3. Our remarks this morning and our answers to questions may contain forward-looking
statements regarding the company’s expectations of future performance. Such statements are
subject to risks and uncertainties, and our actual results may differ materially from those
contained in the statements. These risks and uncertainties are described in today’s news
release and the documents we file with the Securities and Exchange Commission. We
encourage you to review those documents, particularly our Safe Harbor statement, for a
description of the risks and uncertainties that may affect our results.
3
TENNANT COMPANY
FORWARD LOOKING
STATEMENTS
4. • 2016 first quarter consolidated net sales of $179.9M
– Organic net sales equal to prior-year period
– Sluggish business environment continued in 2016 first quarter
– Increased sales through distribution and direct sales
– Favorable channel mix and product mix
– $32M sales quarter for scrubbers equipped with ec-H2OTM
– Net earnings of $0.29 per diluted share on a “Constant
Currency” basis – up 7.4% versus prior-year quarter
• Sales momentum rose toward end of first quarter
• Reaffirmed sales and earnings guidance for 2016 full year
4
TENNANT COMPANY
2016 First Quarter Overview
5. We remain committed to organic Sales goal of $1
Billion and 12% or above Operating Profit Margin
5
TENNANT COMPANY
Growth Strategy
• Strong new product and technology pipeline
• Sales gains in emerging markets
• Return to growth in Europe
• Ongoing focus on strategic accounts
• Expansion of global market coverage
• Application of lean principles
6. 6
• New products and
technologies
– Sales of new products introduced in
last three years rose to 36% of
equipment sales in 2016 first quarter
• Plan to launch 13 new
products in 2016
– Several significant industrial machine
launches
– M17 released in late March
M17 Battery-Powered
Sweeper-Scrubber
TENNANT COMPANY
New Products
7. ec-H2O NanoClean®
The Responsible Way to Clean
Next generation ec-H2O | Cleans more soils in more applications
HOW IT WORKS:EC-H2O™ SCRUBBERS | 2008-2015
$896 million+
cumulative revenue
8,000+
customers
30,000+
sites
77,000+
machines
7
Record Sales of $157M in 2015
8. ORBIO® Technologies
On-Site Generation Technology
FOCUS ON “3Cs”
CAMPUS | CHAINS | CONTRACTORS
Improving health and safety for the environment, employees
and people in their care while reducing costs.
GENERATES
cleaner & disinfectant/sanitizer on-site
8
13. • Diverse portfolio of initiatives to create value
• Introductions of new products and technologies
• Expanding global sales and marketing to increase
global market share
• Building Tennant’s e-Business capabilities
• Concurrently running a more efficient business to
raise productivity
13
TENNANT COMPANY
Growth & Profitability
14. 14
SALES
GROSS MARGIN
R&D EXPENSE (% of sales)
S&A EXPENSE (% of sales)
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q1’16 Q1’15 CHANGE
$179.9 M
43.1%
4.4%
34.7%
$7.1 M
3.9%
$0.25
$185.7 M
42.0%
4.2%
33.4%
$8.3 M
4.4%
$0.27
(3.2%)
+110 bps
+20 bps
+130 bps
(14.0%)
(50 bps)
(7.4%)
TENNANT COMPANY
2016 First Quarter
Organic Sales Growth 0% | Americas Sales up 1.7% organically
15. 15
• Sales up 1.7% organically
(excluding 2.0% unfavorable foreign currency impact)
• Strong sales through distribution and direct sales
• Increased sales of scrubbers equipped with ec-H2O
• Brazil achieved 7.5% organic sales growth despite
economic headwinds
TENNANT COMPANY
2016 First Quarter by Region
AMERICAS
16. • Sales decreased 2.8% organically
(excluding 2.0% unfavorable foreign currency impact and 6.5%
impact from divestiture)
• Strong sales to strategic accounts more than offset by
lower direct sales and sales through distribution
• Divested Green MachinesTM
outdoor city cleaning line
16
EMEA
TENNANT COMPANY
2016 First Quarter by Region
17. • Sales declined 5.8% organically
(excluding 3.0% unfavorable foreign currency impact)
• Organic sales growth in Australia, Japan and
China was more than offset by lower organic
sales in the other Asian countries
17
APAC
TENNANT COMPANY
2016 First Quarter by Region
18. 18
SALES
GROSS MARGIN
R&D EXPENSE (% of sales)
S&A EXPENSE (% of sales)
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q1’16 Q1’15 CHANGE
$179.9 M
43.1%
4.4%
34.7%
$7.1 M
3.9%
$0.25
$185.7 M
42.0%
4.2%
33.4%
$8.3 M
4.4%
$0.27
(3.2%)
+110 bps
+20 bps
+130 bps
(14.0%)
(50 bps)
(7.4%)
TENNANT COMPANY
2016 First Quarter
Organic Sales Growth 0% | Americas Sales up 1.7% organically
19. 19
SALES
GROSS MARGIN
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q1’16 Q1’15 CHANGE
$183.5 M
43.5%
$8.2 M
4.5%
$0.29
$185.7 M
42.0%
$8.3 M
4.4%
$0.27
(1.2%)*
+150 bps
(0.8%)
+10 bps
+7.4%
TENNANT COMPANY
2016 First Quarter
“CONSTANT CURRENCY” VIEW (excludes estimated foreign exchange impact)
CONSTANT(1)
CURRENCY
Q1’16
AS
REPORTED
$179.9 M
43.1%
$7.1 M
3.9%
$0.25
(1)“Constant Currency”: estimated income statement which assumes
no change in exchange rates from prior year.
*Organic Sales Growth, excluding approximately 2.0 percent unfavorable foreign
currency exchange impact and the impact from the divestiture of the Green
Machines outdoor city cleaning line of 1.2%, was 0%.
20. Remain committed to at least 12% OP Margin
• Drive organic revenue growth in mid- to high-single digits
• Hold fixed costs essentially flat in manufacturing as volume
rises
• Strive for zero net inflation at gross profit line
• Standardize and simplify processes to improve scalability of
business model
20
TENNANT COMPANY
Operating Profit Margin Goal
21. • Overall effective tax rate for 2016 first quarter
of 32.0%
• Base tax rate of 30.3%
(excluding routine discrete items)
• Federal R&D tax credit – was re-enacted for 2016;
favorable benefit included in 2016 tax rate
21
TENNANT COMPANY
Successful Tax Strategies
23. 23
TENNANT COMPANY
2016 EPS & Sales Guidance
2015
ACTUAL
As Reported
$1.74EPS
$811.8MSALES
AsAdjusted
$2.49EPS
$811.8MSALES
2016 Financial Outlook
$2.25 to $2.55/$795M to $825M
KEY EXPECTATIONS FOR 2016
• Net sales in the range of $795M to $825M versus $811.8M in 2015.
• Slower economic growth in North America, modest improvement in Europe, and
growth in emerging markets.
• Foreign currency impact on sales in the range of an unfavorable 1% to 2%.
• Sales decline from divestiture of approximately 1%.
• Organic sales growth, excluding foreign currency exchange impact and
divestiture, in the range of 0% to 4%.
• Foreign currency exchange headwinds estimated to negatively impact operating
profit in the range of $3M to $6M, or approximately $0.10 to $0.20 EPS.
• Gross margin of approximately 43%.
• R&D expense of approximately 4% of sales.
• Effective tax rate of approximately 31% (negatively impacting 2016 by
approximately $0.05).
• Capital expenditures in the range of $25M to $30M.
25. Tennant is Well Positioned!
25
Competitively advantaged
in the market with our
innovative product and
technology portfolio and
go-to-market strategy
Well positioned to
leverage our
operational efficiency
Notes de l'éditeur
Tennant Company remains committed to Orbio.
Innovators typically overestimate what is possible in the short term, and underestimate what is possible in the long term. Tennant Company’s SMT understands this and that is why we remain committed to Orbio.
Orbio is aligned with our Corporate Vision
On-Site Generation is a disruptive innovation that is “right on trend”
There are many future potential products and applications that can drive growth
We have the ability to expand globally and grow sales
And we believe that we are nearing the TIPPING POINT with our current Orbio products – where sales acceleration will really take off.
If you have questions or want to learn more about Orbio – you can visit the website at www.Orbio.com or reach out to Karla Leis, GM for Orbio Technologies directly.
And over the last three years, we have a fourth emerging pillar – digital transformation of Tennant. We are executing against many things in this space:
IRIS: We introduced IRIS in the 2015 fourth quarter – and we recently received a significant order from a large retailer in Europe that specified IRIS, allowing us to displace one of our largest competitors for this important piece of business! The IRIS onboard technology tracks machine productivity and maintenance needs, including machine and ec-water usage. It helps customers with large fleets of equipment make informed decisions and reduce their overall cost to clean, which is a very attractive proposition and a fast-emerging trend. The data is available online 24/7 through an easy-to-use portal. The IRIS Asset Manager is available on many of our commercial and industrial cleaning machines.
E-commerce continues to grow as an important sales platform and customer interface for Tennant. We estimate that more than 70 percent of our customers start their buying journey online and, increasingly, they are purchasing parts and consumables this way. Our progress in building a more robust platform is on track and our secure “My Tennant” portal is the first step in this effort. It is generating more inquiries and more cost-effective sales for us. E-commerce is a growing trend in other industries and we expect this evolution to occur in the cleaning industry, as well. In a few years, we anticipate being able to report e-commerce as another significant revenue channel, along with our existing direct, distribution and strategic accounts channels.
CRM: We continue the global rollout of our new Customer Relationship Management, or CRM, marketing and sales management tool. This system helps us identify new customers, grow our existing business and improve the overall Tennant customer experience. We already have implemented our new CRM solution in North America, EMEA and Australia – and we are benefiting from its improved sales analytical capabilities. We expect to complete the global rollout to Japan, China and other regions early this year.
For the 2013 full year, Tennant reported consolidated net sales of $752.0 million compared to $739.0 million in 2012. Tennant’s 2013 net sales increased 1.8 percent versus the prior year and organic net sales rose 2.8 percent, excluding unfavorable foreign currency exchange of approximately 1.0 percent.
For 2013, Tennant reported net earnings of $40.2 million, or $2.14 per diluted share. Excluding special items, the company’s 2013 adjusted full year net earnings increased to $42.6 million, or $2.26 per diluted share, compared to 2012 adjusted net earnings of $39.7 million, or $2.08 per diluted share.
Tennant recorded special items in 2013 that lowered net earnings by a total of $0.12 per diluted share. In addition to the previously noted special item that was recorded in the 2013 fourth quarter, the company had special items in the 2013 first quarter that together reduced earnings by $0.02 per diluted share. These items included: a $1.4 million pre-tax restructuring charge, or $0.05 per diluted share, to right size the European operations, given continued challenging economic conditions there, which was partially offset by a $0.6 million, or $0.03 per diluted share, tax benefit related to the retroactive reinstatement of the 2012 U.S. Federal R&D Tax Credit. Tennant’s 2012 full year results included net special items that increased earnings by $0.10 per diluted share. Tennant’s gross margin for the 2013 full year was 43.3 percent, which as noted above, was within the company’s target range of 43 percent to 44 percent, but below the 44.0 percent reported in the prior year. The 2013 full year operating profit margin was 8.3 percent, or 8.7 percent as adjusted, compared to 8.5 percent in the 2012 full year.
For the 2013 full year, Tennant reported consolidated net sales of $752.0 million compared to $739.0 million in 2012. Tennant’s 2013 net sales increased 1.8 percent versus the prior year and organic net sales rose 2.8 percent, excluding unfavorable foreign currency exchange of approximately 1.0 percent.
For 2013, Tennant reported net earnings of $40.2 million, or $2.14 per diluted share. Excluding special items, the company’s 2013 adjusted full year net earnings increased to $42.6 million, or $2.26 per diluted share, compared to 2012 adjusted net earnings of $39.7 million, or $2.08 per diluted share.
Tennant recorded special items in 2013 that lowered net earnings by a total of $0.12 per diluted share. In addition to the previously noted special item that was recorded in the 2013 fourth quarter, the company had special items in the 2013 first quarter that together reduced earnings by $0.02 per diluted share. These items included: a $1.4 million pre-tax restructuring charge, or $0.05 per diluted share, to right size the European operations, given continued challenging economic conditions there, which was partially offset by a $0.6 million, or $0.03 per diluted share, tax benefit related to the retroactive reinstatement of the 2012 U.S. Federal R&D Tax Credit. Tennant’s 2012 full year results included net special items that increased earnings by $0.10 per diluted share. Tennant’s gross margin for the 2013 full year was 43.3 percent, which as noted above, was within the company’s target range of 43 percent to 44 percent, but below the 44.0 percent reported in the prior year. The 2013 full year operating profit margin was 8.3 percent, or 8.7 percent as adjusted, compared to 8.5 percent in the 2012 full year.
For the 2013 full year, Tennant reported consolidated net sales of $752.0 million compared to $739.0 million in 2012. Tennant’s 2013 net sales increased 1.8 percent versus the prior year and organic net sales rose 2.8 percent, excluding unfavorable foreign currency exchange of approximately 1.0 percent.
For 2013, Tennant reported net earnings of $40.2 million, or $2.14 per diluted share. Excluding special items, the company’s 2013 adjusted full year net earnings increased to $42.6 million, or $2.26 per diluted share, compared to 2012 adjusted net earnings of $39.7 million, or $2.08 per diluted share.
Tennant recorded special items in 2013 that lowered net earnings by a total of $0.12 per diluted share. In addition to the previously noted special item that was recorded in the 2013 fourth quarter, the company had special items in the 2013 first quarter that together reduced earnings by $0.02 per diluted share. These items included: a $1.4 million pre-tax restructuring charge, or $0.05 per diluted share, to right size the European operations, given continued challenging economic conditions there, which was partially offset by a $0.6 million, or $0.03 per diluted share, tax benefit related to the retroactive reinstatement of the 2012 U.S. Federal R&D Tax Credit. Tennant’s 2012 full year results included net special items that increased earnings by $0.10 per diluted share. Tennant’s gross margin for the 2013 full year was 43.3 percent, which as noted above, was within the company’s target range of 43 percent to 44 percent, but below the 44.0 percent reported in the prior year. The 2013 full year operating profit margin was 8.3 percent, or 8.7 percent as adjusted, compared to 8.5 percent in the 2012 full year.