tnc-20230630

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 June 30, 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 July 28, 2023, there were 18,583,434 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	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net sales	$	321.7	$	280.2	$	627.5	$	538.3
Cost of sales	182.2		174.1		362.5		333.3
Gross profit	139.5		106.1		265.0		205.0
Selling and administrative expense	87.0		79.1		168.7		155.7
Research and development expense	9.0		7.9		16.9		15.6
Gain on sale of assets	—		(3.7)		—		(3.7)
Operating income	43.5		22.8		79.4		37.4
Interest expense, net	(4.0)		(1.2)		(7.7)		(1.5)
Net foreign currency transaction gain (loss)	1.0		(1.0)		0.9		(0.4)
Other expense, net	(0.6)		(0.3)		(0.7)		(0.5)
Income before income taxes	39.9		20.3		71.9		35.0
Income tax expense	8.6		3.7		16.3		8.1
Net income	$	31.3	$	16.6	$	55.6	$	26.9

Net income per share
Basic	$	1.70	$	0.90	$	3.02	$	1.46
Diluted	$	1.68	$	0.89	$	2.98	$	1.44

Weighted average shares outstanding
Basic	18,436,367		18,507,073		18,442,862		18,485,367
Diluted	18,713,455		18,683,798		18,691,736		18,735,913

Table of Contents

TENNANT COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	31.3	$	16.6	$	55.6	$	26.9
Other comprehensive income (loss):
Foreign currency translation adjustments (net of related tax benefit (expense) of $0.2, $(1.0), $0.3, and $(1.4), respectively)	0.1		(16.9)		5.4		(20.7)
Derivative financial instruments (net of related tax expense of $0.4, $0.3, $0.2, and $0.2, respectively)	1.1		0.8		0.5		0.6
Total other comprehensive income (loss), net of tax	1.2		(16.1)		5.9		(20.1)

Comprehensive income	$	32.5	$	0.5	$	61.5	$	6.8

See accompanying notes to consolidated financial statements.

Table of Contents

TENNANT COMPANY

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(In millions, except shares and per share data)	June 30, 2023		December 31, 2022
ASSETS
Cash, cash equivalents, and restricted cash	$	95.8	$	77.4
Receivables, less allowances of $8.0 and $6.1, respectively	263.5		251.5
Inventories	198.4		206.6
Prepaid and other current assets	32.1		39.8
Total current assets	589.8		575.3
Property, plant and equipment, less accumulated depreciation of $297.4 and $279.3, respectively	184.6		179.9
Operating lease assets	32.2		31.8
Goodwill	185.6		182.0
Intangible assets, net	69.6		76.4
Other assets	46.5		39.7
Total assets	$	1,108.3	$	1,085.1
LIABILITIES AND EQUITY
Current portion of long-term debt	$	5.3	$	5.2
Accounts payable	113.0		126.1
Employee compensation and benefits	51.6		44.0
Other current liabilities	87.9		86.3
Total current liabilities	257.8		261.6
Long-term debt	272.7		295.1
Long-term operating lease liabilities	17.4		17.1
Employee benefits	13.2		13.2
Deferred income taxes	9.7		11.5
Other liabilities	15.6		14.5
Total long-term liabilities	328.6		351.4
Total liabilities	$	586.4	$	613.0
Commitments and contingencies (Note 11)
Common Stock, $0.375 par value; 60,000,000 shares authorized; 18,540,598 and 18,521,485 shares issued and outstanding, respectively	7.0		7.0
Additional paid-in capital	54.1		56.0
Retained earnings	503.8		458.0
Accumulated other comprehensive loss	(44.3)		(50.2)
Total Tennant Company shareholders' equity	520.6		470.8
Noncontrolling interest	1.3		1.3
Total equity	521.9		472.1
Total liabilities and total equity	$	1,108.3	$	1,085.1

See accompanying notes to consolidated financial statements.

Table of Contents

TENNANT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In millions)	Six Months Ended June 30,
	2023		2022
OPERATING ACTIVITIES
Net income	$	55.6	$	26.9
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense	17.2		16.4
Amortization expense	7.5		8.4
Deferred income tax benefit	(5.6)		(4.4)
Share-based compensation expense	3.9		2.7
Bad debt and returns expense	1.7		0.7
Gain on sale of assets	—		(3.7)
Other, net	0.4		0.5
Changes in operating assets and liabilities:
Receivables	(10.9)		(9.5)
Inventories	(1.3)		(44.7)
Accounts payable	(10.5)		6.5
Employee compensation and benefits	7.0		(8.7)
Other assets and liabilities	5.2		(14.7)
Net cash provided by (used in) operating activities	70.2		(23.6)
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(11.8)		(10.5)
Proceeds from sale of assets, net of cash divested	—		4.1
Investment in leased assets	(0.5)		(4.0)
Cash received from leased assets	0.3		0.3
Net cash used in investing activities	(12.0)		(10.1)
FINANCING ACTIVITIES
Proceeds from borrowings	20.0		15.0
Repayments of borrowings	(42.5)		(16.6)
Proceeds (repurchases) from exercise of stock options, net of employee tax withholdings obligations	4.2		(1.4)
Repurchases of common stock	(10.0)		—
Dividends paid	(9.8)		(9.2)
Net cash used in financing activities	(38.1)		(12.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1.7)		(3.9)
Net increase (decrease) in cash, cash equivalents and restricted cash	18.4		(49.8)
Cash, cash equivalents and restricted cash at beginning of period	77.4		123.6
Cash, cash equivalents and restricted cash at end of period	$	95.8	$	73.8

Table

SEC Form 10-Q filed by Tennant Company