Tennant Company
Tennant Company Reports 2020 Second-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 second-quarter results for 2020. For the second quarter, net sales totaled $214.0 million, representing a year-over-year decrease of 28.6 percent, or down 27.2 percent on an organic basis, primarily due to the coronavirus pandemic and resulting global business slowdown. Net income for the second quarter of 2020 was $14.3 million, or $0.77 per diluted share, compared with $14.8 million, or $0.81 per diluted share, in the year-ago period. Adjusted diluted earnings per share, which exclude certain non-operational items and amortization expense, were $0.96, compared with $1.35 in the second quarter of 2019. Excluding non-operational items, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2020 were $35.3 million, or 16.5 percent of sales, compared with $41.8 million, or 13.9 percent of sales, in the year-ago period. In the second quarter of 2020, cash flow from operations provided $39.8 million, compared to $22.5 million in the prior-year second quarter.
“In the second quarter, we honored our 150-year commitment to providing the equipment, parts and service our customers need to keep their facilities clean and safe,” said Chris Killingstad, Tennant Company’s president and chief executive officer. “While revenue was down year-over-year in the quarter, we are encouraged with the trend we saw in the quarter as the decline in revenue was significantly less in June than in the earlier months of the quarter. At the same time, we took certain actions to manage our costs and cash flow carefully, while preserving our ability to ramp up quickly when global markets recover. While our profitability measures for the second quarter reflect some considerable cost savings that we do not expect will repeat in subsequent quarters, they are consistent with our overall commitment to successfully manage through this period of uncertainty. Tennant is a resilient company that will emerge from this health crisis in a strong position and I am proud of the way our team members have responded with determination, dedication and resourcefulness to the unprecedented challenges of the ongoing pandemic.”
Second-Quarter Operating Review
“The health and safety of our employees, customers and business partners are always our top priority,” said Killingstad. “In the second quarter, we took a number of actions globally in response to the pandemic to minimize its financial impact and to preserve our operational flexibility as we plan for the future.”
In the second quarter, the Company implemented a combination of reduced work schedules and furlough programs for employees globally, consistent with applicable laws and regulations. These actions also included pay reductions for our senior executives and the board of directors within the quarter. Additionally, Tennant reduced management incentives, limited travel to business-critical trips only, implemented work-from-home processes where possible, reduced non-essential discretionary and project spending, and participated in government programs, where appropriate, that benefited our EBITDA results. In total, a number of these actions resulted in approximately $15 million of cost savings that are not expected to repeat in subsequent quarters.
Sales Highlights
Tennant’s second-quarter 2020 consolidated net sales of $214.0 million were down 28.6 percent over the same period last year, including a 1.4 percent reduction from foreign currency. On an organic basis, sales declined 27.2 percent, reflecting an improved trend in June compared to earlier months in the quarter.
Regional Sales Highlights
- Americas – Sales in the Americas declined 28.1 percent, or down 27.0 percent organically, with overall declines across North and Latin America, due to the pandemic, which offset continued strength for Tennant’s autonomous cleaning machines in North America.
- EMEA–Sales in the Europe, Middle East and Africa (EMEA) region were down 32.3 percent, or 30.2 percent organically, primarily due to the broad economic impact of the pandemic across the entire region. Shutdowns of customer facilities were widespread in the second quarter.
- APAC – Sales in the Asia Pacific (APAC) region decreased 21.8 percent, or down 20.1 percent organically, primarily as a result of significant decreases in sales in China, along with declines in Japan and Southeast Asia, due to the pandemic.
Profitability Measures and Related Factors (See the Supplemental Non-GAAP Financial Table)
- Gross margin – Gross margin in the second quarter of 2020 was 42.3 percent, compared with 40.3 percent in the year-ago period. Adjusted gross margins during the second quarter of 2020 and 2019 were 42.3 percent and 41.4 percent, respectively, primarily reflecting actions directly resulting from the Company’s enterprise strategy efforts like pricing and cost-out initiatives, benefits from government programs, and cost actions including employee furloughs and reduced work hours.
- Net income/Adjusted EBITDA – Tennant’s 2020 second-quarter net earnings and adjusted EBITDA decreased compared to the prior year primarily as a result of lower sales due to the pandemic. Net earnings decreased to $14.3 million, or $0.77 per diluted share, compared with $14.8 million, or $0.81 per diluted share. Adjusted earnings per diluted share, excluding non-operational items and amortization expense, were $0.96 compared with $1.35 in the year-ago period. Adjusted EBITDA in the second quarter of 2020 decreased to $35.3 million, or 16.5 percent of sales, compared with $41.8 million, or 13.9 percent of sales, in the second quarter of 2019. The increase as a percentage of sales was attributed to cost savings related to steps taken by the Company, including employee furloughs and reduced work schedules, reduced expected management incentives and proceeds from government programs that are not likely to repeat.
Cash Flow, Capital Allocation and Liquidity
During the second quarter of 2020, Tennant generated $39.8 million in cash flow from operations, primarily driven by business performance. Also in the second quarter, the Company repaid the $125 million it had previously drawn as a precaution from its $200 million revolver. As of June 30, 2020, the Company had $99.3 million in cash and cash equivalents, and approximately $157 million of undrawn funds in its revolver.
2020 Business Outlook
As previously announced, Tennant withdrew the full-year guidance it had provided on February 20, 2020, due to the uncertain nature of the ongoing pandemic. At this time, the Company cannot predict the total impact on its businesses and financial results for the remainder of fiscal 2020 but plans to share additional updates in its third-quarter earnings announcement and conference call.
Conference Call
Tennant will host a conference call to discuss its 2020 second-quarter results today, July 30, 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 recorded replay of the conference call, with accompanying slides, will be available at investors.tennantco.com.
Company Profile
Founded in 1870, Tennant Company (TNC), headquartered in Minneapolis, Minnesota, is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, reduce their environmental impact and help create a cleaner, safer, healthier world. Its products include equipment for maintaining surfaces in industrial, commercial and outdoor environments; detergent-free and other sustainable cleaning technologies; cleaning tools and supplies; and coatings for protecting, repairing and upgrading surfaces. Tennant's global field service network is the most extensive in the industry. Tennant Company had sales of $1.14 billion in 2019 and has approximately 4,400 employees. Tennant has manufacturing operations throughout the world and sells products directly in 15 countries and through distributors in more than 100 countries. For more information, visit www.tennantco.com and www.ipcworldwide.com. The Tennant Company logo and other trademarks designated with the symbol “®” are trademarks of Tennant Company registered in the United States and/or other countries.
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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-Second-Quarter-Results/default.aspx
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