Record net sales for a third quarter of $262 million, up
approximately 31 percent; Organic sales rose 1.3 percent;
Earnings per share of $0.20 include special items primarily
related to IPC Group acquisition that reduced earnings by $0.12 per
share; Adjusted EPS of $0.32;
Adjusted EBITDA of 10.7% improved over prior year by 40 basis
points; Strong cash flow in the quarter enabled debt reduction of $23
million;
Included in both reported and adjusted earnings per share is
non-cash expense for amortization of IPC Group intangible assets of
$0.29 per share;
Company reaffirms 2017 full year net sales guidance range and
lowers EPS guidance range to primarily reflect slower progress with
gross margin improvements and accelerated non-cash purchase accounting
amortization for IPC Group.
MINNEAPOLIS--(BUSINESS WIRE)--
Tennant Company (NYSE: TNC), a world leader in designing, manufacturing
and marketing of solutions that help create a cleaner, safer, healthier
world, today reported net sales of $262 million, a record for a third
quarter, and net income of $3.6 million, or $0.20 per share, for the
quarter ended September 30, 2017.
The 2017 third quarter included special items that reduced earnings by a
total of $0.12 per share for acquisition costs related to the IPC Group
(IPC) acquisition. Further, the third quarter results also included $7.3
million, or $0.29 per share, which was $5.2 million, or $0.21 per share,
higher than was included in the company’s prior guidance, from
accelerated amortization for the intangible assets as the company
refined its purchase accounting and related amortization method for the
IPC acquisition. (See the Supplemental Non-GAAP Financial Table.)
“Our third quarter results reflect slower growth in North America
attributed to timing of key strategic account deals, the restructuring
of our field service team, continued manufacturing inefficiencies and
raw material inflation, matters we continue to address,” said Chris
Killingstad, Tennant Company's president and chief executive officer.
“While we faced some near-term setbacks, we are staying the course
strategically and positioning Tennant to be operationally stronger than
ever before. We are ahead of our acquisition plans for IPC, our core
Tennant EMEA business grew by 14.6 percent in the quarter and a steady
stream of new products has raised our vitality index to 47 percent. I
remain confident that we are building the right platform for long-term
profitable growth.”
Third Quarter Operating Review
The
company's 2017 third quarter consolidated net sales of $262 million
improved approximately 31 percent over the prior-year quarter, including
28.4 percent from acquisitions. Organic net sales, which exclude the
impact of foreign currency exchange, acquisitions and divestitures, rose
approximately 1.3 percent. 2017 third quarter growth was primarily
driven by the company’s Europe, Middle East and Africa (EMEA) region,
offset by slower sales in North America.
Geographically, sales in the Americas increased 5.7 percent, down 0.2
percent organically due to North American key strategic accounts timing,
while sales in the EMEA region were up 169.0 percent, or up 14.6
organically, on strong sales performance in the Western European
countries. Sales in the Asia Pacific (APAC) region increased by 18.9
percent, however declined 8.5 percent organically, reflecting declines
in Korea, China and the Southeast Asia region.
Tennant's gross margin in the 2017 third quarter was 39.9 percent, and
the as-adjusted gross margin was 40.8 percent compared to 42.6 percent
in the prior-year quarter. Results are driven by IPC and other
geographic sales mix, as well as continued pressure from field service
productivity, manufacturing inefficiencies and raw material inflation,
matters the company continues to address.
Research and development (R&D) expense for the 2017 third quarter
totaled $7.9 million, or 3.0 percent of sales, versus $8.4 million, or
4.2 percent of sales, a year ago. The company continues to invest in
developing a robust pipeline of innovative new products and technologies.
Selling and administrative (S&A) expense in the 2017 third quarter was
$85.7 million, or 32.7 percent of sales, which includes $23.4 million of
IPC-related expenses, including $8.2 million of IPC-related amortization
and other acquisition-related expenses. Excluding these costs and
IPC-related revenue, S&A expenses were 30.2 percent of sales, as Tennant
continues to balance disciplined spending control with investments in
key growth initiatives. Tennant’s prior-year quarter S&A expense was
$60.6, or 30.3 percent of sales.
Tennant's 2017 third quarter operating profit was $11.0 million, or 4.2
percent of sales. Excluding operating profit (loss) related to IPC,
Tennant’s operating profit was $16.7 million, or 8.1 percent of sales,
compared to an operating profit of $16.3 million, or 8.1 percent of
sales, in the year-ago quarter. The 2017 third quarter Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) as adjusted was
$28.0 million, or 10.7 percent of sales, compared to $20.7 million, or
10.3 percent of sales, in the year-ago quarter. (See the Supplemental
Non-GAAP Financial Table.)
During the 2017 third quarter, Tennant generated cash flow from
operations of nearly $35 million, compared to nearly $21 million in the
2016 third quarter. In the 2017 third quarter, the company repaid
approximately $23 million in outstanding debt and paid $3.7 million in
cash dividends to shareholders. Capital expenditures in the 2017 third
quarter totaled $7.1 million compared to $7.7 million in the same period
last year.
New Product and Technology Pipeline
This
quarter, Tennant launched the new T350 Stand-On Commercial Scrubber,
which is an ideal choice for customers who demand high productivity and
maneuverability in obstructed spaces. The T350 is the category leader in
productivity, cleaning more than 30,000 square feet per hour, and is
equipped with Tennant’s exclusive ec-H2O NanoClean®,
Smart-Fill automated battery watering, IRIS® and Pro-Panel®
technologies.
“The market is responding positively to our new products. Through the
first nine months of 2017, 47 percent of our equipment sales stemmed
from products released within the last three years, far ahead of our 30
percent target. With the inclusion of IPC, our product portfolio today
addresses a much larger cross-section of the market and wider range of
customers, especially in certain regions where mid-tier offerings are
increasingly relevant. Tennant has a robust and highly promising new
product pipeline and we expect to maintain our momentum in this vital
area in 2018 and beyond. The improved diversity in our offerings, along
with our continued investment in new technologies, such as remote
diagnostics, telemetry-based asset management, lithium ion batteries and
fuel cells, autonomous guided vehicles (AGV) and others, will play an
important role in our growth,” said Chris Killingstad.
2017 Business Outlook
Killingstad
concluded, “We’re continuing to execute on our strategies while
advancing solid operating fundamentals within our business. As we move
toward the end of 2017, we remain focused on several key areas: pursuing
gross margin recovery through better productivity in our service
organization, plants and supply chain, continuing our integration of
IPC, solid sales execution across all geographies, and robust cash
generation to enable reduction of our debt.”
Tennant Company continues to estimate 2017 full year net sales in the
range of $960 million to $990 million, reflecting an increase of 18.7
percent to 22.4 percent from fiscal 2016 results, which includes an
approximate 1 percent to 2 percent of organic growth. Tennant now
expects 2017 full year reported GAAP earnings in the range of $0.05 to
$0.25 per share, and adjusted earnings per share in the range of $1.50
to $1.70, reflecting slower progress against our gross margin recovery
initiatives. The difference between GAAP and adjusted earnings guidance
is related to the year-to-date non-GAAP adjustments of $1.40 per share
and anticipated fourth quarter integration expenses.
Previously, the company expected 2017 full year reported GAAP earnings
in the range of $0.85 to $1.05 per share and adjusted earnings in the
range of $2.20 to $2.40 per share. The change in guidance is attributed
to continued operational challenges within our business, including field
service productivity, manufacturing efficiencies, and raw material
inflation, which accounted for approximately $0.37 per share. In
addition, the company accelerated the amortization for certain of the
IPC-related intangible assets as it continues to finalize the accounting
for the IPC acquisition, which resulted in additional expense of $8.4
million, or $0.33 per share. In total the amortization expense related
to IPC for 2017 is expected to be $15.7 million, or $0.61 per share. For
the 2016 full year, earnings per share totaled $2.59 on net sales of
$808.6 million.
Tennant’s 2017 annual financial outlook includes the following
additional assumptions:
-
Continued stable economy in North America, modest improvement in
Europe and a challenging business environment in APAC;
-
Foreign currency exchange impact net sales from 0 percent to negative
1 percent;
-
Gross margin performance in the range of 41 percent to 42 percent;
-
R&D expense in the range of 3 percent to 4 percent of sales;
-
Capital expenditures in the range of $20 million to $25 million; and
-
An effective tax rate of approximately 29 percent.
Conference Call
Tennant will
host a conference call to discuss the 2017 third quarter results today,
November 2, at 10 a.m. Central Time (11 a.m. Eastern Time). The
conference call and accompanying slides will be available via webcast on
Tennant's investor website. To listen to the call live and view the
slide presentation, go to investors.tennantco.com and click on the link
at the bottom of the Home page. A taped replay of the conference call
with slides will be available at investors.tennantco.com for
approximately three months after the call.
Company Profile
Founded in
1870, Tennant Company (TNC), headquartered in Minneapolis, Minnesota, is
a world leader in designing, manufacturing and marketing solutions that
empower customers to achieve quality cleaning performance, significantly
reduce their environmental impact and help create a cleaner, safer,
healthier world. Its products include equipment for maintaining surfaces
in industrial, commercial and outdoor environments; detergent-free and
other sustainable cleaning technologies; cleaning tools and supplies;
and coatings for protecting, repairing and upgrading surfaces. Tennant's
global field service network is the most extensive in the industry.
Tennant Company had sales of $0.8 billion in 2016 and has approximately
3,200 employees. Tennant acquired IPC Group in April of 2017. IPC Group,
headquartered in Italy, had sales of $0.2 billion in 2016 and has
approximately 1,100 employees. Tennant has manufacturing operations
throughout the world; and sells products directly in 15 countries and
through distributors in more than 100 countries. For more information,
visit www.tennantco.com
and www.ipcworldwide.com.
The Tennant Company logo and other trademarks designated with the symbol
“®” are trademarks of Tennant Company registered in the United States
and/or other countries.
Forward-Looking Statements
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: geopolitical and economic uncertainty
throughout the world; the competition in our business; our ability to
attract, develop and retain key personnel; our ability to achieve
operational efficiencies, including synergistic and other benefits of
acquisitions; our substantial indebtedness could adversely affect our
ability to raise additional capital to fund our operations, limit our
ability to react to changes in the economy or our industry, expose us to
interest rate risk to the extent of any variable rate debt, and prevent
us from meeting our covenant and payment obligations related to our debt
instruments; our ability to effectively manage organizational changes;
our ability to successfully upgrade, evolve and protect our information
technology systems; our ability to develop and commercialize new
innovative products and services; unforeseen product liability claims or
product quality issues; fluctuations in the cost, quality, or
availability of raw materials and purchased components; foreign currency
exchange rate fluctuations, particularly the relative strength of the
U.S. dollar against other major currencies; the occurrence of a
significant business interruption; our ability to comply with laws and
regulations; and our ability to sufficiently remediate any material
weaknesses or significant deficiencies in our internal control over
financial reporting.
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, including disclosures
under “Risk Factors.”
We do not undertake to update any forward-looking statement except as
required by law, 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 any list of such factors to be an
exhaustive or complete list of all risks or uncertainties.
Non-GAAP Financial Measures
This
news release and the related conference call include presentation of
non-GAAP measures that include or exclude special items. Management
believes that the non-GAAP measures provide useful information to
investors regarding the company’s results of operations and financial
condition because they permit a more meaningful comparison and
understanding of Tennant Company’s operating performance for the
current, past or future periods. Management uses these non-GAAP measures
to monitor and evaluate ongoing operating results and trends, and to
gain an understanding of the comparative operating performance of the
company.
We believe that disclosing Gross Margin - as adjusted, Profit from
Operations - as adjusted, Operating Margin - as adjusted, Profit from
Operations, excluding IPC-related profit - as adjusted, Operating
Margin, excluding IPC-related profit - as adjusted, Profit Before Income
Taxes - as adjusted, Income Tax Expense - as adjusted, Net Earnings
Attributable to Tennant Company - as adjusted, and Net Earnings
Attributable to Tennant Company per Share - as adjusted (collectively,
the “Non-GAAP Measures”), excluding the impacts from inventory fair
value adjustment, restructuring charge, acquisition costs, pension
settlement, and debt financing costs write-off, are useful to investors
as a measure of operating performance. We use these as one measure to
monitor and evaluate operating performance. The Non-GAAP measures are
financial measures that do not reflect United States Generally Accepted
Accounting Principles (GAAP). We calculate Gross Margin - as adjusted,
Profit from Operations - as adjusted, Operating Margin - as adjusted,
and Profit Before Income Taxes - as adjusted by adding back the pre-tax
effect of the inventory fair value adjustment, restructuring charge,
acquisition costs, pension settlement, and debt financing costs
write-off. We calculate Profit from Operations, excluding IPC-related
profit - as adjusted and Operating Margin, excluding IPC-related profit
- as adjusted by adding back the pre-tax effect of the inventory fair
value adjustment, the restructuring charge, acquisition costs, pension
settlement and IPC-related loss/profit from operations. We calculate
Income Tax Expense - as adjusted by adding back the tax effect of the
inventory fair value adjustment, restructuring charge, acquisition
costs, pension settlement, and debt financing costs write-off. We
calculate Net Earnings Attributable to Tennant Company - as adjusted by
adding back the after-tax effect of the inventory fair value adjustment,
restructuring charge, acquisition costs, pension settlement, and debt
financing costs write-off. We calculate Net Earnings Attributable to
Tennant Company per Share - as adjusted by adding back the after-tax
effect of the inventory fair value adjustment, restructuring charge,
acquisition costs, pension settlement, and debt financing costs
write-off and dividing the result by the diluted weighted average shares
outstanding.
We believe that disclosing Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) and EBITDA Margin, excluding the impact from
inventory fair value adjustment, restructuring charge, acquisition
costs, pension settlement, and acquisition-related currency loss (EBITDA
- as adjusted), is useful to investors as a measure of operating
performance. We use these measures to monitor and evaluate operating
performance. EBITDA - as adjusted and EBITDA Margin are financial
measures that do not reflect GAAP. We calculate EBITDA - as adjusted by
adding back the pre-tax effect of the inventory fair value adjustment,
restructuring charge, acquisition costs, pension settlement,
acquisition-related currency loss, Interest Income, Interest Expense,
Income Tax Expense, Depreciation Expense, and Amortization Expense to
Net Earnings (Loss) - as Reported. We calculate EBITDA Margin - as
adjusted by dividing EBITDA - as adjusted by Net Sales.
Investors should consider these non-GAAP financial measures in addition
to, not as a substitute for or better than, financial measures prepared
in accordance with GAAP. Reconciliations of the components of these
measures to the most directly comparable GAAP financial measures are
included in the Supplemental Non-GAAP Financial Table to this earnings
release.
|
|
|
|
|
TENNANT COMPANY
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
|
(In thousands, except shares and per share data)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net Sales
|
|
$
|
261,921
|
|
|
$
|
200,134
|
|
|
$
|
723,771
|
|
|
$
|
596,826
|
|
Cost of Sales
|
|
|
157,317
|
|
|
|
114,839
|
|
|
|
434,877
|
|
|
|
338,740
|
|
Gross Profit
|
|
|
104,604
|
|
|
|
85,295
|
|
|
|
288,894
|
|
|
|
258,086
|
|
Gross Margin
|
|
|
39.9
|
%
|
|
|
42.6
|
%
|
|
|
39.9
|
%
|
|
|
43.2
|
%
|
Operating Expense:
|
|
|
|
|
|
|
|
|
Research and Development Expense
|
|
|
7,907
|
|
|
|
8,418
|
|
|
|
24,239
|
|
|
|
24,712
|
|
Selling and Administrative Expense
|
|
|
85,651
|
|
|
|
60,623
|
|
|
|
247,067
|
|
|
|
187,315
|
|
Loss on Sale of Business
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
149
|
|
Total Operating Expense
|
|
|
93,558
|
|
|
|
69,041
|
|
|
|
271,306
|
|
|
|
212,176
|
|
Profit from Operations
|
|
|
11,046
|
|
|
|
16,254
|
|
|
|
17,588
|
|
|
|
45,910
|
|
Operating Margin
|
|
|
4.2
|
%
|
|
|
8.1
|
%
|
|
|
2.4
|
%
|
|
|
7.7
|
%
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
698
|
|
|
|
107
|
|
|
|
1,575
|
|
|
|
188
|
|
Interest Expense
|
|
|
(6,093
|
)
|
|
|
(329
|
)
|
|
|
(18,720
|
)
|
|
|
(919
|
)
|
Net Foreign Currency Transaction (Losses) Gains
|
|
|
(842
|
)
|
|
|
(149
|
)
|
|
|
(2,375
|
)
|
|
|
175
|
|
Other Expense, Net
|
|
|
(482
|
)
|
|
|
(10
|
)
|
|
|
(700
|
)
|
|
|
(360
|
)
|
Total Other Expense, Net
|
|
|
(6,719
|
)
|
|
|
(381
|
)
|
|
|
(20,220
|
)
|
|
|
(916
|
)
|
Profit (Loss) Before Income Taxes
|
|
|
4,327
|
|
|
|
15,873
|
|
|
|
(2,632
|
)
|
|
|
44,994
|
|
Income Tax Expense
|
|
|
731
|
|
|
|
4,396
|
|
|
|
385
|
|
|
|
13,750
|
|
Net Earnings (Loss) Including Noncontrolling Interest
|
|
|
3,596
|
|
|
|
11,477
|
|
|
|
(3,017
|
)
|
|
|
31,244
|
|
Net Earnings (Loss) Attributable to Noncontrolling Interest
|
|
|
37
|
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
—
|
|
Net Earnings (Loss) Attributable to Tennant Company
|
|
$
|
3,559
|
|
|
$
|
11,477
|
|
|
$
|
(2,989
|
)
|
|
$
|
31,244
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Tennant Company per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.20
|
|
|
$
|
0.66
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.78
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.64
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,729,857
|
|
|
|
17,498,808
|
|
|
|
17,673,656
|
|
|
|
17,516,941
|
|
Diluted
|
|
|
18,171,444
|
|
|
|
17,973,206
|
|
|
|
17,673,656
|
|
|
|
17,955,499
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Declared per Common Share
|
|
$
|
0.21
|
|
|
$
|
0.20
|
|
|
$
|
0.63
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GEOGRAPHICAL NET SALES(1) (Unaudited)
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
|
2017
|
|
2016
|
|
%
|
|
2017
|
|
2016
|
|
%
|
Americas
|
|
$
|
161,037
|
|
|
$
|
152,294
|
|
|
5.7
|
|
$
|
472,953
|
|
|
$
|
449,704
|
|
|
5.2
|
Europe, Middle East and Africa
|
|
|
78,851
|
|
|
|
29,309
|
|
|
169.0
|
|
|
189,483
|
|
|
|
94,433
|
|
|
100.7
|
Asia Pacific
|
|
|
22,033
|
|
|
|
18,531
|
|
|
18.9
|
|
|
61,335
|
|
|
|
52,689
|
|
|
16.4
|
Total
|
|
$
|
261,921
|
|
|
$
|
200,134
|
|
|
30.9
|
|
$
|
723,771
|
|
|
$
|
596,826
|
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of intercompany sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30,
|
|
December 31,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
55,947
|
|
|
$
|
58,033
|
|
|
$
|
42,283
|
|
Restricted Cash
|
|
|
1,292
|
|
|
|
517
|
|
|
|
549
|
|
Net Receivables
|
|
|
193,725
|
|
|
|
149,134
|
|
|
|
135,458
|
|
Inventories
|
|
|
141,519
|
|
|
|
78,622
|
|
|
|
87,284
|
|
Prepaid Expenses
|
|
|
26,281
|
|
|
|
9,204
|
|
|
|
14,031
|
|
Other Current Assets
|
|
|
4,909
|
|
|
|
2,412
|
|
|
|
1,952
|
|
Total Current Assets
|
|
|
423,673
|
|
|
|
297,922
|
|
|
|
281,557
|
|
Property, Plant and Equipment
|
|
|
389,391
|
|
|
|
298,500
|
|
|
|
308,922
|
|
Accumulated Depreciation
|
|
|
(207,882
|
)
|
|
|
(186,403
|
)
|
|
|
(195,540
|
)
|
Property, Plant and Equipment, Net
|
|
|
181,509
|
|
|
|
112,097
|
|
|
|
113,382
|
|
Deferred Income Taxes
|
|
|
19,857
|
|
|
|
13,439
|
|
|
|
13,217
|
|
Goodwill
|
|
|
179,048
|
|
|
|
21,065
|
|
|
|
24,669
|
|
Intangible Assets, Net
|
|
|
175,752
|
|
|
|
6,460
|
|
|
|
2,887
|
|
Other Assets
|
|
|
22,959
|
|
|
|
19,054
|
|
|
|
17,362
|
|
Total Assets
|
|
$
|
1,002,798
|
|
|
$
|
470,037
|
|
|
$
|
453,074
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Short-Term Borrowings and Current Portion of Long-Term Debt
|
|
$
|
5,281
|
|
|
$
|
3,459
|
|
|
$
|
3,461
|
|
Accounts Payable
|
|
|
88,618
|
|
|
|
47,408
|
|
|
|
44,997
|
|
Employee Compensation and Benefits
|
|
|
35,085
|
|
|
|
35,997
|
|
|
|
30,861
|
|
Income Taxes Payable
|
|
|
10,599
|
|
|
|
2,348
|
|
|
|
985
|
|
Other Current Liabilities
|
|
|
63,327
|
|
|
|
43,617
|
|
|
|
42,585
|
|
Total Current Liabilities
|
|
|
202,910
|
|
|
|
132,829
|
|
|
|
122,889
|
|
Long-Term Liabilities:
|
|
|
|
|
|
|
Long-Term Debt
|
|
|
383,252
|
|
|
|
32,735
|
|
|
|
32,744
|
|
Employee-Related Benefits
|
|
|
25,247
|
|
|
|
21,134
|
|
|
|
20,579
|
|
Deferred Income Taxes
|
|
|
62,167
|
|
|
|
171
|
|
|
|
85
|
|
Other Liabilities
|
|
|
32,686
|
|
|
|
4,625
|
|
|
|
4,556
|
|
Total Long-Term Liabilities
|
|
|
503,352
|
|
|
|
58,665
|
|
|
|
57,964
|
|
Total Liabilities
|
|
|
706,262
|
|
|
|
191,494
|
|
|
|
180,853
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common Stock
|
|
|
6,690
|
|
|
|
6,633
|
|
|
|
6,611
|
|
Additional Paid-In Capital
|
|
|
12,062
|
|
|
|
3,653
|
|
|
|
3,032
|
|
Retained Earnings
|
|
|
303,987
|
|
|
|
318,180
|
|
|
|
306,521
|
|
Accumulated Other Comprehensive Loss
|
|
|
(28,426
|
)
|
|
|
(49,923
|
)
|
|
|
(43,943
|
)
|
Total Tennant Company Shareholders’ Equity
|
|
|
294,313
|
|
|
|
278,543
|
|
|
|
272,221
|
|
Noncontrolling Interest
|
|
|
2,223
|
|
|
|
—
|
|
|
|
—
|
|
Total Equity
|
|
|
296,536
|
|
|
|
278,543
|
|
|
|
272,221
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
1,002,798
|
|
|
$
|
470,037
|
|
|
$
|
453,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
(In thousands)
|
|
Nine Months Ended
|
|
|
September 30
|
|
|
2017
|
|
2016
|
OPERATING ACTIVITIES
|
|
|
|
|
Net (Loss) Earnings Including Noncontrolling Interest
|
|
$
|
(3,017
|
)
|
|
$
|
31,244
|
|
Adjustments to reconcile Net (Loss) Earnings to Net Cash Provided by
Operating Activities:
|
|
|
|
|
Depreciation
|
|
|
18,515
|
|
|
|
13,150
|
|
Amortization of Intangible Assets
|
|
|
11,430
|
|
|
|
323
|
|
Amortization of Debt Issuance Costs
|
|
|
896
|
|
|
|
—
|
|
Debt Issuance Cost Charges Related to Short-Term Financing
|
|
|
6,200
|
|
|
|
—
|
|
Fair Value Step-Up Adjustment to Acquired Inventory
|
|
|
8,445
|
|
|
|
—
|
|
Deferred Income Taxes
|
|
|
(4,848
|
)
|
|
|
(676
|
)
|
Share-Based Compensation Expense
|
|
|
4,915
|
|
|
|
5,747
|
|
Allowance for Doubtful Accounts and Returns
|
|
|
983
|
|
|
|
779
|
|
Loss on Sale of Business
|
|
|
—
|
|
|
|
149
|
|
Other, Net
|
|
|
175
|
|
|
|
(418
|
)
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
Receivables
|
|
|
(524
|
)
|
|
|
5,752
|
|
Inventories
|
|
|
(9,866
|
)
|
|
|
(4,873
|
)
|
Accounts Payable
|
|
|
5,747
|
|
|
|
(6,415
|
)
|
Employee Compensation and Benefits
|
|
|
(9,462
|
)
|
|
|
(5,448
|
)
|
Other Current Liabilities
|
|
|
10,019
|
|
|
|
(3,097
|
)
|
Income Taxes
|
|
|
4,149
|
|
|
|
2,248
|
|
Other Assets and Liabilities
|
|
|
(11,634
|
)
|
|
|
(5,183
|
)
|
Net Cash Provided by Operating Activities
|
|
|
32,123
|
|
|
|
33,282
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
Purchases of Property, Plant and Equipment
|
|
|
(16,239
|
)
|
|
|
(22,499
|
)
|
Proceeds from Disposals of Property, Plant and Equipment
|
|
|
2,456
|
|
|
|
559
|
|
Proceeds from Principal Payments Received on Long-Term Note
Receivable
|
|
|
500
|
|
|
|
—
|
|
Issuance of Long-Term Note Receivable
|
|
|
(1,500
|
)
|
|
|
—
|
|
Acquisition of Businesses, Net of Cash Acquired
|
|
|
(354,073
|
)
|
|
|
(12,358
|
)
|
Purchase of Intangible Asset
|
|
|
(2,500
|
)
|
|
|
—
|
|
Proceeds from Sale of Business
|
|
|
—
|
|
|
|
285
|
|
(Increase) Decrease in Restricted Cash
|
|
|
(133
|
)
|
|
|
116
|
|
Net Cash Used in Investing Activities
|
|
|
(371,489
|
)
|
|
|
(33,897
|
)
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from Short-Term Debt
|
|
|
300,000
|
|
|
|
—
|
|
Repayments of Short-Term Debt
|
|
|
(300,000
|
)
|
|
|
—
|
|
Proceeds from Issuance of Long-Term Debt
|
|
|
440,000
|
|
|
|
15,000
|
|
Payments of Long-Term Debt
|
|
|
(81,262
|
)
|
|
|
(3,452
|
)
|
Payments of Debt Issuance Costs
|
|
|
(16,465
|
)
|
|
|
—
|
|
Purchases of Common Stock
|
|
|
—
|
|
|
|
(12,762
|
)
|
Proceeds from Issuances of Common Stock
|
|
|
4,728
|
|
|
|
2,893
|
|
Excess Tax Benefit on Stock Plans
|
|
|
—
|
|
|
|
447
|
|
Dividends Paid
|
|
|
(11,204
|
)
|
|
|
(10,583
|
)
|
Net Cash Provided by (Used in) Financing Activities
|
|
|
335,797
|
|
|
|
(8,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
1,483
|
|
|
|
55
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(2,086
|
)
|
|
|
(9,017
|
)
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
58,033
|
|
|
|
51,300
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
55,947
|
|
|
$
|
42,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
(In thousands, except per share data)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Gross Profit - as reported
|
|
$
|
104,604
|
|
|
$
|
85,295
|
|
|
$
|
288,894
|
|
|
$
|
258,086
|
|
Gross Margin - as reported
|
|
|
39.9
|
%
|
|
|
42.6
|
%
|
|
|
39.9
|
%
|
|
|
43.2
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
2,246
|
|
|
|
—
|
|
|
|
8,445
|
|
|
|
—
|
|
Gross Profit - as adjusted
|
|
$
|
106,850
|
|
|
$
|
85,295
|
|
|
$
|
297,339
|
|
|
$
|
258,086
|
|
Gross Margin - as adjusted
|
|
|
40.8
|
%
|
|
|
42.6
|
%
|
|
|
41.1
|
%
|
|
|
43.2
|
%
|
|
|
|
|
|
|
|
|
|
Profit from Operations - as reported
|
|
$
|
11,046
|
|
|
$
|
16,254
|
|
|
$
|
17,588
|
|
|
$
|
45,910
|
|
Operating Margin - as reported
|
|
|
4.2
|
%
|
|
|
8.1
|
%
|
|
|
2.4
|
%
|
|
|
7.7
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
2,246
|
|
|
|
—
|
|
|
|
8,445
|
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
8,018
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
885
|
|
|
|
—
|
|
|
|
8,443
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
205
|
|
|
|
—
|
|
Profit from Operations - as adjusted
|
|
$
|
14,177
|
|
|
$
|
16,254
|
|
|
$
|
42,699
|
|
|
$
|
45,910
|
|
Operating Margin - as adjusted
|
|
|
5.4
|
%
|
|
|
8.1
|
%
|
|
|
5.9
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
Profit from Operations - as reported
|
|
$
|
11,046
|
|
|
$
|
16,254
|
|
|
$
|
17,588
|
|
|
$
|
45,910
|
|
Operating Margin - as reported
|
|
|
4.2
|
%
|
|
|
8.1
|
%
|
|
|
2.4
|
%
|
|
|
7.7
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
2,246
|
|
|
|
—
|
|
|
|
8,445
|
|
|
|
—
|
|
IPC-Related Loss (Profit) from Operations
|
|
|
2,509
|
|
|
|
—
|
|
|
|
(1,161
|
)
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
8,018
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
885
|
|
|
|
—
|
|
|
|
8,443
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
205
|
|
|
|
—
|
|
Profit from Operations, Excluding IPC-Related Operating Profit - as
adjusted
|
|
$
|
16,686
|
|
|
$
|
16,254
|
|
|
$
|
41,538
|
|
|
$
|
45,910
|
|
Operating Margin, Excluding IPC-Related Operating Profit - as
adjusted
|
|
|
8.1
|
%
|
|
|
8.1
|
%
|
|
|
6.8
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
Profit (Loss) Before Income Taxes - as reported
|
|
$
|
4,327
|
|
|
$
|
15,873
|
|
|
$
|
(2,632
|
)
|
|
$
|
44,994
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
2,246
|
|
|
|
—
|
|
|
|
8,445
|
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
8,018
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
885
|
|
|
|
—
|
|
|
|
8,443
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
205
|
|
|
|
—
|
|
Financing Costs
|
|
|
—
|
|
|
|
—
|
|
|
|
7,378
|
|
|
|
—
|
|
Profit Before Income Taxes - as adjusted
|
|
$
|
7,458
|
|
|
$
|
15,873
|
|
|
$
|
29,857
|
|
|
$
|
44,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense - as reported
|
|
$
|
731
|
|
|
$
|
4,396
|
|
|
$
|
385
|
|
|
$
|
13,750
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Inventory Step-Up(1)
|
|
|
627
|
|
|
|
—
|
|
|
|
2,356
|
|
|
|
—
|
|
Restructuring Charge(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,234
|
|
|
|
—
|
|
Acquisition Costs(1)
|
|
|
263
|
|
|
|
—
|
|
|
|
263
|
|
|
|
—
|
|
Pension Settlement(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
|
—
|
|
Financing Costs(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,759
|
|
|
|
—
|
|
Income Tax Expense - as adjusted
|
|
$
|
1,621
|
|
|
$
|
4,396
|
|
|
$
|
8,044
|
|
|
$
|
13,750
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Tennant Company - as reported
|
|
$
|
3,559
|
|
|
$
|
11,477
|
|
|
$
|
(2,989
|
)
|
|
$
|
31,244
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
1,619
|
|
|
|
—
|
|
|
|
6,089
|
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
5,784
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
622
|
|
|
|
—
|
|
|
|
8,180
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
158
|
|
|
|
—
|
|
Financing Costs
|
|
|
—
|
|
|
|
—
|
|
|
|
4,619
|
|
|
|
—
|
|
Net Earnings Attributable to Tennant Company - as adjusted
|
|
$
|
5,800
|
|
|
$
|
11,477
|
|
|
$
|
21,841
|
|
|
$
|
31,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Tennant Company per Share - as
reported:
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.64
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.74
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Inventory Step-Up
|
|
|
0.09
|
|
|
|
—
|
|
|
|
0.34
|
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
0.32
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
0.03
|
|
|
|
—
|
|
|
|
0.47
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
|
|
—
|
|
Financing Costs
|
|
|
—
|
|
|
|
—
|
|
|
|
0.26
|
|
|
|
—
|
|
Net Earnings Attributable to Tennant Company per Share - as adjusted
|
|
$
|
0.32
|
|
|
$
|
0.64
|
|
|
$
|
1.23
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In determining the tax impact, we applied the
statutory rate in effect for each jurisdiction where expenses were
incurred and deductible for tax purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Including Noncontrolling Interest - as reported
|
|
$
|
3,596
|
|
|
$
|
11,477
|
|
|
$
|
(3,017
|
)
|
|
$
|
31,244
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
(698
|
)
|
|
|
(107
|
)
|
|
|
(1,575
|
)
|
|
|
(188
|
)
|
Interest Expense
|
|
|
6,093
|
|
|
|
329
|
|
|
|
18,720
|
|
|
|
919
|
|
Income Tax Expense
|
|
|
731
|
|
|
|
4,396
|
|
|
|
385
|
|
|
|
13,750
|
|
Depreciation Expense
|
|
|
7,472
|
|
|
|
4,495
|
|
|
|
18,515
|
|
|
|
13,150
|
|
Amortization Expense
|
|
|
7,650
|
|
|
|
99
|
|
|
|
11,430
|
|
|
|
323
|
|
Inventory Step-Up
|
|
|
2,246
|
|
|
|
—
|
|
|
|
8,445
|
|
|
|
—
|
|
Restructuring Charge
|
|
|
—
|
|
|
|
—
|
|
|
|
8,018
|
|
|
|
—
|
|
Acquisition Costs
|
|
|
885
|
|
|
|
—
|
|
|
|
8,443
|
|
|
|
—
|
|
Pension Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
205
|
|
|
|
—
|
|
Acquisition Related Currency Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
1,178
|
|
|
|
—
|
|
Earnings Before Interest, Taxes, Depreciation & Amortization - as
adjusted
|
|
$
|
27,975
|
|
|
$
|
20,689
|
|
|
$
|
70,747
|
|
|
$
|
59,198
|
|
EBITDA Margin - as adjusted
|
|
|
10.7
|
%
|
|
|
10.3
|
%
|
|
|
9.8
|
%
|
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005144/en/
Source: Tennant Company