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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
oTRANSITION 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
__________________________________________
tennantcompanylogo.jpg
TENNANT COMPANY
(Exact name of registrant as specified in its charter)
Minnesota41-0572550
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.375 per shareTNCNew 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.
YesþNoo
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).
YesþNoo
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 filerþAccelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
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).
YesoNoþ
As of October 25, 2024, there were 18,872,792 shares of common stock outstanding.
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TABLE OF CONTENTS
Page
Item 5.
 
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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
September 30,		Nine Months Ended
September 30,
2024202320242023
Net sales$315.8 $304.7 $957.8 $932.2 
Cost of sales182.0 172.7 543.8 535.2 
Gross profit133.8 132.0 414.0 397.0 
Selling and administrative expense92.7 88.2 275.5 256.9 
Research and development expense10.5 9.1 31.8 26.0 
Operating income30.6 34.7 106.7 114.1 
Interest expense, net(2.7)(3.3)(7.5)(11.0)
Net foreign currency transaction (loss) gain(0.4)(0.4)0.1 0.5 
Other (expense) income, net— (1.1)0.2 (1.8)
Income before income taxes27.5 29.9 99.5 101.8 
Income tax expense6.7 7.0 22.4 23.3 
Net income$20.8 $22.9 $77.1 $78.5 
Net income per share
Basic$1.11 $1.23 $4.10 $4.25 
Diluted$1.09 $1.21 $4.03 $4.19 
Weighted average shares outstanding
Basic18,810,26718,570,29318,790,82418,485,806
Diluted19,093,87318,878,31119,120,45518,747,128
See accompanying notes to consolidated financial statements.
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TENNANT COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Net income$20.8 $22.9 $77.1 $78.5 
Other comprehensive income (loss):
Foreign currency translation adjustments (net of related tax benefit (expense) of $0.5, $(0.2), $0.4, and $0.1, respectively)
12.9 (10.6)(2.4)(5.2)
Pension and postretirement medical benefits (net of related tax expense of $0, $0, $0, and $0, respectively)
(0.2)— (0.2)— 
Derivative financial instruments (net of related tax benefit (expense) of $0.5, $(0.4), $0.1, and $(0.2), respectively)
(1.7)0.2 (0.4)0.7 
Total other comprehensive income (loss), net of tax11.0 (10.4)(3.0)(4.5)
Total comprehensive income$31.8 $12.5 $74.1 $74.0 
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)September 30,
2024		December 31,
2023
ASSETS
Cash, cash equivalents, and restricted cash$91.3 $117.1 
Receivables, less allowances of $6.8 and $7.2, respectively
260.2 247.6 
Inventories201.8 175.9 
Prepaid and other current assets40.6 28.5 
Total current assets593.9 569.1 
Property, plant and equipment, less accumulated depreciation of $316.4 and $304.0, respectively
183.7 187.7 
Operating lease assets52.1 41.7 
Goodwill198.4 187.4 
Intangible assets, net66.4 63.1 
Other assets121.6 64.4 
Total assets$1,216.1 $1,113.4 
LIABILITIES AND EQUITY
Current portion of long-term debt$0.6 $6.4 
Accounts payable128.0 111.4 
Employee compensation and benefits59.4 67.3 
Other current liabilities85.5 88.6 
Total current liabilities273.5 273.7 
Long-term debt208.6 194.2 
Long-term operating lease liabilities35.2 27.4 
Employee benefits13.8 13.3 
Deferred income taxes7.9 5.0 
Other liabilities28.6 21.5 
Total long-term liabilities294.1 261.4 
Total liabilities$567.6 $535.1 
Commitments and contingencies (Note 12)
Common Stock, $0.375 par value; 60,000,000 shares authorized; 18,872,792 and 18,631,384 shares issued and outstanding, respectively
7.1 7.0 
Additional paid-in capital76.8 64.9 
Retained earnings608.6 547.4 
Accumulated other comprehensive loss(45.3)(42.3)
Total Tennant Company shareholders' equity647.2 577.0 
Noncontrolling interest1.3 1.3 
Total equity648.5 578.3 
Total liabilities and total equity$1,216.1 $1,113.4 
See accompanying notes to consolidated financial statements.
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TENNANT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)Nine Months Ended
September 30,
20242023
OPERATING ACTIVITIES
Net income$77.1 $78.5 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense29.6 26.4 
Amortization expense11.4 11.0 
Deferred income tax benefit(1.8)(7.4)
Share-based compensation expense9.4 8.6 
Bad debt and returns expense1.8 3.2 
Other, net0.5 0.5 
Changes in operating assets and liabilities:
Receivables(12.3)7.9 
Inventories(35.7)3.5 
Accounts payable17.9 (25.1)
Employee compensation and benefits(8.1)18.3 
Other assets and liabilities(37.6)(0.8)
Net cash provided by operating activities52.2 124.6 
INVESTING ACTIVITIES
Purchases of property, plant and equipment(11.5)(15.3)
Purchase of investment(32.1)— 
Payments made in connection with business acquisition, net of cash acquired(25.7)— 
Investment in leased assets(0.4)(0.5)
Cash received from leased assets0.6 0.6 
Net cash used in investing activities(69.1)(15.2)
FINANCING ACTIVITIES
Proceeds from borrowings40.0 20.0 
Repayments of borrowings(32.5)(98.7)
Payment of debt financing costs(2.2)— 
Proceeds from exercise of stock options, net of employee tax withholdings obligations19.6 18.1 
Repurchases of common stock(17.1)(11.7)
Dividends paid(15.9)(14.8)
Net cash used in financing activities(8.1)(87.1)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.8)(2.7)
Net (decrease) increase in cash, cash equivalents and restricted cash(25.8)19.6 
Cash, cash equivalents and restricted cash at beginning of period117.1 77.4 
Cash, cash equivalents and restricted cash at end of period$91.3 $97.0 
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SUPPLEMENTAL CASH FLOW INFORMATION
Nine Months Ended
September 30,
(In millions)20242023
Cash paid for income taxes$27.9 $29.1 
Cash paid for interest11.3 14.7 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases15.1 13.9 
Financing cash flows from financing leases0.1 — 
Lease assets obtained in exchange for new operating lease liabilities24.0 13.0 
Lease assets obtained in exchange for new financing lease liabilities1.0 0.6 
Supplemental non-cash investing and financing activities:
Capital expenditures in accounts payable1.6 1.9 
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, 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 of 27,808 shares
388,1790.1 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 $0.280 per common share
— — (5.3)— (5.3)— (5.3)
Balance, March 31, 202419,006,838$7.1 $86.5 $570.5 $(49.5)$614.6 $1.3 $615.9 
Net income— — 27.9 — 27.9 — 27.9 
Other comprehensive income— — — (6.8)(6.8)— (6.8)
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 5,132 shares
21,337— 0.1 — — 0.1 — 0.1 
Share-based compensation— 2.1 — — 2.1 — 2.1 
Repurchases of common stock(77,514)— (8.0)— — (8.0)— (8.0)
Dividends paid $0.280 per common share
— — (5.3)— (5.3)— (5.3)
Balance, June 30, 202418,950,661$7.1 $80.7 $593.1 $(56.3)$624.6 $1.3 $625.9 
Net income— — 20.8 — 20.8 — 20.8 
Other comprehensive income— — — 11.0 11.0 — 11.0 
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 1,026 shares
2,246— — — — — — — 
Share-based compensation— 4.1 — — 4.1 — 4.1 
Repurchases of common stock(80,115)— (8.0)— — (8.0)— (8.0)
Dividends paid $0.280 per common share
— — (5.3)— (5.3)— (5.3)
Balance, September 30, 202418,872,792$7.1 $76.8 $608.6 $(45.3)$647.2 $1.3 $648.5 
See accompanying notes to consolidated financial statements.
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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, 202218,521,485$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 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
— — (4.9)— (4.9)— (4.9)
Balance, March 31, 202318,541,033$7.0 $53.0 $477.4 $(45.5)$491.9 $1.3 $493.2 
Net income — — 31.3 — 31.3 — 31.3 
Other comprehensive income— — — 1.2 1.2 — 1.2 
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 4,258 shares
69,345— 3.4 — — 3.4 — 3.4 
Share-based compensation— 2.7 — — 2.7 — 2.7 
Repurchases of common stock(69,780)— (5.0)— — (5.0)— (5.0)
Dividends paid $0.265 per common share
— — (4.9)— (4.9)— (4.9)
Balance, June 30, 202318,540,598$7.0 $54.1 $503.8 $(44.3)$520.6 $1.3 $521.9 
Net income— 22.9 — 22.9 — 22.9 
Other comprehensive income — — (10.4)(10.4)— (10.4)
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 148 shares
222,566— 13.9 — — 13.9 — 13.9 
Share-based compensation— 4.7 — — 4.7 — 4.7 
Repurchases of common stock(21,793)— (1.7)— — (1.7)— (1.7)
Dividends paid $0.265 per common share
— — (5.0)— (5.0)— (5.0)
Balance, September 30, 202318,741,371$7.0 $71.0 $521.7 $(54.7)$545.0 $1.3 $546.3 
See accompanying notes to consolidated financial statements.
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TENNANT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In millions, except shares and per share data)
1.    Summary of Significant Accounting Policies
Tennant Company ("the Company", "we", "us", or "our") is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, reduce environmental impact and help create a cleaner, safer, healthier world. The Company is committed to creating and commercializing breakthrough, sustainable cleaning innovations to enhance its broad suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, and asset management solutions.
Our products are used in many types of environments, including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and more.
Customers include contract cleaners to whom organizations outsource facilities maintenance as well as businesses that perform facilities maintenance themselves. The Company reaches these customers through the industry's largest direct sales and service organization and through a strong and well-supported network of authorized distributors worldwide.
Basis of Presentation – The accompanying unaudited consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for interim reporting. In our opinion, the consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for the fair presentation of our financial position and results of operations.
These statements should be read in conjunction with the consolidated financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2023. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
2.    Newly Adopted Accounting Pronouncements
There are no newly adopted accounting pronouncements during the nine months ended September 30, 2024 that impacted the Company.
3.    Revenue
Disaggregation of Revenue
The following tables illustrate the disaggregation of revenue by geographic area, groups of similar products and services and sales channels:
Net sales by geographic area
Three Months Ended
September 30,		Nine Months Ended
September 30,
20242023% Change20242023% Change
Americas$218.7 $211.2 3.6 %$662.1 $632.2 4.7 %
Europe, Middle East and Africa76.3 72.0 6.0 %234.6 234.1 0.2 %
Asia Pacific20.8 21.5 (3.3)%61.1 65.9 (7.3)%
Total$315.8 $304.7 3.6 %$957.8 $932.2 2.7 %
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Net sales are attributed to each geographic area based on the end-user country and are net of intercompany sales.
Net sales by groups of similar products and services
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Equipment$196.6 $189.5 $597.1 $579.1 
Parts and consumables68.0 68.3 207.5 212.7 
Service and other51.2 46.9 153.2 140.4 
Total$315.8 $304.7 $957.8 $932.2 
Net sales by sales channel
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Sales direct to consumer$222.6 $214.6 $673.7 $638.4 
Sales to distributors93.2 90.1 284.1 293.8 
Total$315.8 $304.7 $957.8 $932.2 
Contract Liabilities
Sales Returns
The right of return may exist explicitly or implicitly with our customers. When the right of return exists, we adjust the transaction price for the estimated effect of returns. We estimate the expected returns using the expected value method by assessing historical sales levels and the timing and magnitude of historical sales return levels as a percent of sales and projecting this experience into the future.
Sales Incentives
Our sales contracts may contain various customer incentives, such as volume-based rebates or other promotions. We reduce the transaction price for certain customer programs and incentive offerings that represent variable consideration. Sales incentives given to our customers are recorded using the most likely amount approach for estimating the amount of consideration to which the Company will be entitled. We forecast the most likely amount of the incentive to be paid at the time of sale, update this forecast quarterly, and adjust the transaction price accordingly to reflect the new amount of incentives expected to be earned by the customer. A majority of our customer incentives are settled within one year. We record our accruals for volume-based rebates and other promotions in other current liabilities on our consolidated balance sheets.
The change in our sales incentive accrual balance was as follows:
Nine Months Ended
September 30,
20242023
Beginning balance$21.2 $20.0 
Additions to sales incentive accrual20.5 21.9 
Contract payments(20.9)(20.4)
Foreign currency fluctuations0.1 (0.1)
Ending balance$20.9 $21.4 
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Deferred Revenue
We sell separately priced prepaid contracts to our customers where we receive payment at the inception of the contract and defer recognition of the consideration received because we have to satisfy future performance obligations. Our deferred revenue balance includes autonomous subscription sales and prepaid maintenance contracts on our machines ranging from 12 months to 60 months. In circumstances where prepaid contracts are bundled with machines, we use an observable price to determine stand-alone selling price for separate performance obligations.
The change in the deferred revenue balance was as follows:
Nine Months Ended
September 30,
20242023
Beginning balance$10.3 $9.3 
Increase in deferred revenue representing our obligation to satisfy future performance obligations21.8 13.5 
Decrease in deferred revenue for amounts recognized in net sales for satisfied performance obligations(15.3)(14.0)
Foreign currency fluctuations(0.5)— 
Ending balance$16.3 $8.8 
At September 30, 2024, $8.3 million and $8.0 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets. Of these amounts, we expect to recognize the following approximate amounts in net sales in the following periods:
Remaining 2024
$4.4 
20254.3 
20263.6 
20272.1 
20281.3 
Thereafter0.6 
Total$16.3 
At December 31, 2023, $7.9 million and $2.4 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets.
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4.    Management Actions
Restructuring Actions
During the three and nine months ended September 30, 2024 and September 30, 2023, we incurred restructuring expenses as part of our ongoing global reorganization efforts. The following pre-tax restructuring charges were included in selling and administrative expense in the consolidated statements of income.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Severance-related costs$— $— $0.6 $1.2 
Total pre-tax restructuring costs$— $— $0.6 $1.2 
The expense in 2024 impacted the Europe, Middle East and Africa (EMEA) operating segment. The expense in 2023 impacted the EMEA and Asia Pacific (APAC) operating segments.
A reconciliation of the beginning and ending liability balances for severance-related costs is as follows:
Nine Months Ended
September 30,
20242023
Beginning balance$2.4 $1.7 
New charges1.2 1.1 
Cash payments(1.3)(1.6)
Foreign currency fluctuations(0.1)— 
Adjustments to accrual(0.6)0.1 
Ending balance$1.6 $1.3 
5.    Acquisitions
On February 29, 2024, we acquired 100% of M&F Management and Financing GmbH ("M&F"), the parent company of TCS EMEA GmbH ("TCS"), as we seek to accelerate growth in the EMEA region.
Based in Austria, TCS was Tennant Company's largest Central and Eastern Europe distributor. The acquisition gives Tennant a knowledgeable and experienced sales force and an established direct channel into countries including Romania, Hungary, Czech Republic, and Slovakia, along with an expanded network in Austria, Switzerland, Poland, and other nations in the region, as well as the Middle East and Africa.
Our consolidated financial results for the three months ended September 30, 2024 include $7.5 million of revenue and $1.1 million of net income related to TCS. Our consolidated financial results for the nine months ended September 30, 2024 include $16.6 million of revenue and $2.3 million of net income related to TCS. The proforma impact of this acquisition is immaterial to our operations.
The purchase price has been preliminarily allocated based on the estimated fair value of assets acquired and liabilities assumed at the date of the acquisition. The preliminary purchase price allocation is subject to further refinement and may require adjustments to arrive at the final purchase price allocation. These changes will
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primarily relate to the impacts associated with income taxes. Such finalization may result in material changes from the preliminary purchase price allocation.
The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:
March 31,
2024		AdjustmentsJune 30,
2024
Components of purchase price:
Cash paid$30.8 $0.2 $31.0 
Settlement of preexisting transactions3.9 — 3.9 
Total purchase price34.7 0.2 34.9 
ASSETS
Cash5.3 0.1 5.4 
Other current assets8.0 (0.7)7.3 
Intangible assets subject to amortization
Customer lists13.6 (0.4)13.2 
Backlog0.6 — 0.6 
Other assets5.3 0.3 5.6 
Total identifiable assets acquired32.8 (0.7)32.1 
LIABILITIES
Current liabilities(1.5)— (1.5)
Long-term liabilities(5.0)(0.2)(5.2)
Total identifiable liabilities assumed(6.5)(0.2)(6.7)
Net assets acquired26.3 (0.9)25.4 
Goodwill$8.4 $1.1 $9.5 
Included in the total purchase price is cash paid of $31.0 million and the settlement of $3.9 million of preexisting transactions. In connection with the acquisition, we paid cash totaling $30.8 million on the acquisition date of February 29, 2024 and $0.2 million in the second quarter of 2024. There were no adjustments to purchase price allocation in the third quarter of 2024.
The goodwill is not expected to be deductible for income tax purposes. The expected lives of the acquired intangible assets is 3 months and 10 years for backlog and customer lists, respectively, and are being amortized on a straight-line basis.
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6.    Inventories
Inventories are valued at the lower of cost or net realizable value and consisted of the following:
September 30,
2024		December 31,
2023
Inventories carried at LIFO:
Finished goods(a)
$87.9 $74.7 
Raw materials and work-in-process38.8 38.5 
Excess of FIFO over LIFO cost(b)
(49.4)(47.7)
Total LIFO inventories$77.3 $65.5 
Inventories carried at FIFO:
Finished goods(a)
$62.9 $52.8 
Raw materials and work-in-process61.6 57.6 
Total FIFO inventories$124.5 $110.4 
Total inventories$201.8 $175.9 
(a)Finished goods include machines, parts and consumables and component parts that are used in our products.
(b)The difference between replacement cost and the stated LIFO inventory value is not materially different from the reserve for the LIFO valuation method.
7.    Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:
Goodwill
Accumulated
Impairment
Losses
Total
Balance as of December 31, 2023
$220.7 $(33.3)$187.4 
Additions9.5 — 9.5 
Foreign currency fluctuations3.0 (1.5)1.5 
Balance as of September 30, 2024
$233.2 $(34.8)$198.4 
The additions to goodwill recorded during the first nine months of 2024 were related to our acquisition of TCS, as described further in Note 5.
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The balances of acquired intangible assets, excluding goodwill, were as follows:
Customer ListsTrade NamesTechnologyTotal
Balance as of September 30, 2024
Original cost$165.5 $29.6 $16.6 $211.7 
Accumulated amortization(109.7)(21.6)(14.0)(145.3)
Carrying value$55.8 $8.0 $2.6 $66.4 
Weighted average original life (in years)141012
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)151111
As part of our acquisition of TCS, we acquired customer lists and backlog with a combined fair value of $13.8 million. Further details regarding the preliminary purchase price allocation of TCS are described further in Note 5.
Amortization expense on intangible assets for the three and nine months ended September 30, 2024 was $3.6 million and $11.4 million, respectively. Amortization expense on intangible assets for the three and nine months ended September 30, 2023 was $3.5 million and $11.0 million, respectively.
Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets for each of the five succeeding years and thereafter is as follows:
Remaining 2024
$4.5 
202513.2 
202612.0 
20278.8 
20287.0 
Thereafter20.9 
Total$66.4 

8.    Debt
On April 5, 2021, we and certain of our foreign subsidiaries entered into an Amended and Restated Credit Agreement (the “2021 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent. The 2021 Credit Agreement provides us and certain of our foreign subsidiaries access to a senior secured credit facility until April 3, 2026, consisting of a term loan facility in an amount up to $100.0 million and a revolving facility in an amount up to $450.0 million with an option to expand the credit facility by up to $275.0 million, with the consent of the lenders willing to provide additional borrowings in the form of increases to their revolving facility commitment or funding of incremental term loans. Borrowings may be denominated in U.S. dollars or certain other currencies.
On November 10, 2022, we amended the 2021 Credit Agreement (the "Amendment") to update the benchmark provisions to replace LIBOR with Term SOFR (as defined in the Amendment) as the reference rate for purposes of calculating interest under the 2021 Credit Agreement. Pursuant to the Amendment, borrowings denominated in U.S. dollars bear interest at a rate per annum equal to (a) the Term SOFR Rate (as defined in the Amendment) plus a credit spread adjustment of 0.10% per annum, but in any case, not less than 0%, plus an additional spread of 1.10% to 1.70%, depending on our leverage ratio, or (b) the Alternate Base Rate (as defined in the Amendment), which is the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and
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(iii) the adjusted Term SOFR Rate for a one month period, but in any case, not less than 1.0%, plus, in any such case, 1.0%, plus an additional spread of 0.10% to 0.70%, depending on our leverage ratio. All other material terms included in the 2021 Credit Agreement remain unchanged as a result of the Amendment.
On August 7, 2024, we and certain of our foreign subsidiaries entered into an Amended and Restated Credit Agreement (the "2024 Credit Agreement") with JPMorgan Chase Bank, N.A. as administrative agent, which amends and restates the 2021 Credit Agreement as amended by the Amendment. The 2024 Credit Agreement provides us and certain of our foreign subsidiaries access to a senior secured credit facility until August 7, 2029, consisting of a revolving facility in an amount up to $650.0 million, with an option to expand the revolving facility or obtain incremental term loans by up to $325.0 million, with the consent of the lenders willing to provide additional borrowings in the form of increases to their revolving facility commitment or funding of incremental term loans. Borrowings may be denominated in U.S. dollars or certain other currencies.
The fee for undrawn committed funds under the revolving facility of the 2024 Credit Agreement ranges from an annual rate of 0.15% to 0.30%, depending on our leverage ratio. Borrowings denominated in U.S. dollars under the 2024 Credit Agreement bear interest at a rate per annum equal to (a) the greatest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the 2024 Credit Agreement) plus 0.50% and (iii) the Adjusted Term SOFR Rate (as defined in the 2024 Credit Agreement) for a one month period plus 1%; but in any case not less than 1%, plus an additional spread of 0.25% to 1%, depending on our leverage ratio, (b) the Adjusted Term SOFR Rate plus an additional spread of 1.25% to 2%, depending on our leverage ratio, or (c) the Adjusted Daily Simple RFR (as defined in the 2024 Credit Agreement) plus an additional spread of 1.25% to 2%, depending on our leverage ratio.
In connection with the 2024 Credit Agreement, we reaffirmed our security interest in favor of the lenders in substantially all its personal property and pledged the stock of certain of its domestic and foreign subsidiaries. The obligations under the 2024 Credit Agreement are also guaranteed by certain of the Company’s subsidiaries and those subsidiaries also provided a security interest in their similar personal property.
The 2024 Credit Agreement contains customary representations, warranties and covenants, including but not limited to covenants restricting the Company’s ability to incur indebtedness and liens and merge or consolidate with another entity. Further, the 2024 Credit Agreement contains the following covenants:
•a covenant requiring us to maintain an indebtedness to EBITDA ratio, determined as of the end of each of its fiscal quarters, of no greater than 3.75 to 1.00, with certain alternative requirements for permitted acquisitions of at least $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; 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, in such case limiting such payments to the greater of 10% of consolidated total assets and $100.0 million during any fiscal year.
We are in compliance with the covenants as of September 30, 2024.
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Debt Outstanding
Debt outstanding consisted of the following:
September 30, 2024December 31, 2023
Credit facility borrowings:
Revolving credit facility borrowings$207.5 $110.0 
Term loan facility borrowings— 90.0 
Finance lease liabilities1.7 0.6 
Total debt209.2 200.6 
Less: current portion of long-term debt(a)
(0.6)(6.4)
Long-term debt$208.6 $194.2 
(a)As of September 30, 2024, the Company was required to repay $0.6 million of finance lease liabilities, and no amounts in outstanding credit facility borrowings, over the next 12 months.
As of September 30, 2024, we had outstanding borrowings of $207.5 million under our revolving credit facility. We had letters of credit and bank guarantees outstanding in the amount of $3.2 million, leaving approximately $439.3 million of unused borrowing capacity on our revolving facility. Commitment fees on unused lines of credit for the nine months ended September 30, 2024 were $0.4 million. The overall weighted average cost of debt was approximately 6.6% and net of related cross-currency swap instruments and fixed rate interest rate swap instruments was approximately 5.1%. Further details regarding the cross-currency swap instrument and fixed rate interest rate swap instrument are discussed in Note 10.
9.    Warranty
We record a liability for warranty claims at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. Warranty terms on machines generally range from one to four years. The majority of the liability for estimated warranty claims represents amounts to be paid out in the near term for qualified warranty issues.
The changes in warranty reserves were as follows:
Nine Months Ended
September 30,
20242023
Beginning balance$11.1 $10.9 
Additions charged to expense7.9 9.5 
Foreign currency fluctuations— 0.1 
Claims paid(8.3)(9.3)
Ending balance$10.7 $11.2 
10.    Derivatives
Hedge Accounting and Hedging Programs
We recognize all derivative instruments as either assets or liabilities in our consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.
We evaluate hedge effectiveness on our hedges that are designated and qualify for hedge accounting at the inception of the hedge prospectively, as well as retrospectively, and record any ineffective portion of the hedging instruments along with the time value of purchased contracts in the same line item of the income statement as the item being hedged on our consolidated statements of income.
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Our hedging policy establishes maximum limits for each counterparty to minimize concentration of risk.
Balance Sheet Hedges
We hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value as either assets or liabilities on the consolidated balance sheets with changes in the fair value recorded to net foreign currency transaction gain (loss) in our consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. At September 30, 2024 and December 31, 2023, the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $77.0 million and $73.0 million, respectively.
Cash Flow Hedges
We manage our floating rate debt exposure using interest rate swaps. Fixed rate swaps are used to reduce our risk of the possibility of increased interest costs. We entered into an aggregate $120 million notional amount of interest rate swaps effective December 1, 2022, that exchange a variable rate of interest for a fixed rate of interest of 4.076%. These interest rate swaps are designated as cash flow hedges. These swaps are scheduled to mature on December 1, 2026.
Fair Value Hedges
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps associated with an intercompany loan from a wholly owned European subsidiary. We enter into these foreign exchange cross-currency swaps to hedge the foreign currency risk associated with this intercompany loan, and accordingly, they are not speculative in nature. These cross-currency swaps are designated as fair value hedges. As of September 30, 2024 and December 31, 2023, these cross-currency swaps included €75.0 million of total notional value. As of September 30, 2024, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to €5.8 million. The scheduled maturity and principal payment of the loan of €75.0 million is due in April 2027.
Net Investment Hedges
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps to hedge our exposure to adverse foreign currency exchange rate movements between Tennant Company and a wholly owned European subsidiary. We enter into these fixed-to-fixed cross-currency swap agreements to protect a designated monetary amount of the Company’s net investment in its Euro functional currency subsidiary against the risk of changes in the Euro to U.S. dollar foreign exchange rate. These cross-currency swaps are designated as net investment hedges. As of September 30, 2024 and December 31, 2023, the cross-currency swaps included €75.0 million of total notional value. These swaps are scheduled to mature in April 2027.
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The fair value of derivative instruments on our consolidated balance sheets was as follows:
Derivative AssetsDerivative Liabilities
Balance Sheet LocationSeptember 30, 2024December 31, 2023Balance Sheet LocationSeptember 30, 2024December 31, 2023
Derivatives designated as cash flow hedges:
Interest rate swapsOther current assets$0.1 $0.8 Other current liabilities$0.3 $— 
Interest rate swapsOther assets— — Other liabilities1.5 1.9 
Derivatives designated as fair value hedges:
Cross-currency swapsOther current assets1.3 1.3 Other current liabilities— — 
Cross-currency swapsOther assets— — Other liabilities4.0 3.3 
Derivatives designated as net investment hedges:
Cross-currency swapsOther current assets1.2 1.2 Other current liabilities— — 
Cross-currency swapsOther assets— — Other liabilities4.0 3.4 
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets$0.1 $— Other current liabilities$0.3 $1.6 
As of September 30, 2024, we anticipate reclassifying $2.3 million of gains from accumulated other comprehensive loss to net income during the next 12 months.
The following tables include the amounts in the consolidated statements of income in which the effects of derivatives designated as hedging instruments are recorded:
Three Months Ended September 30,
20242023
TotalGain (Loss) on HedgingTotalGain on Hedging
Derivatives designated as cash flow hedges:
Interest expense, net$(2.7)$0.3 $(3.3)$0.3 
Net foreign currency transaction loss(0.4)— (0.4)— 
Derivatives designated as fair value hedges:
Interest expense, net(2.7)0.2 (3.3)0.3 
Net foreign currency transaction (loss) gain(0.4)(2.5)(0.4)2.0 
Derivatives designated as net investment hedges:
Interest expense, net$(2.7)$0.2 $(3.3)$0.2 
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Nine Months Ended September 30,
20242023
TotalGain (Loss) on HedgingTotalGain on Hedging
Derivatives designated as cash flow hedges:
Interest expense, net$(7.5)$0.9 $(11.0)$0.6 
Net foreign currency transaction gain0.1 — 0.5 — 
Derivatives designated as fair value hedges:
Interest expense, net(7.5)0.8 (11.0)1.7 
Net foreign currency transaction gain (loss)0.1 (0.6)0.5 2.8 
Derivatives designated as net investment hedges:
Interest expense, net$(7.5)$0.7 $(11.0)$1.4 

The effect of derivative instruments designated as hedges and derivative instruments not designated as hedges in our consolidated statements of income was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Derivatives designated as cash flow hedges:
Net (loss) gain recognized in other comprehensive income (loss), net of tax(a)
$(1.7)$1.2 $0.4 $2.6 
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net0.3 0.3 0.9 0.6 
Derivatives designated as fair value hedges:
Net gain (loss) recognized in other comprehensive income (loss), net of tax(a)
0.6 (0.5)0.9 (0.5)
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net0.3 0.2 0.8 0.8 
Derivatives designated as net investment hedges:
Net (loss) gain recognized in other comprehensive income (loss), net of tax(a)
(1.8)1.3 0.2 0.2 
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net0.2 0.2 0.7 0.7 
Derivatives not designated as hedging instruments:
Net (loss) gain recognized in income(b)
$(1.9)$0.1 $1.0 $1.0 
(a)Net change in the fair value of the effective portion classified in other comprehensive income (loss).
(b)Classified in net foreign currency transaction gain (loss).
11.    Fair Value Measurements
Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for
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measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Our population of assets and liabilities subject to fair value measurements at September 30, 2024 was as follows:
Fair
Value		Level 1Level 2Level 3
Assets:
Equity securities$20.0 $— $— $20.0 
Debt securities12.1 — — 12.1 
Foreign currency forward contracts0.1 — 0.1 — 
Cross-currency swaps2.5 — 2.5 — 
Interest rate swaps0.1 — 0.1 — 
Total assets34.8 — 2.7 32.1 
Liabilities:
Foreign currency forward contracts0.3 — 0.3 — 
Cross-currency swaps8.0 — 8.0 — 
Interest rate swaps1.8 — 1.8 — 
Total liabilities$10.1 $— $10.1 $— 
Our population of assets and liabilities subject to fair value measurements at December 31, 2023 was as follows:
Fair
Value		Level 1Level 2Level 3
Assets:
Cross-currency swaps$2.5 $— $2.5 $— 
Interest rate swaps0.8 — 0.8 — 
Total assets3.3 — 3.3 — 
Liabilities:
Foreign currency forward contracts1.6 — 1.6 — 
Cross-currency swaps6.7 — 6.7 — 
Interest rate swaps1.9 — 1.9 — 
Total liabilities$10.2 $— $10.2 $— 
Our foreign currency forward contracts, cross-currency swaps and interest rate swaps are valued using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount. Further details regarding our derivative instruments are discussed in Note 10.
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On February 21, 2024, the Company acquired certain investment securities in Brain Corp, a privately held autonomous technology company located in San Diego, California. The investment will drive the development and adoption of Brain Corp's next generation of robotic and AI technologies.
The investment securities include $12.1 million of redeemable convertible preferred stock, accounted for as available-for-sale debt instruments. The investment securities also include $12.2 million of non-redeemable convertible preferred stock and $7.8 million of warrants, accounted for as equity instruments under the elected measurement alternative.
The equity and debt securities were recorded at closing at their allocated fair values. For equity instruments, the carrying amount will be adjusted to fair value through net income each period based upon observable transactions for identical or similar investments of the same issuer and monitored for impairment. For debt instruments, the carrying amount will be adjusted to fair value each period through other comprehensive income. The securities will be measured to fair value based on Level 3 inputs. As of September 30, 2024, the total carrying value of our equity and debt instruments was $20.0 million and $12.1 million, respectively, which is recorded in other assets on the consolidated balance sheet. The debt instruments will mature on February 21, 2029. There have been no remeasurements of the equity securities as of September 30, 2024. Fair value adjustments for debt securities were not material as of September 30, 2024.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value due to their short-term nature.
The fair value and carrying value of total debt, including current portion, was $209.2 million as of September 30, 2024. The fair value and carrying value of total debt, including current portion, was $198.2 million and $200.6 million, respectively, as of December 31, 2023. The fair value was estimated using Level 2 inputs based on the borrowing rates currently available to us for bank loans with similar terms and remaining maturities.
12.    Commitments and Contingencies
In the ordinary course of business, we may become liable with respect to pending and threatened litigation, tax, environmental and other matters. While the ultimate results of current claims, investigations and lawsuits involving us are unknown at this time, we do not expect that these matters will have a material adverse effect on our consolidated financial position or results of operations. Legal costs associated with such matters are expensed as incurred.
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13.    Shareholders' Equity
Accumulated Other Comprehensive Loss
The changes in components of accumulated other comprehensive loss, net of tax, are as follows:
Nine Months Ended September 30, 2024
Foreign Currency
Translation
Adjustments		Pension and Post-
Retirement Medical
Benefits		Derivative Financial InstrumentsTotal
Beginning balance$(45.6)$3.7 $(0.4)$(42.3)
Other comprehensive (loss) income before reclassifications(1.7)(0.2)1.3 (0.6)
Amounts reclassified from accumulated other comprehensive loss(0.7)