984 ------- ------- ------- ------- PER SHARE (note 5) Net earnings $ .44 $ .40 Dividends $ .18 $ .17 Average number of shares 10,014,700 10,008,300
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) <TABLE> <CAPTION> BALANCE SHEET (Condensed from Audited (Unaudited) Financial Statements) ASSETS March 31, 1997 December 31, 1996 -------------- ----------------- <S> <C> <C> Cash and cash equivalents $ 9,572 $ 9,881 Receivables 75,768 78,855 Less deferred income from sales finance charges (1,779) (1,831) Less allowance for doubtful accounts (2,357) (2,506) -------- -------- Net receivables 71,632 74,518 Inventories (note 3) 35,623 35,264 Prepaid expenses 768 934 Deferred income taxes, current portion 5,814 5,884 -------- -------- Total current assets 123,409 126,481 Property, plant, and equipment 148,828 148,922 Less allowance for depreciation (85,348) (83,538) -------- -------- Net property, plant, and equipment 63,480 65,384 Net noncurrent installment accounts receivable 7,244 7,448 Deferred income taxes, long-term portion 1,468 1,524 Intangible assets 17,377 17,752 Other assets 535 591 -------- -------- Total assets $213,513 $219,180 -------- -------- -------- -------- </TABLE> <TABLE> <CAPTION> LIABILITIES & SHAREHOLDERS' EQUITY (Condensed from Audited (Unaudited) Financial Statements) LIABILITIES March 31, 1997 December 31, 1996 -------------- ----------------- <S> <C> <C> Current debt $ 3,375 $ 3,864 Accounts payable 14,184 17,485 Accrued expenses 24,459 28,239 -------- -------- Total current liabilities 42,018 49,588 Long-term debt 22,956 21,824 Employee retirement-related benefits 18,999 18,528 Other long-term liabilities 190 380 -------- -------- Total liabilities 84,163 90,320 SHAREHOLDERS' EQUITY Common stock (note 5) 3,748 3,737 Additional paid-in capital (note 5) 3,962 3,547 Equity adjustment from foreign currency translation 1,143 2,877 Common stock subscribed 113 703 Unearned restricted shares (733) (440) Retained earnings 133,310 130,703 Receivable from ESOP (12,193) (12,267) -------- -------- Total shareholders' equity 129,350 128,860 -------- -------- Total liabilities and shareholders' equity $213,513 $219,180 -------- -------- -------- -------- </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> STATEMENTS OF CASH FLOWS (note 4) Three Months Ended March 31 --------------------------- 1997 1996 -------- -------- <S> <C> <C> Net cash flow related to operating activities $ 3,508 $ 3,072 Cash flow related to investing activities: Acquisition of property, plant, and equipment (3,032) (3,882) Acquisition of intangible assets -- (164) Acquisition of Castex and Eagle -- -- Proceeds from disposals of property, plant, and equipment 319 1,043 Settlement of foreign currency hedging contracts 326 210 -------- -------- Net cash flow related to investing activities (2,387) (2,793) Cash flow related to financing activities: Net changes in current debt 524 (1,127) Issuance of long-term debt 4 -- Payments to settle long-term debt (6) -- Principal payment from ESOP 545 495 Proceeds from employee stock issues 462 450 Repurchase of common stock (1,316) -- Dividends paid (1,800) (1,698) -------- -------- Net cash flow related to financing activities (1,587) (1,880) Effect of exchange rate changes on cash 157 30 -------- -------- Net increase (decrease) in cash and cash equivalents (309) (1,571) Cash and cash equivalents at beginning of year 9,881 4,247 -------- -------- Cash and cash equivalents at end of first quarter $ 9,572 $ 2,676 -------- -------- -------- -------- </TABLE>
Page 4 of 7 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the interim periods presented. The results of operations for interim periods are not necessarily indicative of results which will be realized for the full fiscal year. (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 1996 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, maintenance and repairs, warranty, and bad debt expenses were charged to operations for the three months ended March 31, 1997 and 1996, as follows: 1997 1996* ------ ------ (In Thousands) Engineering, research and development $3,237 $3,302 ------ ------ ------ ------ Maintenance and repairs $1,490 $1,352 ------ ------ ------ ------ Warranty $1,034 $1,221 ------ ------ ------ ------ Bad debts $ 135 $ 199 ------ ------ ------ ------ 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. *Restated to conform with current year presentation. (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, 1997, and December 31, 1996, is as follows: March 31 December 31 1997 1996 -------- ----------- (In Thousands) FIFO Inventories: Finished Goods $26,204 $26,317 All Other 27,932 26,879 LIFO Adjustment (18,513) (17,932) -------- -------- LIFO Inventories $35,623 $35,264 -------- -------- -------- --------
Page 5 of 7 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 three months ended March 31, 1997 and 1996, were $2,361,000 and $443,000, respectively. Interest costs paid during the three months ended March 31, 1997, and 1996, were $529,000 and $694,000, 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 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, 1997, 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 <TABLE> <CAPTION> (a) Exhibits 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. 13.1 Text Portion of Report to Shareholders for Filed herewith electronically. the Three Months Ended March 31, 1997. 27.1 Financial Data Schedule. Filed herewith electronically. </TABLE> (b) Reports on Form 8-K There were no reports filed on Form 8K filed for the quarter ended March 31, 1997.
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: 5/12/97 /s/ R. A. Snyder ----------------------------- ------------------------------ Richard A. Snyder Vice President, Treasurer and Chief Financial Officer Date: 5/12/97 /s/ Mahedi A. Jiwani ----------------------------- ------------------------------ Mahedi A. Jiwani Corporate Controller and Principal Accounting Officer