News Details

Company posts record sales for a fourth quarter of $195.1 million;

Net sales in quarter increased 4.1 percent, or 5.1 percent organically;

Fourth quarter adjusted diluted EPS up 4.8 percent to $0.65;

2013 full year adjusted diluted EPS up 8.7 percent to $2.26;

Company provides 2014 full year guidance range;

Targets $1 billion in revenues by 2017

MINNEAPOLIS--(BUSINESS WIRE)--Feb. 25, 2014-- 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 earnings of $10.3 million, or $0.55 per diluted share, on net sales of $195.1 million for the fourth quarter ended December 31, 2013. The 2013 fourth quarter included a $1.6 million pre-tax restructuring charge, or $0.10 per diluted share, to right size its cost structure and enhance its go-to-market approach primarily in Europe. Excluding this special item, adjusted 2013 fourth quarter net earnings totaled $12.2 million, or $0.65 per diluted share. In the 2012 fourth quarter, which included a special tax benefit that increased earnings by $0.11 per diluted share, Tennant reported net earnings of $13.8 million, or $0.73 per diluted share, on net sales of $187.5 million. Excluding this special item, Tennant’s 2012 fourth quarter adjusted net earnings were $11.8 million, or $0.62 per diluted share. (See the Supplemental Non-GAAP Financial Table.)

Tennant Company's president and chief executive officer Chris Killingstad stated: “We had record revenues for a fourth quarter, although they were slightly below our expectations. In order to accelerate future growth, we intentionally ramped up key strategic investments in anticipation of higher sales. Going forward, we expect our growth initiatives to produce clear benefits in 2014 and beyond.”

Fourth Quarter Operating Review
The company's 2013 fourth quarter consolidated net sales of $195.1 million rose 4.1 percent compared to the prior year quarter on higher volume across all of Tennant’s product categories. Unfavorable foreign currency exchange reduced consolidated net sales by approximately 1 percent. Organic net sales, which exclude the impact of foreign currency exchange (and acquisitions when applicable), increased approximately 5.1 percent.

Contributing to 2013 fourth quarter results was demand for newly introduced products, especially the T12 rider scrubber, which is the first new product in Tennant’s redesigned modular large equipment portfolio, as well as strong sales of industrial equipment and sales to strategic accounts. Sales of scrubbers equipped with ec-H2O™ technology rose in the fourth quarter and posted their strongest quarterly gains for the year.

Geographically, sales increased 4.6 percent in the Americas, with continued growth in both North America and Latin America. Sales in the Americas rose approximately 5.6 percent organically, excluding an unfavorable foreign currency exchange impact of about 1.0 percent. Sales in Europe, Middle East and Africa (EMEA) were up 0.3 percent, but declined approximately 3.2 percent organically, excluding a favorable foreign currency exchange impact of about 3.5 percent. Although EMEA sales continued to be somewhat constrained due to challenging economic conditions, sales to strategic accounts increased in the quarter, as did sales of Tennant’s environmentally friendly Green Machines™ outdoor sweepers. Sales in the Asia Pacific region (APAC) increased 8.6 percent, rising approximately 15.1 percent organically, excluding an unfavorable foreign currency exchange impact of about 6.5 percent. The APAC organic sales gain was mainly due to strong sales performance in China, which had approximately 45 percent organic sales growth in the 2013 fourth quarter.

Tennant's gross margin in the 2013 fourth quarter was 42.9 percent compared to an exceptionally high gross margin of 44.5 percent in the prior year quarter. Gross margin in the 2013 fourth quarter was impacted by the mix of selling channel and products sold. The company’s full year gross margin of 43.3 percent was within its target range of 43 percent to 44 percent.

Research and development (R&D) expense for the 2013 fourth quarter totaled $7.2 million, or 3.7 percent of sales, compared to $7.7 million, or 4.1 percent of sales, in the prior year quarter. The company continued to invest in developing innovative new products for its traditional core business, as well as in its Orbio Technologies Group, which is focused on advancing a platform of chemical-free and other sustainable, water-based cleaning technologies.

Selling and administrative (S&A) expense in the 2013 fourth quarter totaled $58.9 million, or 30.2 percent of sales, or $57.3 million and 29.4 percent of sales as adjusted to exclude the $1.6 million restructuring charge, versus $56.8 million, or 30.3 percent of sales, in the 2012 fourth quarter. Adjusted S&A expense declined 90 basis points as a percent of sales compared to the prior year quarter. Tennant continued to gain leverage in S&A spending due to cost controls and operating efficiencies.

The company's 2013 fourth quarter operating profit was $17.7 million, or 9.1 percent of sales, and $19.2 million or 9.9 percent as adjusted, compared to $19.0 million, or 10.1 percent of sales, in the prior year quarter.

Strong Pipeline of Innovative New Products and Technologies
“We launched 20 new products in 2013, on top of 17 new products in 2012, and Tennant is on track to roll out more than 63 additional new products by 2016,” said Killingstad. “We continue to have the most robust new product pipeline in the company’s history.”

In the 2013 fourth quarter, Tennant introduced new canister carpet extractors and grout cleaners with high heat functionality. In the 2014 first quarter, Tennant also plans to introduce a new line of walk-behind burnishers. These new core equipment offerings are engineered to improve the customers’ cleaning performance and operator safety, lower operating costs and reduce environmental impact.

In addition, the Orbio Technologies Group from Tennant Company is developing an exciting new product using Split Stream™ Technology that will deliver an anti-microbial solution, as well as an effective multi-surface cleaner, for use in a wide variety of customer segments. The company plans to introduce this new Orbio product in the first half of 2014.

Tennant remains committed to being an industry innovation leader and aims to set the standard for sustainable cleaning around the world.

Tennant Company Targets $1 Billion in Revenues By 2017
Over the past five years, Tennant Company has been focused on building a scalable business model capable of delivering improved operational efficiency and profitability. To take full advantage of that effort, the company is shifting its focus to organic revenue growth to increase market share and enhance Tennant Company’s ability to reach a 12 percent or above operating profit margin.

“Our goal is to drive top line growth to reach $1 billion in revenue by 2017,” stated Killingstad. “We are confident that we have the right people, strategies and business model in place to be successful.”

Tennant plans to meet its objectives through a strong new product pipeline in both the core business and in the Orbio Technologies Group, continued gains in emerging markets, growth in Europe, focus on strategic accounts and an enhanced go-to-market strategy designed to significantly expand its global market coverage and customer base.

“We have identified opportunities to increase our market coverage and customer penetration in underserved markets where our value proposition is compelling. We are investing in additional direct sales, distribution and marketing capabilities to build on our success and accelerate growth,” said Killingstad.

2013 Full Year Results and Liquidity
For the 2013 full year, Tennant reported consolidated net sales of $752.0 million compared to $739.0 million in 2012. Tennant’s 2013 net sales increased 1.8 percent versus the prior year and organic net sales rose 2.8 percent, excluding unfavorable foreign currency exchange of approximately 1.0 percent.

For 2013, Tennant reported net earnings of $40.2 million, or $2.14 per diluted share. Excluding special items, the company’s 2013 adjusted full year net earnings increased to $42.6 million, or $2.26 per diluted share, compared to 2012 adjusted net earnings of $39.7 million, or $2.08 per diluted share.

Tennant recorded special items in 2013 that lowered net earnings by a total of $0.12 per diluted share. In addition to the previously noted special item that was recorded in the 2013 fourth quarter, the company had special items in the 2013 first quarter that together reduced earnings by $0.02 per diluted share. These items included: a $1.4 million pre-tax restructuring charge, or $0.05 per diluted share, to right size the European operations, given continued challenging economic conditions there, which was partially offset by a $0.6 million, or $0.03 per diluted share, tax benefit related to the retroactive reinstatement of the 2012 U.S. Federal R&D Tax Credit. Tennant’s 2012 full year results included net special items that increased earnings by $0.10 per diluted share. (See the Supplemental Non-GAAP Financial Table.)

Tennant’s gross margin for the 2013 full year was 43.3 percent, which as noted above, was within the company’s target range of 43 percent to 44 percent, but below the 44.0 percent reported in the prior year. The 2013 full year operating profit margin was 8.3 percent, or 8.7 percent as adjusted, compared to 8.5 percent in the 2012 full year.

Tennant continued to have a strong balance sheet and generated $59.8 million in cash from operations in 2013. Cash and cash equivalents at December 31, 2013, totaled $81.0 million, up from $53.9 million in the prior year, and debt decreased to $31.8 million. During 2013, Tennant paid cash dividends of $13.2 million and repurchased 434,118 shares of the company’s stock in the market for $22.2 million. Tennant had 18.5 million common shares outstanding at December 31, 2013.

Business Outlook
Based on its 2013 results and expectations of future performance, Tennant Company estimates 2014 full year net sales in the range of $780 million to $800 million, up 4 percent to 6 percent, and earnings in the range of $2.50 to $2.80 per diluted share, an increase of 11 percent to 24 percent, compared to 2013, as adjusted. The company anticipates that its 2014 financial results will be stronger in the second half of the year, as its growth investments begin to generate incremental revenues and profits. For the 2013 full year, adjusted diluted earnings per share totaled $2.26 on net sales of $752 million. (See the Supplemental Non-GAAP Financial Table.)

The company's 2014 annual financial outlook includes the following expectations:

“We are excited about our prospects in 2014 and beyond, as we work to reach our goal of $1 billion in annual sales by 2017,” said Killingstad. “We will continue to manage our business with a focus on operational excellence and strong cost controls, while investing in direct sales, distribution and marketing capabilities, and maintaining a strong pipeline of new products in order to deliver long term growth and improved profitability.”

Conference Call
Tennant will host a conference call to discuss the 2013 fourth quarter and full year results today, February 25, 2014, at 10 a.m. Central Time (11 a.m. Eastern Time). The conference call will be available via webcast on the investor portion of Tennant's website. To listen to the call live, go to www.tennantco.com and click on Company, Investors. A taped replay of the conference call will be available at www.tennantco.com for approximately two weeks after the call.

Company Profile
Minneapolis-based Tennant Company (TNC) is a world leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. Its products include equipment for maintaining surfaces in industrial, commercial and outdoor environments; chemical-free and other sustainable cleaning technologies; and coatings for protecting, repairing and upgrading surfaces. Tennant's global field service network is the most extensive in the industry. Tennant has manufacturing operations in Minneapolis, Minn.; Holland, Mich.; Louisville, Ky.; Uden, The Netherlands; the United Kingdom; São Paulo, Brazil; and Shanghai, China; and sells products directly in 15 countries and through distributors in more than 80 countries. For more information, visit www.tennantco.com.

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 and retain key personnel; our ability to successfully upgrade, evolve and protect our information technology systems; our ability to develop and commercialize new innovative products and services; our ability to comply with laws and regulations; fluctuations in the cost or availability of raw materials and purchased components; unforeseen product liability claims or product quality issues; the occurrence of a significant business interruption; the occurrence of disruptions to our supply and delivery chains; and the relative strength of the U.S. dollar, which affects the cost of our materials and products purchased and sold internationally.

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, 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 includes presentations 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. See the Supplemental Non-GAAP Financial Table.

Source: Tennant Company

Tennant Company
Investor Contact:
Tom Paulson, 763-540-1204
Senior Vice President and Chief Financial Officer
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Media Contact:
Kathryn Lovik, 763-540-1212
Director, Global Corporate Communications