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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 June 30, 2017
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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
|
|
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
|
ü
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No
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Yes
|
ü
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No
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Large accelerated filer
|
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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Emerging growth 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 OPERATIONS
(Unaudited)
|
||||||||||||||||
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|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(In thousands, except shares and per share data)
|
|
June 30
|
|
June 30
|
||||||||||||
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|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net Sales
|
|
$
|
270,791
|
|
|
$
|
216,828
|
|
|
$
|
461,850
|
|
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$
|
396,692
|
|
Cost of Sales
|
|
166,237
|
|
|
121,539
|
|
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277,560
|
|
|
223,901
|
|
||||
Gross Profit
|
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104,554
|
|
|
95,289
|
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184,290
|
|
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172,791
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||||
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||||||||
Operating Expense:
|
|
|
|
|
|
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||||||||
Research and Development Expense
|
|
7,886
|
|
|
8,390
|
|
|
16,332
|
|
|
16,294
|
|
||||
Selling and Administrative Expense
|
|
87,513
|
|
|
64,253
|
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161,416
|
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126,692
|
|
||||
Loss on Sale of Business
|
|
—
|
|
|
87
|
|
|
—
|
|
|
149
|
|
||||
Total Operating Expense
|
|
95,399
|
|
|
72,730
|
|
|
177,748
|
|
|
143,135
|
|
||||
Profit from Operations
|
|
9,155
|
|
|
22,559
|
|
|
6,542
|
|
|
29,656
|
|
||||
|
|
|
|
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|
||||||||
Other Income (Expense):
|
|
|
|
|
|
|
|
|
||||||||
Interest Income
|
|
793
|
|
|
40
|
|
|
877
|
|
|
81
|
|
||||
Interest Expense
|
|
(11,833
|
)
|
|
(288
|
)
|
|
(12,627
|
)
|
|
(590
|
)
|
||||
Net Foreign Currency Transaction (Losses) Gains
|
|
(336
|
)
|
|
597
|
|
|
(1,533
|
)
|
|
324
|
|
||||
Other Expense, Net
|
|
(197
|
)
|
|
(314
|
)
|
|
(218
|
)
|
|
(350
|
)
|
||||
Total Other (Expense) Income, Net
|
|
(11,573
|
)
|
|
35
|
|
|
(13,501
|
)
|
|
(535
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
(Loss) Profit Before Income Taxes
|
|
(2,418
|
)
|
|
22,594
|
|
|
(6,959
|
)
|
|
29,121
|
|
||||
Income Tax Expense (Benefit)
|
|
238
|
|
|
7,266
|
|
|
(346
|
)
|
|
9,354
|
|
||||
Net (Loss) Earnings Including Noncontrolling Interest
|
|
(2,656
|
)
|
|
15,328
|
|
|
(6,613
|
)
|
|
19,767
|
|
||||
Net Loss Attributable to Noncontrolling Interest
|
|
(65
|
)
|
|
—
|
|
|
(65
|
)
|
|
—
|
|
||||
Net (Loss) Earnings Attributable to Tennant Company
|
|
$
|
(2,591
|
)
|
|
$
|
15,328
|
|
|
$
|
(6,548
|
)
|
|
$
|
19,767
|
|
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||||||||
Net (Loss) Earnings Attributable to Tennant Company per Share:
|
|
|
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|
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||||||||
Basic
|
|
$
|
(0.15
|
)
|
|
$
|
0.88
|
|
|
$
|
(0.37
|
)
|
|
$
|
1.13
|
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Diluted
|
|
$
|
(0.15
|
)
|
|
$
|
0.85
|
|
|
$
|
(0.37
|
)
|
|
$
|
1.10
|
|
|
|
|
|
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||||||||
Weighted Average Shares Outstanding:
|
|
|
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||||||||
Basic
|
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17,693,102
|
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17,508,022
|
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17,645,090
|
|
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17,526,107
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Diluted
|
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17,693,102
|
|
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17,933,243
|
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17,645,090
|
|
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17,954,167
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||||
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||||||||
Cash Dividend Declared per Common Share
|
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$
|
0.21
|
|
|
$
|
0.20
|
|
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$
|
0.42
|
|
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$
|
0.40
|
|
TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|||||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(In thousands)
|
June 30
|
|
June 30
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net (Loss) Earnings Including Noncontrolling Interest
|
$
|
(2,656
|
)
|
|
$
|
15,328
|
|
|
$
|
(6,613
|
)
|
|
$
|
19,767
|
|
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
13,640
|
|
|
403
|
|
|
16,040
|
|
|
3,999
|
|
||||
Pension and retiree medical benefits
|
152
|
|
|
19
|
|
|
162
|
|
|
38
|
|
||||
Cash flow hedge
|
(4,506
|
)
|
|
18
|
|
|
(4,579
|
)
|
|
(429
|
)
|
||||
Income Taxes:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
5
|
|
||||
Pension and retiree medical benefits
|
(4
|
)
|
|
(7
|
)
|
|
(22
|
)
|
|
(14
|
)
|
||||
Cash flow hedge
|
1,681
|
|
|
(7
|
)
|
|
1,708
|
|
|
160
|
|
||||
Total Other Comprehensive Income, Net of Tax
|
10,963
|
|
|
425
|
|
|
13,309
|
|
|
3,759
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total Comprehensive Income Including Noncontrolling Interest
|
8,307
|
|
|
15,753
|
|
|
6,696
|
|
|
23,526
|
|
||||
Comprehensive Loss Attributable to Noncontrolling Interest
|
(65
|
)
|
|
—
|
|
|
(65
|
)
|
|
—
|
|
||||
Comprehensive Income Attributable to Tennant Company
|
$
|
8,372
|
|
|
$
|
15,753
|
|
|
$
|
6,761
|
|
|
$
|
23,526
|
|
TENNANT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|||||||
|
June 30,
|
|
December 31,
|
||||
(In thousands, except shares and per share data)
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and Cash Equivalents
|
$
|
53,305
|
|
|
$
|
58,033
|
|
Restricted Cash
|
1,243
|
|
|
517
|
|
||
Accounts Receivable, less Allowances of $2,992 and $3,108, respectively
|
199,861
|
|
|
149,134
|
|
||
Inventories
|
141,579
|
|
|
78,622
|
|
||
Prepaid Expenses
|
25,198
|
|
|
9,204
|
|
||
Other Current Assets
|
5,461
|
|
|
2,412
|
|
||
Total Current Assets
|
426,647
|
|
|
297,922
|
|
||
Property, Plant and Equipment
|
373,254
|
|
|
298,500
|
|
||
Accumulated Depreciation
|
(195,248
|
)
|
|
(186,403
|
)
|
||
Property, Plant and Equipment, Net
|
178,006
|
|
|
112,097
|
|
||
Deferred Income Taxes
|
20,157
|
|
|
13,439
|
|
||
Goodwill
|
183,250
|
|
|
21,065
|
|
||
Intangible Assets, Net
|
166,198
|
|
|
6,460
|
|
||
Other Assets
|
22,953
|
|
|
19,054
|
|
||
Total Assets
|
$
|
997,211
|
|
|
$
|
470,037
|
|
LIABILITIES AND TOTAL EQUITY
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Short-Term Borrowings and Current Portion of Long-Term Debt
|
$
|
5,307
|
|
|
$
|
3,459
|
|
Accounts Payable
|
88,572
|
|
|
47,408
|
|
||
Employee Compensation and Benefits
|
35,789
|
|
|
35,997
|
|
||
Income Taxes Payable
|
6,753
|
|
|
2,348
|
|
||
Other Current Liabilities
|
58,189
|
|
|
43,617
|
|
||
Total Current Liabilities
|
194,610
|
|
|
132,829
|
|
||
Long-Term Liabilities:
|
|
|
|
||||
Long-Term Debt
|
405,716
|
|
|
32,735
|
|
||
Employee-Related Benefits
|
25,581
|
|
|
21,134
|
|
||
Deferred Income Taxes
|
59,002
|
|
|
171
|
|
||
Other Liabilities
|
24,937
|
|
|
4,625
|
|
||
Total Long-Term Liabilities
|
515,236
|
|
|
58,665
|
|
||
Total Liabilities
|
709,846
|
|
|
191,494
|
|
||
Commitments and Contingencies (Note 14)
|
|
|
|
|
|
||
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; 17,823,292 and 17,688,350 shares issued and outstanding, respectively
|
6,684
|
|
|
6,633
|
|
||
Additional Paid-In Capital
|
9,915
|
|
|
3,653
|
|
||
Retained Earnings
|
304,170
|
|
|
318,180
|
|
||
Accumulated Other Comprehensive Loss
|
(36,614
|
)
|
|
(49,923
|
)
|
||
Total Tennant Company Shareholders' Equity
|
284,155
|
|
|
278,543
|
|
||
Noncontrolling Interest
|
3,210
|
|
|
—
|
|
||
Total Equity
|
287,365
|
|
|
278,543
|
|
||
Total Liabilities and Total Equity
|
$
|
997,211
|
|
|
$
|
470,037
|
|
TENNANT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|||||||
|
Six Months Ended
|
||||||
(In thousands)
|
June 30
|
||||||
|
2017
|
|
2016
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net (Loss) Earnings Including Noncontrolling Interest
|
$
|
(6,613
|
)
|
|
$
|
19,767
|
|
Adjustments to Reconcile Net (Loss) Earnings to Net Cash (Used in) Provided by Operating Activities:
|
|
|
|
||||
Depreciation
|
11,043
|
|
|
8,655
|
|
||
Amortization of Intangible Assets
|
3,780
|
|
|
224
|
|
||
Amortization of Debt Issuance Costs
|
466
|
|
|
77
|
|
||
Debt Issuance Cost Charges Related to Financing
|
6,200
|
|
|
—
|
|
||
Fair Value Step-Up Adjustment to Acquired Inventory
|
6,199
|
|
|
—
|
|
||
Deferred Income Taxes
|
(6,032
|
)
|
|
(1,633
|
)
|
||
Share-Based Compensation Expense
|
3,622
|
|
|
4,426
|
|
||
Allowance for Doubtful Accounts and Returns
|
697
|
|
|
606
|
|
||
Loss on Sale of Business
|
—
|
|
|
149
|
|
||
Other, Net
|
64
|
|
|
(63
|
)
|
||
Changes in Operating Assets and Liabilities:
|
|
|
|
||||
Receivables
|
(6,016
|
)
|
|
(12,314
|
)
|
||
Inventories
|
(9,854
|
)
|
|
(3,941
|
)
|
||
Accounts Payable
|
6,190
|
|
|
(389
|
)
|
||
Employee Compensation and Benefits
|
(8,262
|
)
|
|
(5,788
|
)
|
||
Other Current Liabilities
|
5,252
|
|
|
(3,936
|
)
|
||
Income Taxes
|
(1,617
|
)
|
|
6,743
|
|
||
Other Assets and Liabilities
|
(7,614
|
)
|
|
(142
|
)
|
||
Net Cash (Used in) Provided by Operating Activities
|
(2,495
|
)
|
|
12,441
|
|
||
INVESTING ACTIVITIES
|
|
|
|
||||
Purchases of Property, Plant and Equipment
|
(9,145
|
)
|
|
(14,769
|
)
|
||
Proceeds from Disposals of Property, Plant and Equipment
|
2,428
|
|
|
427
|
|
||
Issuance of Long-Term Note Receivable
|
(1,500
|
)
|
|
—
|
|
||
Acquisition of Businesses, Net of Cash Acquired
|
(354,073
|
)
|
|
—
|
|
||
Purchase of Intangible Asset
|
(2,500
|
)
|
|
—
|
|
||
Proceeds from Sale of Business
|
—
|
|
|
285
|
|
||
(Increase) Decrease in Restricted Cash
|
(118
|
)
|
|
120
|
|
||
Net Cash Used in Investing Activities
|
(364,908
|
)
|
|
(13,937
|
)
|
||
FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from Short-Term Debt
|
300,000
|
|
|
—
|
|
||
Repayments of Short-Term Debt
|
(300,000
|
)
|
|
—
|
|
||
Proceeds from Issuance of Long-Term Debt
|
440,000
|
|
|
—
|
|
||
Payments of Long-Term Debt
|
(58,471
|
)
|
|
(3,444
|
)
|
||
Payments of Debt Issuance Costs
|
(16,039
|
)
|
|
—
|
|
||
Purchases of Common Stock
|
—
|
|
|
(12,762
|
)
|
||
Proceeds from Issuances of Common Stock
|
3,843
|
|
|
1,196
|
|
||
Excess Tax Benefit on Stock Plans
|
—
|
|
|
246
|
|
||
Dividends Paid
|
(7,463
|
)
|
|
(7,058
|
)
|
||
Net Cash Provided by (Used in) Financing Activities
|
361,870
|
|
|
(21,822
|
)
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
805
|
|
|
(37
|
)
|
||
Net Decrease in Cash and Cash Equivalents
|
(4,728
|
)
|
|
(23,355
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
58,033
|
|
|
51,300
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
53,305
|
|
|
$
|
27,945
|
|
|
|
|
|
1.
|
Summary of Significant Accounting Policies
|
2.
|
Newly Adopted Accounting Pronouncements
|
•
|
For the
three and six months ended
June 30, 2017
, we recognized discrete tax benefits of
$742
and
$1,144
, respectively, in the Income Tax Expense (Benefit) line item of our Condensed Consolidated Statements of Operations related to excess tax benefits upon vesting or settlement in that period.
|
•
|
We elected to adopt the cash flow presentation of the excess tax benefits prospectively where the tax benefits are classified along with other income tax cash flows as operating cash flows in 2017. Our prior year's excess tax benefits are recognized as financing cash flows. However, other income tax cash flows are classified as operating cash flows.
|
•
|
We have elected to account for forfeitures as they occur, rather than electing to estimate the number of share-based awards expected to vest to determine the amount of compensation cost to be recognized in each period. The difference of such change is immaterial.
|
•
|
We excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the
three and six months ended
June 30, 2017
.
|
3.
|
Investment in Joint Venture
|
4.
|
Management Action
|
|
|
Severance and Related Costs
|
||
Q1 2017 restructuring action
|
|
$
|
7,057
|
|
Cash payments
|
|
(5,297
|
)
|
|
Foreign currency adjustments
|
|
110
|
|
|
June 30, 2017 balance
|
|
$
|
1,870
|
|
5.
|
Acquisitions
|
ASSETS
|
|
|
||
Restricted Cash
|
|
538
|
|
|
Receivables
|
|
40,067
|
|
|
Inventories
|
|
54,222
|
|
|
Other Current Assets
|
|
4,362
|
|
|
Assets Held for Sale
|
|
2,247
|
|
|
Property, Plant and Equipment
|
|
62,845
|
|
|
Intangible Assets Subject to Amortization:
|
|
|
||
Trade Name
|
|
29,963
|
|
|
Customer Lists
|
|
115,571
|
|
|
Noncompete Agreements
|
|
3,210
|
|
|
Other Assets
|
|
4,168
|
|
|
Total Identifiable Assets Acquired
|
|
317,193
|
|
|
LIABILITIES
|
|
|
||
Accounts Payable
|
|
31,529
|
|
|
Accrued Expenses
|
|
15,756
|
|
|
Deferred Income Taxes
|
|
58,573
|
|
|
Other Liabilities
|
|
6,967
|
|
|
Total Identifiable Liabilities Assumed
|
|
112,825
|
|
|
Net Identifiable Assets Acquired
|
|
204,368
|
|
|
Noncontrolling Interest
|
|
(3,312
|
)
|
|
Goodwill
|
|
152,713
|
|
|
Total Estimated Purchase Price, net of Cash Acquired
|
|
$
|
353,769
|
|
Pro Forma Financial Information (Unaudited)
|
|||||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(In thousands, except per share data)
|
June 30
|
|
June 30
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net Sales
|
|
|
|
|
|
|
|
||||||||
Pro forma
|
$
|
270,791
|
|
|
$
|
269,689
|
|
|
$
|
517,163
|
|
|
$
|
497,896
|
|
As reported
|
270,791
|
|
|
216,828
|
|
|
461,850
|
|
|
396,692
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Earnings (Loss) Attributable to Tennant Company
|
|
|
|
|
|
|
|
||||||||
Pro forma
|
$
|
10,308
|
|
|
$
|
13,577
|
|
|
$
|
10,260
|
|
|
$
|
15,889
|
|
As reported
|
(2,591
|
)
|
|
15,328
|
|
|
(6,548
|
)
|
|
19,767
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Earnings (Loss) Attributable to Tennant Company per Share
|
|
|
|
|
|
|
|
||||||||
Pro forma
|
$
|
0.58
|
|
|
$
|
0.76
|
|
|
$
|
0.58
|
|
|
$
|
0.88
|
|
As reported
|
(0.15
|
)
|
|
0.85
|
|
|
(0.37
|
)
|
|
1.10
|
|
•
|
Incremental amortization and depreciation expense related to the estimated fair value of the identifiable intangible assets and property, plant and equipment from the preliminary purchase price allocation
.
|
•
|
Exclusion of the purchase accounting impact of the inventory step up reported in cost of sales for the sale of acquired inventory of
$6,199
.
|
•
|
Incremental interest expense related to additional debt used to finance the acquisition.
|
•
|
Exclusion of non-recurring acquisition-related transaction and financing costs.
|
•
|
Pro forma adjustments tax affected based on the jurisdiction where the costs were incurred.
|
Current Assets
|
|
$
|
5,949
|
|
Property, Plant and Equipment, net
|
|
4,112
|
|
|
Identified Intangible Assets
|
|
6,055
|
|
|
Goodwill
|
|
1,739
|
|
|
Other Assets
|
|
7
|
|
|
Total Assets Acquired
|
|
17,862
|
|
|
Current Liabilities
|
|
4,764
|
|
|
Other Liabilities
|
|
53
|
|
|
Total Liabilities Assumed
|
|
4,817
|
|
|
Net Assets Acquired
|
|
$
|
13,045
|
|
6.
|
Divestiture
|
7.
|
Inventories
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Inventories carried at LIFO:
|
|
|
|
||||
Finished goods
|
$
|
45,562
|
|
|
$
|
39,142
|
|
Raw materials, production parts and work-in-process
|
25,107
|
|
|
23,980
|
|
||
LIFO reserve
|
(28,190
|
)
|
|
(28,190
|
)
|
||
Total LIFO inventories
|
42,479
|
|
|
34,932
|
|
||
Inventories carried at FIFO:
|
|
|
|
|
|
||
Finished goods
|
57,771
|
|
|
31,044
|
|
||
Raw materials, production parts and work-in-process
|
41,329
|
|
|
12,646
|
|
||
Total FIFO inventories
|
99,100
|
|
|
43,690
|
|
||
Total inventories
|
$
|
141,579
|
|
|
$
|
78,622
|
|
8.
|
Goodwill and Intangible Assets
|
|
Goodwill
|
|
Accumulated
Impairment
Losses
|
|
Total
|
||||||
Balance as of December 31, 2016
|
$
|
58,397
|
|
|
$
|
(37,332
|
)
|
|
$
|
21,065
|
|
Additions
|
152,713
|
|
|
—
|
|
|
152,713
|
|
|||
Purchase accounting adjustments
|
(2,048
|
)
|
|
—
|
|
|
(2,048
|
)
|
|||
Foreign currency fluctuations
|
13,736
|
|
|
(2,216
|
)
|
|
11,520
|
|
|||
Balance as of June 30, 2017
|
$
|
222,798
|
|
|
$
|
(39,548
|
)
|
|
$
|
183,250
|
|
|
Customer Lists
|
|
Trade Name
|
|
Technology
|
|
Noncompete Agreement
|
|
Total
|
||||||||||
Balance as of June 30, 2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Original cost
|
$
|
136,503
|
|
|
$
|
33,954
|
|
|
$
|
5,247
|
|
|
$
|
3,424
|
|
|
$
|
179,128
|
|
Accumulated amortization
|
(8,697
|
)
|
|
(823
|
)
|
|
(2,982
|
)
|
|
(428
|
)
|
|
(12,930
|
)
|
|||||
Carrying value
|
$
|
127,806
|
|
|
$
|
33,131
|
|
|
$
|
2,265
|
|
|
$
|
2,996
|
|
|
$
|
166,198
|
|
Weighted average original life (in years)
|
15
|
|
|
11
|
|
|
14
|
|
|
2
|
|
|
|
|
|||||
Balance as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Original cost
|
$
|
8,016
|
|
|
$
|
2,000
|
|
|
$
|
5,136
|
|
|
$
|
—
|
|
|
$
|
15,152
|
|
Accumulated amortization
|
(5,948
|
)
|
|
—
|
|
|
(2,744
|
)
|
|
—
|
|
|
(8,692
|
)
|
|||||
Carrying value
|
$
|
2,068
|
|
|
$
|
2,000
|
|
|
$
|
2,392
|
|
|
$
|
—
|
|
|
$
|
6,460
|
|
Weighted average original life (in years)
|
15
|
|
|
15
|
|
|
13
|
|
|
0
|
|
|
|
|
Remaining 2017
|
$
|
7,043
|
|
2018
|
14,085
|
|
|
2019
|
12,801
|
|
|
2020
|
12,374
|
|
|
2021
|
12,374
|
|
|
Thereafter
|
107,521
|
|
|
Total
|
$
|
166,198
|
|
9.
|
Debt
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Long-Term Debt:
|
|
|
|
||||
Senior Unsecured Notes
|
$
|
300,000
|
|
|
$
|
—
|
|
Credit Facility Borrowings
|
117,750
|
|
|
36,143
|
|
||
Capital Lease Obligations
|
688
|
|
|
51
|
|
||
Total Long-Term Debt
|
418,438
|
|
|
36,194
|
|
||
Less: Unamortized Debt Issuance Costs
|
(7,415
|
)
|
|
—
|
|
||
Less: Current Maturities of Credit Facility Borrowings, Net of Debt Issuance Costs
(1)
|
(4,905
|
)
|
|
(3,459
|
)
|
||
Less: Current Maturities of Capital Lease Obligations
(1)
|
(402
|
)
|
|
—
|
|
||
Long-Term Portion, Net
|
$
|
405,716
|
|
|
$
|
32,735
|
|
(1)
|
Current maturities of long-term debt includes
$5,000
of current maturities, less
$95
of unamortized debt issuance costs, under our 2017 Credit Agreement and
$402
of current maturities of capital lease obligations.
|
10.
|
Warranty
|
|
Six Months Ended
|
||||||
|
June 30
|
||||||
|
2017
|
|
2016
|
||||
Beginning balance
|
$
|
10,960
|
|
|
$
|
10,093
|
|
Additions charged to expense
|
5,815
|
|
|
5,946
|
|
||
Acquired warranty obligations
|
384
|
|
|
—
|
|
||
Foreign currency fluctuations
|
154
|
|
|
48
|
|
||
Claims paid
|
(5,872
|
)
|
|
(5,766
|
)
|
||
Ending balance
|
$
|
11,441
|
|
|
$
|
10,321
|
|
11.
|
Derivatives
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
|
Fair Value Asset Derivatives
|
|
Fair Value Liability Derivatives
|
|
Fair Value Asset Derivatives
|
|
Fair Value Liability Derivatives
|
||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency option contracts
(1)
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
184
|
|
|
$
|
—
|
|
Foreign currency forward contracts
(1)
|
|
10,154
|
|
|
26,090
|
|
|
—
|
|
|
13
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency option contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts
(1)
|
|
$
|
713
|
|
|
$
|
1,324
|
|
|
$
|
12
|
|
|
$
|
162
|
|
(1)
|
Contracts that mature within the next 12 months are included in Other Current Assets and Other Current Liabilities for asset derivatives and liability derivatives, respectively, on our Condensed Consolidated Balance Sheets. Contracts with maturities greater than 12 months are included in Other Assets and Other Liabilities for asset derivatives and liability derivatives, respectively, on our Condensed Consolidated Balance Sheets. Amounts included in our Condensed Consolidated Balance Sheets are recorded net where a right of offset exists with the same derivative counterparty.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30, 2017
|
|
June 30, 2017
|
||||||||||||
|
|
Foreign Currency Option Contracts
|
|
Foreign Currency Forward Contracts
|
|
Foreign Currency Option Contracts
|
|
Foreign Currency Forward Contracts
|
||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
Net loss recognized in Other Comprehensive Income, net of
tax
(1)
|
|
$
|
(47
|
)
|
|
$
|
(9,517
|
)
|
|
$
|
(137
|
)
|
|
$
|
(9,534
|
)
|
Net gain (loss) reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Net Sales
|
|
43
|
|
|
(83
|
)
|
|
1
|
|
|
(102
|
)
|
||||
Net gain reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Interest Income
|
|
—
|
|
|
449
|
|
|
—
|
|
|
449
|
|
||||
Net loss reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Net Foreign Currency Transaction (Losses) Gains
|
|
—
|
|
|
(7,148
|
)
|
|
—
|
|
|
(7,148
|
)
|
||||
Net (loss) gain recognized in earnings
(2)
|
|
(4
|
)
|
|
3
|
|
|
(5
|
)
|
|
5
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Net loss recognized in earnings
(3)
|
|
$
|
—
|
|
|
$
|
(3,939
|
)
|
|
$
|
(1,132
|
)
|
|
$
|
(5,307
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30, 2016
|
|
June 30, 2016
|
||||||||||||
|
|
Foreign Currency Option Contracts
|
|
Foreign Currency Forward Contracts
|
|
Foreign Currency Option Contracts
|
|
Foreign Currency Forward Contracts
|
||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
Net loss recognized in Other Comprehensive Income, net of tax
(1)
|
|
$
|
(44
|
)
|
|
$
|
(29
|
)
|
|
$
|
(230
|
)
|
|
$
|
(65
|
)
|
Net loss reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Net Sales
|
|
—
|
|
|
(84
|
)
|
|
—
|
|
|
(26
|
)
|
||||
Net loss recognized in earnings
(2)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Net loss recognized in earnings
(3)
|
|
$
|
—
|
|
|
$
|
(371
|
)
|
|
$
|
—
|
|
|
$
|
(2,062
|
)
|
(1)
|
Net change in the fair value of the effective portion classified in Other Comprehensive Income.
|
(2)
|
Ineffective portion and amount excluded from effectiveness testing classified in Net Foreign Currency Transaction (Losses) Gains.
|
(3)
|
Classified in Net Foreign Currency Transaction (Losses) Gains.
|
12.
|
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
|
$
|
10,867
|
|
|
$
|
—
|
|
|
$
|
10,867
|
|
|
$
|
—
|
|
Foreign currency option contracts
|
78
|
|
|
—
|
|
|
78
|
|
|
—
|
|
||||
Total Assets
|
$
|
10,945
|
|
|
$
|
—
|
|
|
$
|
10,945
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts
|
$
|
27,414
|
|
|
$
|
—
|
|
|
$
|
27,414
|
|
|
$
|
—
|
|
Foreign currency option contracts
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total Liabilities
|
$
|
27,414
|
|
|
$
|
—
|
|
|
$
|
27,414
|
|
|
$
|
—
|
|
13.
|
Retirement Benefit Plans
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
June 30
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
Postretirement
|
||||||||||||||||||||
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Medical Benefits
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Service cost
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
24
|
|
|
$
|
36
|
|
|
$
|
20
|
|
|
$
|
24
|
|
Interest cost
|
|
390
|
|
|
415
|
|
|
129
|
|
|
103
|
|
|
90
|
|
|
100
|
|
||||||
Expected return on plan assets
|
|
(586
|
)
|
|
(603
|
)
|
|
(101
|
)
|
|
(97
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of net actuarial loss
|
|
11
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service cost
|
|
—
|
|
|
10
|
|
|
49
|
|
|
32
|
|
|
—
|
|
|
—
|
|
||||||
Settlement charge
|
|
205
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign currency
|
|
—
|
|
|
—
|
|
|
234
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
||||||
Net periodic cost (benefit)
|
|
$
|
20
|
|
|
$
|
(73
|
)
|
|
$
|
335
|
|
|
$
|
58
|
|
|
$
|
110
|
|
|
$
|
124
|
|
|
|
Six Months Ended
|
||||||||||||||||||||||
|
|
June 30
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
Postretirement
|
||||||||||||||||||||
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Medical Benefits
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Service cost
|
|
$
|
—
|
|
|
$
|
177
|
|
|
$
|
48
|
|
|
$
|
72
|
|
|
$
|
40
|
|
|
$
|
48
|
|
Interest cost
|
|
780
|
|
|
830
|
|
|
219
|
|
|
208
|
|
|
181
|
|
|
199
|
|
||||||
Expected return on plan assets
|
|
(1,171
|
)
|
|
(1,200
|
)
|
|
(197
|
)
|
|
(194
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of net actuarial loss
|
|
21
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service cost
|
|
—
|
|
|
21
|
|
|
96
|
|
|
64
|
|
|
—
|
|
|
—
|
|
||||||
Settlement charge
|
|
205
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign currency
|
|
—
|
|
|
—
|
|
|
229
|
|
|
24
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic (benefit) cost
|
|
$
|
(165
|
)
|
|
$
|
(155
|
)
|
|
$
|
395
|
|
|
$
|
174
|
|
|
$
|
221
|
|
|
$
|
247
|
|
14.
|
Commitments and Contingencies
|
Remaining 2017
|
|
$
|
7,702
|
|
2018
|
|
10,540
|
|
|
2019
|
|
7,074
|
|
|
2020
|
|
4,380
|
|
|
2021
|
|
2,488
|
|
|
Thereafter
|
|
4,183
|
|
|
Total
|
|
$
|
36,367
|
|
15.
|
Accumulated Other Comprehensive Loss
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Foreign currency translation adjustments
|
$
|
(28,404
|
)
|
|
$
|
(44,444
|
)
|
Pension and retiree medical benefits
|
(5,251
|
)
|
|
(5,391
|
)
|
||
Cash flow hedge
|
(2,959
|
)
|
|
(88
|
)
|
||
Total Accumulated Other Comprehensive Loss
|
$
|
(36,614
|
)
|
|
$
|
(49,923
|
)
|
|
Foreign Currency Translation Adjustments
|
|
Pension and Post Retirement Benefits
|
|
Cash Flow Hedge
|
|
Total
|
||||||||
December 31, 2016
|
$
|
(44,444
|
)
|
|
$
|
(5,391
|
)
|
|
$
|
(88
|
)
|
|
$
|
(49,923
|
)
|
Other comprehensive income (loss) before reclassifications
|
16,040
|
|
|
127
|
|
|
(9,671
|
)
|
|
6,496
|
|
||||
Amounts reclassified from Accumulated Other Comprehensive Loss
|
—
|
|
|
13
|
|
|
6,800
|
|
|
6,813
|
|
||||
Net current period other comprehensive income (loss)
|
$
|
16,040
|
|
|
$
|
140
|
|
|
$
|
(2,871
|
)
|
|
$
|
13,309
|
|
June 30, 2017
|
$
|
(28,404
|
)
|
|
$
|
(5,251
|
)
|
|
$
|
(2,959
|
)
|
|
$
|
(36,614
|
)
|
16.
|
Income Taxes
|
17.
|
Share-Based Compensation
|
18.
|
(Loss) Earnings Attributable to Tennant Company Per Share
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net (Loss) Earnings Attributable to Tennant Company
|
$
|
(2,591
|
)
|
|
$
|
15,328
|
|
|
$
|
(6,548
|
)
|
|
$
|
19,767
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic - Weighted Average Shares Outstanding
|
17,693,102
|
|
|
17,508,022
|
|
|
17,645,090
|
|
|
17,526,107
|
|
||||
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
||||||||
Share-Based Compensation Plans
|
—
|
|
|
425,221
|
|
|
—
|
|
|
428,060
|
|
||||
Diluted - Weighted Average Shares Outstanding
|
17,693,102
|
|
|
17,933,243
|
|
|
17,645,090
|
|
|
17,954,167
|
|
||||
Basic (Loss) Earnings per Share
|
$
|
(0.15
|
)
|
|
$
|
0.88
|
|
|
$
|
(0.37
|
)
|
|
$
|
1.13
|
|
Diluted (Loss) Earnings per Share
|
$
|
(0.15
|
)
|
|
$
|
0.85
|
|
|
$
|
(0.37
|
)
|
|
$
|
1.10
|
|
19.
|
Segment Reporting
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Americas
|
$
|
169,146
|
|
|
$
|
163,857
|
|
|
$
|
311,916
|
|
|
$
|
297,410
|
|
EMEA
|
77,356
|
|
|
34,391
|
|
|
110,632
|
|
|
65,124
|
|
||||
APAC
|
24,289
|
|
|
18,580
|
|
|
39,302
|
|
|
34,158
|
|
||||
Total
|
$
|
270,791
|
|
|
$
|
216,828
|
|
|
$
|
461,850
|
|
|
$
|
396,692
|
|
20.
|
Related Party Transactions
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
June 30
|
|
June 30
|
||||||||||||||||||||||||
|
2017
|
|
%
|
|
2016
|
|
%
|
|
2017
|
|
%
|
|
2016
|
|
%
|
||||||||||||
Net Sales
|
$
|
270,791
|
|
|
100.0
|
|
|
$
|
216,828
|
|
|
100.0
|
|
|
$
|
461,850
|
|
|
100.0
|
|
|
$
|
396,692
|
|
|
100.0
|
|
Cost of Sales
|
166,237
|
|
|
61.4
|
|
|
121,539
|
|
|
56.1
|
|
|
277,560
|
|
|
60.1
|
|
|
223,901
|
|
|
56.4
|
|
||||
Gross Profit
|
104,554
|
|
|
38.6
|
|
|
95,289
|
|
|
43.9
|
|
|
184,290
|
|
|
39.9
|
|
|
172,791
|
|
|
43.6
|
|
||||
Operating Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and Development Expense
|
7,886
|
|
|
2.9
|
|
|
8,390
|
|
|
3.9
|
|
|
16,332
|
|
|
3.5
|
|
|
16,294
|
|
|
4.1
|
|
||||
Selling and Administrative Expense
|
87,513
|
|
|
32.3
|
|
|
64,253
|
|
|
29.6
|
|
|
161,416
|
|
|
34.9
|
|
|
126,692
|
|
|
31.9
|
|
||||
Loss on Sale of Business
|
—
|
|
|
—
|
|
|
87
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149
|
|
|
—
|
|
||||
Total Operating Expense
|
95,399
|
|
|
35.2
|
|
|
72,730
|
|
|
33.5
|
|
|
177,748
|
|
|
38.5
|
|
|
143,135
|
|
|
36.1
|
|
||||
Profit from Operations
|
9,155
|
|
|
3.4
|
|
|
22,559
|
|
|
10.4
|
|
|
6,542
|
|
|
1.4
|
|
|
29,656
|
|
|
7.5
|
|
||||
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest Income
|
793
|
|
|
0.3
|
|
|
40
|
|
|
—
|
|
|
877
|
|
|
0.2
|
|
|
81
|
|
|
—
|
|
||||
Interest Expense
|
(11,833
|
)
|
|
(4.4
|
)
|
|
(288
|
)
|
|
(0.1
|
)
|
|
(12,627
|
)
|
|
(2.7
|
)
|
|
(590
|
)
|
|
(0.1
|
)
|
||||
Net Foreign Currency Transaction (Losses) Gains
|
(336
|
)
|
|
(0.1
|
)
|
|
597
|
|
|
0.3
|
|
|
(1,533
|
)
|
|
(0.3
|
)
|
|
324
|
|
|
0.1
|
|
||||
Other Expense, Net
|
(197
|
)
|
|
(0.1
|
)
|
|
(314
|
)
|
|
(0.1
|
)
|
|
(218
|
)
|
|
—
|
|
|
(350
|
)
|
|
(0.1
|
)
|
||||
Total Other (Expense) Income, Net
|
(11,573
|
)
|
|
(4.3
|
)
|
|
35
|
|
|
—
|
|
|
(13,501
|
)
|
|
(2.9
|
)
|
|
(535
|
)
|
|
(0.1
|
)
|
||||
(Loss) Profit Before Income Taxes
|
(2,418
|
)
|
|
(0.9
|
)
|
|
22,594
|
|
|
10.4
|
|
|
(6,959
|
)
|
|
(1.5
|
)
|
|
29,121
|
|
|
7.3
|
|
||||
Income Tax Expense (Benefit)
|
238
|
|
|
0.1
|
|
|
7,266
|
|
|
3.4
|
|
|
(346
|
)
|
|
(0.1
|
)
|
|
9,354
|
|
|
2.4
|
|
||||
Net (Loss) Earnings Including Noncontrolling Interest
|
(2,656
|
)
|
|
(1.0
|
)
|
|
15,328
|
|
|
7.1
|
|
|
(6,613
|
)
|
|
(1.4
|
)
|
|
19,767
|
|
|
5.0
|
|
||||
Net Loss Attributable to Noncontrolling Interest
|
(65
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net (Loss) Earnings Attributable to Tennant Company
|
$
|
(2,591
|
)
|
|
(1.0
|
)
|
|
$
|
15,328
|
|
|
7.1
|
|
|
$
|
(6,548
|
)
|
|
(1.4
|
)
|
|
$
|
19,767
|
|
|
5.0
|
|
Net (Loss) Earnings Attributable to Tennant Company per Diluted Share
|
$
|
(0.15
|
)
|
|
|
|
$
|
0.85
|
|
|
|
|
|
$
|
(0.37
|
)
|
|
|
|
$
|
1.10
|
|
|
|
|
2017 v. 2016
|
||
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30
|
|
June 30
|
Organic Growth:
|
|
|
|
Volume
|
(3.3%)
|
|
—%
|
Price
|
1.0%
|
|
1.0%
|
Organic Growth
|
(2.3%)
|
|
1.0%
|
Foreign Currency
|
(1.0%)
|
|
(0.5%)
|
Acquisitions & Divestiture
|
28.2%
|
|
15.9%
|
Total
|
24.9%
|
|
16.4%
|
•
|
An organic sales decrease of approximately
2.3%
which excludes the effects of foreign currency exchange and acquisitions and divestitures, due to an approximate
3.3%
volume decrease and a
1.0%
price increase. The volume decrease was primarily due to decreased sales in the Americas and Europe, Middle East and Africa ("EMEA") regions. These decreases were partially offset by higher sales in the Asia Pacific ("APAC") region. Sales of new products introduced within the past three years totaled 49% of equipment revenue for the second quarter of 2017. This compares to 34% of equipment revenue in the 2016 second quarter from sales of new products introduced within the past three years. The price increase was the result of selling price increases, typically in the range of 2 percent to 4 percent in most geographies, with an effective date of February 1, 2017. We expect the increase in selling prices to increase Net Sales in the range of 1 percent to 2 percent for the 2017 full year. The impact to gross margin is estimated to be minimal as these selling price increases were taken to offset inflation.
|
•
|
An unfavorable direct foreign currency translation exchange impact of approximately 1.0%.
|
•
|
A favorable impact of 28.2% resulting from the April 2017 acquisition of the IPC Group and the expansion of our commercial floor coatings business through the August 2016 acquisition of the Florock® brand.
|
•
|
An organic sales increase of approximately 1.0% which excludes the effects of foreign currency exchange and acquisitions and divestitures, due to an approximate 0.0% volume increase and a 1.0% price increase. The volume increase in the EMEA region was offset by volume decreases in the Americas and APAC regions. Sales of new products introduced within the past three years totaled 45% of equipment revenue for the first six months of 2017. This compares to 35% of equipment revenue in the first six months of 2016 from sales of new products introduced within the past three years. The price increase was the result of selling price increases, typically in the range of 2 percent to 4 percent in most geographies, with an effective date of February 1, 2017. We expect the increase in selling prices to increase Net Sales in the range of 1 percent to 2 percent for the 2017 full year. The impact to gross margin is estimated to be minimal as these selling price increases were taken to offset inflation.
|
•
|
An unfavorable direct foreign currency translation exchange impact of approximately 0.5%.
|
•
|
A favorable net impact of 15.9% resulting from the April 2017 acquisition of the IPC Group and the expansion of our commercial floor coatings business through the August 2016 acquisition of the Florock brand, partially offset by the sale of our Green Machines outdoor city cleaning line in January 2016.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||
|
|
June 30
|
|
June 30
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
%
|
|
2017
|
|
2016
|
|
%
|
||||||||
Americas
|
|
$
|
169,146
|
|
|
$
|
163,857
|
|
|
3.2
|
|
$
|
311,916
|
|
|
$
|
297,410
|
|
|
4.9
|
Europe, Middle East and Africa
|
|
77,356
|
|
|
34,391
|
|
|
124.9
|
|
110,632
|
|
|
65,124
|
|
|
69.9
|
||||
Asia Pacific
|
|
24,289
|
|
|
18,580
|
|
|
30.7
|
|
39,302
|
|
|
34,158
|
|
|
15.1
|
||||
Total
|
|
$
|
270,791
|
|
|
$
|
216,828
|
|
|
24.9
|
|
$
|
461,850
|
|
|
$
|
396,692
|
|
|
16.4
|
|
Six Months Ended
|
||||||
|
June 30
|
||||||
|
2017
|
|
2016
|
||||
Operating Activities
|
$
|
(2,495
|
)
|
|
$
|
12,441
|
|
Investing Activities:
|
|
|
|
||||
Purchases of Property, Plant and Equipment, Net of Disposals
|
(6,717
|
)
|
|
(14,342
|
)
|
||
Issuance of Long-Term Note Receivable
|
(1,500
|
)
|
|
—
|
|
||
Acquisition of Businesses, Net of Cash Acquired
|
(354,073
|
)
|
|
—
|
|
||
Purchase of Intangible Asset
|
(2,500
|
)
|
|
—
|
|
||
Proceeds from Sale of Business
|
—
|
|
|
285
|
|
||
(Increase) Decrease in Restricted Cash
|
(118
|
)
|
|
120
|
|
||
Financing Activities
|
361,870
|
|
|
(21,822
|
)
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
805
|
|
|
(37
|
)
|
||
Net Decrease in Cash and Cash Equivalents
|
$
|
(4,728
|
)
|
|
$
|
(23,355
|
)
|
|
June 30,
2017 |
|
December 31,
2016 |
|
June 30,
2016 |
DSO
|
63
|
|
59
|
|
60
|
DIOH
|
98
|
|
89
|
|
86
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
•
|
Sponsoring ongoing training related to the COSO 2013 Framework best practices for personnel that are accountable for internal control over financing reporting.
|
•
|
Performing a complete review of our accounting for revenue related to equipment maintenance and repair service to ensure the adequacy of the design and implementation of automated and manual controls.
|
•
|
Designing and implementing controls over the determination of technological feasibility and the capitalization of software development costs.
|
Item 1.
|
Legal Proceedings
|
•
|
our ability to obtain financing for future working capital needs or acquisitions or other purposes may be limited;
|
•
|
our funds available for operations, expansions, dividends or other distributions, or stock repurchases may be reduced because we dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our indebtedness;
|
•
|
our ability to conduct our business could be limited by restrictive covenants; and
|
•
|
our vulnerability to adverse economic conditions may be greater than less leveraged competitors and, thus, our ability to withstand competitive pressures may be limited.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
For the Quarter Ended June 30, 2017
|
|
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
|
|||||
April 1 - 30, 2017
|
|
3,650
|
|
|
$
|
73.24
|
|
|
—
|
|
|
1,393,965
|
|
May 1 - 31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,393,965
|
|
|
June 1 - 30, 2017
|
|
136
|
|
|
71.70
|
|
|
—
|
|
|
1,393,965
|
|
|
Total
|
|
3,786
|
|
|
$
|
73.18
|
|
|
—
|
|
|
1,393,965
|
|
(1)
|
Includes 3,786 shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by employees who exercised stock options or restricted stock under employee share-based compensation plans.
|
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
|
|
|
Amended and Restated By-Laws
|
|
Incorporated by reference to Exhibit 3iii to the Company’s Current Report on Form 8-K dated December 14, 2010.
|
4.1
|
|
|
Indenture dated as of April 18, 2017
|
|
Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed April 24, 2017.
|
4.2
|
|
|
Registration Rights Agreement dated April 18, 2017
|
|
Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed April 24, 2017.
|
10.1
|
|
|
Credit Agreement dated as of April 4, 2017
|
|
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 5, 2017 and the Company's Current Report on Form 8-K/A filed July 27, 2017.
|
10.2
|
|
|
2017 Stock Incentive Plan
|
|
Incorporated by reference to Appendix A on the Company's Proxy Statement for the 2017 Annual Meeting of Shareholders filed March 15, 2017.
|
10.3
|
|
|
Form of Tennant Company 2017 Stock Incentive Plan Non-Statutory Stock Option Agreement
|
|
Filed herewith electronically.
|
10.4
|
|
|
Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock Agreement
|
|
Filed herewith electronically.
|
10.5
|
|
|
Form of Tennant Company 2017 Stock Incentive Plan Non-Employee Director Restricted Stock Agreement
|
|
Filed herewith electronically.
|
10.6
|
|
|
Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock Unit Agreement
|
|
Filed herewith electronically.
|
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 June 30, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2017 and 2016; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016; (iii) Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016; and (v) Notes to the Condensed Consolidated Financial Statements
|
|
Filed herewith electronically.
|
|
|
|
|
TENNANT COMPANY
|
|
|
|
|
|
Date:
|
|
August 9, 2017
|
|
/s/ H. Chris Killingstad
|
|
|
|
|
H. Chris Killingstad
President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
|
August 9, 2017
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
Name of Optionee:
|
|
No. of Shares Covered:
|
Date of Grant:
|
Exercise Price Per Share:
$
|
Vesting:
No. of Shares
Date
|
1.
|
Grant
. The Optionee is granted this Option to purchase the number of Shares specified at the beginning of this Agreement.
|
2.
|
Exercise Price
. The purchase price to the Optionee of each Share subject to this Option shall be the exercise price specified at the beginning of this Agreement.
|
3.
|
Non-Statutory Stock Option
. This Option is
not
intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
|
4.
|
Exercise Schedule
. This Option shall vest in accordance with the schedule specified at the beginning of this Agreement. If this Option has not expired prior thereto, it may be exercised at any time with respect to any or all of the Shares as to which this Option has vested.
|
5.
|
Expiration
. This Option shall expire at 5:00 p.m. Central Time on the earliest of:
|
(b)
|
The last day of the period following the termination of employment of the Optionee during which this Option can be exercised (as specified in Section 7 of this Agreement); or
|
6.
|
Procedure to Exercise Option
.
|
(a)
|
Notice of Exercise
. Inquiries regarding forms and procedures for exercising options should be directed to a Merrill Lynch Participant Service Representative at (877) 767-2404. If the person exercising this Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise this Option.
|
(b)
|
Tender of Payment
. Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the purchase price of the Shares being purchased and the amount of any tax withholding required in connection with such exercise as provided in Section 14 of the Plan through one or a combination of the following methods:
|
(c)
|
Delivery of Shares
. As soon as practicable after the Company receives the notice of exercise and payment provided for above, it shall deliver to the person exercising the Option, in the name of such person, a certificate or certificates representing the Shares being purchased (net of the number of Shares sold or withheld, if any, to pay the exercise price and withholding tax). The Company may alternatively satisfy this obligation to deliver Shares by a book entry made in the records of the Company’s transfer agent or by electronically transferring such shares to an account designated by the person exercising the Option. Notwithstanding anything to the contrary in this Agreement, the Company shall not be required to issue or deliver any Shares prior to the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or desirable.
|
7.
|
Employment Requirement
. This Option may be exercised only while the Optionee remains employed with the Company or an Affiliate thereof, and only if the Optionee has been continuously so employed since the date of this Agreement; provided that:
|
(a)
|
This Option may be exercised within one year after the Optionee’s employment by the Company ceases if such cessation of employment is because of death or Disability;
|
(b)
|
This Option may be exercised within three months after the Optionee’s employment by the Company ceases if such cessation of employment is because of Retirement; provided that if the Optionee has provided the Company with six months’ prior written notice of the Optionee’s intention to Retire, and if there are no special payments made by the Company as a retirement incentive or inducement, then this Option may
be exercised at any time within five years after the Optionee’s employment by the Company ceases
due to Retirement;
|
(c)
|
If the Optionee’s employment terminates after a declaration made pursuant to Section 17 of the Plan, this Option may be exercised at any time during the period permitted by such declaration;
|
(d)
|
If the Optionee’s employment is terminated by the Company for Cause, the Option shall expire and all rights to purchase Shares hereunder shall terminate immediately upon such termination; or
|
(e)
|
If the Optionee’s employment terminates in any manner other than as provided above, this Option may be exercised at any time within three months after the time of such termination of employment, but only to the extent that it was exercisable immediately prior to such termination of employment.
|
(a)
|
Death, Disability or Retirement.
This Option shall vest and may be exercised in full, regardless of whether such exercise occurs prior to a date on which this Option would otherwise vest in accordance with the vesting schedule, upon the death, Disability or Retirement of the Optionee; provided that the Optionee shall have been continuously employed by the Company or an Affiliate thereof between the date of this Agreement and the date of such death, Disability or Retirement.
|
(b)
|
Change of Control
. In the event of a Change of Control, then, without any action by the Committee, this Option, to the extent not already exercised in full or otherwise expired, shall immediately vest and become exercisable in full; provided that the Committee, in its sole discretion, may cancel this Option in exchange for a cash payment equal to the amount, if any, by which the Fair Market Value per Share immediately prior to the Change of Control exceeds the exercise price per Share.
|
9
.
|
Forfeiture/Recoupment of Option/Shares
.
This Option shall be subject to the terms of the Company’s Compensation Recoupment Policy as in effect from time to time.
|
10.
|
Limitation on Transfer
. While the Optionee is alive, only the Optionee or his/her Successor may exercise this Option. This Option may not be assigned or transferred other than to a Successor in the event of Optionee’s death or pursuant to a Qualified Domestic Relations Order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. Notwithstanding the foregoing and to the extent permitted by law, the Optionee may transfer this Option to a Transferee if the Optionee does not receive any consideration for the transfer. Any such transfer shall be subject to Section 6.3 of the Plan.
|
11.
|
No Shareholder Rights Before Exercise
. No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to this Option until the Share actually is issued to him/her upon exercise of this Option.
|
12.
|
Adjustments for Changes in Capitalization
. This Option shall be subject to adjustments for changes in the Company’s capitalization as provided in Section 16 of the Plan.
|
13.
|
No Right to Employment
. This Agreement shall not give the Optionee a right to continued employment with the Company or any Affiliate of the Company, and the Company or any such Affiliate employing the Optionee may terminate his/her employment and otherwise deal with the Optionee without regard to the effect it may have upon him/her under this Agreement.
|
14.
|
Tax Withholding
. The Company (or any Subsidiary of Affiliate employing the Optionee) shall have a right to require the Optionee to pay the Company (or such Subsidiary or Affiliate) a cash amount sufficient to cover any taxes including without limitation income, employment, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items related to Optionee’s participation in the Plan and legally applicable to Optionee including, without limitation, in connection with the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired under the Plan and/or the receipt of any dividends on such Shares which the Company determines must be withheld (“Tax-Related Items”)before delivery of Shares upon exercise of this Option. In lieu of all or any part of a cash payment from the Optionee, the Optionee may elect to cover the Tax-Related Items by tendering shares or reducing the number of shares delivered to the Optionee upon exercise of this Option equal in value to the amount of such Tax-Related Items, in accordance with the provisions of Section 14 of the Plan and Section 6 of this Agreement. Optionee further acknowledges that the Company and its Affiliates (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result.
|
15.
|
Option Subject to Plan, Articles of Incorporation, and By-Laws
.
Optionee acknowledges that this Option and the exercise thereof is subject to the Plan, the Articles of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.
|
16.
|
Obligation to Reserve Sufficient Shares
. The Company shall at all times during the term of this Option reserve and keep available a sufficient number of Shares to satisfy this Agreement.
|
17.
|
Binding Effect
. This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee.
|
18.
|
Choice of Law
. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles).
|
19.
|
Interpretation of This Agreement
. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. This Agreement is subject to and shall be construed in accordance with the terms of the Plan. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.
|
20.
|
Nature of the Option
. The Optionee understands that the value that may be realized, if any, from the Option is contingent, and depends on the future market price of the Common Stock, among other factors. The Optionee further confirms his or her understanding that the Option is intended to promote employee retention and stock ownership and to align employees’ interests with those of the Company’s shareholders. The Optionee also understands that (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii)
|
Name of Participant:
|
||
No. of Shares:
|
Date of Grant:
|
|
|
Vesting Schedule:
No. of Shares
Date
|
1.
|
Grant
.
|
(a)
|
The Participant is granted the number of Shares of Restricted Stock specified at the beginning of this Agreement. Unless and until these Shares vest as provided in Section 2 below, they are subject to the restrictions provided for in this Agreement and are referred to as “Restricted Shares.”
|
(b)
|
The Restricted Shares will be evidenced by a book entry made in the records of the Company’s transfer agent in the name of the Participant, unless the Participant requests a certificate evidencing the Restricted Shares. Each book entry, or stock certificate if requested by a Participant, evidencing any Restricted Shares may contain such notifications or legends and stock transfer instructions or limitations as provided herein or as may be determined or authorized by the Company in its sole discretion. If a certificate evidencing any Restricted Shares is issued, the Company may, in its discretion, retain custody of such certificate until such Shares vest and require, as a condition to issuing any such certificate, that the Participant deliver to the Company a stock power duly executed in blank relating to such custody.
|
2.
|
Vesting of Award
.
|
(a)
|
If the Participant remains continuously employed by the Company or an Affiliate from the date of grant of this Restricted Stock Award, then the Restricted Shares will vest in the numbers and on the dates specified in the vesting schedule specified at the beginning of this Agreement.
|
(b)
|
If the Participant’s employment with the Company and its Affiliates terminates due to death, Disability or Retirement (provided that, in the case of Retirement, the Participant has provided at least six months advance notice to the Company of the Participant’s intention to Retire), and the Participant has been continuously employed by the Company or an Affiliate between the date of grant specified above and the date of such death, Disability or Retirement, then a pro rata portion of the number of Restricted Shares outstanding immediately preceding such termination of employment shall vest in connection with such termination. The pro rata portion shall be determined by utilizing a fraction the numerator of which is [CLIFF VESTING: the number of days between the Date of Grant specified at the beginning of this Agreement and the date Participant’s employment ended, and the denominator of which is the number of days between such Date of Grant and the vesting date specified at the beginning of this Agreement][RATABLE VESTING: the number of days between the last scheduled vesting date prior the date Participant’s employment ended (or the Date of Grant if there was no scheduled vesting date prior to the termination of employment) and the date Participant’s employment ended, and whose denominator is the number of days between the last scheduled vesting date prior to the date Holder’s employment ended (or the Date of Grant if there was no scheduled vesting date prior the termination of employment) and the
|
(c)
|
In the event of a Change of Control, then this Restricted Stock Award shall immediately vest in full.
|
(d)
|
Notwithstanding any other provision of this Agreement, the Committee may, in its discretion, declare that the Restricted Shares, or any portion of them, will vest at such other times and in such other situations as it deems appropriate and in the best interest of the Company.
|
3.
|
Effect of Vesting
.
Upon the vesting of any Restricted Shares, all restrictions on such vested Shares as specified in this Agreement will lapse and such vested Shares will no longer be subject to forfeiture as provided in Section 5 below. Upon vesting, the Company will issue to the Participant a certificate or electronically transfer by book-entry the number of Shares that are free of any transfer or other restrictions arising under this Agreement. Any such issuance or transfer may be conditioned upon the Participant returning to the Company any certificate(s) evidencing such Restricted Shares that may previously have been delivered to the Participant.
|
4.
|
Applicable Restrictions
.
The Restricted Shares may not be transferred, sold, assigned, pledged, alienated, attached or otherwise encumbered (collectively, a “Transfer”) prior to the time they vest in accordance with this Agreement, except for a transfer to the Successor of the Participant in the event of the Participant’s death. Any prohibited Transfer will be void and unenforceable against the Company. No attempted Transfer of any Restricted Shares that is prohibited hereunder, whether voluntary or involuntary, shall vest the purported transferee with any interest or right in or with respect to such Shares.
|
5.
|
Forfeiture of Shares
. If any of the Restricted Shares become the subject of an attempted Transfer, or if Participant’s employment with the Company and its Affiliates terminates for any reason other than as provided in Section 2(b) above, this Restricted Stock Award will immediately terminate and all Restricted Shares will be forfeited to the Company.
|
6.
|
Forfeiture/Recoupment of Restricted Shares
.
This Award is subject to the terms of the Company’s Compensation Recoupment Policy as in effect from time to time
.
|
7.
|
Actions in Connection With a Forfeiture of Shares
.
If the Company does not have custody of any and all certificates representing any Restricted Shares forfeited hereunder, the Participant shall immediately return to the Company any and all such certificates. If the Participant has not already done so, the Participant will also deliver to the Company a stock power duly executed in blank relating to any and all certificates representing Restricted Shares forfeited to the Company, and the Company will be authorized to cancel any and all certificates representing Restricted Shares so forfeited and to cause a book entry to be made in the records of the Company’s transfer agent in the name of the Participant (or a new stock certificate to be issued, if requested by the Participant) evidencing any Shares that vested prior to forfeiture. If the Restricted Shares are evidenced by a book-entry made in the records of the Company’s transfer agent, then the Company will be authorized to cause such book-entry to be adjusted to reflect the number of Restricted Shares so forfeited.
|
8.
|
Restrictive Legend
.
Any book entry or certificate representing Restricted Shares shall contain a notation or bear the following legend:
|
9.
|
Rights as a Shareholder; Rights to Dividends
. As of the date of grant specified at the beginning of this Agreement, the Participant shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares (including voting rights), except as otherwise specifically provided in this Agreement. Notwithstanding the foregoing, any dividends, whether in cash, stock or other property, declared and paid by the Company with respect to Restricted Shares that have not yet vested in accordance with Section 2 of this Agreement (“Accrued Dividends”) shall vest and be paid to the Participant, without interest, only if and when such Restricted Shares vest. If Accrued Dividends consist of shares of capital stock, certificates for such shares will be issued and the unvested Accrued Dividends shall be held in the same manner as certificates for Restricted Shares are issued and held under Section 3 above. In the event that the Participant forfeits Restricted Shares as provided under Sections 5 or 6 hereof, all unvested Accrued Dividends shall also be cancelled by the Company. The Participant shall have no further rights with respect to any Accrued Dividends that are so forfeited. If the Accrued Dividends consist of shares of capital stock, such Accrued Dividends will be forfeited and cancelled in the same manner and under the same terms as forfeited Restricted Shares under Section 7.
|
10.
|
Adjustments for Changes in Capitalization
. This Restricted Stock Award shall be subject to adjustments for changes in the Company’s capitalization as provided in Section 16 of the Plan.
|
11.
|
No Right to Employment
. This Agreement shall not give the Participant a right to continued employment with the Company or any Affiliate of the Company, and the Company or any such Affiliate employing the Participant may terminate his/her employment and otherwise deal with the Participant without regard to the effect it may have upon him/her under this Agreement.
|
12.
|
Tax Consequences and Withholding
.
The Participant understands that unless a proper and timely Section 83(b) election has been made as further described below, generally under Section 83 of the Code, at the time the Restricted Shares vest, the Participant will be obligated to recognize ordinary income and be taxed in an amount equal to the Fair Market Value as of the date of vesting for the Restricted Shares then vesting. The Participant has been informed that, with respect to the grant of the Restricted Stock Award, an election may be filed by the Participant with the Internal Revenue Service, within 30 days of the date of grant, electing pursuant to Section 83(b) of the Code to be taxed currently on the Fair Market Value of the Restricted Shares on the date of grant. The Participant acknowledges that it is the Participant’s sole responsibility to timely file the election under Section 83(b) of the Code. If the Participant makes such election, the Participant shall promptly provide the Company a copy and the Company may require at the time of such election an additional payment for withholding tax purposes based on the Fair Market Value of the Restricted Shares as of the date of grant.
|
13.
|
Restricted Shares Subject to Plan, Articles of Incorporation and By-Laws
. Participant acknowledges that this Restricted Stock Award is subject to the Plan, the Articles of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.
|
14.
|
Obligation to Reserve Sufficient Shares
. The Company shall at all times during the term of this Restricted Stock Award reserve and keep available a sufficient number of Shares to satisfy this Agreement.
|
15.
|
Binding Effect
. This Agreement shall be binding in all respects on the heirs, representatives, successors, and assigns of the Participant.
|
16.
|
Choice of Law
. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles).
|
17.
|
Interpretation of This Agreement
. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Participant. This Agreement is subject to and shall be construed in accordance with the terms of the Plan. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.
|
18.
|
Nature of the Award
. The Participant understands that the value that may be realized, if any, from the Restricted Stock Award is contingent, and depends on the future market price of the Common Stock, among other factors. The Participant further confirms his or her understanding that the Restricted Stock Award is intended to promote employee retention and stock ownership and to align employees’ interests with those of the Company’s shareholders. The Participant also understands that (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of a Restricted Stock Award is voluntary and occasional and does not create any contractual or other right to receive future Restricted Stock Awards, or benefits in lieu of Restricted Stock Awards even if Restricted Stock Awards have been granted repeatedly in the past; (iii) all decisions with respect to any future award will be at the sole discretion of the Company; (iv) his or her participation in the Plan is voluntary; (v) the value of this Restricted Stock Award is an extraordinary item of compensation which is outside
|
Name of Participant:
|
|
No. of Shares:
|
Date of Grant:
|
1.
|
Grant
.
|
(a)
|
The Participant is granted the number of Shares of Restricted Stock specified at the beginning of this Agreement
.
Unless and until these Shares vest as provided in Section 2 below
,
they are subject to the restrictions provided for in this Agreement and are referred to as “Restricted Shares
.
”
|
(b)
|
The Restricted Shares will be evidenced by a book entry made in the records of the Company’s transfer agent in the name of the Participant
,
unless the Participant requests a certificate evidencing the Restricted Shares
.
Each book entry
,
or stock certificate if requested by a Participant, evidencing any Restricted Shares may contain such notifications or legends and stock transfer instructions or limitations as provided herein or as may be determined or authorized by the Company in its sole discretion
.
If a certificate evidencing any Restricted Shares is issued
,
the Company may
,
in its discretion
,
retain custody of such certificate until such Shares vest and require
,
as a condition to issuing any such certificate
,
that the Participant deliver to the Company a stock power duly executed in blank relating to such custody
.
|
2.
|
Vesting of Award
.
This Restricted Stock Award shall vest when the Participant’s service as a member of the Board ends as a result of the first to occur of the following events
,
provided the Participant has continuously served as a member of the Board between the date of grant specified above and the date of such event, and that period of continuous service has been at least six months:
|
(a)
|
death;
|
(b)
|
disability preventing continued service as a member of the Board;
|
(c)
|
retirement from the Board in accordance with any policy of the Company regarding retirement of Non-Employee Directors then in effect;
|
(d)
|
resignation at the request of the Board (other than for gross misconduct as determined by the Board);
|
(e)
|
resignation on the date specified in a written notice provided to the Board at least six months in advance;
|
(f)
|
the Participant’s failure to have been re-nominated for election to the Board (unless due to the Participant’s unwillingness to continue to serve) or to have been re- elected to the Board by the Company’s shareholders;
|
(g)
|
the Participant’s removal by the Company’s shareholders; or
|
(h)
|
in the event of a Change of Control.
|
*
|
Unless the context clearly indicates otherwise, any capitalized term that is not defined in this Agreement shall have the meaning set forth in the Plan as it currently exists or as it is amended in the future.
|
3.
|
Effect of Vesting
.
Upon the vesting of any Restricted Shares, all restrictions on such vested Shares as specified in this Agreement will lapse and such vested Shares will no longer be subject to forfeiture as provided in Section 5 below. Upon vesting, the Company will issue to the Participant a certificate or electronically transfer by book-entry the number of Shares that are free of any transfer or other restrictions arising under this Agreement. Any such issuance or transfer may be conditioned upon the Participant returning to the Company any certificate(s) evidencing such Restricted Shares that may previously have been delivered to the Participant.
|
4.
|
Applicable Restrictions
.
The Restricted Shares may not be transferred, sold, assigned, pledged, alienated, attached or otherwise encumbered (collectively, a “Transfer”) prior to the time they vest in accordance with this Agreement, except for a transfer to the Successor of the Participant in the event of the Participant’s death. Any prohibited Transfer will be void and unenforceable against the Company. No attempted Transfer of any Restricted Shares that is prohibited hereunder, whether voluntary or involuntary, shall vest the purported transferee with any interest or right in or with respect to such Shares.
|
5.
|
Forfeiture of Shares
. If any of the Restricted Shares become the subject of an attempted Transfer, or if Participant’s service as a member of the Board terminates for any reason other than as provided in Section 2 above, this Restricted Stock Award will immediately terminate and all Restricted Shares will be forfeited to the Company.
|
6.
|
Actions in Connection With a Forfeiture of Shares
.
If the Company does not have custody of any and all certificates representing any Restricted Shares forfeited hereunder, the Participant shall immediately return to the Company any and all such certificates. If the Participant has not already done so, the Participant will also deliver to the Company a stock power duly executed in blank relating to any and all certificates representing Restricted Shares forfeited to the Company, and the Company will be authorized to cancel any and all certificates representing Restricted Shares so forfeited and to cause a book entry to be made in the records of the Company’s transfer agent in the name of the Participant (or a new stock certificate to be issued, if requested by the Participant) evidencing any Shares that vested prior to forfeiture. If the Restricted Shares are evidenced by a book-entry made in the records of the Company’s transfer agent, then the Company will be authorized to cause such book-entry to be adjusted to reflect the number of Restricted Shares so forfeited.
|
7.
|
Restrictive Legend
.
Any book entry or certificate representing Restricted Shares shall contain a notation or bear the following legend:
|
8.
|
Rights as a Shareholder; Rights to Dividends
. As of the date of grant specified at the beginning of this Agreement, the Participant shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares (including voting rights), except as otherwise specifically provided in this Agreement. Notwithstanding the foregoing, any dividends, whether in cash, stock or other property, declared and paid by the Company with respect to Restricted Shares that have not yet vested in accordance with Section 2 of this Agreement (“Accrued Dividends”) shall vest and be paid to the Participant, without interest, only if and when such Restricted Shares vest. If Accrued Dividends consist of shares of capital stock, certificates for such shares will be issued and the unvested Accrued Dividends shall be held in the same manner as certificates for Restricted Shares are issued and held under Section 3 above. In the event that the Participant forfeits Restricted Shares as provided under Section 5 hereof, all unvested Accrued Dividends shall also be cancelled by the Company. The Participant shall have no further rights with respect to any Accrued Dividends that are so forfeited. If the Accrued Dividends consist of shares of capital stock, such Accrued Dividends will be forfeited and cancelled in the same manner and under the same terms as forfeited Restricted Shares under Section 6.
|
9.
|
Adjustments for Changes in Capitalization
. This Restricted Stock Award shall be subject to adjustments for changes in the Company’s capitalization as provided in Section 16 of the Plan.
|
10.
|
Interpretation of This Agreement
. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Participant. This Agreement is subject to and shall be construed in accordance with the terms of the Plan. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.
|
11.
|
Service as a Director
. This Agreement shall not give the Participant a right to continued service on the Board, nor will it interfere in any way with any right of the Board, the Company or its shareholders to terminate such service.
|
12.
|
Tax Consequences
.
The Participant understands that unless a proper and timely Section 83(b) election has been made as further described below, generally under Section 83 of the Code, at the time the Restricted Shares vest, the Participant will be obligated to recognize ordinary income and be taxed in an amount equal to the Fair Market Value as of the date of vesting for the Restricted Shares then vesting. The Participant shall be solely responsible for any tax obligations that may arise as a result of the vesting of Restricted Shares.
|
13.
|
Restricted Shares Subject to Plan, Articles of Incorporation and By-Laws
. Participant acknowledges that this Restricted Stock Award is subject to the Plan, the Articles of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.
|
14.
|
Obligation to Reserve Sufficient Shares
. The Company shall at all times during the term of this Restricted Stock Award reserve and keep available a sufficient number of Shares to satisfy this Agreement.
|
15.
|
Nature of the Award
. The Participant understands that the value that may be realized, if any, from the Restricted Stock Award is contingent, and depends on the future market price of the Common Stock, among other factors. The Participant further confirms his or her understanding that the Restricted Stock Award is intended to promote stock ownership and to align Non-Employee Directors’ interests with those of the Company’s shareholders. The Participant also understands that (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) all decisions with respect to any future award will be at the sole discretion of the Company; (iii) his or her participation in the Plan is voluntary; and (iv) no claim or entitlement to compensation or damages arises from termination of this Restricted Stock Award or diminution in value of this Restricted Stock Award, and he or she irrevocably releases the Company, and its subsidiaries from any such claim that may arise.
|
16.
|
Binding Effect
. This Agreement shall be binding in all respects on the heirs, representatives, successors, and assigns of the Participant.
|
17.
|
Choice of Law
. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles).
|
Name of Holder:
|
|
No. of Units:
|
Date of Grant:
|
Vesting Date:
______, 20__, subject to vesting conditions set forth on Exhibit I
|
1.
|
Grant
. The Holder is granted the number of Units specified at the beginning of this Agreement, subject to the vesting conditions set forth on Exhibit I.
|
2.
|
Fair Market Value of Units
. The fair market value of a Unit subject to this Agreement shall at all times be equal to the Fair Market Value of a Share of the Company’s Stock (the “Common Stock”).
|
4.
|
No Entitlement to Cash Dividends
. The Holder shall not be entitled to receive any cash dividends or cash dividend equivalents with respect to the Units credited to the Holder’s account.
|
5.
|
Effect of Termination of Employment
. If the Holder ceases to be an Employee prior to the vesting date specified at the beginning of this Agreement other than as a result of the Holder’s death, Retirement or Disability, the Holder shall forfeit the Units. If the Holder ceases to be an Employee as a result of Holder’s death, Retirement or Disability, then the Holder shall be entitled to receive a pro rata portion of the Units that vest, if any, on the vesting date specified at the beginning of this Agreement and based upon the extent of the achievement of the vesting conditions set forth on Exhibit I, as provided in Section 3, and the balance of the Units shall be forfeited. The pro rata portion shall be determined by utilizing a fraction the numerator of which is the number of days between the Date of Grant specified at the beginning of this Agreement and the date Holder’s employment ended, and the denominator of which is the number of days between such Date of Grant and the vesting date specified at the beginning of this Agreement. Notwithstanding anything to the contrary in this Agreement, to the extent the benefit provided hereunder is considered to be deferred compensation under Section 409A of the Code, and if the Holder is a “specified employee” within the meaning of Section 409A of the Code, then any payment due as a result of separation from service will
|
6.
|
Change of Control
. Notwithstanding anything to the contrary stated herein, upon the occurrence of a Change of Control, all of the Units (based on achievement at the target level) subject to this Agreement shall immediately vest and be paid in full as provided in Section 3. Notwithstanding anything in this Agreement to the contrary, no Change of Control shall be deemed to occur unless it would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of a business under Section 409A of the Code.
|
7.
|
Forfeiture/Recoupment of Restricted Stock Unit
.
This Award is subject to the terms of the Company’s Compensation Recoupment Policy as in effect from time to time.
|
8.
|
Adjustments for Changes in Capitalization
. The Units subject to this Agreement shall be subject to adjustments for changes in the Company’s capitalization as provided in Section 16 of the Plan.
|
9.
|
No Transfer
. The Units may not be pledged, assigned or transferred except as expressly provided in Section 6.3 of the Plan.
|
10.
|
No Shareholder Rights Until Payment
. The Holder shall not have any of the rights of a shareholder of the Company in connection with the award of Units subject to this Agreement unless and until the Holder becomes the holder of record of the Common Stock issued in payment of the Units.
|
11.
|
No Right to Employment
. This Agreement shall not give the Holder a right to continued employment with the Company or any Affiliate of the Company, and the Company or any such Affiliate employing the Holder may terminate his/her employment and otherwise deal with the Holder without regard to the effect it may have upon him/her under this Agreement.
|
12.
|
Tax Withholding
. The Company (or the Subsidiary or Affiliate employing the Holder) shall, in accordance with the provisions of Section 14 of the Plan, withhold from any payment in settlement of vested Units under this Agreement an amount equal to the amount of any required domestic or foreign tax withholding obligation, including any social security obligation. The Company (or the Subsidiary or Affiliate employing the Holder) may withhold Shares equal in value to the amount of such tax withholding obligation, or may permit the Holder to arrange for the satisfaction of such tax withholding obligation by payment of the estimated tax obligation to the Company (or the Subsidiary or Affiliate employing the Holder).
|
13.
|
Restricted Stock Units Subject to Plan, Articles of Incorporation and By-Laws
. Holder acknowledges that this Award is subject to the Plan, the Articles of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.
|
14.
|
Obligation to Reserve Sufficient Shares
. The Company shall at all times during the term of this Award reserve and keep available a sufficient number of Shares to satisfy this Agreement.
|
15.
|
Binding Effect
. This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Holder.
|
16.
|
Choice of Law
. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles).
|
17.
|
Interpretation of This Agreement
. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Holder. This Agreement is subject to and shall be construed in accordance with the terms of the Plan. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.
|
18.
|
Nature of the Award
. The Holder understands that the value that may be realized, if any, from the Award is contingent, and depends on the future market price of the Common Stock, among other factors. The Holder further confirms his or her understanding that the Award is intended to promote employee retention and stock ownership and to align employees’ interests with those of the Company’s shareholders, is subject to vesting conditions and will be cancelled if vesting conditions are not satisfied. The Holder also understands that (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an Award is voluntary and occasional and does not create any contractual or other right to receive future Awards, or benefits in lieu of Awards even if Awards have been granted repeatedly in the past; (iii) all decisions with respect to any future award will be at the sole discretion of the Company; (iv) his or her participation in the Plan is voluntary; (v) the value of this Award is an extraordinary item of compensation which is outside the scope of his or her employment contract with his or her actual employer, if any; (vi) this Award and past or future Awards are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (vii) no claim or entitlement to compensation or damages arises from termination of this Award or diminution in value of this Award, and he or she irrevocably releases the Company, and its subsidiaries from any such claim that may arise.
|
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:
|
|
August 9, 2017
|
|
/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:
|
|
August 9, 2017
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
Senior 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:
|
|
August 9, 2017
|
|
/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:
|
|
August 9, 2017
|
|
/s/ Thomas Paulson
|
|
|
|
|
Thomas Paulson
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|