tnc-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission File Number 1-16191

__________________________________________

TENNANT COMPANY

(Exact name of registrant as specified in its charter)


Minnesota			41-0572550
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

10400 Clean Street

Eden Prairie, Minnesota 55344

(Address of principal executive offices)

(Zip Code)

(763) 540-1200

(Registrant’s telephone number, including area code)

____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.375 per share

TNC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

As of April 26, 2024, there were 19,007,460 shares of common stock outstanding.


PART I - FINANCIAL INFORMATION (Unaudited)		Page
Item 1.	Financial Statements	3
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Equity	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5.	Other Information	32
Item 6.	Exhibits	30
Signatures		31


(In millions, except shares and per share data)	Three Months Ended March 31,
	2024		2023
Net sales	$	311.0	$	305.8
Cost of sales	173.5		180.3
Gross profit	137.5		125.5
Selling and administrative expense	89.9		81.7
Research and development expense	10.1		7.9
Operating income	37.5		35.9
Interest expense, net	(2.3)		(3.7)
Net foreign currency transaction loss	(0.2)		(0.1)
Other income (expense), net	0.1		(0.1)
Income before income taxes	35.1		32.0
Income tax expense	6.7		7.7
Net income	$	28.4	$	24.3

Net income per share
Basic	$	1.52	$	1.32
Diluted	$	1.49	$	1.30

Weighted average shares outstanding
Basic	18,665,570		18,449,430
Diluted	19,077,767		18,682,268


(In millions)	Three Months Ended March 31,
	2024		2023
Net income	$	28.4	$	24.3
Other comprehensive (loss) income:
Foreign currency translation adjustments (net of related tax (expense) benefit of $(0.2) and $0.1, respectively)	(8.2)		5.3
Derivative financial instruments (net of related tax (expense) benefit of $(0.3), $0.2, respectively)	1.0		(0.6)
Total other comprehensive (loss) income, net of tax	(7.2)		4.7

Comprehensive income	$	21.2	$	29.0


	(Unaudited)
(In millions, except shares and per share data)	March 31, 2024		December 31, 2023
ASSETS
Cash, cash equivalents, and restricted cash	$	88.8	$	117.1
Receivables, less allowances of $7.1 and $7.2, respectively	257.3		247.6
Inventories	181.4		175.9
Prepaid and other current assets	33.6		28.5
Total current assets	561.1		569.1
Property, plant and equipment, less accumulated depreciation of $307.4 and $304.0, respectively	184.7		187.7
Operating lease assets	40.4		41.7
Goodwill	192.2		187.4
Intangible assets, net	72.3		63.1
Other assets	101.0		64.4
Total assets	$	1,151.7	$	1,113.4
LIABILITIES AND EQUITY
Current portion of long-term debt	$	7.2	$	6.4
Accounts payable	124.9		111.4
Employee compensation and benefits	46.7		67.3
Other current liabilities	81.6		88.6
Total current liabilities	260.4		273.7
Long-term debt	207.4		194.2
Long-term operating lease liabilities	27.1		27.4
Employee benefits	13.7		13.3
Deferred income taxes	8.4		5.0
Other liabilities	18.8		21.5
Total long-term liabilities	275.4		261.4
Total liabilities	$	535.8	$	535.1
Commitments and contingencies (Note 12)
Common Stock, $0.375 par value; 60,000,000 shares authorized; 19,006,838 and 18,631,384 shares issued and outstanding, respectively	7.1		7.0
Additional paid-in capital	86.5		64.9
Retained earnings	570.5		547.4
Accumulated other comprehensive loss	(49.5)		(42.3)
Total Tennant Company shareholders' equity	614.6		577.0
Noncontrolling interest	1.3		1.3
Total equity	615.9		578.3
Total liabilities and total equity	$	1,151.7	$	1,113.4


SUPPLEMENTAL CASH FLOW INFORMATION	Three Months Ended March 31,
(In millions)	2024		2023
Cash paid for income taxes	$	1.6	$	0.8
Cash paid for interest	4.5		4.5
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	4.7		4.6
Lease assets obtained in exchange for new operating lease liabilities	3.8		4.6
Supplemental non-cash investing and financing activities:
Capital expenditures in accounts payable	2.1		1.5


	Tennant Company Shareholders
	Common Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Tennant Company Shareholders' Equity		Noncontrolling Interest		Total Equity
Balance, December 31, 2023	18,631,384	$	7.0	$	64.9	$	547.4	$	(42.3)	$	577.0	$	1.3	$	578.3
Net income		—		—		28.4		—		28.4		—		28.4
Other comprehensive income		—		—		—		(7.2)		(7.2)		—		(7.2)
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings and repurchases of 27,808 shares	388,179	0.1		19.5		—		—		19.6		—		19.6
Share-based compensation		—		3.2		—		—		3.2		—		3.2
Repurchases of common stock	(12,725)	—		(1.1)		—		—		(1.1)		—		(1.1)
Dividends paid $0.28 per common share		—		—		(5.3)		—		(5.3)		—		(5.3)
Balance, March 31, 2024	19,006,838	$	7.1	$	86.5	$	570.5	$	(49.5)	$	614.6	$	1.3	$	615.9


Remaining 2024	$	6.6
2025	2.1
2026	1.3
2027	0.6
2028	0.2
Thereafter	0.1
Total	$	10.9


Components of purchase price:
Cash paid	$	30.8
Settlement of preexisting transactions	3.9
Total purchase price	34.7

ASSETS
Cash	5.3
Other current assets	8.0
Intangible assets subject to amortization
Customer lists	13.6
Backlog	0.6
Other assets	5.3
Total identifiable assets acquired	32.8
LIABILITIES
Current liabilities	(1.5)
Long-term liabilities	(5.0)
Total identifiable liabilities assumed	(6.5)
Net assets acquired	26.3

Goodwill	$	8.4


	March 31, 2024		December 31, 2023
Inventories carried at LIFO:
Finished goods(a)	$	75.4	$	74.7
Raw materials and work-in-process	37.1		38.5
Excess of FIFO over LIFO cost(b)	(47.5)		(47.7)
Total LIFO inventories	$	65.0	$	65.5

Inventories carried at FIFO:
Finished goods(a)	$	56.9	$	52.8
Raw materials and work-in-process	59.5		57.6
Total FIFO inventories	$	116.4	$	110.4
Total inventories	$	181.4	$	175.9


	Goodwill		Accumulated Impairment Losses		Total
Balance as of December 31, 2023	$	220.7	$	(33.3)	$	187.4
Additions	8.4		—		8.4
Foreign currency fluctuations	(3.9)		0.3		(3.6)
Balance as of March 31, 2024	$	225.2	$	(33.0)	$	192.2


	Three Months Ended March 31,
	2024		2023
Americas	$	215.6	$	204.4
Europe, Middle East and Africa	76.8		82.1
Asia Pacific	18.6		19.3
Total	$	311.0	$	305.8


	Three Months Ended March 31,
	2024		2023
Beginning balance	$	21.2	$	20.0
Additions to sales incentive accrual	6.3		6.6
Contract payments	(11.3)		(11.3)
Foreign currency fluctuations	(0.4)		0.1
Ending balance	$	15.8	$	15.4


	Three Months Ended March 31,
	2024		2023
Beginning balance	$	10.3	$	9.3
Increase in deferred revenue representing our obligation to satisfy future performance obligations	5.0		5.5
Decrease in deferred revenue for amounts recognized in net sales for satisfied performance obligations	(4.3)		(4.7)
Foreign currency fluctuations	(0.1)		0.1
Ending balance	$	10.9	$	10.2


	Customer Lists		Trade Names		Technology		Total
Balance as of March 31, 2024
Original cost	$	161.7	$	28.7	$	16.1	$	206.5
Accumulated amortization	(101.5)		(19.5)		(13.2)		(134.2)
Carrying value	$	60.2	$	9.2	$	2.9	$	72.3
Weighted average original life (in years)	14		10		12

Balance as of December 31, 2023
Original cost	$	150.6	$	29.3	$	16.3	$	196.2
Accumulated amortization	(100.8)		(19.2)		(13.1)		(133.1)
Carrying value	$	49.8	$	10.1	$	3.2	$	63.1
Weighted average original life (in years)	15		11		11


Remaining 2024	$	11.2
2025	13.1
2026	11.9
2027	8.6
2028	6.9
Thereafter	20.6
Total	$	72.3


•			A covenant requiring us to maintain an indebtedness to EBITDA ratio, determined as of the end of each of our fiscal quarters, of no greater than 3.50 to 1.00, with certain alternative requirements for permitted acquisitions greater than $50.0 million;


•			A covenant requiring us to maintain an EBITDA to interest expense ratio for a period of four consecutive fiscal quarters as of the end of each quarter of no less than 3.00 to 1.00; and


•			A covenant restricting us from paying dividends or repurchasing stock if, after giving effect to such payments and assuming no default exists or would result from such payment, our leverage ratio is greater than 2.50 to 1.00, in such case limiting such payments to $60.0 million during any fiscal year.


	March 31, 2024		December 31, 2023
Credit facility borrowings:
Revolving credit facility borrowings	$	125.0	$	110.0
Term loan facility borrowings	88.8		90.0
Finance lease liabilities	0.8		0.6
Total debt	214.6		200.6
Less: current portion of long-term debt(a)	(7.2)		(6.4)
Long-term debt	$	207.4	$	194.2

SEC Form 10-Q filed by Tennant Company