Net sales of $252.1 million, decrease of 2.4
percent organically
First-quarter GAAP net income of $5.2
million, or $0.28 diluted earnings per share; adjusted
diluted EPS of $0.57 per share
Adjusted EBITDA of $26.1 million, or 10.4
percent of sales
Strong cash and liquidity position
Tennant Company (“Tennant”) (NYSE: TNC), a world leader in the
design, manufacture and marketing of solutions that help create a
cleaner, safer and healthier world, today reported first-quarter
results for 2020. For the first quarter, net sales totaled $252.1
million, representing a year-over-year decrease of 4.0 percent, or
down 2.4 percent on an organic basis, primarily as a result of the
coronavirus pandemic and ensuing global business slowdown. Net
income for the first quarter of 2020 was $5.2 million, or $0.28 per
diluted share, compared with $5.4 million, or $0.29 per diluted
share, in the year-ago period. Adjusted diluted earnings per share,
which exclude certain non-operational items and amortization
expense, were $0.57, compared with $0.72 in the first quarter of
2019. Excluding non-operational items, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) for the
first quarter of 2020 were $26.1 million, or 10.4 percent of sales,
compared with $29.5 million, or 11.2 percent of sales, in the
year-ago period. In the first quarter of 2020, cash flow from
operations provided $8.7 million, compared to a cash usage of $11.6
million in the prior year first quarter. (See the Supplemental
Non-GAAP Financial Table.)
“Our first quarter was the story of two strong months and one
difficult one as our global operations weathered the impact of the
coronavirus pandemic,” said Chris Killingstad, Tennant Company’s
president and chief executive officer. “The primary impacts of the
pandemic on our business were related to temporary plant shutdowns,
as well as a slowdown in sales to some end markets, amid widespread
closures of customer facilities and operations. Our China factories
were closed for two weeks in February, and we temporarily suspended
operations at our plants in Italy and the United States at times
during the month of March, in accordance with local
directives.”
First-Quarter Operating
Review
In the first quarter of 2020, Tennant’s consolidated net sales
of $252.1 million were down 4.0 percent over the same period last
year, including a 1.6 percent reduction from foreign currency. On
an organic basis, sales declined 2.4 percent.
Regional Sales Highlights
- Americas – Sales in the Americas improved 1.1 percent, or 1.9
percent organically, resulting in the tenth consecutive quarter of
organic growth, driven by strength in both North America and Latin
America. North America results reflected demand for Tennant’s
autonomous cleaning machine as well as pricing. Sales in Latin
America were primarily driven by strength in Mexico. To ensure the
safety of our employees, some of the Company’s U.S.-based
manufacturing plants were closed within the month of March for
cleaning related to the coronavirus.
- EMEA – Sales in the Europe, Middle East and Africa (EMEA)
region were down 7.8 percent, or 4.9 percent organically, primarily
due to the broad economic impact of the coronavirus pandemic, with
the largest declines recorded in Italy and France. The Company’s
regional manufacturing plants were closed for one to two weeks in
March, depending on their location and in accordance with local
government orders. Shutdowns of customer facilities in March were
widespread.
- APAC – Sales in the Asia Pacific region decreased 25.8 percent,
or 22.9 percent organically, primarily as a result of significant
decreases in sales in China due to the coronavirus pandemic and in
Australia due to the coronavirus pandemic as well as timing of
strategic account orders. The Company’s regional manufacturing
plants were closed for approximately two weeks in February, in
accordance with local government orders.
Profitability Measures and Related Factors
(See the Supplemental Non-GAAP Financial Table)
- Gross margin – Gross margin in the first quarter of 2020 was
41.3 percent, compared with 41.2 percent in the year-ago period.
Adjusted gross margins during the first quarter of 2020 and 2019
were 42.0 percent and 41.2 percent, respectively, primarily
reflecting actions directly resulting from the Company’s enterprise
strategy efforts like pricing and cost-out initiatives, as well as
favorable freight costing, which more than offset the negative
effect of labor and material inflation.
- Net Earnings/Adjusted EBITDA – Tennant’s 2020 first-quarter net
earnings and EBITDA decreased compared to the prior year primarily
driven by lower sales related to the coronavirus pandemic and
currency transaction loss of approximately $4 million related to
significant strengthening of the U.S. dollar, particularly relative
to the Brazilian real and Mexican peso compared to the same period
last year. Net earnings decreased to $5.2 million, or $0.28 per
diluted share, compared with $5.4 million, or $0.29 per diluted
share. Adjusted earnings per diluted share, excluding
non-operational items and amortization expense, were $0.57 compared
with $0.72 in the year-ago period. Adjusted EBITDA in the first
quarter of 2020 decreased to $26.1 million, or 10.4 percent of
sales, compared with $29.5 million, or 11.2 percent of sales, in
the first quarter of 2019.
Cash Flow, Capital Allocation and
Liquidity
During the first quarter of 2020, Tennant generated $8.7 million
in cash flow from operations, primarily driven by business
performance. As a precaution, the Company has drawn an additional
$125 million from its $200 million revolver and has approximately
$30 million of remaining undrawn funds. As of March 31, 2020, the
Company had $192 million in cash and cash equivalents.
2020 Business Outlook
As previously announced, the Company withdrew the full-year
guidance it provided on February 20, 2020, due to the uncertain
nature of the coronavirus pandemic. At this time, the Company does
not have the ability to accurately predict the level of impact on
its businesses and financial results for the remainder of fiscal
2020. Accordingly, the Company is not updating its outlook, but
plans to share further updates in its second-quarter earnings
announcement and conference call.
In response to this pandemic, the Company has already taken a
number of actions globally to minimize the financial impact.
Specifically, the Company implemented a combination of reduced work
schedules and furlough programs for all employees globally, while
operating within the local laws and regulations, and maintaining
health coverage for all impacted employees. As previously
announced, Tennant’s CEO will forgo 100 percent of his salary,
while senior leaders within the organization will forgo 35 percent
of their salaries and the board of directors will take a 50 percent
cut in pay, through the second quarter of 2020. Additionally, the
Company has been proactive in establishing a dedicated
enterprise-wide response team, limiting travel to business-critical
trips only, implementing work-from-home processes where possible,
reducing non-essential discretionary and project spending, and
developing multiple financial scenario plans to ensure liquidity
and to identify additional actions, if needed.
“While the extent of the impact of the pandemic is uncertain and
continually evolving, we will continue to manage costs and cash
flow while maintaining our ability to ramp up quickly as markets
recover,” said Killingstad. “The health and safety of our
employees, customers and business partners remains our top priority
and we are committed to providing the equipment, parts and service
our customers need to keep their facilities clean and safe. In its
150-year history, Tennant has always been a resilient and adaptable
company, and we will do whatever is necessary to emerge from this
crisis in a strong position.”
Conference Call
Tennant will host a conference call to discuss its 2020
first-quarter results today, May 6, 2020, 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.
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
$1.14 billion in 2019 and has approximately 4,400 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 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: uncertainty surrounding the impacts and duration of the
COVID-19 pandemic; our ability to effectively develop and manage
strategic planning and growth processes and the related operational
plans; our ability to successfully upgrade and evolve our
information technology systems; fluctuations in the cost, quality
or availability of raw materials and purchased components;
geopolitical and economic uncertainty throughout the world; our
ability to integrate acquisitions; our ability to attract, retain
and develop key personnel and create effective succession planning
strategies; our ability to successfully protect our information
technology systems from cybersecurity risks; our ability to develop
and commercialize new innovative products and services; the
competition in our business; the occurrence of a significant
business interruption; our ability to comply with global laws and
regulations; the potential disruption of our business from actions
of activist investors or others; unforeseen product liability
claims or product quality issues; our ability to generate
sufficient cash to satisfy our debt obligations; and foreign
currency fluctuations.
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 2019 Form 10-K. 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 of a nonrecurring and/or non-operational nature (hereinafter
referred to as “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 Profit – as adjusted, Gross
Margin – as adjusted, Selling and Administrative Expense – as
adjusted, Selling and Administrative Expense as a percent of Net
Sales – 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, Net Earnings
Attributable to Tennant Company per Share – as adjusted, Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA) – as
adjusted, and EBITDA Margin – as adjusted (collectively, the
“Non-GAAP Measures”), excluding the impacts from special items, is
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 Profit – as adjusted and Gross Margin – as
adjusted by adding back the discontinuation of product lines. We
calculate Selling and Administrative Expense – as adjusted, and
Selling and Administrative Expense as a percent of Net Sales – as
adjusted by adding back acquisition and integration costs, certain
non-operational professional services, and restructuring charges
recorded in S&A. We calculate Profit from Operations – as
adjusted and Operating Margin – as adjusted by adding back the
pre-tax effect of the discontinuation of product lines, acquisition
and integration costs, certain non-operational professional
services, and restructuring charges. We calculate Profit Before
Income Taxes – as adjusted by adding back the pre-tax effect of the
discontinuation of product lines, acquisition and integration
costs, certain non-operational professional services, restructuring
charges, and amortization expense. We calculate Income Tax Expense
– as adjusted by adding back the tax effect of the discontinuation
of product lines, acquisition and integration costs, certain
non-operational professional services, restructuring charges and
amortization expense. We calculate Net Earnings Attributable to
Tennant Company – as adjusted by adding back the after-tax effect
of the discontinuation of product lines, acquisition and
integration costs, certain non-operational professional services,
restructuring charges, and amortization expense. We calculate Net
Earnings Attributable to Tennant Company per Share – as adjusted by
adding back the after-tax effect of the discontinuation of product
lines, acquisition and integration costs, certain non-operational
professional services, restructuring charges, and amortization
expense and dividing the result by the diluted weighted average
shares outstanding. We calculate EBITDA – as adjusted by adding
back the pre-tax effect of the discontinuation of product lines,
acquisition and integration costs, certain non-operational
professional services, restructuring charges, Interest Income,
Interest Expense, Income Tax Expense, Depreciation Expense and
Amortization Expense to Net Earnings Including Noncontrolling
Interest – 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
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except shares and per share
data)
Three Months Ended
March 31
2020
2019
Net Sales
$
252.1
$
262.5
Cost of Sales
148.0
154.3
Gross Profit
104.1
108.2
Gross Margin
41.3
%
41.2
%
Operating Expense:
Research and Development Expense
7.4
7.2
Selling and Administrative Expense
82.3
90.2
Total Operating Expense
89.7
97.4
Profit from Operations
14.4
10.8
Operating Margin
5.7
%
4.1
%
Other Income (Expense):
Interest Income
0.9
0.8
Interest Expense
(5.1
)
(5.0
)
Net Foreign Currency Transaction (Loss)
Gain
(4.1
)
0.2
Other Income (Expense), Net
0.2
(0.2
)
Total Other Expense, Net
(8.1
)
(4.2
)
Profit Before Income Taxes
6.3
6.6
Income Tax Expense
1.1
1.2
Net Earnings Including Noncontrolling
Interest
5.2
5.4
Net Earnings Attributable to Tennant
Company
$
5.2
$
5.4
Net Earnings Attributable to Tennant
Company per Share:
Basic
$
0.28
$
0.30
Diluted
$
0.28
$
0.29
Weighted Average Shares Outstanding:
Basic
18,286,816
18,042,468
Diluted
18,666,238
18,345,211
GEOGRAPHICAL NET SALES(1)
(Unaudited)
(In millions)
Three Months Ended
March 31
2020
2019
%
Americas
$
162.6
$
160.8
1.1
Europe, Middle East and Africa
72.0
78.1
(7.8
)
Asia Pacific
17.5
23.6
(25.8
)
Total
$
252.1
$
262.5
(4.0
)
(1) Net of intercompany sales.
TENNANT COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
March 31,
December 31,
2020
2019
ASSETS
Current Assets:
Cash, Cash Equivalents and Restricted
Cash
$
192.1
$
74.6
Receivables:
Trade, less Allowances of $3.6 and $3.6,
respectively
203.8
216.5
Other
3.3
6.8
Net Receivables
207.1
223.3
Inventories
155.2
150.1
Prepaid and Other Current Assets
30.8
33.0
Total Current Assets
585.2
481.0
Property, Plant and Equipment
416.0
412.5
Accumulated Depreciation
(242.1
)
(239.2
)
Property, Plant and Equipment, Net
173.9
173.3
Operating Lease Assets
42.8
46.6
Goodwill
191.2
195.1
Intangible Assets, Net
129.6
137.7
Other Assets
27.5
29.2
Total Assets
$
1,150.2
$
1,062.9
LIABILITIES AND TOTAL EQUITY
Current Liabilities:
Current Portion of Long-Term Debt
$
1.1
$
31.3
Accounts Payable
95.8
94.1
Employee Compensation and Benefits
40.2
63.5
Other Current Liabilities
88.0
86.0
Total Current Liabilities
225.1
274.9
Long-Term Liabilities:
Long-Term Debt
462.5
307.5
Long-Term Operating Lease Liabilities
27.3
30.3
Employee-Related Benefits
18.6
19.4
Deferred Income Taxes
39.8
41.7
Other Liabilities
18.2
27.8
Total Long-Term Liabilities
566.4
426.7
Total Liabilities
791.5
701.6
Equity:
Common Stock
6.9
6.9
Additional Paid-In Capital
49.4
45.5
Retained Earnings
347.1
346.0
Accumulated Other Comprehensive Loss
(46.1
)
(38.5
)
Total Tennant Company Shareholders’
Equity
357.3
359.9
Noncontrolling Interest
1.4
1.4
Total Equity
358.7
361.3
Total Liabilities and Total Equity
$
1,150.2
$
1,062.9
TENNANT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended
March 31
2020
2019
OPERATING ACTIVITIES
Net Earnings Including Noncontrolling
Interest
$
5.2
$
5.4
Adjustments to reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation
8.1
8.0
Amortization of Intangible Assets
5.0
5.7
Amortization of Debt Issuance Costs
0.4
0.4
Deferred Income Taxes
(2.5
)
1.3
Share-Based Compensation Expense
2.8
3.3
Allowance for Doubtful Accounts and
Returns
0.1
0.1
Other, Net
0.3
0.2
Changes in Operating Assets and
Liabilities, Net of Assets Acquired:
Receivables, Net
15.9
0.8
Inventories
(11.6
)
(20.3
)
Accounts Payable
4.3
(2.0
)
Employee Compensation and Benefits
(20.8
)
(13.6
)
Other Current Liabilities
2.6
0.3
Other Assets and Liabilities
(1.1
)
(1.2
)
Net Cash Provided by (Used in) Operating
Activities
8.7
(11.6
)
INVESTING ACTIVITIES
Purchases of Property, Plant and
Equipment
(12.4
)
(20.5
)
Proceeds from Disposals of Property, Plant
and Equipment
0.1
—
Proceeds from Principal Payments Received
on Long-Term Note Receivable
—
0.1
Acquisition of Business, Net of Cash, Cash
Equivalents and Restricted Cash Acquired
—
(9.0
)
Purchase of Intangible Assets
(0.1
)
(0.2
)
Net Cash Used in Investing Activities
(12.4
)
(29.6
)
FINANCING ACTIVITIES
Proceeds from Credit Facility
Borrowings
125.0
13.0
Repayments of Debt
(0.3
)
(8.0
)
Change in Finance Lease Obligations
(0.1
)
(0.1
)
Proceeds from Issuances of Common
Stock
2.4
0.6
Dividends Paid
(4.0
)
(4.0
)
Net Cash Provided by Financing
Activities
123.0
1.5
Effect of Exchange Rate Changes on Cash,
Cash Equivalents and Restricted Cash
(1.8
)
0.5
Net Increase (Decrease) in Cash, Cash
Equivalents and Restricted Cash
117.5
(39.2
)
Cash, Cash Equivalents and Restricted Cash
at Beginning of Period
74.6
86.1
Cash, Cash Equivalents and Restricted Cash
at End of Period
$
192.1
$
46.9
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2020
2019
Gross Profit - as reported
$
104.1
$
108.2
Gross Margin - as reported
41.3
%
41.2
%
Adjustments:
Discontinuation of Product Lines
1.7
—
Gross Profit - as adjusted
$
105.8
$
108.2
Gross Margin - as adjusted
42.0
%
41.2
%
Selling and Administrative Expense - as
reported
$
82.3
$
90.2
Selling and Administrative Expense as a
percent of Net Sales - as reported
32.6
%
34.4
%
Adjustments:
Acquisition and Integration Costs
—
(0.6
)
Professional Services
—
(0.1
)
Restructuring Charge
(0.8
)
(4.3
)
Selling and Administrative Expense - as
adjusted
$
81.5
$
85.2
Selling and Administrative Expense as a
percent of Net Sales - as adjusted
32.3
%
32.5
%
Profit from Operations - as reported
$
14.4
$
10.8
Operating Margin - as reported
5.7
%
4.1
%
Adjustments:
Discontinuation of Product Lines
1.7
—
Acquisition and Integration Costs
—
0.6
Professional Services
—
0.1
Restructuring Charge
0.8
4.3
Profit from Operations - as adjusted
$
16.9
$
15.8
Operating Margin - as adjusted
6.7
%
6.0
%
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2020
2019
Profit Before Income Taxes - as
reported
$
6.3
$
6.6
Adjustments:
Discontinuation of Product Lines
1.7
—
Acquisition and Integration Costs
—
0.6
Professional Services
—
0.1
Restructuring Charge
0.8
4.3
Amortization Expense
5.0
5.7
Profit Before Income Taxes - as
adjusted
$
13.8
$
17.3
Income Tax Expense - as reported
$
1.1
$
1.2
Adjustments:
Discontinuation of Product Lines(1)
0.4
—
Acquisition and Integration Costs(1)
—
0.1
Professional Services(1)
—
—
Restructuring Charge(1)
0.3
1.2
Amortization Expense(1)
1.4
1.4
Income Tax Expense - as adjusted
$
3.2
$
3.9
(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 millions, except per share data)
Three Months Ended
March 31
2020
2019
Net Earnings Attributable to Tennant
Company - as reported
$
5.2
$
5.4
Adjustments:
Discontinuation of Product Lines
1.3
—
Acquisition and Integration Costs
—
0.5
Professional Services
—
0.1
Restructuring Charge
0.5
3.1
Amortization Expense
3.6
4.3
Net Earnings Attributable to Tennant
Company - as adjusted
$
10.6
$
13.4
Net Earnings Attributable to Tennant
Company per Share - as reported:
Diluted
$
0.28
$
0.29
Adjustments:
Discontinuation of Product Lines
0.07
—
Acquisition and Integration Costs
—
0.03
Professional Services
—
—
Restructuring Charge
0.03
0.17
Amortization Expense
0.19
0.23
Net Earnings Attributable to Tennant
Company per Share - as adjusted
$
0.57
$
0.72
TENNANT COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL
TABLE
(In millions, except per share data)
Three Months Ended
March 31
2020
2019
Net Earnings Including Noncontrolling
Interest - as reported
$
5.2
$
5.4
Adjustments:
Interest Income
(0.9
)
(0.8
)
Interest Expense
5.1
5.0
Income Tax Expense
1.1
1.2
Depreciation Expense
8.1
8.0
Amortization Expense
5.0
5.7
Discontinuation of Product Lines
1.7
—
Acquisition and Integration Costs
—
0.6
Professional Services
—
0.1
Restructuring Charge
0.8
4.3
Earnings Before Interest, Taxes,
Depreciation & Amortization - as adjusted
$
26.1
$
29.5
EBITDA Margin - as adjusted
10.4
%
11.2
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506005171/en/
Investor Contact: William Prate Director, Investor Relations
william.prate@tennantco.com 763-540-1547
Tennant (NYSE:TNC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Tennant (NYSE:TNC)
Historical Stock Chart
From Apr 2023 to Apr 2024