Good morning everyone. My name is Jacob, and I will be your conference operator today. At this time I would like to welcome everyone to the Tennant Company's first-quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After speakers remark, there will be a question and answer period. (OPERATOR INSTRUCTIONS). Thank you. At this time, I would now like to turn the call over to Mr. Tom Paulson, Vice President and Chief Financial Officer. Please go ahead, sir.

Thanks, Jacob. Good morning, everyone, and welcome to Tennant Company's first quarter 2008 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 Chief Executive Officer, Pat O'Neill, our Treasurer, and Karen Durant, our Corporate Controller. Our agenda this morning is to review Tennant's performance during the quarter and discuss our outlook for 2008. First, Chris will update you on our operations, and then I will review the financials and our outlook. After that we will 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 description of the risks and uncertainties that may affect our results. Our earnings release was issued this morning via BusinessWire and is also posted on the Investors section of our website at tennantco.com. At this time I will turn the call over to Chris.

Thanks, Tom, and thank you all for joining us this morning. Clearly our first-quarter sales growth of 9%, or 2% excluding favorable foreign exchange and acquisitions was lower than we expected. Our performance was good in January and February, and it was not until mid-March that we began experiencing some sales softness, primarily in North America. This combined with our first-quarter investments and expanded market coverage and new product launches, resulted in lower-than-expected operating profit for the quarter. We continued to carefully monitor the uncertain US economy, and while we see inconclusive trends in our business at this point, we are implementing our contingency plans to reduce spending levels. With that said, we still believe we can meet our full year EPS guidance of $2.25 to $2.40. Our outlook assumes a modest US economic recovery in the second half of this year. This is consistent with current economic forecast of positive GDP growth in the third and fourth quarters due to economic stimulus actions and a diminished drag from residential investment and business inventories. There are a number of bright spots in Tennant's first-quarter results that I would like to review with you, before I discuss where we are making adjustments to our spending levels. Our focus on the first quarter remained on growing the business through innovative new products, expanding our international markets and acquiring complimentary businesses, as well as leveraging our operational efficiency. We made substantial progress in all of these areas during the quarter, which led to double-digit sales gains in our international markets, two completed acquisitions that will offer Tennant further opportunities for international market expansion, 38% of total equipment sales stemming from new products that we have introduced in the past three years, and improved gross margins, despite continued inflationary cost pressures. We are pleased…

Thanks, Chris. In have my comments today, all referenced just to earnings per share are on a fully diluted basis. For the first quarter ended March 31, 2008, we reported net sales of $168.6 million, a 9% increase over last year's record first quarter sales. We sustained revenue growth across all of our geographies with the strongest results coming from outside the United States. Our consolidated organic growth was led by pricing actions taken worldwide to mitigate higher material costs and also volume increases in key international areas such as China and Brazil. Foreign currency exchange added approximately 5% to consolidated net sales for the quarter, and acquisitions added approximately 2%. We posted first-quarter net earnings of $0.28 per diluted share. This included a $0.05 per share dilutive impact from the two acquisitions that we closed during the quarter, primarily due to a flow through of a portion of the fair market value step-up of inventory related to Applied Sweepers and the foreign exchange loss related to the Alfa purchase transaction. Excluding the dilutive impact of the two acquisitions, the Company's earnings per share would have increased in the 2008 first quarter versus the comparable 2007 quarter. Earnings per share of $0.31 were reported in the 2007 first quarter. In North America, 2008 first-quarter net sales totaled $98.3 million, up 1.8% versus the prior year quarter, mostly due to the benefit of pricing actions. Foreign currency exchange effects added 1% to sales in North America. As Chris discussed, sales in the market remained on track until late in the quarter. At that point, we began to experience a softening of industrial equipment sales in North America, which constrained our growth. Currently we're still seeing strong customer interest in activity levels, which are very encouraging, but the sales cycle is taking…

1 (Operator Instructions). Our first question comes from Ted Kundtz, Needham & Co. Ted Kundtz - Needham & Co.: Hello Chris and Tom.

Hey Ted. Ted Kundtz - Needham & Co.: Couple of questions for you. Could you talk a little bit -- going back to your sales, you didn't really give an exact sales forecast, except organic growth being up 5% to 9%. And, I would think there will be a little bit of a stretch given what you have to make up after the first quarter. So looking at just the US, you mentioned that. How about Europe? What are you seeing over in Europe? It sounds like -- it seems like things are starting to slow over in Europe as well. So, I just wanted to see you what your views and what your assumptions are for Europe in your outlook?

Well, for us basically Europe met our planned expectations in the first quarter. Remember, if you look back to the first quarter of 2007, we had a very, very strong quarter in Europe, up in excess of 20%. So, being flat is what we planned. Now for Europe, as we look for the balance of the year, we expect the European market or our European business to grow at approximately 10% organically. Ted Kundtz - Needham & Co.: Okay.

Right, which gets us to the 5% to 9% that we have set as a target for ourselves. So, and then the question is, are we seeing the same sort of economic slowdown in Europe as we did in March in North America? I would say right now the answer is no Ted Kundtz - Needham & Co.: Okay. Okay, because we're just hearing more about that happening, but so far, so good. Okay.

And, the other thing I would say about North America is that January and February were very strong. I mean, we had equipment sales up in excess of 10% in both of those months. So, it really was in the second half of March that the decline started, and it was pretty precipitous. The good news is that our order rates in April are back on track. Ted Kundtz - Needham & Co.: Okay, okay great. Do you think any of the -- was there any hesitation do you think as you are introducing the new product line, people waiting for that, the ech2o started rolling out shipments, and would you think there was any impact from that at all?

I don't think the impact has been material to our results. Sure, there are pockets where somebody may have waited for the new technology, sure but, we do not think it is material to the results in the first quarter. Ted Kundtz - Needham & Co.: Okay. How about looking forward in terms of the cost pressures you might be seeing from inflationary issues? And, any plans for future price increases?

I will comment on that Ted. I mean, we are evaluating whether we need to take some pricing on our distribution, and it's under evaluation at the current time given the pressure we are seeing in that regard. So, that is the one area that we're taking a hard look at. Right now, though in our forecasts based on what we saw in the first quarter and our expectations, we believe that the pricing actions we have taken, the stick rates that we're seeing so far, are going to allow us to offset the cost pressures that we're seeing in the balance of the year. So, our forecast is that we will be able to continue to maintain our gross margin level through being able to completely offset our cost increases. Ted Kundtz - Needham & Co.: Okay. Do you think -- I mean, looking at your estimate on EPS, it seems to me that you will have to increase the gross margins nicely to get to those numbers?

We are anticipating some modest level of gross margin increase, and I do not want to commit to a specific number since, as you know, we're actively managing the cost of goods sold side of things, as well as the operating expense side of things. But, we do expect to see some improvement in gross margins. Ted Kundtz - Needham & Co.: Okay. And, then you're going to be able to take some more out of the cost side to get to that operating margin level that you targeted?

Yeah. And, as you can see, I mean, we really felt good about what we did from a cost reduction standpoint in the first quarter. The $2.8 million that we saved lines up awfully well with the 9 to 12 million that we have built in our numbers, and we're seeing balance between the lean benefits and sourcing. But, we are comfortable with where we're heading in that regard. Ted Kundtz - Needham & Co.: Okay, terrific. Let me jump back in queue, and thank you.

Thank you.

Thanks Ted.

Thank you sir. Our next question comes from Seaver Wang, Utendahl Capital Partners.

I just want to touch on, Chris, you had mentioned that April order rates were kind of back on track. Was there any event that kind of was a catalyst for that, too or I mean, is it basically, you are just basically -- you basically think that people will kind of took a pause and said, maybe we should reevaluate our buying behavior in March?

You know, I don't think there was a catalyst. I think people took pause. I mean, we saw lengthening of the sales cycle, and now we seem to be back on track. So, this was a three-week phenomenon for us, which is why we're saying the trends are inconclusive. You have strong January and February, a tough second half of March, and then you see order levels rebound down in April. Then you look at, we still have four to five new products for launch in the remainder of the year. The ech2o technology has just now been launched and the pipeline is being filled. Our judgment is that we are cautiously optimistic that we can achieve our plan still.

You guys have mentioned that your customer base, they tend to adopt new technology kind of slowly. Is the response still very positive for the ech2o product and all the other new offerings?

Well, let's say, when we sell the larger equipment, we sell it direct, and there we get very quick traction for new technology. With ech2o, what we have told you and remains true is that the response has been very, very enthusiastic, and we had the highest pre-launch order build that we have ever had for a product. But, in terms of how we're doing in the marketplace, I mean, we really only started shipping in the second half of the year, and there's still many markets where we are still rolling out. So, we have got to take a wait and see position. Our hope is that the next quarter conference call we will be able to give you some more definitive information on progress on ech2o.

Okay. And, just to go back to raw materials again, you're sourcing -- do you think -- are you forecasting that the cost savings from sourcing overseas will offset all the raw materials costs, or will that be in addition to -- are you going to add-on to --?

Yeah, we will clearly need, if we're going to expand our gross margins, we need to be able to take some of those sourcing benefits to the bottom line, or some portion of those. So, we are comfortable that our pricing actions can offset the general inflation that we're seeing and commodity increases, and then some portion of the sourcing benefits we believe we can take that to the bottom line.

Okay.

And, we have not seen a -- the commodity market I would say, there are some up-and-downs, but it stayed relatively the same. We certainly have not seen an acceleration in concerns around the cost increases that we saw during probably each and every quarter last year. It's still on top, but we have not seen any kind of acceleration broadly.

Did you say it is steel components, and then resins and then maybe some copper --

Yeah, the two big areas -- I mean, we are still feeling pressure on plastics and other oil-related areas. Steel certainly is the one area that we believe we have some contracts in place, and we're taking some mitigating action as we're in sourcing some of our fabrication that we think for the near-term we can offset some of those increases that are coming out, but steel is the biggest area of concern right now. The offset to that is we think that lead, it still hurt us in the first-quarter levels to prior year, but as we look at it the rest of the year that we believe is going to be -- we're going to get downward pressure there and actually will be some savings year-on-year.

Okay. Thank you.

You're welcome Seaver.

Thank you. Our next question comes from Rick D'Auteuil with Columbia Management Advisors.

Just a couple of things, just to understand, do you think any of the issues around financing availability, I don't know if leasing programs or anything like that might be affecting some of your particularly the North American sales?

You know, Rick, I don't have any data that would suggest that. I mean, I cannot definitively say that it's not. Today we -- out of the leases that we originate through our two leasing partners, it's only about somewhere slightly north of 15% of our equipment sales are on lease. We also know that our customers go to other partners. But we're not hearing anything about the inability of people to get leases. So, we don't think so.

Okay. And, how about, you know, any kind of feedback from the sales personnel on maybe some capital budget pullbacks out there, or are you not hearing that at this point as the source of some of the issues?

We're not hearing that anybody has -- that anybody significant has canceled an order. So, our impression is they fully intend to buy. They put it on hold for a brief period of time in March it appears. And, I think, as I said, the good news is that our order levels have returned to normal here in April. So, I think it was a pause. And, as we also said, the activity pipeline in North America is actually building.

Okay. Unrelated question, the buyback you did 98,000 shares, just remind me about your philosophy. The stock is obviously getting hit pretty good here today, and what are your thoughts on the buyback? I know you've spent some money on a couple of acquisitions, so your capital structure is a little different than when it was in place. But, give me an updated idea of where you are thinking there.

Yeah, I could not give you, Rick, a targeted number. I can tell you philosophically that we will be opportunistic in going and buying some shares as we see the value being diminished. We believe it's as appropriate levels that it makes sense to buy back. We do have at the current time most of the shares, for example, that we bought back last quarter. I mean it was a small amount. We have an arrangement with our 401K provider that as shares become available, we will purchase those. And, most of what we bought back last quarter was related to that. We still firmly believe that there is going to be a more acquisition activity. So, from a capital structure standpoint, we're going to be measured in how many -- the level of share buybacks we do. So, we will wait and see at what level of the acquisition activity plays out over the next remainder of this year and into next year before we would get much more aggressive than we have currently been around share repurchases. But, we will continue to buy some back opportunistically.

Okay. Thank you, that’s all I have.

Great.

Thank you.

Thank you sir. Our next question comes from Bob Nicholson with Pine Cobble Capital.

A quick question for you. Chris or Tom could you give us a quick perspective on as you talk about some of the cost actions on the G&A side that you have begun to implement, could you give us a flavor for what sort of spending you are either deferring or curtailing as you go into the second half?

Sure. I will give you a flavor for that. I will give you a flavor for that Bob. I mean, we have given some pretty specific directions. If you first look at any headcount, we have really categorized headcount around jobs that are indefinitely put on hold. That they are ultimately we won't hire, job that we're continuing to recruit for because they are revenue generating, and we believe the right thing to continue to drive the business, we will continue to recruit for those. And, we have other jobs that we've put on hold until July 1 till we really get a better flavor of what we see happening in the economy. We have done that globally, and we have put all of our headcounts into three buckets. Additional jobs that would open up will need -- everything needs approval at quite a high-level to move forward on. From an expense spending standpoint, anything that's discretionary is being either eliminated or deferred. We have put a deferral program in place in Q2 as we are monitoring the economy slowly. We're not saying we're going to cut the spin, but we are deferring as much spending as we can out of the second quarter to taking more of a measured approach than we took in Q1. We have made a decision that the total level that relative to our plan, we've told everybody to anticipate they will cut 5% of their operating expenses for the year, and we're putting in plans to go higher than that. So, what we really are doing is executing against a plan that we put in place and if the year did not get off to the start, we expected. In all honesty, we got added a little. We would have liked to have gone a little earlier, but we did not see the softness in the business. So, when we saw it, we're being more measured than we were in Q1.

Okay, great. Thank you.

You're welcome.

Welcome.

Thank you sir. Our next question comes from Ted Kundtz with Needham & Co. Ted Kundtz - Needham & Co. : Got a little bit more about the acquisitions. You said the integration was going very well. The dilution effect, I guess is over in the first quarter, and I guess it will be slightly neutral or accretive going forward. Is that correct? And, maybe you could talk about the growth rates for that -- of those businesses. I think, if my memory is right, those two acquisitions represent about almost $50 million of revenues in '07. I am just wondering what kind of growth rates you are seeing out of those businesses?

Yeah, I will comment on that a little bit Ted. First, you are right. We do believe that the dilution is behind us, and we expect as we look across the next three quarters that those deals will be accretive to us. We had hoped that we can get back to being breakeven for the full year, meaning we would gain back in nickel across the next three quarters. We could be modestly dilutive. Things are going well. We're quite excited about both the transactions. We're embedded in them deeply right away. From a growth rate standpoint, we are really not ready to commit to that. But, what I can say is you are right. They are about $49 to $50 million of the revenue, and if you are trying to get some flavor around what we were thinking, it would be reasonable to assume three quarters of a year of that revenue with some reasonable growth rate on top of that. We certainly expect to grow outside of our targeted 5% to 9% organic range, but I would not say anything more than that. That will give you a flavor for kind of how much upside there might be to our base revenue. Ted Kundtz - Needham & Co.: Okay. Yeah, because I was looking at your organic growth projections and then just trying to incrementally add on what the acquisitions would do. Could you talk -- just a quick question on that? What is the interest rate on the -- what is it, a term loan you have got out there?

Little bit above -- it is about 3.3 or 3.4% of --

The average would be, for everything we have drawn, about 3.2%. Ted Kundtz - Needham & Co. : Okay. Is that fixed or is that float?

It's float. Ted Kundtz - Needham & Co. : Is it float?

It's a LIBOR contract that we have got through -- it's a six month LIBOR contract.

Okay, okay. Okay, terrific. Thank you.

Thank you.

(Operator Instructions). Our next comes from Klaus Almer with Carnegie.

Hi.

Hi.

Just a question about, you were saying that March was a difficult month. In the past, have you seen that now and then that one month is just dropping out of the bed, or is it of normal what you're seeing in 2008?

Do we normally have maybe a slower month in the first quarter, and it's usually the month after the price increase? Right, because people buy in prior to the price increase, so the next month tends to be a little slower. But, that's a natural phenomenon that we experience every year. But, to see the type of drop-off that we did within a relatively short period of time, because it was not even all of March, it was really the second half, is very unusual.

Got to be a little more specific about that cost, we did, we moved our price increase in North America up by 30 days, and we really do not know conclusively exactly how that affected things. But, we do know that there had to be some level of impact on March as we took pricing around February 1 versus March 1. And, it would be normal that you would see after the price increase is fully implemented that you see some slowdown in your business, but certainly nowhere near what we did see. The good news as we commented is April back to normalized levels in North America.

Okay. Also, I was unable to hear the first 20 minutes of the call, so sorry if you have already commented or told this. But, are there any particular segments or products which really, really were badly hurt in Q1 in the US?

It was -- the majority of it came from larger indoor equipment and outdoor equipment. It was sold to manufacturing distribution warehousing and customers of that nature. And, as we said, what we saw was not the cancellation of any orders. It was the lengthening of the sales cycle that people were cautious given the economic news that was coming out around that time. But, we are cautiously optimistic going forward based on what we are seeing with April order rates.

Do you see this just as a normal market reaction, or have you loss some market share to various reasons?

No, we have not lost any sale due to this. There has been no cancellation of orders. We have not lost a deal that we knew we were going to win to competition. As a matter-of-fact, this year our expectation is we take market share in North America.

Thanks.

You're welcome.

(Operator Instructions). Our next question comes from Ted Kundtz with Needham & Co. Ted Kundtz - Needham & Co.: Could you comment a little bit on the competition? Are they -- what are they doing on pricing, on the pricing front as far as you know?

You know, I would prefer not to comment there Ted. I mean, what we can say is that on our side is, we have been felt good about our price stick. It has been at the higher end of our normal. We have always talked about pricing in the 2% to 3% range. What we're seeing now is that our stick rate is at the higher end of that. And, I could not give you any conclusions on what we're seeing from a competitive pricing standpoint.

But generally, we are the price leaders in North America, and competition tends to follow. And, it has always been a very rational market. We do not expect that to change. Ted Kundtz - Needham & Co.: Okay. The same would be in Europe? I mean, you're not as strong in Europe as you are here, but --?

Yes, but I would say, yes, I would, can't characterize Europe as a rational market as well. Ted Kundtz - Needham & Co.: As well? Okay. Okay, great. Do you anticipate any other further price increases, or this is it for the year?

I would say it would be unlikely that we would take any pure additional pricing unless something really changed. We are offering some modest incentives in given places to try to drive some revenue, we don’t want to comment on that, and we are looking at whether we should implement some pricing around some of our transportation or distribution costs. But no firm conclusions there yet. Ted Kundtz - Needham & Co.: Okay, thanks.

Welcome.

Thank you sir. Our next comes from Rick D'Auteuil with Columbia Management Advisors.

Follow up. I don't know since it's in the rearview mirror, you might provide this. You have provided annual guidance. You're not providing quarterly guidance. It looks to me like you fell short on North America due to the month of March. Europe, even though it was flat, was in line with what your thoughts were. In the rearview mirror, can you tell us where you were? Because the revenues were more or less in line with the street, and yet the bottom line was quite a bit off. So, was this street mis-guessing on how to allocate the quarters, or were you off your numbers, too?

I will give you some flavor for that. We did miss our number in the quarter both from -- at all three levels -- revenue, operating profit and EPS. But, the external numbers I would say were a fair amount higher than our own internal numbers, and I wont comment much more specifically than that. We do not give quarterly guidance, but I did try to, on the last call, if you went back and looked at it to say that we expected the quarter to be seasonally comparable to other quarters, meaning EPS as a percent for the quarter of the total would be similar. And, then also knowing that we were in an investment mode to try to drive revenue, we would have expected EPS to be maybe a little lower than what the outside people looking in would think. So, we were a little off kilter with our own internal numbers relative to the external world.

Okay. But, the street was too aggressive all along, even based on your internal forecast?

I should not comment further than that. But, I mean it's always a little difficult when you make the decision to only give annual guidance. You are going to have some inconsistency along within quarters, and this was an example of that.

Here is an opportunity. Is there any comments you want to make more on a big picture on seasonally how the year should play out as a percentage of your annual guidance?

Yeah, I won't get real specific, but I mean, I think it's pretty self-evident that the quarter that we would certainly hope is going to be the biggest success would be our fourth quarter. I mean, it's always the most important quarter of the year. I mean, we are -- you know we're being more measured right now, but we are continuing to be -- we are continuing to spend to try to drive the topline. We are -- we have been in some level of investment mode, and if those investments pay off and we see the full benefit of our new product pipeline coming in, our fourth quarter should be our best quarter relative to the year. And, that should be a natural evolution of the way we're managing the business. So, that's about all I can really say.

Okay, that is very helpful. I appreciate it. Thanks.

(Operator Instructions). Next question comes from Beth Lilly with Gabelli.

I wanted to just talk a little bit more about you sticking to your goal to get operating margins to 9.5% by the fourth quarter. And, just can you give us a little more insight into how you think that is achievable given what happened this quarter?

Yeah, I would say it's, continues to be really three dimensions to that. One is, we do anticipate growing from a revenue standpoint at higher levels the rest of the year than we saw in Q1. So, that's certainly in our forecast that we expect to grow at higher levels. We are going to manage our operating expenses. I mean, as you saw our operating expenses were -- they were too high for our revenue levels in Q1. That's just the reality of the situation. So, we anticipate for the full year that if you looked our operating expenses as a percent of revenue, we will see some level of benefit level to prior year. I mean, that is just something that we have continually attempted to do. We expect to do that again, and we are bullish on what we're seeing from our cost reduction efforts, particularly on the sourcing side. So, we don't -- we are particularly feel very good about our efforts in that regard. So -- and our pricing actions. I mean, certainly one of the questions that we will ask is, as we have been somewhat aggressive on our pricing relative to history, and we believe that the pricing is sticking in the marketplace, and we are anticipating that as we go through the rest of the year too. So, we still -- we are still going after the 9.5%, and we're not moving off of that.

And, the other thing we said is, in the first quarter, 38% of our equipment sales came from new products launched in the last three years. We have four to five new products coming up, and we've said that we won't launch a new product unless it has a higher gross margin than the product that it replaces. So, we're coming to market with products with higher gross margins than the products they are replacing, and the new products are representing a bigger, bigger piece of our equipment sales, and that impacts our ability to get the 9.5% as well.

Okay. Great, thanks.

(Operator Instructions). At this time, sir, there are no further questions in queue.

Alright. Well then I will close and say thank you for your time today and for your questions. And coming off a record year in 2007, we feel that we remain confident in the long-term strength of our business. We believe a continued focus on our strategies of international market expansion, new products, operating efficiency gains, and coupling that with taking the necessary short-term actions to align our spending with our current sales levels positions us for continued success this year, and we look forward to keeping you posted on our progress. Thank you all.

Thank you, sir. That does conclude today's conference call. Everyone, you may now disconnect.