Tennant Company Reports 2018 Second Quarter Results
Net sales of $292.2 million in the second quarter, up 7.9 percent
Organic sales rose 5.2 percent, reflecting growth across all geographic regions
Second quarter GAAP diluted earnings per share of $0.69; Adjusted EPS excluding special items of
$0.82
Adjusted EBITDA of $35.7 million, or 12.2 percent of sales, up 120 basis points
Cash flow from operations of $20.4 million
Company increases 2018 full year guidance ranges for net sales, adjusted net earnings and
adjusted EBITDA
Tennant Company (“Tennant”) (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 $292.2 million and net earnings of $12.7 million, or $0.69 per
share, and adjusted net earnings of $15.1 million, or $0.82 per share, for the quarter ended June 30, 2018. The 2018 second quarter
reported results reflected $3.1 million in pre-tax expenses, or $0.13 per share, related to non-operational special items,
primarily IPC acquisition integration costs. Additionally, the 2018 second quarter results included pre-tax expense of $5.5
million, or $0.23 per share, from amortization of the intangible assets related to the IPC acquisition and discrete tax benefits of
approximately $3.0 million, or $0.16 per share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in
the 2018 second quarter climbed to $35.7 million, or 12.2 percent of sales, from $29.8 million, or 11.0 percent of sales, in the
year-ago quarter. (See the Supplemental Non-GAAP Financial Table).
“Our strategy is to take full advantage of Tennant’s broader geographic footprint and product platform to support two main
objectives: driving sustainable growth and operational effectiveness,” said Chris Killingstad, Tennant Company's president and
chief executive officer. “During the second quarter, we again made broad progress across these strategies. We posted organic
revenue growth in every geographic region for the third consecutive quarter. We had revenue growth across all of our channels, with
particular strength in our strategic accounts. We continued improving our field-service utilization and manufacturing productivity.
We also made efficient use of our expense structure and substantially improved our cash flow. We are pleased with our progress to
date and are confident in the underlying performance of the business.”
Second Quarter Operating Review
The company's 2018 second quarter consolidated net sales of $292.2 million grew approximately 7.9 percent over the same period last
year. This includes a 2.7 percent benefit from foreign currency and an organic growth of 5.2 percent. Organic growth was driven by
improvement in all regions, with notable performance in the Americas and EMEA regions.
Sales in the Americas region improved 5.7 percent, or 6.0 percent organically, reflecting the strength in all channels,
especially strategic accounts and North American service, parts and consumables business. Sales in the Americas region also
reflects 16.9 percent organic growth in the Latin American region led by industrial equipment sales in South America and
broad-based strength in Brazil. Sales in the Europe, Middle East and Africa (EMEA) region were up 13.0 percent, or 3.6 percent
organically, reflecting strong growth across the entire region. Sales in the Asia Pacific (APAC) region rose 7.2 percent, or 5.1
percent organically.
Gross margin in the 2018 second quarter was 40.7 percent, compared to 38.6 percent in the same period last year. The prior year
gross margin rate included a $6.2 million, or 230-basis-point, acquisition-related charge. Excluding the charge, the prior year
gross margin rate was 40.9 percent. The 20-basis-point decline reflects robust strategic account sales impacting the company’s mix
and manufacturing productivity issues associated with raw material and labor shortages. These factors were partially offset by
improved operational performance in both manufacturing and service that are the result of Tennant’s operational effectiveness
strategies. The company remains intently focused on gross margin expansion. (See the Supplemental Non-GAAP Financial Table.)
Research and development (R&D) expense for the 2018 second quarter totaled $7.9 million, or 2.7 percent of sales, versus
$7.9 million, or 2.9 percent of sales, a year ago. The R&D expense ratio for the second quarter compared to last year reflects
the impact of 2018 higher revenue and the timing of anticipated project spend in 2018. Tennant remains committed to investing in a
robust pipeline of new products and technologies.
Selling and administrative (S&A) expense in the 2018 second quarter was $91.9 million, or 31.4 percent of sales, compared to
$87.3 million, or 32.2 percent of sales, a year ago. The second quarters of 2018 and 2017 included non-operational costs of $3.1
million and $4.9 million, respectively. Excluding these items, S&A expense as a percent of sales was flat at 30.4 percent. (See
the Supplemental Non-GAAP Financial Table.) In addition, the second quarter of 2018 included a non-cash amortization expense
related to the IPC acquisition of $5.5 million, or 1.9 percent of sales, compared to $3.1 million, or 1.1 percent of sales, in last
year’s second quarter. Tennant continues to leverage disciplined spending control with investments in key growth initiatives.
During the 2018 second quarter, Tennant realized two discrete tax benefits, totaling approximately $3.0 million, or $0.16 per
share, resulting from a favorable ruling from Italian tax authorities related to the deductibility of interest expense in Italy and
higher levels of soon-to-expire stock options that were exercised in the quarter. These items positively impacted the adjusted tax
rate by approximately 18 percentage points.
Tennant’s 2018 second quarter net earnings were $12.7 million, compared to a net loss of $2.6 million in the 2017 second
quarter. Excluding the non-operational items, the 2018 second quarter net earnings were $15.1 million, up 42 percent compared to
$10.6 million in the 2017 second quarter. (See the Supplemental Non-GAAP Financial Table.)
During the 2018 second quarter, Tennant generated cash flow from operations of $20.4 million, compared to net cash flow from
operations of $8.6 million in the 2017 second quarter. The company also repaid $14.0 million in outstanding debt and paid $3.8
million in cash dividends to shareholders during the second quarter.
2018 Business Outlook
Killingstad concluded, “We remain confident in our key global strategies: maintaining our robust new product and technology
leadership; successfully completing the integration of IPC; expanding and diversifying our global market coverage; improving
operating effectiveness; and strengthening our financial position. We have more progress to make; however, these strategies have
created significant momentum for Tennant Company to date and they remain essential to generating value for our shareholders. While
we anticipate headwinds in the back half of 2018 from tariff impacts and raw material and labor availability constraints, we are
pleased with the platform we are building, which gives us the confidence to increase our previously announced 2018 full year
guidance ranges for net sales, EPS, adjusted EPS and adjusted EBITDA.”
Tennant is increasing the low and high end of the previously announced 2018 full year guidance range for net sales by $20
million and $10 million, respectively. The company anticipates net sales to be in the range of $1.10 billion to $1.12 billion, up
9.7 percent to 11.7 percent compared to the prior year and reflecting organic growth of 4.0 percent to 4.5 percent. Based on the
anticipated higher level of sales, Tennant is increasing the low and high end of adjusted earnings per share to a range of $1.95 to
$2.10. This excludes $4.0 million to $5.0 million of special items, including IPC acquisition and integration costs. The company
also is increasing the 2018 full year reported GAAP earnings to a range of $1.75 to $1.90 per share and adjusted EBITDA to a range
of $117 million to $121 million.
Tennant's 2018 annual financial outlook includes the following additional assumptions:
- Reasonable growth in all regions, especially strategic accounts in North America;
- Gross margin performance of approximately 41.0 percent;
- R&D expense of approximately 3.0 percent of sales;
- Capital expenditures in the range of $25 million to $30 million; and
- An effective tax rate of approximately 20 percent.
Conference Call
Tennant will host a conference call to discuss 2018 second quarter results today, July 25, 2018 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 until August 25, 2018.
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, 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 $1.0 billion in 2017 and has approximately 4,300 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: our ability to effectively manage organizational changes; our ability to attract, retain and develop
key personnel and create effective succession planning strategies; the competition in our business; fluctuations in the cost,
quality or availability of raw materials and purchased components; our ability to successfully upgrade and evolve our information
technology systems; our ability to develop and commercialize new innovative products and services; our ability to integrate
acquisitions, including IPC; our ability to generate sufficient cash to satisfy our debt obligations; geopolitical and economic
uncertainty throughout the world; our ability to successfully protect our information technology systems from cyber security risks;
the occurrence of a significant business interruption; our ability to comply with laws and regulations; the potential disruption of
our business from actions of activist investors or others; the relative strength of the U.S. dollar, which affects the cost of our
materials and products purchased and sold internationally; unforeseen product liability claims or product quality issues; and our
internal control over financial reporting risks resulting from our acquisition of IPC.
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. Information about factors that could materially affect our results can be found
in our 2017 Form 10-K or 2017 Form 10-Qs. 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.
We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future
events or otherwise, except as required by law. Investors are advised to consult any further disclosures by us in our filings with
the Securities and Exchange Commission and in other written statements on related subjects. 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 Selling and Administrative Expense - as adjusted, Profit from Operations - as adjusted, Operating
Margin - 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 restructuring charge, acquisition costs, certain non-operational professional
services, 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 Selling and Administrative Expense - 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 restructuring charge, acquisition costs, and certain non-operational professional services. We calculate Income Tax
Expense - as adjusted by adding back the tax effect of the restructuring charge, acquisition costs, certain non-operational
professional services 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 restructuring charge, acquisition costs, certain non-operational professional services,
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 restructuring charge, acquisition costs, certain non-operational professional services, 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 restructuring charge, acquisition costs, certain non-operational professional services, and debt financing costs
write-off (EBITDA - as adjusted) and EBITDA margin - 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 - as adjusted are
financial measures that do not reflect GAAP. We calculate EBITDA - as adjusted by adding back the pre-tax effect of the
restructuring charge, acquisition costs, certain non-operating professional services, debt financing costs write-off 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 |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
| Net Sales |
|
$ |
292,197 |
|
|
$ |
270,791 |
|
|
$ |
565,044 |
|
|
$ |
461,850 |
|
| Cost of Sales |
|
173,398 |
|
|
166,237 |
|
|
335,608 |
|
|
277,560 |
|
| Gross Profit |
|
118,799 |
|
|
104,554 |
|
|
229,436 |
|
|
184,290 |
|
| Gross Margin |
|
40.7 |
% |
|
38.6 |
% |
|
40.6 |
% |
|
39.9 |
% |
| Operating Expense: |
|
|
|
|
|
|
|
|
| Research and Development Expense |
|
7,906 |
|
|
7,886 |
|
|
15,902 |
|
|
16,332 |
|
| Selling and Administrative Expense |
|
91,864 |
|
|
87,326 |
|
|
184,133 |
|
|
161,282 |
|
| Total Operating Expense |
|
99,770 |
|
|
95,212 |
|
|
200,035 |
|
|
177,614 |
|
| Profit from Operations |
|
19,029 |
|
|
9,342 |
|
|
29,401 |
|
|
6,676 |
|
| Operating Margin |
|
6.5 |
% |
|
3.4 |
% |
|
5.2 |
% |
|
1.4 |
% |
| Other Income (Expense): |
|
|
|
|
|
|
|
|
| Interest Income |
|
952 |
|
|
793 |
|
|
1,701 |
|
|
877 |
|
| Interest Expense |
|
(6,005 |
) |
|
(11,833 |
) |
|
(11,750 |
) |
|
(12,627 |
) |
| Net Foreign Currency Transaction Losses |
|
(337 |
) |
|
(336 |
) |
|
(1,086 |
) |
|
(1,533 |
) |
| Other Expense, Net |
|
(510 |
) |
|
(384 |
) |
|
(760 |
) |
|
(352 |
) |
| Total Other Expense, Net |
|
(5,900 |
) |
|
(11,760 |
) |
|
(11,895 |
) |
|
(13,635 |
) |
| Profit (Loss) Before Income Taxes |
|
13,129 |
|
|
(2,418 |
) |
|
17,506 |
|
|
(6,959 |
) |
| Income Tax Expense (Benefit) |
|
363 |
|
|
238 |
|
|
1,440 |
|
|
(346 |
) |
| Net Earnings (Loss) Including Noncontrolling Interest |
|
12,766 |
|
|
(2,656 |
) |
|
16,066 |
|
|
(6,613 |
) |
| Net Earnings (Loss) Attributable to Noncontrolling Interest |
|
22 |
|
|
(65 |
) |
|
48 |
|
|
(65 |
) |
| Net Earnings (Loss) Attributable to Tennant Company |
|
$ |
12,744 |
|
|
$ |
(2,591 |
) |
|
$ |
16,018 |
|
|
$ |
(6,548 |
) |
|
|
|
|
|
|
|
|
|
| Net Earnings (Loss) Attributable to Tennant Company per Share: |
|
|
|
|
|
|
|
|
| Basic |
|
$ |
0.71 |
|
|
$ |
(0.15 |
) |
|
$ |
0.90 |
|
|
$ |
(0.37 |
) |
| Diluted |
|
$ |
0.69 |
|
|
$ |
(0.15 |
) |
|
$ |
0.88 |
|
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
|
|
| Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
| Basic |
|
17,943,450 |
|
|
17,693,102 |
|
|
17,867,641 |
|
|
17,645,090 |
|
| Diluted |
|
18,371,538 |
|
|
17,693,102 |
|
|
18,303,960 |
|
|
17,645,090 |
|
|
|
|
|
|
|
|
|
|
| Cash Dividends Declared per Common Share |
|
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.42 |
|
|
$ |
0.42 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GEOGRAPHICAL NET SALES (1) (Unaudited)
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2018 |
|
2017 |
|
% |
|
2018 |
|
2017 |
|
% |
| Americas |
|
$ |
178,752 |
|
|
$ |
169,146 |
|
|
5.7 |
|
$ |
341,390 |
|
|
$ |
311,916 |
|
|
9.4 |
| Europe, Middle East and Africa |
|
87,410 |
|
|
77,356 |
|
|
13.0 |
|
176,226 |
|
|
110,632 |
|
|
59.3 |
| Asia Pacific |
|
26,035 |
|
|
24,289 |
|
|
7.2 |
|
47,428 |
|
|
39,302 |
|
|
20.7 |
| Total |
|
$ |
292,197 |
|
|
$ |
270,791 |
|
|
7.9 |
|
$ |
565,044 |
|
|
$ |
461,850 |
|
|
22.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of intercompany sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
June 30, |
|
December 31, |
|
|
2018 |
|
2017 |
| ASSETS |
|
|
|
|
| Current Assets: |
|
|
|
|
| Cash and Cash Equivalents |
|
$ |
53,901 |
|
|
$ |
58,398 |
|
| Restricted Cash |
|
543 |
|
|
653 |
|
| Net Receivables |
|
215,323 |
|
|
209,516 |
|
| Inventories |
|
139,406 |
|
|
127,694 |
|
| Prepaid Expenses |
|
27,382 |
|
|
19,351 |
|
| Other Current Assets |
|
8,707 |
|
|
7,503 |
|
| Total Current Assets |
|
445,262 |
|
|
423,115 |
|
| Property, Plant and Equipment |
|
381,607 |
|
|
382,768 |
|
| Accumulated Depreciation |
|
(212,625 |
) |
|
(202,750 |
) |
| Property, Plant and Equipment, Net |
|
168,982 |
|
|
180,018 |
|
| Deferred Income Taxes |
|
13,721 |
|
|
11,134 |
|
| Goodwill |
|
185,715 |
|
|
186,044 |
|
| Intangible Assets, Net |
|
157,674 |
|
|
172,347 |
|
| Other Assets |
|
14,730 |
|
|
21,319 |
|
| Total Assets |
|
$ |
986,084 |
|
|
$ |
993,977 |
|
|
|
|
|
|
| LIABILITIES AND TOTAL EQUITY |
|
|
|
|
| Current Liabilities: |
|
|
|
|
| Current Portion of Long-Term Debt |
|
$ |
30,969 |
|
|
$ |
30,883 |
|
| Accounts Payable |
|
103,602 |
|
|
96,082 |
|
| Employee Compensation and Benefits |
|
41,289 |
|
|
37,257 |
|
| Income Taxes Payable |
|
2,809 |
|
|
2,838 |
|
| Other Current Liabilities |
|
66,753 |
|
|
69,447 |
|
| Total Current Liabilities |
|
245,422 |
|
|
236,507 |
|
| Long-Term Liabilities: |
|
|
|
|
| Long-Term Debt |
|
328,699 |
|
|
345,956 |
|
| Employee-Related Benefits |
|
22,583 |
|
|
23,867 |
|
| Deferred Income Taxes |
|
50,444 |
|
|
53,225 |
|
| Other Liabilities |
|
36,739 |
|
|
35,948 |
|
| Total Long-Term Liabilities |
|
438,465 |
|
|
458,996 |
|
| Total Liabilities |
|
683,887 |
|
|
695,503 |
|
| Equity: |
|
|
|
|
| Common Stock |
|
6,778 |
|
|
6,705 |
|
| Additional Paid-In Capital |
|
22,273 |
|
|
15,089 |
|
| Retained Earnings |
|
306,667 |
|
|
297,032 |
|
| Accumulated Other Comprehensive Loss |
|
(35,391 |
) |
|
(22,323 |
) |
| Total Tennant Company Shareholders’ Equity |
|
300,327 |
|
|
296,503 |
|
| Noncontrolling Interest |
|
1,870 |
|
|
1,971 |
|
| Total Equity |
|
302,197 |
|
|
298,474 |
|
| Total Liabilities and Total Equity |
|
$ |
986,084 |
|
|
$ |
993,977 |
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
|
|
| (In thousands) |
|
Six Months Ended |
|
|
June 30 |
|
|
2018 |
|
2017 |
| OPERATING ACTIVITIES |
|
|
|
|
| Net Earnings (Loss) Including Noncontrolling Interest |
|
$ |
16,066 |
|
|
$ |
(6,613 |
) |
|
Adjustments to reconcile Net Earnings (Loss) to Net Cash Provided by (Used in) Operating
Activities:
|
|
|
|
|
| Depreciation |
|
16,340 |
|
|
11,043 |
|
| Amortization of Intangible Assets |
|
11,657 |
|
|
3,780 |
|
| Amortization of Debt Issuance Costs |
|
1,307 |
|
|
466 |
|
| Debt Issuance Cost Charges Related to Short-Term Financing |
|
— |
|
|
6,200 |
|
| Fair Value Step-Up Adjustment to Acquired Inventory |
|
— |
|
|
6,199 |
|
| Deferred Income Taxes |
|
(7,857 |
) |
|
(6,032 |
) |
| Share-Based Compensation Expense |
|
4,115 |
|
|
3,622 |
|
| Allowance for Doubtful Accounts and Returns |
|
940 |
|
|
697 |
|
| Other, Net |
|
280 |
|
|
64 |
|
| Changes in Operating Assets and Liabilities, Net of Assets Acquired: |
|
|
|
|
| Receivables, Net |
|
(6,832 |
) |
|
(6,016 |
) |
| Inventories |
|
(17,039 |
) |
|
(9,854 |
) |
| Accounts Payable |
|
9,827 |
|
|
6,190 |
|
| Employee Compensation and Benefits |
|
4,075 |
|
|
(8,262 |
) |
| Other Current Liabilities |
|
(3,772 |
) |
|
5,252 |
|
| Income Taxes |
|
(973 |
) |
|
(1,617 |
) |
| Other Assets and Liabilities |
|
(2,170 |
) |
|
(7,614 |
) |
| Net Cash Provided by (Used in) Operating Activities |
|
25,964 |
|
|
(2,495 |
) |
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
| Purchases of Property, Plant and Equipment |
|
(7,726 |
) |
|
(9,145 |
) |
| Proceeds from Disposals of Property, Plant and Equipment |
|
102 |
|
|
2,428 |
|
| Proceeds from Principal Payments Received on Long-Term Note Receivable |
|
706 |
|
|
— |
|
| Issuance of Long-Term Note Receivable |
|
— |
|
|
(1,500 |
) |
| Acquisition of Business, Net of Cash, Cash Equivalents and Restricted Cash
Acquired |
|
— |
|
|
(353,535 |
) |
| Purchase of Intangible Assets |
|
(1,195 |
) |
|
(2,500 |
) |
| Net Cash Used in Investing Activities |
|
(8,113 |
) |
|
(364,252 |
) |
|
|
|
|
|
| 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 |
|
| Payments of Long-Term Debt |
|
(18,133 |
) |
|
(58,471 |
) |
| Payments of Debt Issuance Costs |
|
— |
|
|
(16,039 |
) |
| Change in Capital Lease Obligations |
|
59 |
|
|
— |
|
| Proceeds from Issuances of Common Stock |
|
3,724 |
|
|
3,843 |
|
| Dividends Paid |
|
(7,553 |
) |
|
(7,463 |
) |
| Net Cash (Used in) Provided by Financing Activities |
|
(21,903 |
) |
|
361,870 |
|
|
|
|
|
|
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash |
|
(555 |
) |
|
875 |
|
|
|
|
|
|
| Net Decrease in Cash, Cash Equivalents and Restricted Cash |
|
(4,607 |
) |
|
(4,002 |
) |
|
|
|
|
|
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period |
|
59,051 |
|
|
58,550 |
|
|
|
|
|
|
| Cash, Cash Equivalents and Restricted Cash at End of Period |
|
$ |
54,444 |
|
|
$ |
54,548 |
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
|
|
|
|
| (In thousands, except per share data) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
| Gross Profit - as reported |
|
$ |
118,799 |
|
|
$ |
104,554 |
|
|
$ |
229,436 |
|
|
$ |
184,290 |
|
| Gross Margin - as reported |
|
40.7 |
% |
|
38.6 |
% |
|
40.6 |
% |
|
39.9 |
% |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up |
|
— |
|
|
6,199 |
|
|
— |
|
|
6,199 |
|
| Gross Profit - as adjusted |
|
$ |
118,799 |
|
|
$ |
110,753 |
|
|
$ |
229,436 |
|
|
$ |
190,489 |
|
| Gross Margin - as adjusted |
|
40.7 |
% |
|
40.9 |
% |
|
40.6 |
% |
|
41.2 |
% |
|
|
|
|
|
|
|
|
|
| Selling and Administrative Expense - as reported |
|
$ |
91,864 |
|
|
$ |
87,326 |
|
|
$ |
184,133 |
|
|
$ |
161,282 |
|
| Selling and Administrative Expense as a percent of Net Sales - as reported |
|
31.4 |
% |
|
32.2 |
% |
|
32.6 |
% |
|
34.9 |
% |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
(8,018 |
) |
| Acquisition and Integration Costs |
|
(2,800 |
) |
|
(4,684 |
) |
|
(3,815 |
) |
|
(7,558 |
) |
| Professional Services |
|
(312 |
) |
|
— |
|
|
(1,556 |
) |
|
— |
|
| Pension Settlement |
|
— |
|
|
(205 |
) |
|
— |
|
|
(205 |
) |
| Selling and Administrative Expense - as adjusted |
|
$ |
88,752 |
|
|
$ |
82,437 |
|
|
$ |
178,762 |
|
|
$ |
145,501 |
|
| Selling and Administrative Expense as a percent of Net Sales - as
adjusted |
|
30.4 |
% |
|
30.4 |
% |
|
31.6 |
% |
|
31.5 |
% |
|
|
|
|
|
|
|
|
|
| Profit from Operations - as reported |
|
$ |
19,029 |
|
|
$ |
9,342 |
|
|
$ |
29,401 |
|
|
$ |
6,676 |
|
| Operating Margin - as reported |
|
6.5 |
% |
|
3.4 |
% |
|
5.2 |
% |
|
1.4 |
% |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up |
|
— |
|
|
6,199 |
|
|
— |
|
|
6,199 |
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
8,018 |
|
| Acquisition and Integration Costs |
|
2,800 |
|
|
4,684 |
|
|
3,815 |
|
|
7,558 |
|
| Professional Services |
|
312 |
|
|
— |
|
|
1,556 |
|
|
— |
|
| Pension Settlement |
|
— |
|
|
205 |
|
|
— |
|
|
205 |
|
| Profit from Operations - as adjusted |
|
$ |
22,141 |
|
|
$ |
20,430 |
|
|
$ |
34,772 |
|
|
$ |
28,656 |
|
| Operating Margin - as adjusted |
|
7.6 |
% |
|
7.5 |
% |
|
6.2 |
% |
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
| Profit (Loss) Before Income Taxes - as reported |
|
$ |
13,129 |
|
|
$ |
(2,418 |
) |
|
$ |
17,506 |
|
|
$ |
(6,959 |
) |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up |
|
— |
|
|
6,199 |
|
|
— |
|
|
6,199 |
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
8,018 |
|
| Acquisition and Integration Costs |
|
2,800 |
|
|
4,684 |
|
|
3,815 |
|
|
7,558 |
|
| Professional Services |
|
312 |
|
|
— |
|
|
1,556 |
|
|
— |
|
| Pension Settlement |
|
— |
|
|
205 |
|
|
— |
|
|
205 |
|
| Financing Costs |
|
— |
|
|
6,221 |
|
|
— |
|
|
7,378 |
|
| Profit Before Income Taxes - as adjusted |
|
$ |
16,241 |
|
|
$ |
14,891 |
|
|
$ |
22,877 |
|
|
$ |
22,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
|
|
|
|
| (In thousands, except per share data) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
| Income Tax Expense (Benefit) - as reported |
|
$ |
363 |
|
|
$ |
238 |
|
|
$ |
1,440 |
|
|
$ |
(346 |
) |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up(1) |
|
— |
|
|
1,729 |
|
|
— |
|
|
1,729 |
|
| Restructuring Charge(1) |
|
— |
|
|
— |
|
|
— |
|
|
2,234 |
|
| Acquisition and Integration Costs(1)(2) |
|
663 |
|
|
— |
|
|
917 |
|
|
— |
|
| Professional Services(1) |
|
77 |
|
|
— |
|
|
382 |
|
|
— |
|
| Pension Settlement(1) |
|
— |
|
|
47 |
|
|
— |
|
|
47 |
|
| Financing Costs(1) |
|
— |
|
|
2,326 |
|
|
— |
|
|
2,759 |
|
| Income Tax Expense - as adjusted |
|
$ |
1,103 |
|
|
$ |
4,340 |
|
|
$ |
2,739 |
|
|
$ |
6,423 |
|
|
|
|
|
|
|
|
|
|
| Net Earnings (Loss) Attributable to Tennant Company - as reported |
|
$ |
12,744 |
|
|
$ |
(2,591 |
) |
|
$ |
16,018 |
|
|
$ |
(6,548 |
) |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up |
|
— |
|
|
4,470 |
|
|
— |
|
|
4,470 |
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
5,784 |
|
| Acquisition and Integration Costs |
|
2,137 |
|
|
4,684 |
|
|
2,898 |
|
|
7,558 |
|
| Professional Services |
|
235 |
|
|
— |
|
|
1,174 |
|
|
— |
|
| Pension Settlement |
|
— |
|
|
158 |
|
|
— |
|
|
158 |
|
| Financing Costs |
|
— |
|
|
3,895 |
|
|
— |
|
|
4,619 |
|
| Net Earnings Attributable to Tennant Company - as adjusted |
|
$ |
15,116 |
|
|
$ |
10,616 |
|
|
$ |
20,090 |
|
|
$ |
16,041 |
|
|
|
|
|
|
|
|
|
|
| Net Earnings (Loss) Attributable to Tennant Company per Share - as reported: |
|
|
|
|
|
|
|
|
| Diluted |
|
$ |
0.69 |
|
|
$ |
(0.15 |
) |
|
$ |
0.88 |
|
|
$ |
(0.37 |
) |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Inventory Step-Up |
|
— |
|
|
0.25 |
|
|
— |
|
|
0.25 |
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
0.32 |
|
| Acquisition and Integration Costs |
|
0.12 |
|
|
0.27 |
|
|
0.16 |
|
|
0.44 |
|
| Professional Services |
|
0.01 |
|
|
— |
|
|
0.06 |
|
|
— |
|
| Pension Settlement |
|
— |
|
|
0.01 |
|
|
— |
|
|
0.01 |
|
| Financing Costs |
|
— |
|
|
0.22 |
|
|
— |
|
|
0.26 |
|
| Adjustment from Impact of Using Diluted Shares |
|
— |
|
|
(0.02 |
) |
|
— |
|
|
(0.04 |
) |
| Net Earnings Attributable to Tennant Company per Share - as
adjusted |
|
$ |
0.82 |
|
|
$ |
0.58 |
|
|
$ |
1.10 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
(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. |
|
|
|
|
|
|
|
|
|
(2)
|
|
2017 Acquisition Costs were nondeductible for tax purposes. |
|
|
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
SUPPLEMENTAL NON-GAAP FINANCIAL TABLE
|
|
|
|
|
|
|
|
|
|
| (In thousands, except per share data) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
| Net Earnings (Loss) Including Noncontrolling Interest - as reported |
|
$ |
12,766 |
|
|
$ |
(2,656 |
) |
|
$ |
16,066 |
|
|
$ |
(6,613 |
) |
|
Adjustments:
|
|
|
|
|
|
|
|
|
| Interest Income |
|
(952 |
) |
|
(793 |
) |
|
(1,701 |
) |
|
(877 |
) |
| Interest Expense |
|
6,005 |
|
|
11,833 |
|
|
11,750 |
|
|
12,627 |
|
| Income Tax Expense (Benefit) |
|
363 |
|
|
238 |
|
|
1,440 |
|
|
(346 |
) |
| Depreciation Expense |
|
8,632 |
|
|
6,550 |
|
|
16,340 |
|
|
11,043 |
|
| Amortization Expense |
|
5,819 |
|
|
3,536 |
|
|
11,657 |
|
|
3,780 |
|
| Inventory Step-Up |
|
— |
|
|
6,199 |
|
|
— |
|
|
6,199 |
|
| Restructuring Charge |
|
— |
|
|
— |
|
|
— |
|
|
8,018 |
|
| Acquisition and Integration Costs |
|
2,800 |
|
|
4,684 |
|
|
3,815 |
|
|
7,558 |
|
| Professional Services |
|
312 |
|
|
— |
|
|
1,556 |
|
|
— |
|
| Pension Settlement |
|
— |
|
|
205 |
|
|
— |
|
|
205 |
|
| Acquisition Related Currency Loss |
|
— |
|
|
46 |
|
|
— |
|
|
1,178 |
|
| Earnings Before Interest, Taxes, Depreciation & Amortization - as
adjusted |
|
$ |
35,745 |
|
|
$ |
29,842 |
|
|
$ |
60,923 |
|
|
$ |
42,772 |
|
| EBITDA Margin - as adjusted |
|
12.2 |
% |
|
11.0 |
% |
|
10.8 |
% |
|
9.3 |
% |
Tennant Company
Investor Contact:
Tom Paulson, 763-540-1204
Senior Vice President and Chief Financial Officer
tom.paulson@tennantco.com
or
Media Contact:
Kathryn Lovik, 763-540-1212
Global Communications Director
kathryn.lovik@tennantco.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005086/en/