Investor Presentation - Corporate-ir

COMPANY
WORLDWIDE
WHY TENNANT?
MARKETS
PRODUCTS
OFFERING
Creating a cleaner, safer world
Chris Killingstad – President and CEO
11th Annual Sidoti & Co. New York Emerging Growth
Institutional Investor Forum
March 28, 2007
Safe Harbor Statement
This presentation contains statements that are considered “forward-looking
statements” within the meaning of the Private Securities Litigation Reform
Act. These statements do not relate to strictly historical or current facts and
provide current expectations or forecasts of future events. Any such
expectations or forecasts of future events are subject to a variety of factors.
We caution that forward-looking statements must be considered carefully
and that actual results may differ in material ways due to risks and
uncertainties both known and unknown. For additional information about
factors that could materially affect Tennant’s results, please see the
company’s Securities and Exchange Commission filings.
We do not undertake to update any forward-looking statement, and
investors are advised to consult any further disclosures by us on this matter
in our filings with the Securities and Exchange Commission and in other
written statements we make from time to time. It is not possible to
anticipate or foresee all risks factors, and investors should not consider that
any list of such factors to be an exhaustive or complete list of all risks or
uncertainties.
2
Why Tennant Company?
• Proven revenue growth trajectory with CAGR of 9% over the
last three years
• Targeting continuation of double-digit earnings growth
• Innovation leadership in products, services and solutions
• Identified opportunities to achieve 9.5% operating margin
before end of F’08
• Significant global opportunities to help fuel future revenue
growth guidance of 5-9%
• World-class marketing competency
• Expanding/evolving business to provide environmental
cleaning solutions
• Solid balance sheet that contains no long-term debt
3
Key Milestones
Founded in 1870 by George H. Tennant as wood products company
1938 – Developed Tennant Floor Maintenance System
1947 – Invented first vacuumized power sweeper
1949 – Sold first machines overseas to Swiss Rail System
1969 – Became a public company on NASDAQ
1994 – Acquired Castex & Nobles brands for small products
2000 – Moves to the NYSE
2003 – Revolutionizes hard floor care with FaST
2004 – Revolutionizes carpet care with ReadySpace
2005 – Further expansion in China market
2006 – Launches the Tennant M20, the first fully integrated scrubber-sweeper
2006 – Acquires Hofmans Machinefabriek B.V. in Schaijk, The Netherlands, a
manufacturer of outdoor cleaning equipment
4
Senior Management Team
Chris Killingstad
President & CEO
Start date: 2002; Age: 51
Previously: VP North America, Tennant; Sr. VP & GM of Frozen
Products for Pillsbury North America; VP & MD of Pillsbury Europe
Don Westman
Heidi Hoard
Tom Paulson
Karel Huijser
VP – Global Operations
Start date: 2006; Age: 53
Previously: VP of OperationsPump Division, Pentair, Inc.; VP of
Operations of Pentair Water,
Pentair, Inc.; VP of Operations,
Hoffmans Enclosures
VP – General Counsel & Secretary
Start date: 2003; Age: 56
Previously: Asst. General Counsel &
Asst. Sec., Tennant; VP, General
Counsel & Sec., Musicland Group, Inc.
VP & CFO
Start date: 2006; Age: 50
Previously: CFO & Sr. VP, Innovex;
VP of Finance for North American
Foods Division, Pillsbury
VP – International
Start date: 2006; Age: 45
Previously: Pres. & CEO of Asia
Pacific for GE Infrastructure
Shanghai, China; GM of Asia Pacific,
GE Water & Process Technologies
Andy Eckert
Steven Coopersmith
Tom Dybsky
Mark Fleigle
VP – North America Sales
Start date: 2002; Age: 43
Previously: Sr. VP of Operations,
Storecast Merchandising Company;
Dir. of Strategic Planning, General
Mills
VP – Global Marketing
Start date: 2003; Age: 43
Previously: Pres. of Dairy Marketing
Alliance LLC; VP of Product Devel.,
United Healthcare
VP – Administration
Start date: 1998; Age: 57
Previously: VP of Human Resources;
VP & Sr Consultant, MDA Consulting
VP – Global R&D
Start date: 1981; Age: 47
Previously: Dir. New Product
Devel., Tennant; has held various
management-level positions
within Tennant R&D
5
Our Capabilities
HARD FLOOR
COATINGS
SOFT FLOOR
INTEGRATED PARTS & SERVICE
OUTDOOR
FINANCING
6
Quality is Our Standard
BEST
Built with premium components for superior
performance & reliability
Engineered to meet the highest standards
Safeguarded from damage & heavy use
Tested thoroughly in the lab & in actual
end-user environments
100 Products America Makes Best – Fortune
200 Best Companies in America – Forbes
7
Who Are Our Customers?
Key Markets:
•
•
•
•
•
•
•
•
•
HOSPITALITY
HEALTHCARE
RETAIL
MANUFACTURING
EDUCATION
GOVERNMENT
AVIATION
WAREHOUSING
AND MANY MORE…
8
How Do We Reach Them?
• National Business Development
Dofesa, Distributor, Mexico
Dalco, Distributor, USA
– Multi-market BSC & Facility
Management
– National Retail
• Direct Sales
– 120 Direct Sales Reps in US
– 114 Direct Sales Reps in Europe
• Distributor Partners
– More than 80 countries around the
world
Kanoo Group, Distributor, UAE
Motrac, Distributor, Belgium
9
Factory-trained Service:
A Tennant Differentiator
• 400+ locally based factory-trained service
reps
• Complete repairs performed on-site – in one
visit
– Fully equipped vans facilitate complete repairs in
one visit at the customer’s site
• Planned maintenance programs
– Over 31,000 machines on PM
– Over 110,000 scheduled maintenance visits per year
• ServiceLINK
– Vans are equipped with laptop computers to:
• Access customer files
• Price repair orders on-site
• Obtain immediate information on inventory and
availability
• Customer satisfaction survey
– Measured by a third party
– 98% of customers fully satisfied
10
Service, Parts & Consumables
2005-2007
$400,000
CAGR 05-07
8.9%
$350,000
Thousands
$300,000
CAGR 05-07
9.4%
$250,000
$200,000
2005
2006
2007
$150,000
$100,000
$50,000
$-$0
Equipment
P&C and Service
Historically, every $1,000 of equipment sales drives
roughly $600 of P&C and service going forward
11
2006 Revenue Distribution
Sales by Geographic Area
Sales by Product Groups
10%
4%
25%
36%
60%
65%
No. Am.
Europe
Other Intl
Equipment
Service, Parts & Consumables
Coatings
We service:
• The White House, Washington DC
• Petronas Twin Towers, Kuala Lumpur, Malaysia
• Olympic and World Cup Stadiums in Korea, Japan & Australia
• US Open, Flushing Meadows, NY
• Holy Cities of Mecca and Medina, Saudi Arabia
• Grand Central Station, New York, NY
• Yankee Stadium, New York, NY
12
Global Market Opportunity
Worldwide Market Share
of $5 Billion Market
2005
12%
Tennant
All Other
88%
Annual estimates based on 2005 sales data.
13
Competitive Landscape
Nilfisk
Advance
Hako
- Nilfisk
- Advance
- Clarke
- Kent/EuroClean
15%*
- Hako
- Minuteman
- PowerBoss
6%*
Karcher
Tennant
Company
- Tennant
- Nobles
12%*
- Karcher
- Windsor
- TecServ
- ProChem
5%*
All Other
62%, none greater
than 3%*
market share
% = Worldwide market share
*Market share data is based on company estimates
14
Key Growth Strategies
Medium-term
•
•
•
•
Be a world-class marketer
Extend global market coverage
Lead the industry through innovative products, services, solutions
Leverage cost structure globally
Long-term
• Migrate from non-residential floor maintenance company to
environmental cleaning solutions company over time
15
World-Class Marketing
• Marketing now focused on customer benefits
• Operating as a marketing-driven packaged goods company vs.
old-line industrial company
• Targeting Tennant brand to “cleaning pros”
– Cleaning is their business
– Cleaning supports their business
• Partnering with customers to design & develop new products
• Satisfying the emerging customer demand for cleaning solutions
16
Extend Global Market Coverage
• Resulting from our market
study findings, we will extend
market coverage in North
America:
– Increasingly customer-focused,
vs. territory-focused
– Integrating our sales channels for
unified go-to-market approach
– Flexibility in how we deploy local
sales resources to accommodate
differences in local markets &
reach under-penetrated markets
• International focus in Europe,
China, Japan, Brazil & India
Allianz Arena, Germany
Coke, Panamco, Mexico
Hangar, Las Vegas
Sharjah Municipality, Dubai, UAE
NEC Building, Tokyo, Japan
17
China Expansion –
Tremendous Market Potential
• Expanded China presence in
December 2005
• Factory start-up June 2006
• Growing economy &
infrastructure
• Follow the migration of
Tennant’s North American
industrial manufacturing
customers
18
Lead with Innovation
• Aim to deliver products that satisfy three filters: performance,
productivity, health & safety
• 2004 – A record-setting year for new products
• Strong product pipeline for 2006 & beyond
• M20 Scrubber-Sweeper
• T-Series line of walk-behind & rider scrubbers
• Concerted effort to lead carpet care industry
FaST™
InstaCure™
ReadySpace®
19
ReadySpace® Technology Platform
• Patented rapid-drying carpet-cleaning technology
• Returns clean carpets to service sooner than traditional
extraction methods - less than 30 minutes
• Minimizes odors and molds caused by excess water
20
FaSTTM Technology Platform
• Foam-activated Scrubbing
Technology (FaST) eliminates
slippery chemical residue, so
just-scrubbed floors are dry & safe
to walk on
• Safer environment with FaST:
– Operators never have to handle
chemicals
– Reduces waste
• FaST accurately measures the mix
of detergent and water, covering
more space with approximately
70% less water
• Productivity gains
21
New Riding Industrial Cleaning
Solutions
M20
• Truly integrated ScrubberSweeper
• Superior Cleaning Results
• Dramatically Lower Total Cost
of Ownership
• 1st Industrial Product in 5 Years
22
M20 Scrubber-Sweeper
•
•
•
•
•
Eliminates the complexity of traditional sweeper-scrubbers
14% fewer moving parts, increases reliability
24 cost-saving innovations
Increases floor traction up to 21% with FaST™
EasyOpen™ Service Access reduces maintenance costs
23
Leverage Cost Structure
•
Improve gross margin by minimum of 30 basis
points annually through execution of long-term
operations plan
– Accelerated global sourcing
– Lean Manufacturing
– Design for Manufacturing & Assembly
North Hampton,
United Kingdom
•
•
Manage S&A growth rate below sales growth rate
over long term
Strengthen information foundation
Uden, Netherlands
– Customer Relationship Management (CRM)
– ServiceLINK rollout in North America and Europe
•
China expansion
– Global sourcing & assembly
– Manufacturing products for the China/Asia market
Holland, MI, USA
Minneapolis, MN, USA
Shanghai, China
24
FINANCIAL SUMMARY
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Financial Goals
• Continuous improvement in economic profit & ROIC
• The power of Economic Profit
– Focuses on ROIC less cost of capital
– Provides single framework for measuring performance &
evaluating growth opportunities
– Links employee & shareholder interests
• Mid- to upper single-digit revenue growth over long term
• Annual average double-digit EPS growth rate over long term
• 9.5% operating margin by end of F’08
26
Solid Revenue Growth
($ millions)
CAGR = 9%*
$700
$599.0
$600
$552.9
$507.8
$500
$424.2
$454.0
$400
$300
$200
$100
$0
2002
2003
2004
2005
2006
*Compounded annual growth rate for 2002-2006
27
Double-digit Earnings
Growth – GAAP EPS
$1.80
$1.57
$1.60
$1.40
$1.26
$1.20
$1.00
$0.80
$0.78
$0.73
2003
2004
$0.60
$0.46
$0.40
$0.20
$0.00
2002
2005
2006
EPS - fully diluted basis
28
Millions of $
$550.0
$450.0
$350.0
$250.0
$150.0
2004
2005
2006
Sales
$507.8
$552.9
$599.0
EPS
$0.73
$1.26
$1.57
Sales: +8%
$ per share
$650.0
$0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75
2006 Full-Year Highlights:
YOY Comparison
– Volume growth across all
businesses
– 2.5% price increase
EPS: +25%
– SG&A expense growth less than
sales growth
– R&D expenses increased 13%
– FAS 123 impact $(0.03)/share
– China/Footprint impact $3.4 million
pre-tax
29
Why Tennant Company?
• Proven revenue growth trajectory with CAGR of 9% over the
last three years
• Targeting continuation of double-digit earnings growth
• Innovation leadership in products, services and solutions
• Identified opportunities to achieve 9.5% operating margin
before end of F’08
• Significant global opportunities to help fuel future revenue
growth guidance of 5-9%
• World-class marketing competency
• Expanding/evolving business to provide environmental
cleaning solutions
• Solid balance sheet that contains no long-term debt
30
135 Years of Excellence
Q&A