Tennant Company
Tennant Company Reports 2020 First-Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)-- Tennant Company (“Tennant”) (NYSE: TNC), a world leader in the design, manufacture and marketing of solutions that help create a cleaner, safer and healthier world, today reported first-quarter results for 2020. For the first quarter, net sales totaled $252.1 million, representing a year-over-year decrease of 4.0 percent, or down 2.4 percent on an organic basis, primarily as a result of the coronavirus pandemic and ensuing global business slowdown. Net income for the first quarter of 2020 was $5.2 million, or $0.28 per diluted share, compared with $5.4 million, or $0.29 per diluted share, in the year-ago period. Adjusted diluted earnings per share, which exclude certain non-operational items and amortization expense, were $0.57, compared with $0.72 in the first quarter of 2019. Excluding non-operational items, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2020 were $26.1 million, or 10.4 percent of sales, compared with $29.5 million, or 11.2 percent of sales, in the year-ago period. In the first quarter of 2020, cash flow from operations provided $8.7 million, compared to a cash usage of $11.6 million in the prior year first quarter. (See the Supplemental Non-GAAP Financial Table.)
“Our first quarter was the story of two strong months and one difficult one as our global operations weathered the impact of the coronavirus pandemic,” said Chris Killingstad, Tennant Company’s president and chief executive officer. “The primary impacts of the pandemic on our business were related to temporary plant shutdowns, as well as a slowdown in sales to some end markets, amid widespread closures of customer facilities and operations. Our China factories were closed for two weeks in February, and we temporarily suspended operations at our plants in Italy and the United States at times during the month of March, in accordance with local directives.”
First-Quarter Operating Review
In the first quarter of 2020, Tennant’s consolidated net sales of $252.1 million were down 4.0 percent over the same period last year, including a 1.6 percent reduction from foreign currency. On an organic basis, sales declined 2.4 percent.
Regional Sales Highlights
- Americas – Sales in the Americas improved 1.1 percent, or 1.9 percent organically, resulting in the tenth consecutive quarter of organic growth, driven by strength in both North America and Latin America. North America results reflected demand for Tennant’s autonomous cleaning machine as well as pricing. Sales in Latin America were primarily driven by strength in Mexico. To ensure the safety of our employees, some of the Company’s U.S.-based manufacturing plants were closed within the month of March for cleaning related to the coronavirus.
- EMEA – Sales in the Europe, Middle East and Africa (EMEA) region were down 7.8 percent, or 4.9 percent organically, primarily due to the broad economic impact of the coronavirus pandemic, with the largest declines recorded in Italy and France. The Company’s regional manufacturing plants were closed for one to two weeks in March, depending on their location and in accordance with local government orders. Shutdowns of customer facilities in March were widespread.
- APAC – Sales in the Asia Pacific region decreased 25.8 percent, or 22.9 percent organically, primarily as a result of significant decreases in sales in China due to the coronavirus pandemic and in Australia due to the coronavirus pandemic as well as timing of strategic account orders. The Company’s regional manufacturing plants were closed for approximately two weeks in February, in accordance with local government orders.
Profitability Measures and Related Factors (See the Supplemental Non-GAAP Financial Table)
- Gross margin – Gross margin in the first quarter of 2020 was 41.3 percent, compared with 41.2 percent in the year-ago period. Adjusted gross margins during the first quarter of 2020 and 2019 were 42.0 percent and 41.2 percent, respectively, primarily reflecting actions directly resulting from the Company’s enterprise strategy efforts like pricing and cost-out initiatives, as well as favorable freight costing, which more than offset the negative effect of labor and material inflation.
- Net Earnings/Adjusted EBITDA – Tennant’s 2020 first-quarter net earnings and EBITDA decreased compared to the prior year primarily driven by lower sales related to the coronavirus pandemic and currency transaction loss of approximately $4 million related to significant strengthening of the U.S. dollar, particularly relative to the Brazilian real and Mexican peso compared to the same period last year. Net earnings decreased to $5.2 million, or $0.28 per diluted share, compared with $5.4 million, or $0.29 per diluted share. Adjusted earnings per diluted share, excluding non-operational items and amortization expense, were $0.57 compared with $0.72 in the year-ago period. Adjusted EBITDA in the first quarter of 2020 decreased to $26.1 million, or 10.4 percent of sales, compared with $29.5 million, or 11.2 percent of sales, in the first quarter of 2019.
Cash Flow, Capital Allocation and Liquidity
During the first quarter of 2020, Tennant generated $8.7 million in cash flow from operations, primarily driven by business performance. As a precaution, the Company has drawn an additional $125 million from its $200 million revolver and has approximately $30 million of remaining undrawn funds. As of March 31, 2020, the Company had $192 million in cash and cash equivalents.
2020 Business Outlook
As previously announced, the Company withdrew the full-year guidance it provided on February 20, 2020, due to the uncertain nature of the coronavirus pandemic. At this time, the Company does not have the ability to accurately predict the level of impact on its businesses and financial results for the remainder of fiscal 2020. Accordingly, the Company is not updating its outlook, but plans to share further updates in its second-quarter earnings announcement and conference call.
In response to this pandemic, the Company has already taken a number of actions globally to minimize the financial impact. Specifically, the Company implemented a combination of reduced work schedules and furlough programs for all employees globally, while operating within the local laws and regulations, and maintaining health coverage for all impacted employees. As previously announced, Tennant’s CEO will forgo 100 percent of his salary, while senior leaders within the organization will forgo 35 percent of their salaries and the board of directors will take a 50 percent cut in pay, through the second quarter of 2020. Additionally, the Company has been proactive in establishing a dedicated enterprise-wide response team, limiting travel to business-critical trips only, implementing work-from-home processes where possible, reducing non-essential discretionary and project spending, and developing multiple financial scenario plans to ensure liquidity and to identify additional actions, if needed.
“While the extent of the impact of the pandemic is uncertain and continually evolving, we will continue to manage costs and cash flow while maintaining our ability to ramp up quickly as markets recover,” said Killingstad. “The health and safety of our employees, customers and business partners remains our top priority and we are committed to providing the equipment, parts and service our customers need to keep their facilities clean and safe. In its 150-year history, Tennant has always been a resilient and adaptable company, and we will do whatever is necessary to emerge from this crisis in a strong position.”
Conference Call
Tennant will host a conference call to discuss its 2020 first-quarter results today, May 6, 2020, at 10 a.m. Central Time (11 a.m. Eastern Time). The conference call and accompanying slides will be available via webcast on Tennant's investor website. To listen to the call live and view the slide presentation, go to investors.tennantco.com and click on the link at the bottom of the home page. A taped replay of the conference call, with slides, will be available at investors.tennantco.com.
Founded in 1870, Tennant Company (TNC), headquartered in Minneapolis, Minnesota, is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, reduce their environmental impact and help create a cleaner, safer, healthier world. Its products include equipment for maintaining surfaces in industrial, commercial and outdoor environments; detergent-free and other sustainable cleaning technologies; cleaning tools and supplies; and coatings for protecting, repairing
and upgrading surfaces. Tennant's global field service network is the most extensive in the industry. Tennant Company had sales of $1.14 billion in 2019 and has approximately 4,400 employees. Tennant has manufacturing operations throughout the world and sells products directly in 15 countries and through distributors in more than 100 countries. For more information, visit www.tennantco.com and www.ipcworldwide.com. The Tennant Company logo and other trademarks designated with the symbol “®” are trademarks of Tennant Company registered in the United States and/or other countries.
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Investor Contact:
William Prate
Director, Investor Relations
william.prate@tennantco.com
763-540-1547
Source: http://investors.tennantco.com/news-and-events/press-releases/press-release-details/2020/Tennant-Company-Reports-2020-First-Quarter-Results/default.aspx
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