Chris Killingstad - CEO Tom Paulson - SVP & CFO.

[Operator Instructions] Thank you for participating in Tennant Company's fourth quarter earnings conference call. Beginning today's meeting is Mr. Tom Paulson, Senior Vice President and Chief Financial Officer for Tennant Company. Mr. Paulson, you may begin..

Thanks, Sean. Good morning, everyone, and welcome to Tennant Company's fourth quarter 2015 earnings conference call. I'm Tom Paulson, Senior Vice President and Chief Financial Officer of Tennant Company. With me on the call today are Chris Killingstad, Tennant's President and CEO; Karen Durant, Vice President and Controller; and Tom Stueve, Treasurer.

Our agenda today is to review Tennant's performance during the 2015 fourth quarter and full-year and our outlook for the 2016 full-year. First, Chris will brief you on our operations, and then I'll cover the financials. After that, we'll open up the call for your questions. We are using slides to accompany this conference call.

Well, we hope this makes it easier for you to review our results. A taped replay of this conference call along with these slides will be available on our Investor Relations website at investors.tennantco.com for approximately three months after this call.

Now, before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking 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 filed 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.

Additionally, on this conference call we will discuss non-GAAP measures that include or exclude special or non-recurring items. For each non-GAAP measure, we also provide the most directly comparable GAAP measure. There were special non-GAAP items in the fourth quarter 2015.

Our 2015 fourth quarter earnings release includes a reconciliation of these non-GAAP measures to our GAAP results for the 2015 fourth quarter and full-year. Our earnings release was issued this morning via Business Wire and is also posted on our Investor Relations website. At this point, I'll turn the call over to Chris..

by continuing to sell Green Machines in certain regions as a distributor and by serving as the exclusive service provider for Green Machines. The impact of the sale is anticipated to reduce Tennant’s annual revenues by approximately $10 million. Related to the sale, we appropriately realigned the company's infrastructure costs.

This resulted in a restructuring charge in the 2015 fourth quarter. Tom will provide more details on this. With the Green Machines sale complete, we believe we are well positioned to operate more efficiently. This is so important in a slower growth environment.

We are focused on investing in our strongest growth opportunities for Tennant and those are in our core industrial and commercial cleaning solutions. We are confident in our growth strategy.

We aim to reach our goal of a $1 billion in organic sales through a strong new product and technology pipeline; sales gains in emerging markets; a return in growth in Europe; ongoing focus on strategic accounts and an enhanced go-to market strategy designed to significantly expand Tennant’s worldwide market coverage and customer base.

Let me spend a few moments updating you on our progress in driving the company's top and bottom line results through innovative products and technologies and efficiencies. We have a strong innovation engine to fuel our revenue growth. Sales of new products introduced within the past three years rose to 26% of equipment revenue for the 2015 full-year.

We continued to execute against the strongest new product pipeline in our history. In 2015, Tennant introduce 36 new products, including product variants, that's on top of 55 new products launched from 2012 to 2014. We are on track to introduce at least 13 new products in 2016, including several significant industrial machine launches.

The total number is below recent years, reflecting the considerable investment needed for large industrial product development. We expect introductions in 2017 to return to a number more comparable to 2015. Among our latest new products and technologies are the IRIS Asset Manager and our next generation ec-H2O NanoClean.

We are very excited about both of these. We introduced IRIS in the 2015 fourth quarter, and we recently received a significant order from a large retailer in Europe that specified IRIS, allowing us to displace one of our largest competitors for this important piece of business.

The IRIS onboard technology tracks machine productivity and maintenance needs, including machine and ec-H2O usage. It helps customers with large fleets of equipment make informed decisions and reduce their overall cost to clean, which is a very attractive proposition and a fast emerging trend.

The data is available online 24/7 through an easy-to-use portal. The IRIS Asset Manager is available on many of our commercial and industrial cleaning machines. Also the launch of our next generation of sustainable cleaning technology, ec-H2O NanoClean, has been successful.

We introduced the ec-H2O NanoClean technology on the T300 Walk-Behind Scrubber and T7 Micro Rider Scrubber. It is now also available on all of our other applicable commercial scrubbers. The name NanoClean refers to the creation of nano-scale bubbles that are an important part of the cleaning mechanism.

Like the original ec-H2O, the next generation ec-H2O NanoClean technology electrically converts water into an innovative solution that offers the same benefits as the original, but cleans better, cleans more soils and is effective in more applications. In addition, the Orbio os3 continues to gain momentum.

The os3 delivers on-site generation of an effective multi-surface cleaner and anti-microbial solution that meets U.S. EPA regulatory guidelines for disinfection and sanitization. It is easy to operate, affordable and compact. Customer satisfaction is high for those who have already adopted this disruptive technology.

We still believe the os3 has great potential for growth. Turning to key digital initiatives. We continued the global rollout of our new customer relationship management or CRM marketing and sales management tool. This system helps us identify new customers, grow our existing business and improve the overall Tennant customer experience.

As I mentioned on our call last quarter, we already have implemented our new CRM solution in North America, EMEA and Australia, and we are benefiting from its improved sales analytical capabilities. We expect to complete the rollout to Japan, China and other regions early this year.

E-commerce continues to grow as an important sales platform and customer interface for Tennant. We estimate that more than 70% of our customers start their buying journey online, and increasingly, they are purchasing parts and consumables this way.

Our progress in building a more robust platform is on track and our secure My Tennant portal is the first step in this effort. It is generating more inquiries and more cost-effective sales for us. E-commerce is a growing trend in other industries and we expect this evaluation to occur in the cleaning industry as well.

In a few years, we anticipate being able to report e-commerce as another significant revenue channel, along with our existing direct distribution and strategic account channels. These are just a few examples of the work we have done to position us for continued success. Now, I'd like to take a moment to welcome our newest Board member.

Just last week, we announced the addition of David Windley to Tennant’s Board of Directors. David is President of IQTalent Partners, which is that talent acquisition professional services firm. Before that, he was the Chief Human Resource Officer at Yahoo.

His prior experience also includes serving in human resource leadership roles at Microsoft and Intuit. Over his 30-plus year career, David has helped companies build high performing leadership teams and acquire the right talent to effectively deliver corporate strategies.

We look forward to benefiting from his insights, as we continue to deliver innovative products and solutions that reinvent the world cleans. Our platform to accelerate organic sales is working.

We have a diverse portfolio of initiatives that are creating value through new product introductions and expanding our global sales and marketing initiatives to increase our global market share, while concurrently running a more efficient business to raise productivity.

While we are seeing global economic sluggishness and unfavorable foreign currency impact carry-forward from the latter part of 2015 into the early part of this year, we are staying in the course strategically, but proceeding cautiously.

We remain committed to both our organic growth goal of $1 billion in sales, as well as a 12% or above operating profit margin. Now I'll ask Tom to take you through Tennant’s fourth quarter financial results.

Tom?.

slower economic growth in North America, modest improvement in Europe and growth in emerging markets; continued negative foreign currency impact on sales for the full-year in the range of an unfavorable 1% to 2% with a $3 million to $6 million negative effect on operating profit; decline in sales of approximately 1% from the sale of the Green Machines outdoor city cleaning line with an immaterial impact on earnings; gross margin performance of approximately 43%; research and development expense of approximately 4% of sales; capital expenditures in the range of $25 million to $30 million; and an effective tax rate of approximately 31%.

Tennant’s operations are performing well and our objective is to continue to build our business for sustained success. We expect our 2016 financial results will be stronger in the second half of the year.

And in the first half of the year, the first quarter will be most challenging, especially considering the strong growth we achieved in the 2015 first quarter. Now, we'd like to open up the call to any questions. Thanks Sean..

[Operator Instructions] And there are currently no questions. Mr. Paulson, I turn the conference back to you..

Do you want to check - we’ll give the queue just another 15 seconds so just to make sure that there isn't questions, then I’ll actually turn it over to Chris to make the closing remarks..

[Operator Instructions].

Okay. We’ll close it with Chris..

All right, I will close. While we anticipate foreign currency and global economic volatility to remain challenging in the coming quarters, we believe that Tennant is competitively advantaged through our innovative products and technologies and our go-to market strategy, and we are well positioned to perform efficiently.

We remain committed to reaching our goals of a $1 billion in organic sales and a 12% or above operating profit margin, and we are very excited about Tennant's future. We look forward to updating you on our 2016 first quarter results in April. Thank you for your time today and for your questions. Take care everybody..

And this concludes today's conference. You may now disconnect..