Good morning and thank you for participating in Tennant Company's second quarter earnings conference call. This call is being recorded. If you do not wish to participate, you may disconnect at this time. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Beginning today's meeting is Tom Paulson, Vice President and Chief Financial Officer for Tennant Company. Mr. Paulson, you may begin.

Thanks, Amanda. Good morning, everyone and welcome to Tennant Company's second quarter 2010 earnings conference call. I'm Tom Paulson, Vice President and Chief Financial Officer of Tennant Company. With me on the call today are Chris Killingstad, Tennant's President and CEO; Pat O'Neill our Treasurer and Karen Durant, our Corporate Controller. Our agenda today is to review Tennant's performance during the second quarter and our outlook for 2010. 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. 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 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. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude special or nonrecurring items. For each non-GAAP measure, we also provide the most directly comparable GAAP measure. Our release includes a reconciliation of those non-GAAP measures to our first half 2009 GAAP results. We have no special items thus far in 2010. Our earnings release was issued this morning via business wire and is also posted on the Investors section of our website at tennantco.com. At this point, I'll turn the call over to Chris.

Thank you, Tom. And thanks to all of you for joining us this morning. Today, I want to cover highlights of the 2010 second quarter and update you on our strategic priorities. As you saw in today's release, Tennant is off to a good start in the first half of 2010. We were very pleased to see favorable trends in the first quarter continue into the second quarter. As a result of the company's strong sales and earnings in the first two quarters, we are increasing our full year guidance again, after raising it in the first quarter as well. Tom will provide more detail on our outlook in just a moment. In the second quarter, net sales increased 11.8% with our business maintaining its strong growth in the Americas and in Asia, most notably China and Australia. As in the 2010 first quarter, the double-digit sales gains were led by demand for scrubbers equipped with our proprietary ec-H2O technology platform and sales to strategic accounts in the Americas. Many of our strategic account customers have designated Tennant as a preferred supplier, largely due to ec-H2O's proven chemical free cleaning capabilities. Importantly, Tennant's organic net sales, which exclude the impact of foreign currency, grew approximately 12% this was the third consecutive quarter of organic net sales growth overall and the second consecutive quarter that we have posted year-over-year organic growth of 12%. The quarter's higher sales volume, coupled with our continued emphasis on controlling and improving our cost structure, again led to increased gross margins and earnings per share. Gross margins rose 270 basis points to 43.1% versus 40.4% in the year earlier quarter. And our second quarter earnings per share doubled to $0.32 up from $0.16 in the prior year quarter. Marketplace momentum for ec-H2O remains very encouraging. I've…

Thank you, Chris. In my comments today, all references to earnings per share are on a fully diluted basis. Also, please note as I go through the results, I'll generally not comment on the year-to-date financials, as those were detailed in the earnings release. As Chris noted, we are pleased with the company's performance in both the first and second quarters of this year, which represented a significant turnaround from a year ago. For the second quarter ended June 30, 2010, Tennant reported net earnings of 6.2 million or $0.32 per diluted share on second quarter net sales of 166.1 million. In the year-ago quarter, Tennant reported net earnings of 3 million or $0.16 per diluted share on net sales of 148.6 million. Now I'll turn to a more detailed review of the 2010 second quarter. Tennant's consolidated net sales of 166.1 million increased 11.8% over the prior-year second quarter. For the 2010 second quarter, consolidated net sales were unfavorably affected from a foreign currency exchange impact of approximately 0.5%. Organic sales, which exclude the foreign currency impact, grew approximately 12.3%. Our organic sales grew 2% in the 2009 fourth quarter, which was the first quarter-over-quarter sales growth we posted since the third quarter of 2008 and now we've had organic sales growth of approximately 12% in both the first and second quarters of 2010, as Chris mentioned. As I take you through our sales by geographic regions, please note that we have re-categorized our three regions to cover the Americas, which now encompasses all of North America and Latin America; EMEA, which still covers Europe, the Middle East and Africa and lastly, Asia Pacific, which includes China and other Asian markets, Japan and Australia. For your reference, we've provided a table with the 2009 sales by quarter for this…

(Operator instructions) Your first question comes from Ted Kundtz from Needham & Company. Ted Kundtz – Needham & Company: Hey, thank you good morning everyone.

Hi, Ted. Ted Kundtz – Needham & Company: Very, very nice quarter. Congratulations on that. Could you talk a little bit about – what are you seeing in Europe in terms of the acceptance of the eco-H2O products? Are they accepting it – probably not as rapidly as here, but could you sort of give us a little more color on that?

Well, actually, they're accepting it more rapidly in Europe than they are here. So the adoption rate, the penetration rate of ec-H2O and scrubber sales is higher in Europe than it is in North America. Ted Kundtz – Needham & Company: Why aren't you seeing the growth? Why wouldn't you be seeing more growth over there, then?

Well, were operating in a much lower growth environment, right? So when people are opening their pocketbooks and actually buying, we're winning; but they're just not doing that. So but if you look at within our sales portfolio, the dynamics of Europe sales being driven mostly by ec-H2O on scrubbers and strategic accounts, it's consistent with what we're seeing in North America but just in a much, much lower growth environment. The other impact we have in Europe that we don't have so much in North America is that a bigger part of our – a larger percentage of our sales go to municipal markets or city cleaning products or outdoor products to municipal markets, which are down across the board to a much greater extent than we're experiencing here. So, that and if you look… Ted Kundtz – Needham & Company: Right.

If we were to split our sales up between our indoor portfolio, which includes ec-H2O on scrubbers and our outdoor portfolio, you'd see that we are struggling much more on the outdoor side and actually performing quite well on the indoor side but when you look at it in total, it looks a little distorted. So I understand your concern. Ted Kundtz – Needham & Company: Got it. Okay. That makes some sense. That really did help clarify. I wasn't quite aware of that, Chris. Thank you. Is the – how's the pricing environment that you guys are seeing out there?

It's a tough pricing environment right now, Ted. We are – as you know, historically, we've priced more in the range at 2% to 3%, maybe even as higher as four times. This year, we're seeing very modest pricing ability and our pricing benefits we've seen in the first half is not even a percentage point. So it's effectively flat, as you look at what we're seeing this year. And we're conscious of that, competitively, that we aren't seeing the – while we're seeing commodity costs begin to uptick, they're not upticking significantly. And you combine that with a tough economical environment, we're more willing in this environment to just ensure we don't see price declines. We expect pricing to return to normal levels as we move forward and the economy recovers. Ted Kundtz – Needham & Company: Okay. So that was the answer to the question, the net-net impact of the inflationary side versus the weakness price. You're saying they're kind of offsetting each other and that both of them are not really putting any pressure or helping margins either way?

The thing that's really helping us there is that while we're seeing some uptick from an inflationary standpoint, it's not significant. We're not getting – we're getting very limited pricing benefit, but we are continuing to generate sourcing savings from low cost sourcing and our factories continue to run extremely efficiently. And part of that is we're just doing a good job of running them and revenue always helps. Ted Kundtz – Needham & Company: Okay. Do you have a longer term goal, I don’t know if you want to share, it a longer term goal on gross margins?

We're hesitant to give a target there. I mean, we're – obviously have gained some confidence over the last quarter that our sustainable margins are more in the 42% to 43% range, as we were historically around the 41% to 42% range. We're – I'm reluctant to commit to anything higher than that at the current time, but as I hope everybody knows at this point we are committed at the operating margin level to getting back to 9.5% earlier than we would have historically. And we are setting a new target of 12%. And we hope, in the not too distant future, to provide some more specifics around that and the timing associated with getting to that target. Ted Kundtz – Needham & Company: Okay. Great. And then one last question from me would be – Chris, you talked – you mentioned the Ecolab partnership and could you – but I didn't know how that was ramping. You will be selling equipment to them; is that correct? And they resell it? I didn't know how that was ramping yet. You talked about the large number of, obviously, the potential locations out there and all the different restaurants that they deal with. Could you give us a little more color as to what revenue you're seeing out of that, maybe not specific numbers, obviously, but maybe just…?

We are starting to ramp. What I would say is we're starting to ramp. We haven't divulged any numbers yet. We think the opportunity is very substantial. And as you said, what we do is we make the equipment and we sell it to Ecolab; Ecolab sells it through their sales and distribution system to quick serve restaurants. Now, this is – there's a process involved here, first, you've got to go out and you've got to convince the big fast food chains that this is something they want to consider and so there's a bunch of testing that goes on. Then they have to decide whether or not they're going to officially approve it within their – both their company owned structure and their franchisee structure. And as we've talked about, we have a lot of the big chains that have done that now. Then the next step is, is the major multiple franchise store owners, they bring in a unit or two to test. Right? So we've gone through that phase now and based on the results of that, we are very optimistic, because we're beginning to see that the people who have been testing the product at the franchisee level, begin to order more. And we hope that will ramp up. So I would say that we're just beginning to ramp up the sales; they're not material to our results at this point, but we remain as optimistic as we were the day we launched this. Ted Kundtz – Needham & Company: Okay. And do you think that could really start being significant in this – by the fourth quarter of this year or is this something we should maybe look into 2011?

Maybe life cycle forward basis, it will not be incrementally material for this year, but we do believe that as we move into 2011, it will be something we'll be talking about. We think it will be driving meaningful incremental revenue to Tennant.

But I would also ask, because a lot of – the fast food chains, they do annual planning, too. Right? And so we're already into this year, so I think what they're doing now is saying, okay, where does Scrub-N-Go fit within our portfolio and how much money are we willing to invest behind it, as we move into 2011 and build that into their plans? And that's why we think 2011 is the year it's really going to ramp up. Ted Kundtz – Needham & Company: Okay, terrific. And maybe just one last question. With the building service contractors, how are you guys doing with them? And how is their business or the health of their business looking at the moment, because they – obviously, a lot of commercial business there.

I'd say, Ted that we still have a relatively low share in that market segment, but we are growing rapidly with them and they have, through the recession and continued to be, maybe the most robust part of the market. Ted Kundtz – Needham & Company: Okay. Great. Thanks very much.

And we have in our solution, especially with ec-H2O is spot on in terms of what they're looking for. Ted Kundtz – Needham & Company: Yeah. I would think so. I think that would be a great appeal to them as they make new decisions. Thank you both. Great quarter.

(Operator instructions) Your next question comes from the line Joe Maxa with Dougherty & Company. Joe Maxa – Dougherty & Company: Thanks and congrats on a nice quarter.

Thanks, Joe.

Thanks Joe. Joe Maxa – Dougherty & Company: I wanted to ask a little more about strategic accounts. You mentioned ec-H2O strength plus strength of your strategic accounts. Could you give us a little color on what they're buying, I'm assuming its larger accounts that have held off on spending and maybe they're coming back, but I just wanted to get a little more color.

No, I mean, strategic accounts, there's two parts. I mean, there are some strategic accounts that we had prior to the recession that they're beginning to order again. But we've talked a lot about the number of new strategic accounts that we've won, especially last year and we were able to name some – SUPERVALU, Kroger, what was the Danish, I mean, IKEA the big building service contractor; ISS and a number of others like that, Tesco in the UK and others that we can't mention. But so I think that may be the more significant piece; that we've negotiated those agreements in 2009 and they have now started to order on those contracts on a fairly regular basis. And as we've said, it can take 18 to 36 months before they turn over their entire equipment portfolio with new Tennant ec-H2O products. Joe Maxa – Dougherty & Company: Got it. And then the large outdoor equipment, I think you said you were up about 40% year-over-year in the first half or you looking for that to continue? What are you seeing in that market today?

Yeah. A big deal to be a more specific there, I probably wasn't as clear as I could have been there. That's actually just on the sweeper side of our large equipment business was up 40% in the first half. And we were still, I can't emphasize enough that that portion of our business is still substantially below pre-downturn levels. But we are seeing some momentum and particularly in North America and in some of our other markets like Australia, et cetera. And we expect to see modest recovery as we go through this year. And we're not – we don't know when we can call when we're going to really see the uptick. And we will at some point, because we know there's a fair amount of pent-up demand; we just don't know when that significant uptick will happen. We're not counting on it during this year, but it could happen later this year though, but we can't call the timing yet.

Joe, also to clarify, I mean and this is also a little bit confusing we divide sweepers into two, we have city cleaning, really which is our city cleaning products which are sweepers, but we don't include them in the sweeper category included in the city cleaning category, mostly sold to municipal markets. And as we said my comments earlier about Europe, where we sell most of them with the municipal business being weighed down, we're struggling there still, but our other sweeper products that are sold more for parking garages and for parking lots and for indoor environments where they don't need so much to clean and scrub, but they need to sweep that business has picked up and as Tom said, was up 40%, which is encouraging. So that's kind of more our traditional industrial business. And what we would say is that we're seeing month-to-month improvement in that, but we're still 20% below where we were pre-recession. Joe Maxa – Dougherty & Company: Okay. I wanted to ask how July has been compared to Q2 and what your typical linearity is in Q3.

You know, we would normally see Q3 be a bit lower than Q2. We don't give quarterly guidance, as you know, but we could see our Q2 be a bit below from a revenue standpoint or it could be a bit higher, but it's traditionally, if you look at history, it's a little bit below; but in a recovery period, it's harder to call it. If you looked at July, though, on a seasonally adjusted basis, it's right on expectations. So we're – the trends that we're seeing at the front end of Q3 are meeting our expectations and we remain encouraged about our outlook for the rest of the year. Joe Maxa – Dougherty & Company: No – I'm sorry the linearity I wanted to ask was regarding Q3 specifically in July versus the back half, the last two months of the quarter.

We would typically see more strength in August and particularly in September. But we don't see gigantic differences in the month; but typically, as we enter new quarters, the first month in new quarters tend to be a little bit lighter. And we see momentum as the quarter builds; but not gigantically differences between the weeks. Joe Maxa – Dougherty & Company: All right. Thanks a lot.

Yeah.

And at this time, there are no further questions. I'll turn the call back over to you.

All right. Thank you, Amanda. So, let me just say that I'm very pleased with our financial performance in the second quarter and the first half of 2010. We made further progress across our operations that resulted in significant top and bottom-line gains. We also made continued investments in new products that we believe will fuel Tennant's future revenue growth. We remain excited and committed to achieving our long-term strategic vision to become a global leader in chemical free cleaning. We believe that our strategic direction, coupled with our strong cost controls, improved operating efficiencies and new products will further enhance Tennant's long-term value creation potential. So thank you for your time today and your questions. And we look forward to updating you next quarter. Take care.

This concludes today's conference call. You may now disconnect.