tnc-20230331

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, 2023


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 21, 2023, there were 18,510,153 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS


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	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
Signatures		29

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TENNANT COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(In millions, except shares and per share data)	Three Months Ended March 31,
	2023		2022
Net sales	$	305.8	$	258.1
Cost of sales	180.3		159.2
Gross profit	125.5		98.9
Selling and administrative expense	81.7		76.6
Research and development expense	7.9		7.7
Operating income	35.9		14.6
Interest expense, net	(3.7)		(0.3)
Net foreign currency transaction (loss) gain	(0.1)		0.6
Other expense, net	(0.1)		(0.2)
Income before income taxes	32.0		14.7
Income tax expense	7.7		4.4
Net income	$	24.3	$	10.3

Net income per share
Basic	$	1.32	$	0.56
Diluted	$	1.30	$	0.55

Weighted average shares outstanding
Basic	18,449,430		18,463,419
Diluted	18,682,268		18,799,732

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In millions)	Three Months Ended March 31,
	2023		2022
Net income	$	24.3	$	10.3
Other comprehensive income (loss):
Foreign currency translation adjustments (net of related tax benefit (expense) of $0.1 and $(0.4), respectively)	5.3		(3.8)
Derivative financial instruments (net of related tax benefit of $0.2 and $0.1, respectively)	(0.6)		(0.2)
Total other comprehensive income (loss), net of tax	4.7		(4.0)

Comprehensive income	$	29.0	$	6.3

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(In millions, except shares and per share data)	March 31, 2023		December 31, 2022
ASSETS
Cash, cash equivalents, and restricted cash	$	91.4	$	77.4
Receivables, less allowances of $7.8 and $6.1, respectively	254.3		251.5
Inventories	203.6		206.6
Prepaid and other current assets	33.1		39.8
Total current assets	582.4		575.3
Property, plant and equipment, less accumulated depreciation of $287.3 and $279.3, respectively	182.8		179.9
Operating lease assets	33.4		31.8
Goodwill	185.0		182.0
Intangible assets, net	73.2		76.4
Other assets	43.9		39.7
Total assets	$	1,100.7	$	1,085.1
LIABILITIES AND EQUITY
Current portion of long-term debt	$	5.3	$	5.2
Accounts payable	117.6		126.1
Employee compensation and benefits	44.9		44.0
Other current liabilities	89.0		86.3
Total current liabilities	256.8		261.6
Long-term debt	293.8		295.1
Long-term operating lease liabilities	18.3		17.1
Employee benefits	13.3		13.2
Deferred income taxes	10.5		11.5
Other liabilities	14.8		14.5
Total long-term liabilities	350.7		351.4
Total liabilities	$	607.5	$	613.0
Commitments and contingencies (Note 11)
Common stock, $0.375 par value; 60,000,000 shares authorized; 18,541,033 and 18,521,485 shares issued and outstanding, respectively	$	7.0	$	7.0
Additional paid-in capital	53.0		56.0
Retained earnings	477.4		458.0
Accumulated other comprehensive loss	(45.5)		(50.2)
Total Tennant Company shareholders' equity	491.9		470.8
Noncontrolling interest	1.3		1.3
Total equity	493.2		472.1
Total liabilities and total equity	$	1,100.7	$	1,085.1

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In millions)	Three Months Ended March 31,
	2023		2022
OPERATING ACTIVITIES
Net income	$	24.3	$	10.3
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense	8.3		8.2
Amortization expense	3.9		4.5
Deferred income tax benefit	(2.0)		(1.3)
Share-based compensation expense	1.2		1.8
Bad debt and returns expense	1.0		0.4
Other, net	0.2		0.2
Changes in operating assets and liabilities:
Receivables	(2.5)		10.1
Inventories	(1.5)		(29.0)
Accounts payable	(6.6)		2.0
Employee compensation and benefits	0.5		(12.6)
Other assets and liabilities	4.3		(4.7)
Net cash provided by (used in) operating activities	31.1		(10.1)
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(6.8)		(5.0)
Investment in leased assets	(0.2)		(3.7)
Cash received from leased assets	0.2		0.1
Net cash used in investing activities	(6.8)		(8.6)
FINANCING ACTIVITIES
Proceeds from borrowings	20.0		15.0
Repayments of borrowings	(21.4)		(0.9)
Change in finance lease obligations	0.2		—
Proceeds (repurchases) from exercise of stock options, net of employee tax withholdings obligations	0.8		(1.2)
Repurchases of common stock	(5.0)		—
Dividends paid	(4.9)		(4.6)
Net cash (used in) provided by financing activities	(10.3)		8.3
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		(2.8)
Net increase (decrease) in cash, cash equivalents and restricted cash	14.0		(13.2)
Cash, cash equivalents and restricted cash at beginning of period	77.4		123.6
Cash, cash equivalents and restricted cash at end of period	$	91.4	$	110.4

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SUPPLEMENTAL CASH FLOW INFORMATION	Three Months Ended March 31,
	2023		2022
Cash paid for income taxes	$	0.8	$	1.3
Cash paid for interest	4.5		1.0
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	4.6		4.9
Financing cash flows from financing leases	—		0.1
Lease assets obtained in exchange for new operating lease liabilities	4.6		2.8
Supplemental non-cash investing and financing activities:
Capital expenditures in accounts payable	1.5		1.6

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In millions, except shares and per share data)


	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, 2022	18,521,485	$	7.0	$	56.0	$	458.0	$	(50.2)	$	470.8	$	1.3	$	472.1
Net income		—		—		24.3		—		24.3		—		24.3
Other comprehensive income		—		—		—		4.7		4.7		—		4.7
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings and repurchases of 18,468 shares	93,073	—		0.8		—		—		0.8		—		0.8
Share-based compensation		—		1.2		—		—		1.2		—		1.2
Repurchases of common stock	(73,525)	—		(5.0)		—		—		(5.0)		—		(5.0)
Dividends paid $0.265 per common share		—		—