What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-10-31 · 117 added, 169 removed, 429 unchanged (40% of the section changed)

3 unchanged sentences

(In millions, except shares and per share data) Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net sales $ 311.0 $ 305.8

3 unchanged sentences

Research and development expense 10.1 7.9

Gain on sale of assets — — — ( 3.7 )

Operating income 37.5 35.9

Interest expense, net ( 2.3 ) ( 3.7 )

Net foreign currency transaction (loss) gain ( 0.4 ) — 0.5 ( 0.4 )

Other (expense) income, net ( 1.1 ) 0.6 ( 1.8 ) 0.1

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

10 unchanged sentences

(In millions) Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 28.4 $ 24.3

Other comprehensive income (loss):

Foreign currency translation adjustments (net of related tax benefit (expense) of $( 0.2 ), $( 1.2 ), $ 0.1 , and $( 2.6 ), respectively)

( 10.6 ) ( 20.1 ) ( 5.2 ) ( 40.8 )

Derivative financial instruments (net of related tax expense of $ 0.4 , $ 0.0 , $ 0.2 , and $ 0.2 , respectively)

0.2 ( 0.1 ) 0.7 0.5

Total other comprehensive income (loss), net of tax ( 10.4 ) ( 20.2 ) ( 4.5 ) ( 40.3 )

Comprehensive income (loss) $ 12.5 $ ( 4.6 ) $ 74.0 $ 2.2

Other comprehensive (loss) income:

Foreign currency translation adjustments (net of related tax (expense) benefit of $( 0.2 ) and $ 0.1 , respectively)

Derivative financial instruments (net of related tax (expense) benefit of $( 0.3 ), $ 0.2 , respectively)

Total other comprehensive (loss) income, net of tax ( 7.2 ) 4.7

Comprehensive income $ 21.2 $ 29.0

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

(In millions, except shares and per share data) September 30,

(In millions, except shares and per share data) March 31,

2024 December 31,

37 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) Nine Months Ended

September 30,

(In millions) Three Months Ended

OPERATING ACTIVITIES

Net income $ 28.4 $ 24.3

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense 9.6 8.3

3 unchanged sentences

Bad debt and returns expense 0.3 1.0

Gain on sale of assets — ( 3.7 )

Other, net 0.1 0.2

5 unchanged sentences

Other assets and liabilities ( 15.9 ) 4.3

Net cash provided by (used in) operating activities 124.6 ( 38.8 )

Net cash provided by operating activities 2.9 31.1

INVESTING ACTIVITIES

Purchases of property, plant and equipment ( 3.0 ) ( 6.8 )

Proceeds from sale of assets, net of cash divested — 4.1

Purchase of investment ( 32.1 ) —

Payments made in connection with business acquisition, net of cash acquired ( 25.5 ) —

Investment in leased assets ( 0.2 ) ( 0.2 )

4 unchanged sentences

Repayments of borrowings ( 26.2 ) ( 21.4 )

Proceeds (repurchases) from exercise of stock options, net of employee tax withholdings obligations 18.1 ( 1.2 )

Change in finance lease obligations — 0.2

Proceeds from exercise of stock options, net of employee tax withholdings obligations 19.5 0.8

Repurchases of common stock ( 1.1 ) ( 5.0 )

Dividends paid ( 5.3 ) ( 4.9 )

Net cash used in financing activities ( 87.1 ) ( 1.2 )

Net cash provided by (used) in financing activities 26.9 ( 10.3 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 2.5 —

Net increase (decrease) in cash, cash equivalents and restricted cash 19.6 ( 64.4 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 28.3 ) 14.0

Cash, cash equivalents and restricted cash at beginning of period 117.1 77.4

1 unchanged sentence

SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended

September 30,

Three Months Ended

(In millions) 2024 2023

4 unchanged sentences

Lease assets obtained in exchange for new operating lease liabilities 3.8 4.6

Lease assets obtained in exchange for new financing lease liabilities 0.6 —

Supplemental non-cash investing and financing activities:

24 unchanged sentences

Balance, March 31, 2024 19,006,838 $ 7.1 $ 86.5 $ 570.5 $ ( 49.5 ) $ 614.6 $ 1.3 $ 615.9

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, 2023 18,540,598 $ 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, 2023 18,741,371 $ 7.0 $ 71.0 $ 521.7 $ ( 54.7 ) $ 545.0 $ 1.3 $ 546.3

Tennant Company Shareholders

13 unchanged sentences

Share-based compensation — 1.2 — — 1.2 — 1.2

Repuchases of common stock ( 73,525 ) — ( 5.0 ) — — ( 5.0 ) — ( 5.0 )

Dividends paid $ 0.265 per common share

1 unchanged sentence

Balance, March 31, 2023 18,541,033 $ 7.0 $ 53.0 $ 477.4 $ ( 45.5 ) $ 491.9 $ 1.3 $ 493.2

Net income — — 16.6 — 16.6 — 16.6

Other comprehensive income — — — ( 16.1 ) ( 16.1 ) — ( 16.1 )

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 2,071 shares

9,859 — ( 0.1 ) — — ( 0.1 ) — ( 0.1 )

Share-based compensation — 0.9 — — 0.9 — 0.9

Dividends paid $ 0.25 per common share

— — ( 4.6 ) — ( 4.6 ) — ( 4.6 )

Balance, June 30, 2022 18,589,675 $ 7.0 $ 55.4 $ 428.3 $ ( 58.0 ) $ 432.7 $ 1.3 $ 434.0

Net income — — 15.6 — 15.6 — 15.6

Other comprehensive income — — — ( 20.2 ) ( 20.2 ) — ( 20.2 )

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 54 shares

6,714 — 0.2 — — 0.2 — 0.2

Share-based compensation — 1.7 — — 1.7 — 1.7

Dividends paid $ 0.25 per common share

— — ( 4.8 ) — ( 4.8 ) — ( 4.8 )

Balance, September 30, 2022 18,596,389 $ 7.0 $ 57.3 $ 439.1 $ ( 78.2 ) $ 425.2 $ 1.3 $ 426.5

See accompanying notes to consolidated financial statements.

14 unchanged sentences

Newly Adopted Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No.

2020-04, Reference Rate Reform (Topic 848), and in December 2022 subsequently issued ASU 2022-06, to temporarily ease the potential burden in accounting for reference rate reform.

The standard provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications, hedging relationships, and other transactions affected by the reference rate reform, which affects the London Inter-bank Offered Rate ("LIBOR"), if certain criteria are met.

The guidance was effective upon issuance and can generally be applied through December 31, 2024.

There has been no material impact to our financial condition, results of operations, or cash flows from reference rate reform as of September 30, 2023.

See Note 7 for information on the replacement of LIBOR with the Secured Overnight Financing Rate ("SOFR") in our Credit Agreements.

There are no newly adopted accounting pronouncements during the three months ended March 31, 2024 that impacted the Company.

Disaggregation of Revenue

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Americas $ 215.6 $ 204.4

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Equipment $ 189.8 $ 186.4

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Sales direct to consumer $ 221.4 $ 205.1

14 unchanged sentences

The change in our sales incentive accrual balance was as follows:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance $ 21.2 $ 20.0

5 unchanged sentences

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 is primarily attributed to prepaid maintenance contracts on our machines ranging from 12 months to 60 months.

Our deferred revenue balance is primarily attributed to 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,

Three Months Ended

Beginning balance $ 10.3 $ 9.3

3 unchanged sentences

Ending balance $ 10.9 $ 10.2

At September 30, 2023, $ 6.8 million and $ 2.0 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets.

At March 31, 2024, $ 7.1 million and $ 3.8 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:

4 unchanged sentences

Restructuring Actions

During the three and nine months ended September 30, 2023 and September 30, 2022, we incurred the following 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,

2023 2022 2023 2022

Severance-related costs $ — $ — $ 1.2 $ 0.3

Other costs — 0.5 — 0.8

Total pre-tax restructuring costs $ — $ 0.5 $ 1.2 $ 1.1

The charge in 2023 impacted the Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) operating segments.

The charge in 2022 primarily impacted the Americas operating segments.

Our restructuring actions represent the continued execution of a multi-year enterprise strategy to drive increased productivity throughout our operations.

During the three months ended March 31, 2024 and March 31, 2023, we incurred no restructuring expenses as part of our ongoing global reorganization efforts.

A reconciliation of the beginning and ending liability balances for severance-related costs is as follows:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance $ 2.4 $ 1.7

4 unchanged sentences

Ending balance $ 1.9 $ 1.2

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 March 31, 2024 include $ 2.1 million of revenue and immaterial 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 primarily relate to the fair value of intangible assets and 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:

Components of purchase price:

Cash paid $ 30.8

Settlement of preexisting transactions 3.9

Total purchase price 34.7

Other current assets 8.0

Intangible assets subject to amortization

Customer lists 13.6

Other assets 5.3

Total identifiable assets acquired 32.8

Current liabilities ( 1.5 )

Long-term liabilities ( 5.0 )

Total identifiable liabilities assumed ( 6.5 )

Net assets acquired 26.3

Goodwill $ 8.4

The total purchase price was paid on the acquisition date of February 29, 2024.

Included in the transaction is cash paid of $ 30.8 million and the settlement of $ 3.9 million of preexisting transactions.

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 .

Inventories are valued at the lower of cost or net realizable value and consisted of the following:

September 30,

2024 December 31,

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Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023 were as follows:

The changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows:

Goodwill Accumulated

1 unchanged sentence

$ 220.7 $ ( 33.3 ) $ 187.4

Additions 8.4 — 8.4

Foreign currency fluctuations ( 3.9 ) 0.3 ( 3.6 )

Balance as of September 30, 2023

Balance as of March 31, 2024

$ 225.2 $ ( 33.0 ) $ 192.2

1 unchanged sentence

Customer Lists Trade Names Technology Total

Balance as of September 30, 2023

Balance as of March 31, 2024

Original cost $ 161.7 $ 28.7 $ 16.1 $ 206.5

7 unchanged sentences

Weighted average original life (in years) 15 11 11

Amortization expense on intangible assets for the three and nine months ended September 30, 2023 was $ 3.5 million and $ 11.0 million, respectively.

Amortization expense on intangible assets for the three and nine months ended September 30, 2022 was $ 3.7 million and $ 12.1 million, respectively.

The additions to Goodwill recorded during the first quarter of 2024 were related to our acquisition of TCS, as described further in Note 5.

As part of our acquisition of TCS, we acquired customer lists and backlog with a combined preliminary fair value of $ 14.2 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 months ended March 31, 2024 and March 31, 2023 was $ 3.9 million.

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:

8 unchanged sentences

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 the Company’s 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 (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 the Company’s leverage ratio.

Pursuant to the Amendment, borrowings denominated

All other material terms included in the 2021 Credit Agreement remain unchanged as a result of the Amendment.

10 unchanged sentences

Debt outstanding consisted of the following:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Credit facility borrowings:

1 unchanged sentence

Term loan facility borrowings 88.8 90.0

Secured borrowings 0.2 0.2

Finance lease liabilities 0.8 0.6

3 unchanged sentences

Long-term debt $ 207.4 $ 194.2

(a) As of September 30, 2023, the Company is required to repay $ 5.6 million in outstanding credit facility borrowings and $ 0.3 million of finance lease liabilities over the next 12 months.

As of September 30, 2023, we had outstanding borrowings of $ 130.0 million and $ 91.3 million under our revolving facility and term loan facility, respectively.

(a) As of March 31, 2024, the Company is required to repay $ 6.9 million in outstanding credit facility borrowings and $ 0.3 million of finance lease liabilities over the next 12 months.

As of March 31, 2024, we had outstanding borrowings of $ 125.0 million and $ 88.8 million under our revolving facility and term loan facility, respectively.

We had letters of credit and bank guarantees outstanding in the amount of $ 3.2 million, leaving approximately $ 321.8 million of unused borrowing capacity on our revolving facility.

Commitment fees on unused lines of credit for the nine months ended September 30, 2023 were $ 0.6 million.

The overall weighted average cost of debt was approximately 6.5 % and net of related cross-currency swap instruments and fixed rate interest rate swap instruments was approximately 5.1 %.

Commitment fees on unused lines of credit for the three months ended March 31, 2024 were $ 0.1 million.

The overall weighted average cost of debt was approximately 6.5 % 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 are discussed in Note 10.

4 unchanged sentences

The changes in warranty reserves were as follows:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance $ 11.1 $ 10.9

12 unchanged sentences

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, 2023 and December 31, 2022, the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $ 74.1 million and $ 83.7 million, respectively.

At March 31, 2024 and December 31, 2023, the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $ 81.5 million and $ 73.0 million, respectively.

Cash Flow Hedges

9 unchanged sentences

These cross-currency swaps are designated as fair value hedges.

As of September 30, 2023 and December 31, 2022, these cross-currency swaps included € 83.1 million and € 84.8 million of total notional value, respectively.

As of September 30, 2023, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to € 8.1 million.

The scheduled maturity and principal payment of the loan and related swaps of € 75.0 million are due in April 2027.

As of March 31, 2024 and December 31, 2023, these cross-currency swaps included € 75.0 million of total notional value.

As of March 31, 2024, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to € 6.9 million.

The scheduled maturity and principal payment of the loan and related interest payments of € 81.9 million are due in April 2027.

Net Investment Hedges

4 unchanged sentences

These cross-currency swaps are designated as net investment hedges.

As of September 30, 2023 and December 31, 2022, the cross-currency swaps included € 75.0 million of total notional value.

As of March 31, 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.

1 unchanged sentence

Derivative Assets Derivative Liabilities

Balance Sheet Location September 30, 2023 December 31, 2022 Balance Sheet Location September 30, 2023 December 31, 2022

Balance Sheet Location March 31, 2024 December 31, 2023 Balance Sheet Location March 31, 2024 December 31, 2023

Derivatives designated as cash flow hedges:

9 unchanged sentences

Foreign currency forward contracts Other current assets $ 0.9 $ — Other current liabilities $ 0.1 $ 1.6

As of September 30, 2023, we anticipate reclassifying $ 2.4 million of gains from accumulated other comprehensive loss to net income during the next 12 months.

As of March 31, 2024, we anticipate reclassifying $ 2.4 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,

Total Gain (Loss) on Hedging Total Gain (Loss) on Hedging

Derivatives designated as cash flow hedges:

Interest expense, net $ ( 3.3 ) $ 0.3 $ ( 2.2 ) $ —

Net foreign currency transaction gain (loss) ( 0.4 ) — — —

Derivatives designated as fair value hedges:

Interest expense, net ( 3.3 ) 0.3 ( 2.2 ) 0.4

Net foreign currency transaction gain (loss) ( 0.4 ) 2.0 — 5.6

Derivatives designated as net investment hedges:

Interest expense, net $ ( 3.3 ) $ 0.2 $ ( 2.2 ) $ 0.3

Nine Months Ended

September 30,

Total Gain (Loss) on Hedging Total Gain (Loss) on Hedging

Three Months Ended March 31,

Total Gain on Hedging Total Gain (Loss) on Hedging

Derivatives designated as cash flow hedges:

Interest expense, net $ ( 2.3 ) $ 1.2 $ ( 3.7 ) $ 0.1

Net foreign currency transaction gain (loss) 0.5 — ( 0.4 ) 4.7

Net foreign currency transaction (loss) ( 0.2 ) — ( 0.1 ) —

Derivatives designated as fair value hedges:

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Derivatives designated as cash flow hedges:

Net gain recognized in other comprehensive income, net of tax (a)

Net gain (loss) recognized in other comprehensive loss, net of tax (a)

$ 1.6 $ ( 0.9 )

Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net 0.3 0.1

Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net foreign currency transaction gain (loss) — — — 3.6

Derivatives designated as fair value hedges:

Net (loss) gain recognized in other comprehensive income (loss), net of tax (a)

( 0.5 ) 0.2 ( 0.5 ) 1.4

Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net 0.2 0.3 0.8 0.6

Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net foreign currency transaction gain (loss) — — — —

Net gain recognized in other comprehensive loss, net of tax (a)

Net gain (loss) reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net 0.3 0.3

Derivatives designated as net investment hedges:

Net (loss) gain recognized in other comprehensive income (loss), net of tax (a)

Net (loss) recognized in other comprehensive loss, net of tax (a)

( 1.3 ) ( 0.1 )

Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net 0.2 0.3 0.7 0.5

Net gain (loss) reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net 0.2 0.2

Derivatives not designated as hedging instruments:

Net gain recognized in income (b)

$ 0.1 $ 4.0 $ 1.0 $ 6.6

Net (loss) recognized in income (b)

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss).

3 unchanged sentences

The framework defines fair value, provides guidance for 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).

framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

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:

3 unchanged sentences

Unobservable inputs that reflect the reporting entity’s own assumptions.

Our population of assets and liabilities subject to fair value measurements at September 30, 2023 was as follows:

Our population of assets and liabilities subject to fair value measurements at March 31, 2024 was as follows:

Value Level 1 Level 2 Level 3

Equity securities $ 20.0 $ — $ — $ 20.0

Debt securities 12.1 — — 12.1

Foreign currency forward exchange contracts 0.9 — 0.9 —

3 unchanged sentences

Foreign currency forward exchange contracts 0.1 — 0.1 —

Cross-currency swaps 4.0 — 4.0 —

Interest rate swaps 0.4 — 0.4 —

2 unchanged sentences

Value Level 1 Level 2 Level 3

Foreign currency forward exchange contracts $ 0.1 $ — $ 0.1 $ —

Cross-currency swaps $ 2.5 $ — $ 2.5 $ —

2 unchanged sentences

Foreign currency forward exchange contracts 1.6 — 1.6 —

Cross-currency swaps 6.7 — 6.7 —

Interest rate swaps 1.9 — 1.9 —

2 unchanged sentences

Further details regarding our derivative instruments are discussed in Note 10.

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 a Level 3 fair value calculation.

As of March 31, 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 or debt securities as of March 31, 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 $ 221.3 million and $ 221.8 million, respectively, as of September 30, 2023.

The fair value and carrying value of total debt, including current portion, was $ 215.8 million and $ 214.6 million, respectively, as of March 31, 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.

7 unchanged sentences

The changes in components of accumulated other comprehensive loss, net of tax, are as follows:

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Foreign Currency

7 unchanged sentences

Ending balance $ ( 53.8 ) $ 3.7 $ 0.6 $ ( 49.5 )

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Foreign Currency

3 unchanged sentences

Beginning balance $ ( 53.9 ) $ 2.7 $ 1.0 $ ( 50.2 )

Other comprehensive (loss) income before reclassifications ( 40.3 ) — 5.2 ( 35.1 )

Other comprehensive income (loss) before reclassifications 5.5 — ( 0.2 ) 5.3

Amounts reclassified from accumulated other comprehensive loss ( 0.2 ) — ( 0.4 ) ( 0.6 )

Net current period other comprehensive (loss) income ( 40.8 ) — 0.5 ( 40.3 )

Net current period other comprehensive income (loss) 5.3 — ( 0.6 ) 4.7

Ending balance $ ( 48.6 ) $ 2.7 $ 0.4 $ ( 45.5 )

8 unchanged sentences

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

In addition to the liability of $ 3.6 million for unrecognized tax benefits as of September 30, 2023, there was approximately $ 0.4 million for accrued interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2023 was $ 3.3 million.

In addition to the liability of $ 4.3 million for unrecognized tax benefits as of March 31, 2024, there was approximately $ 0.5 million for accrued interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2024 was $ 3.9 million.

To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be revised and reflected as an adjustment of the income tax expense.

1 unchanged sentence

Our share-based compensation plans are described in Note 18 of our annual report on Form 10-K for the year ended December 31, 2023.

During the three months ended September 30, 2023 and 2022, we recognized total share-based compensation expense of $ 4.7 million and $ 1.7 million, respectively.

During the nine months ended September 30, 2023 and 2022, we recognized total share-based compensation expense of $ 8.6 million and $ 4.4 million, respectively.

The total excess tax recognized for share-based compensation arrangements during the nine months ended September 30, 2023 and 2022 was a tax expense of $ 0.1 million and tax benefit of $ 0.3 million, respectively.

During the three months ended March 31, 2024 and 2023, we recognized total share-based compensation expense of $ 3.2 million and $ 1.2 million, respectively.

The total excess tax recognized for share-based compensation arrangements during the three months ended March 31, 2024 and 2023 was a tax benefit of $ 2.4 million and tax expense of $ 0.1 million, respectively.

Earnings Per Share

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 28.4 $ 24.3

4 unchanged sentences

Diluted earnings per share $ 1.49 $ 1.30

Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation plans of 169,458 and 766,235 shares of common stock during the three months ended September 30, 2023 and 2022, respectively.

Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation plans of 325,862 and 425,920 shares of common stock during the nine months ended September 30, 2023 and 2022, respectively.

Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation plans of 37,508 and 393,242 shares of common stock during the three months ended March 31, 2024 and 2023, respectively.

These exclusions were made if the exercise prices of the options are greater than the average market price of our common stock for the period, if the number of shares we can repurchase under the treasury stock method exceeds the weighted average shares outstanding in the options or if we have a net loss, as these effects would be anti-dilutive.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements