Tennant Company

At this time, I would like to welcome everyone to the Tenant Company's 2021 Second Quarter Earnings Conference Call. This call is being recorded. There will be time for Q&A at the end of the call. Please press star 1 if you would like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you have joined our call today via telephone and logged on to the conference call presentation on your computer, please mute the audio on your computer to avoid potential quality issues during this call. Thank you for participating in Tenant Company's 2021 Second Quarter Earnings Conference Call. Beginning today's meeting is Mr. William Prate, Senior Director of Global Financial Planning and Analysis and Investor Relations for Tenant Company. Mr. Preet, you may begin your conference.

Thank you. Good morning, everyone, and welcome to Tenant Company's second quarter 2021 earnings conference call. I'm William Preet, Senior Director of Global Financial Planning and Analysis and Investor Relations. Joining me today are Dave Limmel, Tenant's President and CEO, Faye West, our Senior Vice President and CFO, and Dan Glucic, our Senior Vice President of Global Operations. On today's call, we will update you regarding our second quarter performance and guidance for 2021. Faye will brief you on our operations and enterprise strategy, and Faye will cover the financials. After the remarks, we will open the call to questions. Please note a slide presentation accompanies this conference call and is available on our investor relations website at investors.tenneco.com. 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 risk and uncertainties, and our actual results may differ materially from those contained in the statement. 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 certain items. Our 2021 second quarter earnings release includes the comparable gap measures and a reconciliation of the non-gap measures for our gap results. Our earnings release was issued this morning via BusinessWire and is also posted on our investor relations website at investors.tenneco.com. I'll now turn the call over to Dave.

Thanks, William, and thank you, everyone, for joining us today. Our second quarter results reflected the overall business recovery we saw across our geographic markets, despite widespread global supply chain constraints and commodity inflation that cut across a number of industries and which impacted our ability to fully meet the Q2 increase in customer demand. While the demand increase exceeded our initial expectations for Q2, the impact of macro-level headwinds such as parts availability, material inflation, freight costs, and labor shortages was also greater than we had expected. In response, we've taken steps, wherever possible, to help minimize the effects of these challenges to our customers. In most cases, these actions build upon or otherwise benefit from the strategic improvements we have made to our operating model as part of our enterprise strategy. I will now walk you through some of the actions our teams have and will continue to take to mitigate some of the macro challenges in the current environment while serving the needs of our customers. To address the issue of parts availability, which is the result of our suppliers managing their own production, labor, and logistical challenges, our supply chain teams are leveraging our strategic partnerships to manage components and material availability. We are also developing design alternatives and identifying additional sources to keep our manufacturing lines running, all while maintaining strict product quality controls. To ensure a smoother process in securing parts in the second half of the year, our teams have developed more robust sales and inventory operations plans to better align our supply and demand. These plans not only help our manufacturing plants develop smarter strategies to meet increased customer demand, but also allow us to provide longer-term demand forecasts to our suppliers to secure the parts we'll need. To address material inflation, our teams are working diligently to find additional partners and, where possible, consolidating vendors to drive leverage and scale. At the same time, we continue to use value engineering to help reduce the parts and material that go into each machine. Our R&D and operations teams are regularly finding ways to help address material inflation while maintaining our value proposition of quality and innovation. Today's pressures in the steel, resin and lead markets represent a significant challenge that is felt by industrial manufacturers around the world and one that we expect will persist for the foreseeable future. To minimize the impact of higher freight costs, we are fortunate that as part of our enterprise strategy, we had already started to prioritize local for local supply chain and region for region manufacturing. This allows us to manufacture our products closer to our customers, which helps reduce freight costs. This does not entirely offset current headwinds given the constrained transportation market, but we are making every effort to ensure that our manufacturing lines remain up and running and that we can deliver products with appropriate lead times. Regarding labor shortages, specifically in our manufacturing areas, we are staying competitive in the market by adjusting wages, and making every effort to attract new talent by providing a safe, rewarding, and fulfilling work environment. We're also investing in our equipment, processes, and systems to drive increased productivity. With respect to the overall challenges we're facing in our cost of goods sold, we're also carefully and thoughtfully managing our S&A to a level that allows us to invest in the business, serve the needs of our customers and deliver on our enterprise strategy while also maintaining our ability to meet our full-year financial targets. At the same time, we are implementing price increases where appropriate that will benefit the fourth quarter of this year and help offset some of the costs that we're not able to absorb internally. While a price increase at this time of the year is not a normal practice for tenants, we are compelled to take this action in response to the current macro market challenge. The key improvements we've made internally as part of our enterprise strategy have helped facilitate our response to current market dynamics. These improvements include value engineering, plant optimization, simplifying our product portfolio, divesting non-core businesses, and adjusting our go-to-market approach in specific regions. I continue to be extremely proud of our global teams for their efforts in addressing these various operational challenges as countries and markets navigate their post-pandemic recoveries. We are taking decisive actions to safeguard the customer experience and deliver on our financial commitments while remaining focused on our longer-term business objectives. As Faye will discuss, our full-year guidance assumes our continued effective management of a challenging supply chain and operations environment and reflects our growing confidence that the long-term global recovery for commercial and industrial cleaning will continue. While we remain vigilant in our overall cost management in the face of material inflation, parts availability issues, and higher freight costs, we will continue to execute against our enterprise strategy and stay focused on delivering the best possible customer experience. With that, I will turn the call over to Faye for a discussion of our financials.