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TENNANT COMPANY
Earnings Release Conference Call
First Quarter 2015
Monday, April 27, 2015
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TENNANT COMPANY
ON THE CALL TODAY
Chris Killingstad
President and CEO
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Tom Paulson
Senior VP, CFO
TENNANT COMPANY
FORWARD LOOKING
STATEMENTS
Our remarks this morning and our answers to questions may contain forwardlooking 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.
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TENNANT COMPANY
FIRST QUARTER 2015 SALES
• Consolidated net sales of $185.7M
– 6% organic sales growth over prior year quarter
– Record sales for a first quarter
• Growth led by
– Robust strategic account sales in Americas
– Continued demand for new products
– Increased global sales of outdoor equipment
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TENNANT COMPANY
STRATEGIC OVERVIEW
On track to reach
organic growth
goal of $1 Billion
and remain
committed to
12% or above
OP margin
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TENNANT COMPANY
2015 FIRST QUARTER BY REGION
• Americas
– Sales up 11.5% organically
– Robust sales to two leading big box retailers
in U.S.
– LatAm declined due to challenging economy
– Brazil positioned for growth with strong
market share
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Small, simple, affordable On-Site
Generation (OSG) technology
• Generates both cleaning and
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antimicrobial solutions
• Fits into most janitorial closets
• Flexibility to dispense in remote locations
TENNANT COMPANY
2015 FIRST QUARTER BY REGION
• EMEA
– Sales down 5% organically
– Strong outdoor equipment sales
– Order patterns improved throughout the quarter
• APAC
– Sales down 1.3% organically
– Weak economy in Australia
– Slower sales in China
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NEW PRODUCT GROWTH
Strongest product pipeline ever!
17 20 18 36
in 2012
9
in 2013
in 2014
2015
Sales of equipment launched in past three years
totaled 14% of equipment revenue for 1Q 2015
Available NOW
ec-H2O NanoClean™
• Next generation ec-H2O
• Cleans more soils in
more applications
• Nano-scale bubbles
drive cleaning
performance
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FIRST GENERATION
EC-H2O™: 2008-2014
$740 million+
cumulative revenue
7,500+ customers
29,000+ sites
65,000+ machines
TENNANT COMPANY
T300 SCRUBBER
MORE FLEXIBILITY | EASE OF USE | IMPROVED PRODUCTIVITY
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TENNANT COMPANY
WELCOME
Jeffrey Moorefield
Senior VP, Global Operations
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TENNANT COMPANY
GROWTH DRIVERS
•
•
•
•
•
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New products in core and Orbio
Sales gains in emerging markets
Growth in Europe
Focus on Strategic Accounts
Expand global market coverage and
customer base
TENNANT COMPANY
2015 FIRST QUARTER
Organic Sales Growth 6.0% | Strong Growth in North America
Q1’15
Q1’14
CHANGE
$185.7 M
$184.0 M
+1.0%
GROSS MARGIN
42.0%
41.8%
+20 bps
R&D EXPENSE (% of sales)
4.2%
4.1%
+10 bps
S&A EXPENSE (% of sales)
33.4%
32.7%
+70 bps
OPERATING PROFIT
$8.3 M
$9.2 M
(10.6%)
OPERATING PROFIT MARGIN
4.4%
5.0%
(60 bps)
DILUTED EPS
$0.27
$0.31
(12.9%)
SALES
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TENNANT COMPANY
ORGANIC SALES GROWTH
2015 First Quarter 6.0% | 2014 Full Year 10.3%
EMEA
1Q’15 – <5.0%>
2014 FY – 4.4%
AMERICAS
1Q’15 – 11.5%
2014 FY – 11.6%
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APAC
1Q’15 – <1.3%>
2014 FY – 12.8%
TENNANT COMPANY
2015 FIRST QUARTER
Organic Sales Growth 6.0% | Strong Growth in North America
Q1’15
Q1’14
CHANGE
$185.7 M
$184.0 M
+1.0%
GROSS MARGIN
42.0%
41.8%
+20 bps
R&D EXPENSE (% of sales)
4.2%
4.1%
+10 bps
S&A EXPENSE (% of sales)
33.4%
32.7%
+70 bps
OPERATING PROFIT
$8.3 M
$9.2 M
(10.6%)
OPERATING PROFIT MARGIN
4.4%
5.0%
(60 bps)
DILUTED EPS
$0.27
$0.31
(12.9%)
SALES
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TENNANT COMPANY
2015 FIRST QUARTER
“CONSTANT CURRENCY” VIEW (excludes estimated foreign exchange impact)
AS
CONSTANT(1)
REPORTED CURRENCY
Q1’15
Q1’15
Q1’14
CHANGE
$185.7 M
$195.0 M
$184.0 M
+6%
GROSS MARGIN
42.0%
42.6%
41.8%
+80 bps
OPERATING PROFIT
$8.3 M
$10.2 M
$9.2 M
+10%
OPERATING PROFIT MARGIN
4.4%
5.2%
5.0%
+20 bps
DILUTED EPS
$0.27
$0.34
$0.31
+10%
SALES
(1)
“Constant Currency”: estimated income statement which assumes
no change in exchange rates from prior year.
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TENNANT COMPANY
OPERATING PROFIT
MARGIN GOAL
• 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
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TENNANT COMPANY
SUCCESSFUL TAX STRATEGIES
• Overall effective tax rate for 2015 first
quarter of 32.4%
• Base tax rate of 31.8 % (excl. routine discrete items)
• No benefit in 1Q for Federal R&D tax credit –
not yet re-enacted
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TENNANT COMPANY
STRONG BALANCE SHEET
160.0
FY’14
1Q’14
1Q’15
Net Receivables
FY14
152.4
1Q14
144.0
1Q15
134.0
Net Inventory
80.5
73.8
85.6
Cash from Operations
59.4
(3.9)
(2.1)
Capital Expenditures
19.6
3.5
4.1
Dividends
14.5
3.5
3.7
Share Repurchases
14.1
3.6
4.1
Cash
93.0
63.4
76.8
Debt
28.1
28.2
26.1
140.0
120.0
100.0
80.0
$ Millions
60.0
40.0
20.0
0.0
(20.0)
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COMMITMENT TO SHAREHOLDER RETURN
TENNANT COMPANY
REAFFIRMS 2015 EPS GUIDANCE
2015 OUTLOOK
$2.40 to $2.70
2014
ACTUAL
$2.70
KEY EXPECTATIONS FOR 2015
•
•
•
•
•
•
•
•
•
•
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Net sales in the range of $825M to $850M versus $822M in ‘14.
Economic strength in North America and modest improvement in Europe,
and growth in emerging markets.
Foreign currency impact on sales in the range of an unfavorable 4% to 6%.
Organic sales growth, excluding foreign currency exchange impact, in the
range of 5% to 9%.
Foreign currency exchange headwinds estimated to negatively impact
operating profit in the range of $10M to $12M, or approximately $0.37 to
$0.44 EPS.
Minimal inflation net of cost-saving initiatives and selling price increases.
Gross margin of approximately 43%.
R&D expense of approximately 4% of sales.
Effective tax rate of approximately 31% vs. 27.2% in 2014 (Negatively
impacting 2015 by approximately $0.14).
Capital expenditures in the range of $25M to $28M.
TENNANT COMPANY
OUR GUIDANCE REFLECTS
• Ongoing focus on accelerating organic sales growth
• Investments in direct sales, distribution, marketing
• Assumption it will take us into second quarter to
further improve “growing pains” in supply chain
• Estimated significant unfavorable impact from
foreign exchange rates
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TENNANT COMPANY
LOOKING AT MITIGATION OF Fx
• Increase selling prices in affected markets
• Evaluate potential to expand the scope of
hedging strategies
• Explore feasibility of producing and shipping
products from locations with more favorable
Fx pairing
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QUESTIONS?
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TENNANT COMPANY
SUMMARY
• Organic sales grew 6% in 2015 first quarter
• We remain on track to reach our organic growth
goal of $1 Billion in sales by 2017
• We remain committed to the goal of a 12% or above
operating profit margin
• Will update you in July with second quarter results
THANK YOU
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