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[
ü
]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2012
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________ to __________
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Minnesota
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41-0572550
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Yes
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ü
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No
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Yes
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ü
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No
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Large accelerated filer
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ü
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Yes
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No
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ü
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II - OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Item 1.
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Financial Statements
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TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
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||||||||||||||||
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Three Months Ended
|
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Nine Months Ended
|
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||||||||||||
(In thousands, except shares and per share data)
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September 30
|
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September 30
|
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||||||||||||
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2012
|
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2011
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2012
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2011
|
|
||||||||
Net Sales
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$
|
178,268
|
|
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$
|
186,990
|
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$
|
551,473
|
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$
|
560,839
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Cost of Sales
|
100,705
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106,737
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309,640
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325,188
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Gross Profit
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77,563
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80,253
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241,833
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235,651
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Operating Expense:
|
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Research and Development Expense
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7,353
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7,240
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21,558
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20,236
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Selling and Administrative Expense
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57,193
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57,250
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177,326
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181,222
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Gain on Sale of Business
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(784
|
)
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—
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(784
|
)
|
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—
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||||
Total Operating Expense
|
63,762
|
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64,490
|
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|
198,100
|
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|
201,458
|
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Profit from Operations
|
13,801
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|
15,763
|
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43,733
|
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34,193
|
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Other Income (Expense):
|
|
|
|
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|
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Interest Income
|
229
|
|
|
224
|
|
|
871
|
|
|
476
|
|
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||||
Interest Expense
|
(640
|
)
|
|
(654
|
)
|
|
(2,021
|
)
|
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(1,614
|
)
|
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||||
Net Foreign Currency Transaction (Losses) Gains
|
(385
|
)
|
|
(1,390
|
)
|
|
(1,496
|
)
|
|
49
|
|
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||||
Other Income (Expense), Net
|
99
|
|
|
—
|
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|
175
|
|
|
(33
|
)
|
|
||||
Total Other Expense, Net
|
(697
|
)
|
|
(1,820
|
)
|
|
(2,471
|
)
|
|
(1,122
|
)
|
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Profit Before Income Taxes
|
13,104
|
|
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13,943
|
|
|
41,262
|
|
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33,071
|
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Income Tax Expense
|
4,359
|
|
|
4,215
|
|
|
13,522
|
|
|
11,622
|
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||||
Net Earnings
|
$
|
8,745
|
|
|
$
|
9,728
|
|
|
$
|
27,740
|
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$
|
21,449
|
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Earnings per Share:
|
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Basic
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$
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0.47
|
|
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$
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0.52
|
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$
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1.49
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$
|
1.14
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Diluted
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$
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0.46
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$
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0.50
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$
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1.45
|
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$
|
1.10
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||||||||
Weighted Average Shares Outstanding:
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Basic
|
18,468,546
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18,741,524
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18,594,508
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18,881,132
|
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Diluted
|
19,040,875
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19,271,074
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19,154,844
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19,417,061
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Cash Dividend Declared per Common Share
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$
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0.17
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$
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0.17
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$
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0.51
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$
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0.51
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TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
||||||||||||||||
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Three Months Ended
|
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Nine Months Ended
|
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||||||||||||
(In thousands)
|
September 30
|
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September 30
|
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||||||||||||
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2012
|
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2011
|
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2012
|
|
2011
|
|
||||||||
Net Earnings
|
$
|
8,745
|
|
|
$
|
9,728
|
|
|
$
|
27,740
|
|
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$
|
21,449
|
|
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Other Comprehensive Income (Loss), net of tax:
|
|
|
|
|
|
|
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||||
Foreign currency translation adjustments
|
1,424
|
|
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(7,614
|
)
|
|
(433
|
)
|
|
(2,249
|
)
|
|
||||
Pension adjustments
|
246
|
|
|
(12
|
)
|
|
750
|
|
|
1,605
|
|
|
||||
Total Other Comprehensive Income (Loss), net of tax
|
1,670
|
|
|
(7,626
|
)
|
|
317
|
|
|
(644
|
)
|
|
||||
Comprehensive Income
|
$
|
10,415
|
|
|
$
|
2,102
|
|
|
$
|
28,057
|
|
|
$
|
20,805
|
|
|
TENNANT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
||||||||
|
September 30,
|
|
December 31,
|
|
||||
(In thousands, except shares and per share data)
|
2012
|
|
2011
|
|
||||
ASSETS
|
|
|
|
|
||||
Current Assets:
|
|
|
|
|
||||
Cash and Cash Equivalents
|
$
|
62,699
|
|
|
$
|
52,339
|
|
|
Restricted Cash
|
187
|
|
|
3,279
|
|
|
||
Accounts Receivable, less Allowances of $4,778 and $4,828, respectively
|
124,125
|
|
|
128,873
|
|
|
||
Inventories
|
60,953
|
|
|
65,912
|
|
|
||
Prepaid Expenses
|
11,653
|
|
|
10,320
|
|
|
||
Deferred Income Taxes, Current Portion
|
10,521
|
|
|
10,358
|
|
|
||
Other Current Assets
|
53
|
|
|
1,015
|
|
|
||
Total Current Assets
|
270,191
|
|
|
272,096
|
|
|
||
Property, Plant and Equipment
|
297,496
|
|
|
286,949
|
|
|
||
Accumulated Depreciation
|
(210,608
|
)
|
|
(199,795
|
)
|
|
||
Property, Plant and Equipment, Net
|
86,888
|
|
|
87,154
|
|
|
||
Deferred Income Taxes, Long-Term Portion
|
15,568
|
|
|
15,014
|
|
|
||
Goodwill
|
19,779
|
|
|
20,303
|
|
|
||
Intangible Assets, Net
|
21,912
|
|
|
23,758
|
|
|
||
Other Assets
|
8,736
|
|
|
5,937
|
|
|
||
Total Assets
|
$
|
423,074
|
|
|
$
|
424,262
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
|
||
Current Portion of Long-Term Debt
|
$
|
2,731
|
|
|
$
|
4,166
|
|
|
Accounts Payable
|
43,537
|
|
|
46,869
|
|
|
||
Employee Compensation and Benefits
|
32,300
|
|
|
32,934
|
|
|
||
Income Taxes Payable
|
1,304
|
|
|
619
|
|
|
||
Other Current Liabilities
|
37,519
|
|
|
39,404
|
|
|
||
Total Current Liabilities
|
117,391
|
|
|
123,992
|
|
|
||
Long-Term Liabilities:
|
|
|
|
|
|
|
||
Long-Term Debt
|
30,917
|
|
|
32,289
|
|
|
||
Employee-Related Benefits
|
38,022
|
|
|
40,089
|
|
|
||
Deferred Income Taxes, Long-Term Portion
|
3,240
|
|
|
3,189
|
|
|
||
Other Liabilities
|
3,895
|
|
|
3,851
|
|
|
||
Total Long-Term Liabilities
|
76,074
|
|
|
79,418
|
|
|
||
Total Liabilities
|
193,465
|
|
|
203,410
|
|
|
||
Commitments and Contingencies (Note 11)
|
|
|
|
|
|
|
||
Shareholders' Equity:
|
|
|
|
|
|
|
||
Preferred Stock, $0.02 par value; 1,000,000 shares authorized; no shares issued or outstanding
|
—
|
|
|
—
|
|
|
||
Common Stock, $0.375 par value; 60,000,000 shares authorized; 18,578,029 and 18,834,940 shares issued and outstanding, respectively
|
6,967
|
|
|
7,063
|
|
|
||
Additional Paid-In Capital
|
20,061
|
|
|
15,082
|
|
|
||
Retained Earnings
|
231,501
|
|
|
227,944
|
|
|
||
Accumulated Other Comprehensive Loss
|
(28,920
|
)
|
|
(29,237
|
)
|
|
||
Total Shareholders’ Equity
|
229,609
|
|
|
220,852
|
|
|
||
Total Liabilities and Shareholders’ Equity
|
$
|
423,074
|
|
|
$
|
424,262
|
|
|
TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
||||||||
|
Nine Months Ended
|
|
||||||
(In thousands)
|
September 30
|
|
||||||
|
2012
|
|
2011
|
|
||||
OPERATING ACTIVITIES
|
|
|
|
|
||||
Net Earnings
|
$
|
27,740
|
|
|
$
|
21,449
|
|
|
Adjustments to reconcile Net Earnings to Net Cash Provided by Operating Activities:
|
|
|
|
|
|
|
||
Depreciation
|
13,239
|
|
|
12,800
|
|
|
||
Amortization
|
2,096
|
|
|
2,533
|
|
|
||
Impairment of Intangible Assets
|
—
|
|
|
1,805
|
|
|
||
Deferred Income Taxes
|
(731
|
)
|
|
945
|
|
|
||
Stock-Based Compensation Expense
|
7,175
|
|
|
3,569
|
|
|
||
Allowance for Doubtful Accounts and Returns
|
1,528
|
|
|
747
|
|
|
||
Gain on Sale of Business
|
(784
|
)
|
|
—
|
|
|
||
Other, Net
|
130
|
|
|
400
|
|
|
||
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
||
Accounts Receivable
|
1,756
|
|
|
(2,672
|
)
|
|
||
Inventories
|
(3,097
|
)
|
|
(17,461
|
)
|
|
||
Accounts Payable
|
(2,348
|
)
|
|
11,277
|
|
|
||
Employee Compensation and Benefits
|
(2,767
|
)
|
|
134
|
|
|
||
Other Current Liabilities
|
(84
|
)
|
|
2,433
|
|
|
||
Income Taxes
|
4,902
|
|
|
1,628
|
|
|
||
Other Assets and Liabilities
|
(5,473
|
)
|
|
(3,568
|
)
|
|
||
Net Cash Provided by Operating Activities
|
43,282
|
|
|
36,019
|
|
|
||
INVESTING ACTIVITIES
|
|
|
|
|
|
|
||
Purchases of Property, Plant and Equipment
|
(11,110
|
)
|
|
(7,663
|
)
|
|
||
Proceeds from Disposals of Property, Plant and Equipment
|
280
|
|
|
485
|
|
|
||
Acquisition of Businesses, Net of Cash Acquired
|
(750
|
)
|
|
(2,916
|
)
|
|
||
Proceeds from the Sale of Business
|
1,014
|
|
|
—
|
|
|
||
Decrease in Restricted Cash
|
3,089
|
|
|
—
|
|
|
||
Net Cash Used for Investing Activities
|
(7,477
|
)
|
|
(10,094
|
)
|
|
||
FINANCING ACTIVITIES
|
|
|
|
|
|
|
||
Change in Short-Term Borrowings, Net
|
—
|
|
|
(35
|
)
|
|
||
Payment of Long-Term Debt
|
(2,450
|
)
|
|
(18,099
|
)
|
|
||
Issuance of Long-Term Debt
|
—
|
|
|
20,000
|
|
|
||
Purchases of Common Stock
|
(18,567
|
)
|
|
(17,134
|
)
|
|
||
Proceeds from Issuance of Common Stock
|
2,798
|
|
|
3,257
|
|
|
||
Tax Benefit on Stock Plans
|
1,213
|
|
|
801
|
|
|
||
Dividends Paid
|
(9,508
|
)
|
|
(9,660
|
)
|
|
||
Net Cash Used for Financing Activities
|
(26,514
|
)
|
|
(20,870
|
)
|
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
1,069
|
|
|
(311
|
)
|
|
||
Net Increase in Cash and Cash Equivalents
|
10,360
|
|
|
4,744
|
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
52,339
|
|
|
39,529
|
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
62,699
|
|
|
$
|
44,273
|
|
|
|
|
|
|
|
||||
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
||
Cash Paid for Income Taxes
|
$
|
10,319
|
|
|
$
|
8,110
|
|
|
Cash Paid for Interest
|
$
|
1,905
|
|
|
$
|
1,450
|
|
|
Supplemental Non-cash Investing and Financing Activities:
|
|
|
|
|
|
|
||
Capital Expenditures Funded Through Capital Leases
|
$
|
847
|
|
|
$
|
2,621
|
|
|
Collateralized Borrowings
|
$
|
60
|
|
|
$
|
194
|
|
|
Notes Payable Related to Water Star, Inc. Acquisition
|
$
|
750
|
|
|
$
|
1,500
|
|
|
1.
|
Basis of Presentation
|
2.
|
Newly Adopted Accounting Pronouncements
|
3.
|
Management Actions
|
|
Severance, Early Retirement and Related Costs
|
|
||
2010 restructuring action
|
$
|
1,671
|
|
|
Cash payments
|
(87
|
)
|
|
|
December 31, 2010 balance
|
$
|
1,584
|
|
|
2011 utilization:
|
|
|
|
|
Cash payments
|
(1,534
|
)
|
|
|
Foreign currency adjustments
|
(54
|
)
|
|
|
Change in estimate
|
110
|
|
|
|
December 31, 2011 balance
|
$
|
106
|
|
|
2012 utilization:
|
|
|
|
|
Cash payments
|
(64
|
)
|
|
|
Foreign currency adjustments
|
(4
|
)
|
|
|
September 30, 2012 balance
|
$
|
38
|
|
|
|
Severance and Related Costs
|
|
||
2012 restructuring action
|
$
|
760
|
|
|
Cash payments
|
(138
|
)
|
|
|
Foreign currency adjustments
|
17
|
|
|
|
September 30, 2012 balance
|
$
|
639
|
|
|
4.
|
Acquisitions and Divestitures
|
Current Assets
|
$
|
426
|
|
|
Property, Plant and Equipment, net
|
167
|
|
|
|
Identified Intangible Asset
|
3,800
|
|
|
|
Goodwill
|
472
|
|
|
|
Total Assets Acquired
|
4,865
|
|
|
|
Current Liabilities
|
409
|
|
|
|
Total Liabilities Assumed
|
409
|
|
|
|
Net Assets Acquired
|
$
|
4,456
|
|
|
Accounts Receivable
|
$
|
4,398
|
|
|
Inventory
|
4,271
|
|
|
|
Other Current Assets
|
87
|
|
|
|
Current Assets
|
8,756
|
|
|
|
Property, Plant and Equipment, net
|
170
|
|
|
|
Total Assets Divested
|
8,926
|
|
|
|
Current Liabilities
|
1,121
|
|
|
|
Total Liabilities Divested
|
1,121
|
|
|
|
Net Assets Divested
|
$
|
7,805
|
|
|
5.
|
Inventories
|
|
September 30,
2012 |
|
December 31,
2011 |
|
||||
Inventories carried at LIFO:
|
|
|
|
|
||||
Finished goods
|
$
|
36,005
|
|
|
$
|
32,648
|
|
|
Raw materials, production parts and work-in-process
|
15,072
|
|
|
16,611
|
|
|
||
LIFO reserve
|
(27,926
|
)
|
|
(27,926
|
)
|
|
||
Total LIFO inventories
|
23,151
|
|
|
21,333
|
|
|
||
Inventories carried at FIFO:
|
|
|
|
|
|
|
||
Finished goods
|
25,514
|
|
|
31,912
|
|
|
||
Raw materials, production parts and work-in-process
|
12,288
|
|
|
12,667
|
|
|
||
Total FIFO inventories
|
37,802
|
|
|
44,579
|
|
|
||
Total inventories
|
$
|
60,953
|
|
|
$
|
65,912
|
|
|
6.
|
Goodwill and Intangible Assets
|
|
Goodwill
|
|
Accumulated
Impairment
Losses
|
|
Total
|
|
||||||
Balance as of December 31, 2011
|
$
|
66,523
|
|
|
$
|
(46,220
|
)
|
|
$
|
20,303
|
|
|
Foreign currency fluctuations
|
1,641
|
|
|
(2,165
|
)
|
|
(524
|
)
|
|
|||
Balance as of September 30, 2012
|
$
|
68,164
|
|
|
$
|
(48,385
|
)
|
|
$
|
19,779
|
|
|
|
Customer Lists
and
Service Contracts
|
|
Trade
Name
|
|
Technology
|
|
Total
|
|
||||||||
Balance as of September 30, 2012
|
|
|
|
|
|
|
|
|
||||||||
Original cost
|
$
|
23,642
|
|
|
$
|
4,559
|
|
|
$
|
7,115
|
|
|
$
|
35,316
|
|
|
Accumulated amortization
|
(9,309
|
)
|
|
(1,450
|
)
|
|
(2,645
|
)
|
|
(13,404
|
)
|
|
||||
Carrying value
|
$
|
14,333
|
|
|
$
|
3,109
|
|
|
$
|
4,470
|
|
|
$
|
21,912
|
|
|
Weighted-average original life (in years)
|
15
|
|
|
14
|
|
|
13
|
|
|
|
|
|
||||
Balance as of December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Original cost
|
$
|
25,987
|
|
|
$
|
4,583
|
|
|
$
|
7,136
|
|
|
$
|
37,706
|
|
|
Accumulated amortization
|
(10,387
|
)
|
|
(1,209
|
)
|
|
(2,352
|
)
|
|
(13,948
|
)
|
|
||||
Carrying value
|
$
|
15,600
|
|
|
$
|
3,374
|
|
|
$
|
4,784
|
|
|
$
|
23,758
|
|
|
Weighted-average original life (in years)
|
14
|
|
|
14
|
|
|
13
|
|
|
|
|
|
Remaining 2012
|
$
|
575
|
|
|
2013
|
2,299
|
|
|
|
2014
|
2,240
|
|
|
|
2015
|
2,228
|
|
|
|
2016
|
2,188
|
|
|
|
Thereafter
|
12,382
|
|
|
|
Total
|
$
|
21,912
|
|
|
7.
|
Debt
|
|
September 30,
2012 |
|
December 31,
2011 |
|
||||
Long-Term Debt:
|
|
|
|
|
||||
Bank borrowings
|
$
|
25
|
|
|
$
|
49
|
|
|
Credit facility borrowings
|
30,000
|
|
|
30,000
|
|
|
||
Notes payable
|
750
|
|
|
1,500
|
|
|
||
Collateralized borrowings
|
60
|
|
|
127
|
|
|
||
Capital lease obligations
|
2,813
|
|
|
4,779
|
|
|
||
Total Long-Term Debt
|
33,648
|
|
|
36,455
|
|
|
||
Less: Current Portion
|
2,731
|
|
|
4,166
|
|
|
||
Long-Term Portion
|
$
|
30,917
|
|
|
$
|
32,289
|
|
|
•
|
a covenant requiring us to maintain an indebtedness to EBITDA ratio as of the end of each quarter of not greater than
3.00 to 1
;
|
•
|
a covenant requiring us to maintain an EBITDA to interest expense ratio as of the end of each quarter of no less than
3.50 to 1
;
|
•
|
a covenant restricting us from paying dividends or repurchasing stock if, after giving effect to such payments, our leverage ratio is greater than
2.00 to 1
, in such case limiting such payments to an amount ranging from
$50,000
to
$75,000
during any fiscal year based on our leverage ratio after giving effect to such payments; and
|
•
|
a covenant restricting our ability to make acquisitions, if, after giving pro-forma effect to such acquisition, our leverage ratio is greater than
2.75 to 1
, in such case limiting acquisitions to
$25,000
.
|
•
|
elimination of the security interest in our personal property and subsidiaries;
|
•
|
an amendment to the Maximum Leverage Ratio to not greater than
3.00 to 1
for any period ending on or after
March 31, 2011
;
|
•
|
an amendment to our restriction regarding the payment of dividends or repurchase of stock to restrict us from paying dividends or repurchasing stock if, after giving effect to such payments, our leverage ratio is greater than
2.00 to 1
, in such case limiting such payments to an amount ranging from
$50,000
to
$75,000
during any fiscal year based on our leverage ratio after giving effect to such payments; and
|
•
|
an amendment to Permitted Acquisitions restricting our ability to make acquisitions, if, after giving pro-forma effect to such acquisition, our leverage ratio is greater than
2.75 to 1
, in such case limiting acquisitions to
$25,000
.
|
8.
|
Warranty
|
|
Nine Months Ended
|
|
||||||
|
September 30
|
|
||||||
|
2012
|
|
2011
|
|
||||
Beginning balance
|
$
|
8,759
|
|
|
$
|
7,043
|
|
|
Additions charged to expense
|
9,384
|
|
|
9,404
|
|
|
||
Reserve (divested) acquired
|
(236
|
)
|
|
10
|
|
|
||
Foreign currency fluctuations
|
(37
|
)
|
|
(45
|
)
|
|
||
Claims paid
|
(8,647
|
)
|
|
(8,433
|
)
|
|
||
Ending balance
|
$
|
9,223
|
|
|
$
|
7,979
|
|
|
9.
|
Fair Value Measurements
|
•
|
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
•
|
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
•
|
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
||||
Total Assets
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts
|
$
|
169
|
|
|
$
|
—
|
|
|
$
|
169
|
|
|
$
|
—
|
|
|
Total Liabilities
|
$
|
169
|
|
|
$
|
—
|
|
|
$
|
169
|
|
|
$
|
—
|
|
|
10.
|
Retirement Benefit Plans
|
|
Three Months Ended
|
|
||||||||||||||||||||||
|
September 30
|
|
||||||||||||||||||||||
|
Pension Benefits
|
|
Postretirement
|
|
||||||||||||||||||||
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Medical Benefits
|
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||||||||
Service cost
|
$
|
175
|
|
|
$
|
163
|
|
|
$
|
33
|
|
|
$
|
25
|
|
|
$
|
34
|
|
|
$
|
33
|
|
|
Interest cost
|
485
|
|
|
503
|
|
|
131
|
|
|
122
|
|
|
140
|
|
|
153
|
|
|
||||||
Expected return on plan assets
|
(569
|
)
|
|
(581
|
)
|
|
(118
|
)
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
|
||||||
Amortization of net actuarial loss
|
281
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
||||||
Amortization of prior service cost
|
94
|
|
|
137
|
|
|
38
|
|
|
40
|
|
|
(145
|
)
|
|
(145
|
)
|
|
||||||
Foreign currency
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(325
|
)
|
|
—
|
|
|
—
|
|
|
||||||
Net periodic cost
|
$
|
466
|
|
|
$
|
229
|
|
|
$
|
74
|
|
|
$
|
(247
|
)
|
|
$
|
46
|
|
|
$
|
41
|
|
|
|
Nine Months Ended
|
|
||||||||||||||||||||||
|
September 30
|
|
||||||||||||||||||||||
|
Pension Benefits
|
|
Postretirement
|
|
||||||||||||||||||||
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Medical Benefits
|
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||||||||
Service cost
|
$
|
514
|
|
|
$
|
489
|
|
|
$
|
99
|
|
|
$
|
75
|
|
|
$
|
104
|
|
|
$
|
99
|
|
|
Interest cost
|
1,446
|
|
|
1,509
|
|
|
392
|
|
|
366
|
|
|
419
|
|
|
459
|
|
|
||||||
Expected return on plan assets
|
(1,709
|
)
|
|
(1,744
|
)
|
|
(353
|
)
|
|
(325
|
)
|
|
—
|
|
|
—
|
|
|
||||||
Amortization of net actuarial loss
|
849
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
||||||
Amortization of prior service cost
|
286
|
|
|
412
|
|
|
115
|
|
|
118
|
|
|
(435
|
)
|
|
(435
|
)
|
|
||||||
Foreign currency
|
—
|
|
|
—
|
|
|
13
|
|
|
(248
|
)
|
|
—
|
|
|
—
|
|
|
||||||
Net periodic cost
|
$
|
1,386
|
|
|
$
|
687
|
|
|
$
|
266
|
|
|
$
|
(14
|
)
|
|
$
|
139
|
|
|
$
|
123
|
|
|
11.
|
Commitments and Contingencies
|
12.
|
Income Taxes
|
13.
|
Stock-Based Compensation
|
14.
|
Earnings Per Share
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||
|
September 30
|
|
September 30
|
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Earnings
|
$
|
8,745
|
|
|
$
|
9,728
|
|
|
$
|
27,740
|
|
|
$
|
21,449
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic - Weighted Average Shares Outstanding
|
18,468,546
|
|
|
18,741,524
|
|
|
18,594,508
|
|
|
18,881,132
|
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Share-based compensation plans
|
572,329
|
|
|
529,550
|
|
|
560,336
|
|
|
535,929
|
|
|
||||
Diluted - Weighted Average Shares Outstanding
|
19,040,875
|
|
|
19,271,074
|
|
|
19,154,844
|
|
|
19,417,061
|
|
|
||||
Basic Earnings per Share
|
$
|
0.47
|
|
|
$
|
0.52
|
|
|
$
|
1.49
|
|
|
$
|
1.14
|
|
|
Diluted Earnings per Share
|
$
|
0.46
|
|
|
$
|
0.50
|
|
|
$
|
1.45
|
|
|
$
|
1.10
|
|
|
15.
|
Segment Reporting
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||
|
September 30
|
|
September 30
|
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||||
Americas
|
$
|
118,624
|
|
|
$
|
121,280
|
|
|
$
|
365,726
|
|
|
$
|
358,912
|
|
|
Europe, Middle East, Africa
|
38,355
|
|
|
44,599
|
|
|
125,573
|
|
|
139,591
|
|
|
||||
Asia Pacific
|
21,289
|
|
|
21,111
|
|
|
60,174
|
|
|
62,336
|
|
|
||||
Total
|
$
|
178,268
|
|
|
$
|
186,990
|
|
|
$
|
551,473
|
|
|
$
|
560,839
|
|
|
16.
|
Related Party Transactions
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||||||||||||||
|
September 30
|
|
September 30
|
|
||||||||||||||||||||||||
|
2012
|
|
%
|
|
2011
|
|
%
|
|
2012
|
|
%
|
|
2011
|
|
%
|
|
||||||||||||
Net Sales
|
$
|
178,268
|
|
|
100.0
|
|
|
$
|
186,990
|
|
|
100.0
|
|
|
$
|
551,473
|
|
|
100.0
|
|
|
$
|
560,839
|
|
|
100.0
|
|
|
Cost of Sales
|
100,705
|
|
|
56.5
|
|
|
106,737
|
|
|
57.1
|
|
|
309,640
|
|
|
56.1
|
|
|
325,188
|
|
|
58.0
|
|
|
||||
Gross Profit
|
77,563
|
|
|
43.5
|
|
|
80,253
|
|
|
42.9
|
|
|
241,833
|
|
|
43.9
|
|
|
235,651
|
|
|
42.0
|
|
|
||||
Operating Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and Development Expense
|
7,353
|
|
|
4.1
|
|
|
7,240
|
|
|
3.9
|
|
|
21,558
|
|
|
3.9
|
|
|
20,236
|
|
|
3.6
|
|
|
||||
Selling and Administrative Expense
|
57,193
|
|
|
32.1
|
|
|
57,250
|
|
|
30.6
|
|
|
177,326
|
|
|
32.2
|
|
|
181,222
|
|
|
32.3
|
|
|
||||
Gain on Sale of Business
|
(784
|
)
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
(784
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
||||
Total Operating Expense
|
63,762
|
|
|
35.8
|
|
|
64,490
|
|
|
34.5
|
|
|
198,100
|
|
|
35.9
|
|
|
201,458
|
|
|
35.9
|
|
|
||||
Profit from Operations
|
13,801
|
|
|
7.7
|
|
|
15,763
|
|
|
8.4
|
|
|
43,733
|
|
|
7.9
|
|
|
34,193
|
|
|
6.1
|
|
|
||||
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Income
|
229
|
|
|
0.1
|
|
|
224
|
|
|
0.1
|
|
|
871
|
|
|
0.2
|
|
|
476
|
|
|
0.1
|
|
|
||||
Interest Expense
|
(640
|
)
|
|
(0.4
|
)
|
|
(654
|
)
|
|
(0.3
|
)
|
|
(2,021
|
)
|
|
(0.4
|
)
|
|
(1,614
|
)
|
|
(0.3
|
)
|
|
||||
Net Foreign Currency Transaction (Losses) Gains
|
(385
|
)
|
|
(0.2
|
)
|
|
(1,390
|
)
|
|
(0.7
|
)
|
|
(1,496
|
)
|
|
(0.3
|
)
|
|
49
|
|
|
—
|
|
|
||||
Other Income (Expense), Net
|
99
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
175
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
||||
Total Other (Expense) Income, Net
|
(697
|
)
|
|
(0.4
|
)
|
|
(1,820
|
)
|
|
(1.0
|
)
|
|
(2,471
|
)
|
|
(0.4
|
)
|
|
(1,122
|
)
|
|
(0.2
|
)
|
|
||||
Profit Before Income Taxes
|
13,104
|
|
|
7.4
|
|
|
13,943
|
|
|
7.5
|
|
|
41,262
|
|
|
7.5
|
|
|
33,071
|
|
|
5.9
|
|
|
||||
Income Tax Expense
|
4,359
|
|
|
2.4
|
|
|
4,215
|
|
|
2.3
|
|
|
13,522
|
|
|
2.5
|
|
|
11,622
|
|
|
2.1
|
|
|
||||
Net Earnings
|
$
|
8,745
|
|
|
4.9
|
|
|
$
|
9,728
|
|
|
5.2
|
|
|
$
|
27,740
|
|
|
5.0
|
|
|
$
|
21,449
|
|
|
3.8
|
|
|
Earnings per Diluted Share
|
$0.46
|
|
|
|
$
|
0.50
|
|
|
|
|
|
$
|
1.45
|
|
|
|
|
|
$
|
1.10
|
|
|
|
|
|
2012 v. 2011
|
|
||
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30
|
|
September 30
|
|
Organic (Decline) Growth:
|
|
|
|
|
Volume
|
(2.2)%
|
|
(0.7)%
|
|
Price
|
0.5%
|
|
1.5%
|
|
Organic (Decline) Growth
|
(1.7)%
|
|
0.8%
|
|
Foreign Currency
|
(3.0)%
|
|
(2.5)%
|
|
Total
|
(4.7)%
|
|
(1.7)%
|
|
•
|
an organic sales decrease of approximately
1.7%
, excluding the effects of acquisitions and foreign currency exchange, primarily due to an approximate
0.5%
increase in pricing and an approximate
2.2%
volume decrease primarily in large industrial equipment sales; and
|
•
|
an unfavorable direct foreign currency exchange impact of approximately
3.0%
.
|
•
|
an organic sales increase of approximately
0.8%
, excluding the effects of acquisitions and foreign currency exchange, primarily due to an approximate
1.5%
increase in pricing and an approximate
0.7%
volume decrease primarily in large industrial equipment sales; and
|
•
|
an unfavorable direct foreign currency exchange impact of approximately
2.5%
.
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||||||
|
September 30
|
|
September 30
|
|
||||||||||||||||
|
2012
|
|
2011
|
|
%
|
|
2012
|
|
2011
|
|
%
|
|
||||||||
Americas
|
$
|
118,624
|
|
|
$
|
121,280
|
|
|
(2.2)
|
|
$
|
365,726
|
|
|
$
|
358,912
|
|
|
1.9
|
|
Europe, Middle East and Africa
|
38,355
|
|
|
44,599
|
|
|
(14.0)
|
|
125,573
|
|
|
139,591
|
|
|
(10.0)
|
|
||||
Asia Pacific
|
21,289
|
|
|
21,111
|
|
|
0.8
|
|
60,174
|
|
|
62,336
|
|
|
(3.5)
|
|
||||
Total
|
$
|
178,268
|
|
|
$
|
186,990
|
|
|
(4.7)
|
|
$
|
551,473
|
|
|
$
|
560,839
|
|
|
(1.7)
|
|
|
Nine Months Ended
|
|
||||||
|
September 30
|
|
||||||
|
2012
|
|
2011
|
|
||||
Operating Activities
|
$
|
43,282
|
|
|
$
|
36,019
|
|
|
Investing Activities:
|
|
|
|
|
|
|
||
Purchases of Property, Plant and Equipment, Net of Disposals
|
(10,830
|
)
|
|
(7,178
|
)
|
|
||
Acquisitions of Businesses, Net of Cash Acquired
|
(750
|
)
|
|
(2,916
|
)
|
|
||
Proceeds from Sale of Business
|
1,014
|
|
|
—
|
|
|
||
Decrease in Restricted Cash
|
3,089
|
|
|
—
|
|
|
||
Financing Activities
|
(26,514
|
)
|
|
(20,870
|
)
|
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
1,069
|
|
|
(311
|
)
|
|
||
Net (Decrease) Increase in Cash and Cash Equivalents
|
$
|
10,360
|
|
|
$
|
4,744
|
|
|
|
September 30,
2012 |
|
December 31,
2011 |
|
September 30,
2011 |
DSO
|
63
|
|
58
|
|
63
|
DIOH
|
86
|
|
88
|
|
92
|
•
|
a covenant requiring us to maintain an indebtedness to EBITDA ratio as of the end of each quarter of not greater than
3.00 to 1
;
|
•
|
a covenant requiring us to maintain an EBITDA to interest expense ratio as of the end of each quarter of no less than
3.50 to 1
;
|
•
|
a covenant restricting us from paying dividends or repurchasing stock if, after giving effect to such payments, our leverage ratio is greater than
2.00 to 1
, in such case limiting such payments to an amount ranging from
$50.0 million
to
$75.0 million
during any fiscal year based on our leverage ratio after giving effect to such payments; and
|
•
|
a covenant restricting our ability to make acquisitions, if, after giving pro-forma effect to such acquisition, our leverage ratio is greater than
2.75 to 1
, in such case limiting acquisitions to
$25.0 million
.
|
•
|
elimination of the security interest in our personal property and subsidiaries;
|
•
|
an amendment to the Maximum Leverage Ratio to not greater than
3.00 to 1
for any period ending on or after
March 31, 2011
;
|
•
|
an amendment to our restriction regarding the payment of dividends or repurchase of stock to restrict us from paying dividends or repurchasing stock if, after giving effect to such payments, our leverage ratio is greater than
2.00 to 1
, in such case limiting such payments to an amount ranging from
$50.0 million
to
$75.0 million
during any fiscal year based on our leverage ratio after giving effect to such payments; and
|
•
|
an amendment to Permitted Acquisitions restricting our ability to make acquisitions, if, after giving pro-forma effect to such acquisition, our leverage ratio is greater than
2.75 to 1
, in such case limiting acquisitions to
$25.0 million
.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
For the Quarter Ended
September 30, 2012
|
|
Total Number
of Shares
Purchased (1)
|
|
Average Price
Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
|
|||||
July 1 - 31, 2012
|
|
89
|
|
|
$
|
39.95
|
|
|
—
|
|
|
1,359,981
|
|
|
August 1 - 31, 2012
|
|
67,744
|
|
|
42.28
|
|
|
66,108
|
|
|
1,293,873
|
|
|
|
September 1 - 30, 2012
|
|
11,800
|
|
|
41.93
|
|
|
11,800
|
|
|
1,282,073
|
|
|
|
Total
|
|
79,633
|
|
|
$
|
42.22
|
|
|
77,908
|
|
|
1,282,073
|
|
|
Item 6.
|
Exhibits
|
Item #
|
|
Description
|
|
Method of Filing
|
|
3i
|
|
|
Restated Articles of Incorporation
|
|
Incorporated by reference to Exhibit 3i to the Company’s report on Form 10-Q for the quarterly period ended June 30, 2006.
|
3ii
|
|
|
Certificate of Designation
|
|
Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K for the year ended December 31, 2006.
|
3iii
|
|
|
Amended and Restated By-Laws
|
|
Incorporated by reference to Exhibit 3(iii) to the Company’s Form 8-K dated December 14, 2010.
|
10.1
|
|
|
Tennant Company Executive Nonqualified Deferred Compensation Plan, as restated effective January 1, 2009, as amended*
|
|
Filed herewith electronically.
|
10.2
|
|
|
Amendment No. 2 to Private Shelf Agreement dated as of July 24, 2012
|
|
Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K dated July 26, 2012.
|
31.1
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of CEO
|
|
Filed herewith electronically.
|
31.2
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of CFO
|
|
Filed herewith electronically.
|
32.1
|
|
|
Section 1350 Certification of CEO
|
|
Filed herewith electronically.
|
32.2
|
|
|
Section 1350 Certification of CFO
|
|
Filed herewith electronically.
|
101
|
|
|
The following financial information from Tennant Company's Quarterly Report on Form 10-Q for the period ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2012 and 2011; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011; (iii) Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (v) Notes to the Condensed Consolidated Financial Statements.**
|
|
Filed herewith electronically.
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
Date:
|
|
October 30, 2012
|
|
/s/ H. Chris Killingstad
|
|
|
|
|
H. Chris Killingstad
President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
|
October 30, 2012
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
ARTICLE 1.
|
PURPOSE AND DESCRIPTION OF PLAN
|
1
|
|
Section 1.1.
|
Purpose
|
1
|
|
Section 1.2.
|
Description of Plan
|
1
|
|
ARTICLE 2.
|
DEFINITIONS, GENDER, AND NUMBER
|
2
|
|
Section 2.1.
|
Definitions
|
2
|
|
Section 2.2.
|
Gender and Number
|
8
|
|
ARTICLE 3.
|
PARTICIPATION
|
8
|
|
Section 3.1.
|
Who May Participate
|
8
|
|
Section 3.2.
|
Time and Conditions of Participation
|
8
|
|
Section 3.3.
|
Termination and Suspension of Participation
|
8
|
|
Section 3.4.
|
Missing Persons
|
9
|
|
Section 3.5.
|
Relationship to Other Plans
|
9
|
|
ARTICLE 4.
|
ESTABLISHMENT OF AND ENTRIES TO ACCOUNTS
|
10
|
|
Section 4.1.
|
Establishment of Accounts
|
10
|
|
Section 4.2.
|
Compensation Reduction Contributions
|
10
|
|
Section 4.3.
|
Discretionary Contributions
|
14
|
|
Section 4.4.
|
Supplemental Profit Sharing Plan Contributions
|
14
|
|
Section 4.5.
|
Crediting Rate
|
15
|
|
ARTICLE 5.
|
VESTING IN ACCOUNTS
|
16
|
|
ARTICLE 6.
|
DISTRIBUTION OF ACCOUNTS
|
16
|
|
Section 6.1.
|
Benefit Commencement
|
16
|
|
Section 6.2.
|
Form of Benefit Payment
|
16
|
|
Section 6.3.
|
Payment of Accounts on Death
|
17
|
|
ARTICLE 7.
|
SUPPLEMENTAL PENSION BENEFIT
|
18
|
|
Section 7.1.
|
Eligibility to Receive Supplemental Pension Benefit
|
18
|
|
Section 7.2.
|
Amount of Supplemental Pension Benefit
|
18
|
|
Section 7.2.
|
Distribution of Supplemental Pension Benefit
|
19
|
|
Section 7.4.
|
Forfeiture for Cause Termination
|
20
|
|
ARTICLE 8.
|
EXCEPTIONS TO PLAN PAYMENT TERMS
|
20
|
|
Section 8.1.
|
Small Benefit Amounts
|
20
|
|
Section 8.2.
|
Delay of Distributions
|
21
|
|
Section 8.3.
|
Acceleration of Distributions
|
22
|
|
Section 8.4.
|
When a Payment Is Deemed to Be Made
|
24
|
|
ARTICLE 8.
|
FUNDING
|
24
|
|
Section 9.1.
|
Source of Benefits
|
24
|
|
Section 9.2.
|
No Claim on Specific Assets
|
24
|
|
ARTICLE 9.
|
ADMINISTRATION AND FINANCES
|
24
|
|
Section 10.1.
|
Administration
|
24
|
|
Section 10.2.
|
Powers of Plan Administrator
|
24
|
|
Section 10.3.
|
Actions of the Plan Administrator
|
25
|
|
Section 10.4.
|
Delegation
|
25
|
|
Section 10.5.
|
Reports and Records
|
25
|
|
Section 10.6.
|
Claims Procedure
|
25
|
|
ARTICLE 10.
|
AMENDMENTS AND TERMINATION
|
27
|
|
Section 11.1.
|
Amendments
|
27
|
|
Section 10.2.
|
Termination
|
27
|
|
ARTICLE 12.
|
MISCELLANEOUS
|
28
|
|
Section 12.1.
|
No Guarantee of Employment
|
28
|
|
Section 12.2.
|
Release
|
28
|
|
Section 12.3.
|
Notices
|
28
|
|
Section 12.4.
|
Nonalienation
|
28
|
|
Section 12.5.
|
Withholding
|
28
|
|
Section 12.6.
|
Captions
|
28
|
|
Section 12.7.
|
Binding Agreement
|
28
|
|
Section 12.8.
|
Invalidity of Certain Provisions
|
28
|
|
Section 12.9.
|
No Other Agreements
|
29
|
|
Section 12.10.
|
Incapacity
|
29
|
|
Section 12.11.
|
Counterparts
|
29
|
|
Section 12.12.
|
Participating Affiliates
|
29
|
|
Section 12.13.
|
Applicable Law
|
29
|
|
Section 12.14.
|
Electronic Media
|
29
|
|
Section 12.15.
|
USERRA Compliance
|
29
|
|
EXHIBIT A
|
|
31
|
|
(1)
|
“
Account
” means the device used to measure and determine the amount of deferred compensation to be paid to a Participant or Beneficiary under the Plan, other than pursuant to Article 7. An employee Participant shall have the opportunity to maintain two Accounts under the Plan, Account A, and Account B. A Director Participant shall have only one Account under the Plan, Account A.
|
(2)
|
“
Affiliate
” means the Company and any entity with which the Company would be considered a single employer under Code Section 414(b) (employees of controlled group of corporations) and Code Section 414(c) (employees of partnerships, proprietorships, etc., under common control).
|
(3)
|
“
Base Compensation
,” of a Participant for any Plan Year, means the total annual base salary paid by all Affiliates to such individual during such Plan Year for his or her employment with the Affiliate, including any amount that would be included in the definition of Base Compensation but for the individual's election to defer some of his or her compensation pursuant to the Plan or any other deferred compensation plan established by an Affiliate; but excluding any other remuneration paid by an Affiliate, such as overtime, severance pay, Incentive Compensation, stock options, distributions of compensation previously deferred, restricted stock, allowances for expenses (including moving expenses, travel expenses and automobile allowances), fringe benefits whether payable in cash or in a form other than cash, and disability pay. In the case of an individual who is a participant in a plan sponsored by an Affiliate that is described in Code Section 401(k), 125 or 132(f), the term Base Compensation shall include any amount that would be included in the definition of Base Compensation but for the individual's election to reduce his or her Base Compensation and have the amount of the reduction contributed to or used to purchase benefits under such plan.
|
(4)
|
“
Beneficiary
” or “
Beneficiaries
” means the persons or trusts designated by a Participant in writing pursuant to Section 6.3(b) as being entitled to receive the Participant's Accounts, or the benefit described in Section 7.3(b)(ii), by
|
(5)
|
“
Board
” means the Board of Directors of the Company as constituted at the relevant time.
|
(6)
|
“
Code
” means the Internal Revenue Code of 1986, as amended from time to time and any successor statute. References to a Code section shall be deemed to be to that section or to any successor to that section.
|
(7)
|
“
Committee
” means the Company's Retirement Committee, or any successor committee appointed by the Board to perform substantially similar functions.
|
(8)
|
“
Company
” means the Tennant Company, a Minnesota corporation, and its successors and assigns, by merger, purchase or otherwise.
|
(9)
|
“
Compensation
,” of an employee Participant for an period, means the Participant's Base Compensation, STIP Compensation, and LTIP Compensation for that period. “Compensation,” of a Director Participant for any period, means the annual retainer and meeting fees earned by the Director for that period for his or her services as a member of the Company's Board.
|
(10)
|
“
Compensation Reduction Contribution
” means a contribution to the Plan made by a Participant pursuant to a Deferral Election Agreement that the Participant enters into with the Company. Compensation Reduction Contributions shall be made according to the terms of the Plan set forth in Section 4.2.
|
(11)
|
“
Deferred Compensation Plan
” means the Tennant Company Deferred Compensation Plan, as in effect prior to January 1, 2003.
|
(12)
|
“
Deferral Election Agreement
” means the agreement described in Section 4.2 in which the Participant designates the amount of his or her Compensation that he or she wishes to contribute to the Plan, the proportion in which such contribution is to be allocated between his or her Account A and Account B under the Plan, and acknowledges and agrees to the terms of the Plan.
|
(13)
|
“
Deferred Stock Unit
” means a unit of interest under the Plan entitling a Participant to receive a share of Stock at a future date. A Deferred Stock Unit is not a present interest in Stock; rather it is a right to receive a payment under the Plan in the future in the form of Stock. Accordingly, a Participant has no rights as a shareholder of the Company with respect to any Deferred Stock Unit.
|
(14)
|
“
Director
” means a member of the Company's Board who is not an employee of the Company.
|
(15)
|
“
Domestic Relations Order
” has the same meaning as in Code Section 414(p).
|
(16)
|
“
Eligible Employee
” means any key employee of an Affiliate designated by the Committee who is a member of a select group of management or highly compensated employees of the Affiliate, within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1), and any Director.
|
(17)
|
“
Enrollment Period
, ” for a Plan Year, means the period designated by the Committee during which a Deferral Election Agreement may be entered into with respect to an Eligible Employee's Compensation for the Plan Year. The beginning and end of the Enrollment Period for a Plan Year shall be specified by the Committee from time to time, but unless an exception described in Section 4.2 applies, in no event shall the end of the Enrollment Period be later than the last day of the Plan Year immediately preceding the Plan Year in which the services giving rise to the Compensation to be deferred are performed. As described in Section 4.2, an exception may be made to this requirement for individuals who first become eligible to participate in the Plan and for Performance-based Compensation. In addition, other exceptions may be made by the Company from time to time consistent with the requirements of Section 409A.
|
(18)
|
“
ERISA
” means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. References to an ERISA section shall be deemed to be to that section or to any successor to that section
|
(19)
|
“
Excess Benefit Plan
” means the “Tennant Company Excess Benefit Plan,” as in effect prior January 1, 2003.
|
(20)
|
“
Highly-Compensated Employee
” has the same meaning as in the Profit Sharing Plan.
|
(21)
|
“
Incentive Compensation
,” of a Participant, means the Participant's STIP or LTIP Compensation.
|
(22)
|
“
LTIP
” means the Company's Long-term Incentive Plan, as in effect from time to time.
|
(23)
|
“
LTIP Compensation
,” of a Participant for a Plan Year, means the compensation (payable in cash or Stock) under the LTIP in which the Participant vests under the LTIP during the Plan Year, including any amount that would be included in the definition of LTIP Compensation but for the individual's election to defer some of his or her compensation pursuant to the Plan or any other deferred compensation plan established by an Affiliate. In the case of an individual who is a participant in a plan sponsored by an Affiliate that is described in Code Section 401(k), 125 or 132(f), the term LTIP
|
(24)
|
“
Participant
” means: (a) an Eligible Employee who has satisfied the requirements set forth in Section 3.2; and (b) and any other employee of the Company described in Section 3.1 who has satisfied the requirements set forth in Section 3.2.
|
(25)
|
“
Pension Plan
” means the “Tennant Company Pension Plan,” as in effect from time to time.
|
(26)
|
“
Performance-Based Compensation,
” of a Participant for a period, means the Incentive Compensation of the Participant for such period where the amount of, or entitlement to, the Incentive Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. Organizational or individual performance criteria are considered pre-established if established in writing by not later than 90 days after the commencement period of service to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-based Compensation may include payment based on performance criteria that are not approved by the Board or the Committee or by the stockholders of the Company. Performance-based Compensation does not include any amount or portion of any amount that will be paid either regardless of performance or based upon a level of performance that is substantially certain to be met at the time the criteria are established.
|
(27)
|
“
Plan
” means the Tennant Company Executive Nonqualified Deferred Compensation Plan, as set forth herein, and as may be amended from time to time.
|
(28)
|
“
Plan Year”
means the 12-month period commencing each January 1 and ending the following December 31.
|
(29)
|
“
Profit Sharing Plan
” means the “Tennant Company Profit Sharing Plan and Employee Stock Ownership Plan,” as may be amended from time to time.
|
(30)
|
“
Qualified Plans
” means the Profit Sharing Plan and the Pension Plan.
|
(31)
|
“
Restatement
” means the Plan, as set forth herein.
|
(32)
|
“
Section 401(a)(17) Limit
” means the dollar limit on the amount of compensation that may be taken into account under the Qualified Plans under Code Section 401(a)(17).
|
(33)
|
“
Section 401(k) Limit
” means the limit on pre-tax contributions that may be made by a Highly-Compensated Employee under a plan described in Code Section 401(k) as a result of the application of the nondiscrimination tests under Code Section 401(k)(3).
|
(34)
|
“
Section 401(m) Limit
” means the limit on matching contributions that may be made on behalf of a Highly-Compensated Employee under a plan described in Code Section 401(m) as a result of the application of the nondiscrimination tests under Code Section 401(m)(2).
|
(35)
|
“
Section 402(g) Limit
” means the limit on the amount of compensation that may be deferred by an individual on a pre-tax basis under an arrangement described in Code Section 401(k).
|
(36)
|
“
Section 409A
” means Code Section 409A.
|
(37)
|
“
Section 415 Limit
” means the limit on accruals for defined benefit plans and the limit on allocations for defined contribution plans that are imposed by Code Sections 415(b) and 415(c).
|
(38)
|
“
Separation from Service
” or “
Separate from Service
,” with respect to a Participant, means the Participant's separation from service with all Affiliates, within the meaning of Code Section 409A(a)(2)(A)(i) and the regulations under such section. Solely for this purpose, a Participant who is an Eligible Employee will be considered to have a Separation from Service when the Participant dies, retires, or otherwise has a termination of employment with all Affiliates. The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with an Affiliate under an applicable statute or by contract. For purposes hereof, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for an Affiliate. If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six months, where such impairment causes the employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the Company may substitute a 29-month period of absence for such six-month period.
|
(39)
|
“
STIP
” means the Company's Short-term Incentive Plan, as in effect from time to time.
|
(40)
|
“
STIP Compensation
,” of a Participant for a Plan Year, means the compensation earned by the Participant under the STIP for the Plan Year, including any amount that would be included in the definition of STIP Compensation but for the individual's election to defer some of his or her compensation pursuant to the Plan or any other deferred compensation plan established by an Affiliate. In the case of an individual who is a participant in a plan sponsored by an Affiliate that is described in Code Section 401(k), 125 or 132(f), the term STIP Compensation shall include any amount that would be included in the definition of STIP Compensation but for the
|
(41)
|
“
Supplemental Pension Benefit
” means the benefit described in Article 7 that supplements the benefit provided under the Pension Plan.
|
(42)
|
“
Specified Employee
” means an employee of an Affiliate who is subject to the six-month delay rule described in Code Section 409A(2)(B)(i). The Company shall establish a written policy for identifying Specified Employees in a manner consistent with Section 409A, which policy may be amended by the Company from time to time as permitted by Section 409A.
|
(43)
|
“
Stock
” means the common stock, $.375 par value per share (as such par value may be adjusted from time to time), of the Company.
|
(44)
|
“
Stock Sub-Account
,” of a Participant, means a Sub-Account maintained under an Account for the benefit of the Participant that is credited with Deferred Stock Units.
|
(i)
|
Account A
. Account A shall consist of: (i) all Compensation Reduction Contributions made to the Plan that the Participant elects to have allocated to Account A pursuant to a Deferral Election Agreement, adjusted for gains and losses thereon pursuant to Section 4.5; and (ii) all contributions made by the Company to the Plan on behalf of the Participant pursuant to Section 4.3 or 4.4, adjusted for gains and losses thereon pursuant to Section 4.5.
|
(ii)
|
Account B
. Account B shall consist of all Compensation Reduction Contributions made to the Plan that the Participant elects to have allocated to Account B, adjusted for gains and losses thereon pursuant to Section 4.5.
|
(i)
|
Base Compensation
.
Each employee Participant may elect to make a Compensation Reduction Contribution under the Plan for a Plan Year in an amount equal to any whole percentage (up to 25%) of his or her Base Compensation for the Plan Year, determined on a pay period basis.
|
(ii)
|
STIP Compensation.
Each employee Participant may elect to make a Compensation Reduction Contribution under the Plan for a Plan Year in an amount equal to any whole percentage (up to 100%) of his or her STIP Compensation for the Plan Year.
|
(iii)
|
LTIP Compensation
. Each employee Participant may elect to make a Compensation Reduction Contribution under the Plan for a Plan Year in an amount equal to any whole percentage (up to 100%) of his or her LTIP Compensation for the Plan Year that is Performance-Based Compensation.
|
(b)
|
Director Compensation
|
(i)
|
Annual Retainer
. Each Director Participant may elect to make a Compensation Reduction Contribution under the Plan for a Plan Year in an amount equal to 0%, 50% or 100% of his or her annual retainer for such Plan Year.
|
(ii)
|
Meeting Fees
. Each Director Participant may elect to make a Compensation Reduction Contribution under the Plan for a Plan Year in an amount equal to 0% or 100% of his or her meeting fees for such Plan Year
|
(a)
|
The aggregate Profit Sharing Contributions and Matching Contribution that would have been allocated to the Participant under the Profit Sharing Plan for the Plan Year if:
|
(i)
|
The amount the Participant elected to contribute under the Profit Sharing Plan as a 401(k) Contribution had been equal to four percent of his or her Certified Earnings (as adjusted pursuant to (iii) and (v), below) and had not been reduced as a result of the application of the 402(g) Limit or 401(k) Limit;
|
(ii)
|
The Matching Contribution allocated to the Participant under the Profit Sharing Plan had not been reduced as a result of the application of the 401(m) Limit;
|
(iii)
|
The Participant's Certified Earnings under the Profit Sharing Plan were not reduced as a result of the application of the 401(a)(17) Limit;
|
(iv)
|
The Participant's Annual Additions under the Profit Sharing Plan were not reduced as a result of the application of the 415 Limit;
|
(v)
|
The amount of the Participant's Base Compensation and Incentive Compensation contributed to the Plan as a Compensation Reduction Contributions (that would have been included in the Participant's Certified Earnings under the Profit Sharing Plan but for such contribution to the Plan) were included in Certified Earnings.
|
(b)
|
The amount of Profit Sharing Contributions and Matching Contributions actually allocated to the Participant under the Profit Sharing Plan for such Plan Year.
|
(c)
|
For purposes of Section 4.4(a), any amount deferred from Base Compensation or Incentive Compensation under the Plan (or the Prior Plan or Deferred Compensation Plan) that are subsequently paid to the Participant shall be excluded from Certified Earnings at the time of payment. Performance Share payouts and deferrals of such payouts shall be excluded from Certified Earning at all times.
|
(a)
|
a lump sum; or
|
(b)
|
substantially equal quarterly installments over a period of years elected by the Participant (not exceeding ten), with the Participant's Account balance credited with gains and losses (and dividend equivalents, as the case may be) pursuant to Section 4.5 during the payment period.
|
(a)
|
The amount which would have been payable under the Pension Plan if:
|
(i)
|
The limitations imposed by Section 6.11 of the Pension Plan were not applicable;
|
(ii)
|
The dollar limit in Section 2.7(f) of the Pension Plan was not applicable;
|
(iii)
|
STIP Compensation were not excluded from Certified Earnings under Section 2.7(a) of the Pension Plan;
|
(iv)
|
Compensation Reduction Contributions to the Plan (or the Deferred Compensation Plan prior to the Restatement Date) from Base Compensation and STIP Compensation, but disregarding
|
(v)
|
Deferred salary increases were included in Certified Earnings for the Plan Year in which each such amount would have been paid in the absence of the deferral (and are not included for the Plan Year in which such deferred amounts are actually paid).
|
(b)
|
The amount actually payable under the Pension Plan.
|
(A)
|
a lump sum; or
|
(B)
|
substantially equal monthly, quarterly, or annual installments over a period of years elected by the Participant (not exceeding 15).
|
(a)
|
to interpret the provisions of the Plan;
|
(b)
|
to establish and revise the method of accounting for the Plan and to maintain the Accounts; and
|
(c)
|
to establish rules for the administration of the Plan and to prescribe any forms required to administer the Plan.
|
(a)
|
the specific reasons for the adverse determination,
|
(b)
|
a reference to the specific provisions of the Plan on which the determination is based,
|
(c)
|
a description of any additional information or material necessary for the Participant to perfect the claim and an explanation of why it is needed, and
|
(d)
|
a description of the Plan's claims review procedure and the time limits applicable to such procedures, including a statement of the Participant's right to bring a civil action under ERISA Section 502(a), following an adverse benefit determination on review.
|
(a)
|
the specific reasons for the adverse determination,
|
(b)
|
a reference to the specific provisions of the Plan on which the determination is based,
|
(c)
|
a statement that the Participant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and
|
(d)
|
a statement of the Participant's right to bring a civil action under ERISA Section 502(a).
|
1.
|
Section 2.1.23 of the Plan (the definition of LTIP Compensation)
. The words “or Stock” shall be deleted from the parenthetical in the second line of Section 2.1.23 so that the section, as amended, shall read:
|
2.
|
Section 4.1(b) (Stock Sub-Accounts)
. The following sentence shall be added at the end of Section 4.1(b):
|
3.
|
Section 4.2(a)(iii) (LTIP Compensation
). The following sentence shall be added at the end of the second paragraph of Section 4.2(a)(iii):
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Tennant Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
|
October 30, 2012
|
|
/s/ H. Chris Killingstad
|
|
|
|
|
H. Chris Killingstad
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Tennant Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
|
October 30, 2012
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
|
October 30, 2012
|
|
/s/ H. Chris Killingstad
|
|
|
|
|
H. Chris Killingstad
|
|
|
|
|
President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
|
October 30, 2012
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
|
|
|
|
|
Vice President and Chief Financial Officer
|