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, 1999 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, 1999, was 9,042,437.
Page 2 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS (UNAUDITED) (Dollars in thousands, except per share amounts) <TABLE> <CAPTION> Three Months Nine Months Ended September 30 Ended September 30 ---------------------- ----------------------- 1999 1998 1999 1998 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales $ 104,286 $ 96,116 $ 310,412 $ 284,057 Less: Cost of sales 62,984 56,157 185,600 165,915 Selling and administrative 33,439 30,479 99,778 91,311 Restructuring charges 3,078 0 3,078 0 --------- --------- --------- --------- Profit from operations 4,785 9,480 21,956 26,831 Other income (expense) Net foreign currency gain (loss) 240 93 183 (79) Interest income 626 1,036 2,053 3,345 Interest expense (486) (573) (1,826) (1,878) Miscellaneous income (expense), net (226) (214) (574) 165 --------- --------- --------- --------- Total other income (expense) 154 342 (164) 1,553 --------- --------- --------- --------- Earnings before income taxes 4,939 9,822 21,792 28,384 Taxes on income 1,784 3,514 7,767 10,115 --------- --------- --------- --------- Net earnings $ 3,155 $ 6,308 $ 14,025 $ 18,269 ========= ========= ========= ========= Comprehensive earnings adjustment for foreign currency translation, net of tax 414 417 (2,421) 84 --------- --------- --------- --------- Comprehensive earnings $ 3,569 $ 6,725 $ 11,604 $ 18,353 ========= ========= ========= ========= PER SHARE: Basic net earnings $ .35 $ .67 $ 1.54 $ 1.91 Diluted net earnings $ .35 $ .67 $ 1.53 $ 1.91 Dividends $ .19 $ .19 $ .57 $ .55 Weighted average number of shares 9,079,900 9,383,900 9,110,400 9,550,800 (basic) Weighted average number of shares 9,111,800 9,411,800 9,146,800 9,580,100 (diluted) </TABLE>
Page 3 of 15 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 September 30, 1999 December 31, 1998 ------------------ ----------------- <S> <C> <C> Cash and cash equivalents $ 12,705 $ 17,693 Receivables 81,867 81,145 Less deferred income from sales finance charges (137) (954) Less allowance for doubtful accounts (3,732) (2,956) --------- --------- Net receivables 77,998 77,235 Inventories 49,654 46,162 Prepaid expenses 1,880 878 Deferred income taxes, current portion 8,921 8,900 --------- --------- Total current assets 151,158 150,868 Property, plant, and equipment 178,755 169,515 Less allowance for depreciation (111,875) (102,875) --------- --------- Net property, plant, and equipment 66,880 66,640 Net noncurrent installment accounts receivable 2,048 2,843 Deferred income taxes, long-term portion 2,836 2,657 Intangible assets, net 18,452 15,631 Other assets 811 459 --------- --------- Total assets $ 242,185 $ 239,098 ========= ========= <CAPTION> LIABILITIES & SHAREHOLDERS' EQUITY (Condensed from Audited (Unaudited) Financial Statements) LIABILITIES September 30, 1999 December 31, 1998 ------------------ ----------------- <S> <C> <C> Current debt $ 6,448 $ 7,302 Accounts payable 13,264 19,042 Accrued expenses 32,669 30,647 --------- --------- Total current liabilities 52,381 56,991 Long-term debt 24,415 23,038 Long-term employee retirement-related benefits 31,635 27,802 --------- --------- Total liabilities 108,431 107,831 SHAREHOLDERS' EQUITY Common stock 3,392 3,421 Common stock subscribed 153 425 Unearned restricted shares (1,090) (307) Retained earnings 141,934 136,730 Receivable from ESOP (9,801) (10,589) Accumulated other comprehensive income (equity adjustment from foreign currency translation) (834) 1,587 --------- --------- Total shareholders' equity 133,754 131,267 Total liabilities and shareholders' equity $ 242,185 $ 239,098 ========= ========= </TABLE>
Page 4 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED) (Dollars in thousands) <TABLE> <CAPTION> CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 30 ------------------------------ 1999 1998 ---- ---- <S> <C> <C> Net cash flow provided by operating activities $ 26,136 $ 28,682 Cash flow used in investing activities: Acquisition of property, plant, and equipment (13,793) (14,597) Acquisition of Paul Andra KG, less cash acquired (note 7) (6,944) 0 Proceeds from disposals of property, plant, and equipment 1,907 4,178 Proceeds from maturing long-term securities 1 0 -------- -------- Net cash flow used in investing activities (18,829) (10,419) Cash flow related to financing activities: Net changes in current debt (805) 4,541 Issuance (payments) of long-term debt (1,188) 4,163 Payments to settle long-term debt 0 (27) Principal payment from ESOP 660 600 Proceeds from employee stock issues 1,727 1,521 Repurchase of common stock (7,500) (22,259) Dividends paid (5,155) (5,201) -------- -------- Net cash flow used in financing activities (12,261) (16,662) Effect of exchange rate changes on cash (34) 21 -------- -------- Net increase (decrease) in cash and cash equivalents (4,988) 1,622 Cash and cash equivalents at beginning of period 17,693 16,279 -------- -------- Cash and cash equivalents at end of period $ 12,705 $ 17,901 ======== ======== </TABLE>
Page 5 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the accompanying 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) Information Incorporated by Reference from Form 10-K The Company's Summary of Significant Accounting Policies and other Related Data and Summary of Stock Plans, Bonuses, and Profit Sharing are included in the Company's 1998 Annual Report filed as Exhibit 13.1 to the Company's annual filing on Form 10-K and are 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 and nine months ended September 30, 1999 and 1998, as follows: <TABLE> <CAPTION> Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ 1999 1998 1999 1998 ------ ------ ------- ------- (In Thousands) <S> <C> <C> <C> <C> Engineering, research and development $3,575 $4,091 $11,102 $12,555 ====== ====== ======= ======= Maintenance and repairs $1,356 $1,155 $ 4,155 $ 4,174 ====== ====== ======= ======= Warranty $1,591 $1,612 $ 4,769 $ 3,936 ====== ====== ======= ======= Bad debts $ 78 $ 364 $ 632 $ 862 ====== ====== ======= ======= </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. (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, 1999, and December 31, 1998, is as follows: <TABLE> <CAPTION> September 30 December 31 1999 1998 ------------ ----------- (In Thousands) <S> <C> <C> FIFO Inventories: Finished goods $ 31,131 $ 32,895 All other 37,091 32,162 LIFO Adjustment (18,568) (18,895) -------- -------- LIFO Inventories $ 49,654 $ 46,162 ======== ======== </TABLE> The increase in all other inventory is due largely to the acquisition of Paul Andra KG.
Page 6 of 15 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, 1999 and 1998, were $11,938,000 and $14,405,000, respectively. Interest costs paid during the nine months ended September 30, 1999 and 1998, were $1,688,000 and $1,866,000 respectively. (5) Earnings Per Share (In thousands, except per share amounts) <TABLE> <CAPTION> For the Quarter Ended September 30, 1999 ---------------------------------------- Per Share Income Shares Amount ------ ------ --------- <S> <C> <C> <C> Basic EPS Income available to common shareholders $3,155 9,080 $.35 Dilutive effect of stock options 32 Diluted EPS Income available to common shareholders plus assumed conversions $3,155 9,112 $.35 <CAPTION> For the Quarter Ended September 30, 1998 ---------------------------------------- Per Share Income Shares Amount ------ ------ --------- <S> <C> <C> <C> Basic EPS Income available to common shareholders $6,308 9,383 $.67 Dilutive effect of stock options 29 Diluted EPS Income available to common shareholders plus assumed conversions $6,308 9,412 $.67 </TABLE>
Page 7 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (6) Segment Reporting The Company operates in one industry segment which consists of the design, manufacture, and sale of products and services used in the maintenance of nonresidential floors. Financial data by geographic area is before interest expense and elimination of intercompany transactions. North America sales include sales in the United States, Canada, and Mexico. Sales in Canada and Mexico comprise less than 10% of consolidated sales and are interrelated with the Company's U.S. operations. Product transfers from North America are generally made at prices that recognize return on investment objectives for both the manufacturing and selling units. Corporate items include general corporate expense and miscellaneous items such as net ESOP interest income and Foundation contribution expense. <TABLE> <CAPTION> Three Months Nine Months Ended September 30 Ended September 30 -------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> Net sales North America Customer sales $ 74,651 $ 73,543 $225,264 $215,392 Transfers to Europe and other International areas 14,138 13,011 40,855 38,897 -------- -------- -------- -------- Total North America 88,789 86,554 266,119 254,289 Europe customer sales 20,912 14,866 60,088 44,669 Other international customer sales 8,723 7,707 25,060 23,995 Eliminations (14,138) (13,011) (40,855) (38,896) -------- -------- -------- -------- Total $104,286 $ 96,116 $310,412 $284,057 ======== ======== ======== ======== Earnings before income taxes North America 2,350 7,500 17,771 22,631 Europe 1,457 1,503 3,096 4,147 Other international 1,633 1,620 3,124 3,709 Corporate items, interest income, interest expense, and eliminations (501) (801) (2,199) (2,103) -------- -------- -------- -------- Total earnings before income taxes $ 4,939 $ 9,822 $ 21,792 $ 28,384 ======== ======== ======== ======== </TABLE>
Page 8 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q ITEM 1 - FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) Acquisition of Paul Andra KG On January 4, 1999, the Company acquired the shares and holdings in associated businesses of Paul Andra KG, a privately owned manufacturer of commercial floor maintenance equipment in Germany. Paul Andra KG sells products principally under the Sorma brand name, including single disk machines, wet/dry vacuum cleaners and vacuumized scrubbers. Sales of $15.5 million in the first nine months of 1999 generated a $.5 million operating loss. The acquisition is not expected to have a material impact on net income. <TABLE> <S> <C> Acquisition of Paul Andra KG: Assets acquired $ 12,763 Liabilities assumed (10,371) Goodwill 4,551 -------- Total cash paid, less cash acquired $ 6,943 ======== </TABLE> (8) Reclassification The Company reports revenue and costs from providing repair service in its sales and cost of sales figures. Through 1998, in its European operations, the related costs were included in selling and administrative expense. Third quarter and first nine months 1998 figures were restated to reflect $693,000 and $1,840,000, respectively, reclassification from selling and administrative expense to cost of sales to reflect the related allocable portion of service labor costs for those periods. This makes European reporting consistent with Company reporting. (9) Restructuring Charges The company recorded a pre-tax restructuring charge of $3.1 million in the most recent quarter, primarily related to severance and early retirement costs as part of Tennant's shareholder value enhancement plan. The company expects to record additional pre-tax restructuring and other charges in the fourth quarter, which are estimated to be $3-5 million. Charges are expected to include severance costs, asset write-offs and other costs related to closing facilities.
Page 9 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q (10) New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), which is required to be adopted for fiscal years beginning after June 15, 1999, although earlier application is permitted as of the beginning of any fiscal quarter. In June 1999, the Financial Accounting Standards Board issued Statement No. 137, which defers the effective date of SFAS No. 133 to quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through the statement of earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the hedged assets, liabilities, or firm commitments are recognized through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company is in the process of determining what effect the adoption of SFAS No. 133 will have on the Company's results of operations, cash flows or financial position ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Earnings Excluding a restructuring charge, net earnings for the quarter ended September 30, 1999 were $5.2 million, or 57 cents per share diluted, down 15 percent from $6.3 million, or 67 cents per share diluted for the same period in 1998. Excluding the restructuring charge, net earnings were $16.0 million or $1.75 per share diluted for the nine month period ended September 30, 1999, compared to $18.3 million or $1.91 per share diluted for the comparable period last year. Net Sales Net sales of $104.3 million for the third quarter ended and $310.4 million for the nine months ended September 30, 1999 increased 9 percent compared to the same periods last year, positively impacted by the acquisition of Paul Andra KG in January, 1999. Excluding the impact of that acquisition, sales grew $2.4 million or 2.5 percent over the prior year third quarter ($10.8 million or 3.8 percent over the prior year first nine months). A temporary decrease in manufacturing efficiency reduced shipments approximately $4-$5 million below what they otherwise would have been. North American sales for the quarter were $74.7 million which was 1.5 percent or $1.1 million greater than third quarter 1998. This was largely due to continued growth in commercial sales. Sales outside North America, excluding Paul Andra KG, increased 5 percent or $1.2 million due to improved export sales and a stronger European economy.
Page 10 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q Orders for the third quarter ended September 30, 1999 were $108.9 million. Order growth in the third quarter, excluding the Paul Andra KG acquisition, was $8.5 million or 9 percent over the comparable period in 1998. North American orders grew $7.2 or 9 percent over 1998 due to continued strong commercial business and the improving industrial economy and new outdoor machines. Orders outside of North America, excluding Paul Andra KG acquisition, grew $2.0 million or 9 percent due to growth in Europe base business of 11 percent and strong Australian growth. The disparity between order growth and sales growth in the third quarter is reflected in the difference in backlog. Third quarter 1998 backlog declined $1.3 million while backlog increased $4.9 million in third quarter 1999. Gross Profit For the first nine months, gross profit was 40.2 percent in 1999 versus 41.6 percent in 1998. Gross profit for the third quarter as a percentage of sales was 39.6 percent compared to 41.6 percent last year. The decline was due primarily to manufacturing variances related to implementing a flexible, build-to order manufacturing system, a mix shift to lower margin products, and an increased rate of discounting on North American industrial machines. In addition, the acquisition of Paul Andra KG increased the proportion of sales with low gross margin in the company's sales mix. Selling, General, and Administrative Expense (SG&A) SG&A expense for the quarter ended September 30, 1999 was $33.4 million compared to $30.5 million for the comparable period last year largely due to expenses of newly acquired Paul Andra KG. SG&A as a percent of sales increased slightly from 31.7 percent a year ago to 32.1 for the current quarter. This percentage decreased slightly year-to-date from 32.2 percent a year ago to 32.1 for the nine months ended September 30, 1999 as other cost savings efforts offset Paul Andra KG costs. Restructuring Charges The company recorded a pre-tax restructuring charge of $3.1 million in the most recent quarter, primarily related to severance and early retirement costs as part of Tennant's shareholder value enhancement plan. The company expects to record additional pre-tax restructuring and other charges in the fourth quarter, which are estimated to be $3-5 million. Charges are expected to include severance costs, asset write-offs and other costs related to closing facilities. Other Income and Expense Other income and expense for the quarter ended September 30, 1999 was a net income of $.2 million compared to $.3 million last year. Foreign currency gains were more than offset by a reduction of interest income from equipment financing provided by the Company to its customers. In 1998 the Company outsourced its product financing business. The Company transferred its portfolio to the outsourced vendor, and continues to report interest income and interest expense on the portfolio. The principal balance of the portfolio is declining over time as customer balances decrease thereby reducing the Company's interest income.
Page 11 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q Income Taxes The estimated effective tax rate for the Company's current fiscal year is 36 percent consistent with the prior year rate. LIQUIDITY AND CAPITAL RESOURCES Operating activities provided $26.1 million of cash and cash equivalents for the nine-month period ended September 30, 1999 compared to $28.7 million for the same period a year ago. Significant uses of cash during the nine month period ended September 30, 1999 included the cash purchase price paid for the acquisition of Paul Andra KG, purchases of property, plant, and equipment, repurchases of common stock under the Company's stock purchase plan, and dividends paid to shareholders. MARKET RISK The Company's market risk includes the potential loss arising from adverse changes in foreign currency exchange rates. The Company uses forward exchange contracts and other hedging activities to hedge the U.S. dollar value resulting from anticipated foreign currency transactions. There have been no material changes in the Company's market risks since December 31, 1998. YEAR 2000 PROJECT OVERVIEW Tennant's company-wide Year 2000 Project (Project) is proceeding on schedule. Tennant's Project is divided into four major sections: Applications Systems, Systems Infrastructure, External Agents (suppliers/partners/distributors/customers) and Embedded Systems (manufacturing and facilities). General Project phases common to all sections are:1) inventorying Year 2000 items; 2) assigning priorities to identified items; 3) assessing the Year 2000 compliance of items determined to be material to the Company; 4) repairing or replacing material items that are determined not to be Year 2000 compliant; 5) testing material items; and 6) designing and implementing contingency and business continuation plans. Material items are those believed by the Company to have risk involving the safety of individuals that may cause damage to either property or the environment, or affect revenues. Progress status is as follows: <TABLE> <CAPTION> % Complete as of 9/30/99 Completion ------------- ---------------- <S> <C> <C> Applications Systems 100% 2nd Quarter 1999 Systems Infrastructure 100% 2nd Quarter 1999 External Agents 100% 2nd Quarter 1999 Embedded Systems 100% 1st Quarter 1999 </TABLE>
Page 12 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q A more detailed description of activities is as follows: Applications Systems - In 1994, in order to improve access to business information through common integrated computing systems across the Company, Tennant began a worldwide business systems replacement project with systems that use programs from SAP America, Inc. (SAP). The new systems are expected to make approximately 80% of the Company's business systems Year 2000 compliant. The European and North American SAP application systems are now completely installed. The remaining 20% of non-SAP business software is now compliant. The North American Commercial systems remediation was completed in September of 1998. Our activity also includes assessment and remediation of non-mission critical personal systems. Initial survey and assessment work is complete with repair and remediation now completed. Systems Infrastructure - The Infrastructure section consists of hardware and system software other than Applications Software. Activity in this area has been continuous with the majority having been addressed and tested in conjunction with project and regular replacement programs. External Agents (Suppliers/Partners/Distributors/Customers) - The primary activity in this section involves the process of identifying and prioritizing critical suppliers, customers, distributors, and other partners at the direct interface level and communicating with them about their plans and progress in addressing the Year 2000 problem. The initial survey activity has been completed and detailed evaluations of the most critical third parties have been completed. These evaluations have been followed by selective follow-up contact and audit. Embedded Systems (Manufacturing and Facilities) - This section focuses on the hardware and software associated with embedded computer chips that are used in the operation of all facilities operated by the Company. Survey and prioritization activities were completed and are now compliant. In addition, our activities have included the evaluation of Year 2000 dependencies in embedded chips produced in our own products all of which have been certified to be compliant. With the technical remediation and conversions now complete, our efforts for the remainder of the year will focus on refining our business contingency plan. This plan will identify actions to be implemented to reasonably sustain business in the event of Y2K impacts out of our direct control. Costs The total cost associated with the required modifications to become Year 2000 compliant is not material to the Company's financial position. The core of the Company's IT investments have been focused on building new capability while satisfying Year 2000 requirements. The estimated total cost of the planned SAP activities through 1999 is approximately $20 million, which has been expended. Funding for Year 2000 specific activities are estimated at $950,000, which has been expended. Funding for both SAP and Y2K activities is integrated with operational budgets, with IT funding for fiscal year 1999 estimated to be at the same levels as fiscal year 1998. In January 1999 Tennant Company completed the purchase of Paul Andra KG. Activities for Year 2000 compliance have been completed using the same process as outlined for Tennant Company. An action plan has been completed and integrated into the corporate plan. The majority of Y2K issues were addressed by conversion of systems to SAP in June 1999. All other activities have been incorporated into the existing plan and are complete. Funding for the SAP integration was approximately $650,000. Funding for the Y2K specific activities was less than $50,000.
Page 13 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q Cautionary Statement Concerning Forward-Looking Statements Some statements in this report are forward-looking statements and are not meant as historical facts. As discussed above, many factors are involved in this project which contain risk and uncertainty and are beyond the control of the Company. Included in this are the actions of suppliers, distributors, customers, and other partners. EURO CONVERSION On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing currencies and the euro, a new European currency, and adopted the euro as their common legal currency (the "Euro Conversion"). Either the euro or a participating country's present currency will be accepted as legal tender from January 1, 1999, to January 1, 2002, from which date forward only the euro will be accepted. The Company has a significant number of customers located in European Union countries participating in the Euro Conversion. Such customers will likely have to upgrade or modify their computer systems and software to comply with euro requirements. The amount of money the Company anticipates spending in connection with product development related to the Euro Conversion is not expected to have a material adverse effect on the Company's results of operations or financial condition. The Euro Conversion may also have competitive implications for the Company's pricing and marketing strategies, which could be material in nature; however, any such impact is not known at this time. The Company has begun to analyze which of its internal systems will need to be modified to deal with the Euro Conversion. The Company does not currently expect the cost of such modifications to have a material effect on the Company's results of operations or financial condition. There is no assurance, however, that all problems related to the Euro Conversion will be foreseen and corrected, or that no material disruptions of the Company's business will occur. Additional 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, 1999, and is incorporated in this Form 10-Q by reference.
Page 14 of 15 TENNANT COMPANY Quarterly Report - Form 10-Q PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits <TABLE> <S> <C> <C> <C> 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 Shareholders for Filed herewith electronically. the Nine Months Ended September 30, 1999 10iii.1 Management Agreement with John T. Pain Filed herewith electronically. dated October 1, 1998. 10iii.2 Employment Agreement with Janet Dolan Filed herewith electronically. dated April 5, 1999. 10iii.3 Management Agreement with James J. Seifert Filed herewith electronically. dated July 12, 1999. 27.1 Financial Data Schedule Filed herewith electronically. </TABLE> (b) Reports on Form 8-K There were no reports filed on Form 8-K for the quarter ended September 30, 1999.
Page 15 of 15 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: November 12, 1999 /s/ Janet Dolan ---------------------------- -------------------------------------- November 12, 1999 Janet Dolan President and Chief Executive Officer Date: November 12, 1999 /s/ John T. Pain ---------------------------- -------------------------------------- November 12, 1999 John T. Pain Vice President, Treasurer and Chief Financial Officer Date: November 12, 1999 /s/ Dean A. Niehus ---------------------------- -------------------------------------- November 12, 1999 Dean A. Niehus Corporate Controller and Principal Accounting Officer