SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996. COMMISSION FILE NUMBER 0-4804 TENNANT COMPANY INCORPORATED IN THE STATE OF MINNESOTA EMPLOYER IDENTIFICATION NUMBER 41-0572550 701 NORTH LILAC DRIVE, P.O. BOX 1452, MINNEAPOLIS, MINNESOTA 55440 TELEPHONE NUMBER 612-540-1208 SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: COMMON STOCK, PAR VALUE $.375 PER SHARE AND PREFERRED SHARE PURCHASE RIGHTS Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] $216,134,393 is aggregate market value of common stock held by non-affiliates as of March 10, 1997. 10,000,229 shares outstanding at March 10, 1997 DOCUMENTS INCORPORATED BY REFERENCE 1996 Annual Report to Shareholders - Part I (Partial), Part II (Partial), and Part IV (Partial) 1997 Proxy - Part III (Partial)
TENNANT COMPANY 1996 ANNUAL REPORT FORM 10-K (PURSUANT TO SECURITIES EXCHANGE ACT OF 1934) PART I Part I is included in the Tennant Company 1996 Annual Report to Shareholders (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 3 - "Legal Proceedings," of which there were no material legal proceedings pending, and Item 4 - "Submission of Matters to a Vote of Security Holders" during the fourth quarter, of which there were none. GENERAL DEVELOPMENT OF BUSINESS Tennant Company, a Minnesota corporation incorporated in 1909, is a Minneapolis- based company that specializes in the design, manufacture, and sale of non- residential floor maintenance equipment and related products. On February 1, 1994, the Company acquired the business and assets of Castex Industries, Inc., a privately owned manufacturer of commercial floor maintenance equipment. INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS, AND EXPORT SALES The Company, as described under "General Development of Business," has one business segment. The Company sells its products domestically and internationally. Appropriate financial information is provided in the Company's 1996 Annual Report to Shareholders, page 24, footnote 3. Nearly all of the Company's foreign investment in assets reside within Australia, Canada, Japan, Spain, The Netherlands, the United Kingdom, France, and Germany. While subject to increases or decreases in value over time due to foreign exchange rate movements, these investments are considered to be of low business risk. PRINCIPAL PRODUCTS, MARKETS, AND DISTRIBUTION Products consisting mainly of motorized cleaning equipment and related products, including floor cleaning and preservation products, are sold through a direct sales organization and independent distributors in North America, primarily through a direct sales organization in Australia, France, Spain, The Netherlands, Germany, and the United Kingdom, and through independent distributors in more than 40 foreign countries. Additional information pertaining to products and marketing methods is included in the 1996 Annual Report to Shareholders, pages 4, 5, 6, 7, 8, 9, 10, 11 and 13. RAW MATERIALS AND PURCHASED COMPONENTS The Company has not experienced any significant or unusual problems in the purchase of raw materials or other product components and is not disproportionately dependent upon any single source or supply. The Company has some sole-source vendors for certain components, primarily for automotive and plastic parts. A disruption in supply from such vendors may cause a short-term disruption in the Company's operations. However, the Company believes that it can find alternate sources in the event there is a disruption in supply from such vendors. PATENTS AND TRADEMARKS The Company applies for and is granted United States and foreign patents and trademarks in the ordinary course of business, no one of which is of material importance in relation to the business as a whole. SEASONALITY Although the Company's business is not seasonal in the traditional sense, revenues and earnings tend to concentrate in the fourth quarter of each year reflecting the tendency of customers to increase capital spending during such quarter, and the Company's efforts to close orders and reduce order backlogs. 1
WORKING CAPITAL PRACTICES The Company's working capital practices are described in the 1996 Annual Report to Shareholders, Management's Financial Discussion and Analysis, Financial Position section on pages 16 and 17. MAJOR CUSTOMERS The Company sells its products to a wide variety of customers, no one of which is of material importance in relation to the business as a whole. BACKLOG The Company routinely fills orders within 30 days on the average. Consequently, order backlogs are not indicative of future sales levels. COMPETITIVE POSITION While there is no industry association or industry data, the Company believes, through its own market research, that it is a world-leading manufacturer of floor maintenance equipment. Active competition exists in most geographic areas; however, it tends to originate from different sources in each area, and the Company's market share is believed to exceed that of the leading competitor in many areas. The Company competes primarily on the basis of offering a broad line of high-quality, innovative products supported by an extensive sales/service network in major markets. PRODUCT RESEARCH AND DEVELOPMENT The Company regularly commits what is believed to be an above-average amount of resources to product research and development. These amounts are reported on the Company's 1996 Annual Report to Shareholders, page 24, footnote 2. A description of product development is included in the 1996 Annual Report to Shareholders on pages 4, 5, 6, 7, 8, 9, 10, 11 and 13. ENVIRONMENTAL PROTECTION Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, and is not expected to have, a material effect upon the Company's capital expenditures, earnings or competitive position. EMPLOYMENT Year-end employment is reported in the 1996 Annual Report to Shareholders on page 30. EXECUTIVE OFFICERS OF THE REGISTRANT Richard M. Adams, Vice President Richard M. Adams (49) joined the Company in 1974. Mr. Adams was elected Assistant Controller in 1983 and was named Corporate Controller in 1986, and Vice President in 1993. Mr. Adams is a Certified Public Accountant. The President and Chief Executive Officer of the Company, Roger L. Hale, is the first cousin of Mr. Adams. Mr. Adams is a director of Tennant Maintenance Systems, Ltd., Tennant Holding B.V., Tennant Europe B.V., Tennant Japan, Castex Incorporated, and Eagle Floor Care, Incorporated. Bruce J. Borgerding, Deputy General Counsel and Corporate Secretary Bruce J. Borgerding (46) joined the Company in 1988 as Assistant General Counsel. He was named Deputy General Counsel and Corporate Secretary in 1995. Mr. Borgerding is a director of Tennant Maintenance Systems, Ltd., Tennant Holding B.V., Tennant Europe B.V., Tennant N.V., Tennant Japan, and an officer of Eagle Floor Care, Incorporated. Paul E. Brunelle, Vice President Paul E. Brunelle (56) joined the Company in 1965. In 1987 he was elected Vice President of Personnel Resources. Prior to joining the Personnel Resources Department in 1985, he was General Manager of the Company's former Brazilian operations. Mr. Brunelle is the President of the Tennant Company Foundation and a director of Tennant N.V. 2
Janet M. Dolan, Executive Vice President Janet M. Dolan (47) joined the Company in 1986. Ms. Dolan was appointed General Counsel and Secretary in 1987, Vice President in 1990, Senior Vice President in 1995, and Executive Vice President in 1996. She is a director of Castex Incorporated. She is also a director of Donaldson Company, Inc. Roger L. Hale, President and Chief Executive Officer Roger L. Hale (62) joined the Company in 1961. Mr. Hale was named Vice President in 1969 and elected a director in 1969. Mr. Hale was named President and Chief Operating Officer in 1975, and subsequently named Chief Executive Officer in 1976. He also is a director of Dayton Hudson Corporation and First Bank System, Inc. Douglas R. Hoelscher, Senior Vice President Douglas R. Hoelscher (58) joined the Company in 1973. He was named Vice President in 1978 and Senior Vice President in 1995. He is a Registered Professional Engineer. Mahedi A. Jiwani, Corporate Controller and Principal Accounting Officer Mahedi A. Jiwani (48) joined the Company in 1983 as a Financial Analyst. He was named Manager of Planning and Analysis in 1987, Assistant Controller in 1989, Corporate Controller in 1994, and Principal Accounting Officer in 1995. Mr. Jiwani is a Certified Public Accountant. He is a director of Castex Incorporated. Keith D. Payden, Vice President Keith D. Payden (49) joined the Company in 1981. He was named Director, Information Services in 1987, Chief Information Officer in 1992, and Vice President in 1993. Richard A. Snyder, Vice President, Treasurer and Chief Financial Officer Richard A. Snyder (57) joined the Company in 1981 as Controller. He was elected Treasurer and Chief Financial Officer in 1982 and named Vice President in 1985. Mr. Snyder is a Certified Public Accountant. He is a director of Tennant N.V. William R. Strang, Vice President William R. Strang (61) joined the Company in 1969. He was named Director, Corporate Marketing in 1987 and Vice President, Corporate Marketing in 1992. Mr. Strang is a director of Tennant Europe B.V., Tennant Holding B.V., and Tennant Japan. Steven K. Weeks, Vice President Steven K. Weeks (41) joined the Company in 1984. He was named Manager, Global New Business and Marketing Development in 1993, Director of Marketing in 1994, and Vice President, Customer Solutions in 1996. PART II Part II is included in the Tennant Company 1996 Annual Report to Shareholders (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 9, "Changes in and Disagreements with Accountants on Accounting and Financial Disclosure," of which there were none. PART III Part III is included in the Tennant Company 1997 Proxy (to the extent specific pages are referred to on the Cross Reference Sheet) and is incorporated in this Form 10-K Annual Report by reference, except Item 13 - "Certain Relationships and Related Transactions," of which there were none, and Item 10 - "Directors and Executive Officers of the Registrant" as it relates to executive officers. Identification of executive officers is included in Part I of this Form 10-K Annual Report. 3
PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K. A. The following documents are filed as a part of this report: 1. Financial Statements The following consolidated financial statements and independent auditors' report are included on pages 18 through 29 of the Tennant Company 1996 Annual Report to Shareholders and are incorporated in this Form 10-K Annual Report by reference: a. Consolidated Statements of Earnings for each of the years in the three-year period ended December 31, 1996 - page 18. b. Consolidated Balance Sheets as of December 31, 1996 and 1995 - page 19. c. Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 1996 - page 20. d. Consolidated Statements of Shareholders' Equity for each of the years in the three-year period ended December 31, 1996 - page 21. e. Independent Auditors' Report of KPMG Peat Marwick LLP - page 22. f. Notes to Consolidated Financial Statements - pages 23 through 29. 2. Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts (Dollars in Thousands) Additions Balance at charged to Deductions Allowance for doubtful beginning costs and from Balance at accounts of year expenses reserves(1) end of year - ------------------------------------------------------------------------------- Year ended December 31, 1996 2,611 1,160 1,265 2,506 Year ended December 31, 1995 2,609 803 801 2,611 Year ended December 31, 1994 1,495 1,088 (26) 2,609 (1) Accounts determined to be uncollectible and charged against reserve, net of collections on accounts previously charged against reserves. All other schedules are omitted as the required information is inapplicable or because the required information is presented in the Consolidated Financial Statements in the Tennant Company 1996 Annual Report to Shareholders. 3. Exhibits Item # Description Method of Filing ------ ----------- ---------------- 3i Articles of Incorporation Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement No. 33- 62003, Form S-8, dated August 22, 1995. 3ii By-Laws Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement No. 33- 59054, Form S-8, dated March 2, 1993. 4
10.1 Tennant Company 1988 Stock Incorporated by reference to Incentive Plan Exhibit b.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10.2 Tennant Company 1992 Stock Incorporated by reference to Incentive Plan Exhibit 4.4 to the Company's Registration Statement No. 33- 59054, Form S-8 dated March 2, 1993. 10.3 Tennant Company Restricted Incorporated by reference to Stock Plan for Nonemployee Exhibit 4.5 to the Company's Directors Registration Statement No. 33- 59054, Form S-8, dated March 2, 1993. 10.4 Tennant Company 1995 Stock Incorporated by reference to Incentive Plan Exhibit 4.4 to the Company's Registration Statement No. 33- 62003, Form S-8, dated August 22, 1995. 10.5 Tennant Company Restricted Incorporated by reference to Stock Plan for Nonemployee Exhibit 10.2 to the Company's 1995 Directors, as amended and Second Quarter 10-Q filing dated restated effective January 1, August 8, 1995. 1995 10.6 Tennant Company Excess Benefit Incorporated by reference to Plan, as amended and restated Exhibit 10.4 to the Company's effective January 1, 1994 Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 10.7 Management Agreement with Filed herewith electronically. Steven K. Weeks dated November 19, 1996 10.8 Management Agreement with Tom Filed herewith electronically. Vander Bie dated November 19, 1996 10.9 Management Agreement with Incorporated by reference to Richard M. Adams dated Exhibit 10.6 to the Company's December 10, 1993 Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10.10 Management Agreement with Paul Incorporated by reference to E. Brunelle dated December 8, Exhibit 10.7 to the Company's 1987 Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10.11 Amendment to Management Incorporated by reference to Agreement with Paul E. Exhibit 10.8 to the Company's Brunelle dated June 21, 1989 Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10.12 1993 Amendment to Management Incorporated by reference to Agreement with Paul E. Exhibit 10.9 to the Company's Brunelle dated December 10, Annual Report on Form 10-K for the 1993 fiscal year ended December 31, 1993. 10.13 Management Agreement with Incorporated by reference to Janet M. Dolan dated June 21, Exhibit b.5 to the Company's Annual 1989 Report on Form 10-K for the fiscal year ended December 31, 1992. 10.14 1993 Amendment to Management Incorporated by reference to Agreement with Janet M. Dolan Exhibit 10.11 to the Company's dated December 10, 1993 Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10.15 Management Agreement with Incorporated by reference to Roger L. Hale dated March 10, Exhibit b.8 to the Company's Annual 1987 Report on Form 10-K for the fiscal year ended December 31, 1992. 10.16 Amendment to Management Incorporated by reference to Agreement with Roger L. Hale Exhibit b.9 to the Company's Annual dated June 21, 1989 Report on Form 10-K for the fiscal year ended December 31, 1992. 5
10.17 1993 Amendment to Management Incorporated by reference to Exhibit Agreement with Roger L. Hale 10.14 to the Company's Annual Report dated December 10, 1993 on Form 10-K for the fiscal year ended December 31, 1993. 10.18 Management Agreement with Incorporated by reference to Exhibit Douglas R. Hoelscher dated b.10 to the Company's Annual Report March 10, 1987 on Form 10-K for the fiscal year ended December 31, 1992. 10.19 Amendment to Management Incorporated by reference to Exhibit Agreement with Douglas R. b.11 to the Company's Annual Report Hoelscher dated June 21, 1989 on Form 10-K for the fiscal year ended December 31, 1992. 10.20 1993 Amendment to Management Incorporated by reference to Exhibit Agreement with Douglas R. 10.18 to the Company's Annual Report Hoelscher dated December 10, on Form 10-K for the fiscal year 1993 ended December 31, 1993. 10.21 Management Agreement with Incorporated by reference to Exhibit Keith D. Payden dated December 10.19 to the Company's Annual Report 10, 1993 on Form 10-K for the fiscal year ended December 31, 1993. 10.22 Management Agreement with Incorporated by reference to Exhibit Richard A. Snyder dated March b.12 to the Company's Annual Report 10, 1987 on Form 10-K for the fiscal year ended December 31, 1992. 10.23 Amendment to Management Incorporated by reference to Exhibit Agreement with Richard A. b.13 to the Company's Annual Report Snyder dated June 22, 1989 on Form 10-K for the fiscal year ended December 31, 1992. 10.24 1993 Amendment to Management Incorporated by reference to Exhibit Agreement with Richard A. 10.22 to the Company's Annual Report Snyder dated December 10, 1993 on Form 10-K for the fiscal year ended December 31, 1993. 10.25 Management Agreement with Incorporated by reference to Exhibit William R. Strang dated 10.23 to the Company's Annual Report December 10, 1993 on Form 10-K for the fiscal year ended December 31, 1993. 10.26 Asset Purchase Agreement dated Incorporated by reference to Exhibit January 27, 1994, between 2.1 to the Company's Current Report Tennant Company, Castex on Form 8-K dated February 15, 1994. Industries, Inc., Wayne Investment Corp. and Wayne A. Streuer 13.1 Portions of 1996 Annual Report Filed herewith electronically. to Shareholders 6
21.1 Subsidiaries of the Registrant Tennant Company has the following subsidiaries: Tennant Holding B.V. is a wholly owned subsidiary organized under the laws of the Netherlands in 1991. A legal reorganization occurred in 1991 whereby Tennant N.V. became a participating interest of Tennant Holding B.V. Tennant N.V. had previously been a wholly owned subsidiary organized under the laws of the Netherlands in 1970. Tennant Maintenance systems, Limited, was a wholly owned subsidiary, organized under the laws of the United Kingdom until October 29, 1992, at which time Tennant Holding B.V. acquired 100% of its stock from Tennant Company. Contract Applications, Inc., a wholly owned subsidiary organized under the laws of the state of Minnesota, was incorporated on November 15, 1984, became operational in January 1985, and was dissolved in 1993. Castex, Incorporated, is a wholly owned subsidiary organized under the laws of the state of Michigan. The results of these operations have been consolidated into the financial statements, as indicated therein. 23.1 Independent Auditors' Report Filed herewith electronically. and Consent 27.1 Financial Data Schedule Filed herewith electronically. B. Reports on Form 8-K A Form 8-K was filed on November 26, 1996, reporting a Shareholder Rights Plan and a Dividend Reinvestment Plan. 7
CROSS REFERENCE SHEET <TABLE> <CAPTION> FORM 10-K REFERENCED LOCATION - --------- ---------- -------- <S> <C> <C> Part I, Item 1 - Business 1996 Annual Report to Shareholders Exhibit 13.1 a. General Pages 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 13 b. Lines of business, industry segments and Page 24, footnote 3 foreign and domestic operations c. Working capital practices Pages 16 and 17 d. Product research and development Pages 4, 5, 7, 8, 10 and 13 Page 24, footnote 2 e. Employment Page 30 Part I, Item 2 - Properties 1996 Annual Report to Shareholders Exhibit 13.1 Page 25, footnote 7 Page 26, footnote 9 Inside back cover Part II, Item 5 - Market for 1996 Annual Report to Shareholders Exhibit 13.1 the Registrant's Common a. Principal market Inside back cover Equity and Related b. Quarterly data Page 24, footnote 4 Shareholder Matters Inside back cover c. Number of shareholders Inside back cover d. Dividends Page 24, footnote 4 Inside back cover Part II, Item 6 - Selected 1996 Annual Report to Shareholders Exhibit 13.1 Financial Data Pages 30 and 31 Part II, Item 7 - Management's 1996 Annual Report to Shareholders Exhibit 13.1 Discussion and Analysis of Pages 14 to 17 Financial Condition and Results of Operations Part II, Item 8 - Financial 1996 Annual Report to Shareholders Exhibit 13.1 Statements and Supplementary Pages 18 to 29 Data Part III, Item 10 - Directors 1997 Proxy Pages 3 to 6 and Executive Officers of the Registrant Part III, Item 11 - Executive 1997 Proxy Pages 6 to 13 Compensation Part III, Item 12 - Security 1997 Proxy Pages 2 and 5 Ownership of Certain Beneficial Owners and Management </TABLE> 8
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its by the undersigned, thereunto duly authorized. TENNANT COMPANY By /s/ ROGER L. HALE By /s/ WILLIAM A. HODDER Roger L. Hale, President, William A. Hodder Chief Executive Officer, Board of Directors and Board of Directors Date - March 25, 1997 Date - March 25, 1997 By /s/ DELBERT W. JOHNSON By /s/ RICHARD A. SNYDER Delbert W. Johnson Richard A. Snyder Board of Directors Vice President, Treasurer, and Chief Financial Officer Date - March 25, 1997 Date - March 25, 1997 By /s/ WILLIAM I. MILLER William I. Miller By /s/ MAHEDI A. JIWANI Board of Directors Mahedi A. Jiwani Corporate Controller and Date - March 25, 1997 Principal Accounting Officer Date - March 25, 1997 By /s/ ARTHUR D. COLLINS, JR. Arthur D. Collins, Jr. Board of Directors Date - March 25, 1997 By /s/ DAVID C. COX David C. Cox Board of Directors Date - March 25, 1997 By /s/ ANDREW P. CZAJKOWSKI Andrew P. Czajkowski Board of Directors Date - March 25, 1997 9