Good morning. My name is Celina, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's First Quarter Earnings Conference Call. This call is being recorded. (Operator Instructions) There will be a time for Q&A at the end of the call. Also please stay online after the Q&A for closing remarks from management. Thank you for participating in Tennant Company's first 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, Celina. Good morning, everyone, and welcome to Tennant Company's first quarter 2014 earnings conference call. I am 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; Pat O'Neill our Treasurer; and Karen Durant our Vice President and Controller. Our agenda today is to review Tennant's performance during the 2014 first quarter and our outlook for the 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. 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 non-recurring items. For each non-GAAP measure, we'll also provide the most directly comparable GAAP measure. There were no special non-GAAP items in the first quarter of 2014, but there were special non-GAAP items in the first and fourth quarters of 2013. Our 2014 first quarter earnings release includes a reconciliation of these non-GAAP measures to our GAAP results for the first quarter and the 2013 full year. Our earnings release was issued this morning via Business Wire and is also posted on the Investor 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. Let me start today by saying that we are pleased to report double-digit organic growth and record revenue for the first quarter. We also had higher sales across all of our geographies including Europe, Middle East and Africa or EMEA region where we had sales gains for the first time since 2011. We are encouraged that the implementation of the first phase of our growth strategy is off to a strong start in 2014, as we strive to reach $1 billion in revenue by 2017. All of our key drivers to reach this target performed well in the first quarter and we anticipate continued sales increases and improved profitability as the year progresses. Now, let's take a closer look at Tennant's first quarter. Our 2014 first quarter consolidated net sales of $184 million rose 9.5% compared to the prior year quarter and we are up 10.5% organically. A significant contributor to sales was continued demand for newly introduced products especially the T12 rider scrubber, which is the first new product in our redesigned modular large equipment portfolio. Further, we saw robust sales of industrial equipment as well as sales through distribution and through strategic accounts. In addition, building on strong sales in the 2013 fourth quarter sales of scrubbers equipped with ec-water technology grew a 11.7% compared to the first quarter of 2013 driven by repeat purchases of ec-water scrubbers by key strategic accounts. Turning to a few first quarter highlights across our geographic regions, sales increased 10.1% organically in Tennant's largest region, the Americas. We saw a significant increase in sales through distribution as incremental sales coverage dedicated to this channel has begun to drive revenue growth. We also experienced ongoing gains with our strategic…

Thanks Chris. In my comments today, all references to earnings per share are on a fully diluted basis. For the first quarter ended March 31, 2014, Tennant reported net sales of $184 million compared to $168 million in the prior year quarter. Organic sales grew approximately 10.5%, excluding an unfavorable foreign currency impact of about 1%. As you may recall, Tennant's organic sales rose approximately 5.1% in the 2013 fourth quarter, and 6.8% in the 2013 third quarter excluding an unfavorable foreign currency exchange impact of about 1% in both quarters. We are encouraged by the solid level of organic sales growth in these last three quarters. First quarter 2014 net earnings were $5.8 million or $0.31 per share. In the year ago quarter Tennant reported adjusted net earnings of $5.5 million or $0.29 per share. Turning now to a more detailed review of the 2014 first quarter. Our sales are categorized into three geographic regions which are the Americas, which encompasses all of North America and Latin America; EMEA which covers Europe, the Middle East and Africa; and lastly Asia Pacific which includes China and other Asian markets, Japan and Australia. In the Americas, 2014 first quarter organic sales increased approximately 10.1% excluding about 2% of unfavorable foreign currency impact. Record sales for the first quarter North America were due to strong sales of scrubbers equipped with ec-water technology, continued high-demand for new products as well as strong sales through distribution and through strategic accounts. Organic sales growth in the emerging market of Latin America was approximately 10%. In EMEA, organic sales grew about 5.4%, excluding a favorable foreign currency impact of approximately 4.5%. As Chris noted this was the first quarter of organic sales growth for EMEA since the third quarter of 2011. EMEA results benefited from higher…

(Operator Instructions) The first question will come from the line of Mr. Joe Maxa of Dougherty & Company. Joe Maxa - Dougherty & Company: Thank you and good morning.

Good morning, Joe.

Hi, Joe. Joe Maxa - Dougherty & Company: Congrats on a nice revenue quarter, I do want to talk a little bit about the margins regarding – getting back to that 43% to 44%, how much do you think that the increase in pricing will contribute to that and then, I guess the balance would assume a shift in product mix back to maybe more historical levels?

The price increase matters Joe. We will anticipate for the full year that minimally will get a full year pricing benefit of about 1% or larger that won't be significantly above 1%. The pricing benefit that we got in Q1 was only about – roughly 0.5%, so pricing matters – does matter. We were confident in our capability of getting pricing in the back half as we are seeing some modest level of inflation and we have taken – we have taken broad increases. And we do assume that we – our product mix improves, what I would say is, product mix in the quarter was unusual and we think one-time in nature. So we think the shift to a more normal product mix will also be meaningful. And that gives us the confidence with those two pieces that will be back for the full year between 43% and 44%. Joe Maxa - Dougherty & Company: Can you give us a little more color on the product mix on what drove it so low – the unusual one-time items, was it particular products or just much stronger distribution than expected?

No. It was – the mix continued similar to what we saw in Q4 the channel mix is affecting us. I would say that in Q1 distribution was even stronger than we saw in Q4, but the overall impact was similar and we were anticipating that's going to stay the same for the rest of the year. So we are not assuming that our mix between direct and distribution and strategic accounts meaningfully moves, we just believe we can offset that through pricing and through the product mix side. And it really was a few specific products and a few specific one time events that are pretty customer specific and they were the right things to do for our business in the short-term and we think that some of the sales were one-time in nature and we were comfortable that we are going to return to – what we would consider a normalized mix the balance of the year. Joe Maxa - Dougherty & Company: Okay. That's helpful. And then I want to talk a little about the Orbio launch, is this more of a – the new os3, is it going to be a global launch, I'm just wondering about just compared to the 5000-SC global and then is this also going to be going through direct and indirect. Maybe just a little more color?

Hey, Joe. This is Chris. It's going to be focused in North America to begin with and it's going to be focused on a select number of verticals so education healthcare, building service contractors. And the majority will be driven by our Orbio specialist sales team, but we have signed up a select number of distributors who were willing to adhere to the very strict performance guidance lines that we had established for them taking on the os3. So with the 5000, we basically gave it to all of our sales people and to all of our distributors that was much harder to control than its going to be going forward where it's a handful of Orbio specialists, a handful of distributors and vertical markets that we think are the best early adaptor opportunities for us. And that's proving out to be true here in the early going. Joe Maxa - Dougherty & Company: Okay.

So then in terms of the rest of the world, we are testing it in Europe. We are focusing mostly on the U.K. where we have put in place some resources. And then once we have proven the technology out in the U.K. we will hopefully expand that throughout the EMEA, at least Western Europe in 2015. Joe Maxa - Dougherty & Company: Okay. Then just one more on the head count growth, 115 people or so in 2013, what should we be thinking about for 2014?

We are not ready to give a specific number Joe. What can I say is our head count in total didn't meaningfully move in Q1, we did continue to add some sales and service coverage and marketing resource. But, we will continue to do that throughout the year but most of that will come in the front part of the year and you will see us improve our leverage in the back half of the year as we slowdown some of our investment in that regard unless we determine that it is the right thing to keep accelerating. But, we are going to be a bit measured in. It's just natural that the skew hurts us a little bit more in the front half as you need those investments to really ramp up. And we will begin to see more leverage in the back half.

It is important to note that we have added over 100 direct sales distribution-related resources to marketing resources. That's – it generated – revenue generating positions that we are focusing on here over the last three quarters and as we go forward. Joe Maxa - Dougherty & Company: All right. Thank you very much.

Thanks Joe.

Your next question comes from the line of Jason Ursaner with CJS Securities.

Good morning, congratulations on a strong start to the year.

Thanks Jason.

Just following up on a few of Joe's questions. Organic sales in the quarter clearly were very strong, so I guess just wondering why maybe not a change to the full year outlook, the organic growth needed to get you in that 4% to 6% up for the year, why wouldn't that be moving higher especially layering in some of the price increases now for the rest of the year?

Yes. It's a good question Jason, I mean the straight-forward answer is, its just one quarter but probably more importantly than that we are just choosing to remain conservative, it would be easy to go ahead and take the guidance up. We just think it's the prudent thing to be conservative with just one quarter under our belt. Obviously, based on the strength of the revenue growth and pretty solid order pacing as we start our Q2, our confidence level is certainly higher than it was before we started the year. But, we are choosing to remain conservative.

Okay. And do you think any of the revenue growth in Q1 could have been customers buying ahead of the normal – I'm assuming April is kind of a normal time for price increases and I know last year, you guys didn't really do a normal price increase. So maybe you didn't have the same push in Q1. Just wondering if you think any of that could have played into it.

We have a couple of instances where it was – there was some movement in our revenue in the quarter. But nothing meaningful, it was a very modest amount of a total growth. So it certainly something you have to pay attention to. But, it wasn't meaningful.

Okay.

And I think the fact that our order patterns as we start out the second quarter remain just strong is an indication that Tom said it wasn't meaningful.

Got it. And on the gross margin, you specifically mentioned the product mix and selling channel breakdown driving maybe 1% or 1.5% below target in the quarter. And it sounded if there wasn't any reason, do you expect to change from either of those going forward. So I just wanted to make sure I understand getting back to the 43% plus range, I your view that's just primarily a function of dropping most of the price increase to the bottom line at this point?

The two biggest pieces are an expectation that pricing for the full year will generate at least 1% benefit that does matter a lot. And we will begin to see that help in Q2. And the other thing, as we really believe that some of the product mix issues were really one-time in nature in the quarter and we see those going away quickly. So we actually think the return in the range will happen fast and we are not saying we are going to get all the way back to some of those great margins we had in the past. But we are very comfortable will be back within range.

Okay. And the product mix, its manufacturing or its customer specific?

Customer and product. So nothing to do with our supply chain or supply chain continues to be a real star in our organization.

Okay. And then I guess just last question for me. The standalone Orbio, could you possibly maybe put a little more context for that product as part of the 3% growth. Obviously, you guys sound more optimistic on traction given the benefit of experience from the last generation. So just a nice side contributor to growth or is this really in your view a core part of it going forward?

Well, we are pursuing this aggressively and have stayed the course over the last four, five years and invested heavily behind this because we fully believe that its going to be a core part of our growth going forward. And I think this time we have the right product. I mean its half the size, half the cost of the 5000-SC, it produces onsite both the cleaning solution as well as the microbial solution. We have the ability to create concentrate from the unit and take that concentrate to satellite locations around the facility where they can plug it into a dispensing system and create cleaning, sanitize and disinfecting solutions. There we have I think smartly focused on a core group Orbio sales specialists and limited our focus also to healthcare education and BSEs with a few retailers built in there that have proven through the testing process to be extremely interested in this product and are going to be early adaptors. So we hope here by the second half of this year, we are going to be able to start publicly taking about some really good news behind this product.

Okay. Great. Looking forward to it and congrats again, thanks.

Thanks Jason.

(Operator Instructions) Your next question comes from the line of Scott Graham of Jefferies.

Hey, Chris, hey, Tom. How are you?

Good, Scott. How about yourself?

Goes well. Thank you.

Good.

I was just wondering if you could track for us two things on sales, first, development of sales as the quarter progressed on a year-over-year basis. And secondly, the impact in North America on from the weather on sales in January, Feb.

Sure. The order pattern did accelerate during the quarter. So it was – as it is typical, I would say that maybe the way to comment on that. As we did get a decent read on the quarter early but Q1 always starts slow and just due to the year-end and the calendar year. It accelerated – I will make two further comments on that. We did have a larger open order position at the end of the quarter than the prior year as you know we are not – it’s not a great indicator of the business, but it’s certainly a positive. And most importantly as Chris commented, our order patterns are very much inline and remain solid in Q2. So we feel we exited and entered this quarter in very good shape. And it’s proven itself out. On the weather side, we can honestly say, we had any measurable negative impact on our business in Q4. So we won't play the weather card. I'm sorry –

Q1.

In Q1, I'm sorry. Yes, in Q1. We had no measurable impact in the quarter.

Okay. So were you talking about, I know you said an acceleration during the quarter in the first part of your answer. But that's kind of normal, right because March is always the largest month. On a year-over-year basis you are saying your orders were up 1Q this year versus 1Q last year, open orders?

Significantly, yes. We had a decent open order position coming into the quarter. We exited with open order position that grew. And I mean it's above the prior year. And this was the organic growth was completely on the strength of orders was not any kind of system loading or anything at all, it was just a plain good organic quarter.

Very good. Thank you both.

You bet.

You're welcome.

Your final question comes from the line of Dana Walker with Kalmar Investments.

Good morning. A few questions, what do you attribute to the renewed strength in ec-water in the quarter?

It was great to see 11.7% growth. And then we actually had strong growth in the fourth quarter too. And it's all about the key purchases from key strategic accounts who were the early adaptors when we launched the product. So they are in the – they are in position to replace those ec-water scrubbers. They love them. And they have replaced their fleet with new ec-water machine. So I think that's a very bullish sign for us as we go forward here as more and more of these strategic accounts are going to turn over their fleet.

So you believe this is like-for-like trends or like-for-like replacement rather than a displacement of a competitive unit with your system?

Yes. In the last two quarters, we believe that to be the case.

Chris, do you have a read though on market share and that you were later, lesser share arriver to the commercial side of the business?

Can you clarify that question Dana?

Well, my impression is that ec-water allowed you – you lead in industrial; you hadn't led in the commercial business until ec-water gave you a big push forward. I am wondering what you are seeing market share wise in the commercial side of the business?

I think that we would say that we gained market share on the commercial side of the business. We also say that our attachment rates for ec-water hover in the 50% range. I mean 50% of the machines that have ec-water available on both in the industrial and commercial are today being sold as ec-water machine to both existing and new customers. I'm not sure we are able to exactly calculate the incremental market share gain from ec-water, but I would say directionally especially on the commercial side of the business it has had a positive impact.

One last question. As you have added people into sales and marketing over the last several quarters, what types of assumptions are you making on channel mix as you do that? And as Tom and you talk about projecting gross margin ranges, whether you need to fall within a certain mix to justify those people additions.

Yes. Dana, I don't – we've absorbed some of the channel mix changes over the last few quarters, right now our expectation is, is we are about where we are going to be. And there will be a quarter here and there that will be different, but I don't see a major shift going forward in our channel mix. I mean part of the investments are on the direct side of our business also. So we think we are about the mix that we are going to see and there will be some modest adjustments here, there. But we are comfortable, we will be back at our targeted gross margins level and will continue to just be nice leverage in S&A and continued improvement in our operating profit margins particularly in the back part of the year.

If you add people though, are you indifferent to where your unit growth takes place channel wise?

I mean, we have always said, we have the strongest margins on our direct industrial side. And so there is growth opportunities there when we are producing them. But we have also said that we have been underrepresented on the commercial side of the business and a lot of that business goes through distribution. And I think we are now structured around distribution adding appropriate resources where we have identified the biggest growth opportunities. So distribution as you saw, its one of the first time we have actually call that distribution in an earnings release as a growth driver. So that's a good thing because a lot of opportunity there, we added resources and they are already beginning to pay dividends for us. Strategic accounts we have had a lot of success there in North America over the last four or five years increasing success in EMEA and its starting to happen in Asia Pacific too. So I think it's more of the same greater intensity on that part of the business. But, we also said that on our distributor business and strategic account business that it's a more efficient sales process, so while there maybe lower gross margins when you get down the operating profit margin it should be basically margin neutral.

And to your point Dana, we are a bit – don't care that much about where our mix goes as long as we stay true to our business model and create the efficiencies below the gross margin line. We still want to aggressively manage gross margins, but the thing that matters the most is the improvement in our operating margins and driving efficiency in our business model on a go forward basis that's how we pay very close attention to because you could get out of way with your margins. But, we are comfortable that we are managing that nicely.

I do have a follow up, as you talk about ec-water and selling to early customers, would the presently sold ec-water commercial units have features that the original generation didn't have?

In some instances I mean there is simple example would be the T12 that's a revitalized product. It has ec-water on it. So I mean that's just a simple example of a product that's more enhanced relative to the original ec-water offerings that we have had in the past. But, nothing that dramatic but we certainly believe that as people renew their – repurchase their fleets that we will be on the winning side of a majority of those transactions.

Very well. Well done. Thank you.

Welcome.

Thank you, Dana.

And there are no further questions at this time. I'll now turn today's conference call back to management.

Thank you, Celina. We are pleased with our progress to-date and confident that we have laid a strong foundation for our future. We will continue to focus on growth building on an excellent start to 2014, the first quarter results that included double-digit sales gains. By placing a renewed focus on growing Tennant's revenues while continuing to leverage our cost structure, we expect to generate strong bottom line financial performance. We are committed to reaching $1 billion in revenue by 2017 while achieving a 12% or greater operating profit margin. We are hosting our Annual Shareholder meeting this Wednesday in Goldman Valley, Minnesota. Please join us, if you can. Otherwise, we look forward to updating you on our 2014 second quarter results in July. Thank you for your time today and for your questions. Take care, everybody.

Thank you. This will conclude today's conference call. And you may now disconnect your lines.