What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 150 added, 150 removed, 691 unchanged (30% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In millions, except shares and per share data)

$ 279.1  

$ 214.0  

$ 542.4  

$ 466.1  

September 30,

Cost of sales

3 unchanged sentences

Interest expense, net

( 2.1 )  

( 4.8 )  

( 6.0 )  

Net foreign currency transaction gain (loss)

Net foreign currency transaction loss

Loss on extinguishment of debt

( 11.3 )  

Other income (expense), net

( 0.2 )  

Other expense, net

Income before income taxes

Income tax (benefit) expense

( 2.6 )  

Income tax expense

Net income including noncontrolling interest

Net income attributable to Tennant Company

$ 14.3  

$ 35.5  

$ 19.5  

Net income attributable to Tennant Company per share

$ 0.53  

$ 0.78  

$ 1.92  

$ 1.06  

$ 0.51  

$ 0.77  

$ 1.88  

$ 1.05  

Weighted average shares outstanding

18,547,276  

18,347,189  

18,501,930  

18,317,003  

18,931,703  

18,584,693  

18,879,616  

18,614,527  

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In millions)

September 30,

Net income including noncontrolling interest

2 unchanged sentences

$ 57.0  

Other comprehensive income (loss):

Foreign currency translation adjustments (net of related tax benefit (expense) of $ (0.3) million, $ 0.7 million, $ (0.2) million and $ 0.7 million, respectively)

$ 31.2  

Pension and postretirement medical benefits (net of related tax benefit of $ 0.1 million, $ 0 million, $ 0.1 million, and $ 0 million, respectively)

Cash flow hedge (net of related tax benefit (expense) of $ 0 million, $ 0.1 million, $ 0 million, and $ (1.0) million, respectively)

Other comprehensive (loss) income:

Foreign currency translation adjustments (net of related tax benefit of $0.6 , $0.3 , $0.4 and $1.0 , respectively)

( 7.3 )  

( 13.1 )  

Pension and postretirement medical benefits (net of related tax benefit of $- , $- , $0.1 , and $- , respectively)

Cash flow hedge (net of related tax benefit (expense) of $0.1 , $0.2 , $0.1 , and $(0.8) , respectively)

( 0.2 )  

Total other comprehensive income (loss), net of tax

( 0.6 )  

( 0.3 )  

Total other comprehensive (loss) income, net of tax

( 7.5 )  

( 13.3 )  

Total comprehensive income including noncontrolling interest

8 unchanged sentences

(Unaudited)  

September 30,

(In millions, except shares and per share data)

42 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(In millions)

September 30,

OPERATING ACTIVITIES

Net income including noncontrolling interest

$ 35.5  

$ 19.5  

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

1 unchanged sentence

Deferred income taxes

( 5.9 )  

Share-based compensation expense

2 unchanged sentences

Gain on sale of business

( 9.8 )  

Debt extinguishment cost

Changes in operating assets and liabilities:

( 13.5 )  

( 32.3 )  

Accounts payable

1 unchanged sentence

Other assets and liabilities

( 8.3 )  

Net cash provided by operating activities

1 unchanged sentence

Purchases of property, plant and equipment

( 8.0 )  

Proceeds from disposals of property, plant and equipment

5 unchanged sentences

Repayments of debt

( 360.4 )  

Debt extinguishment payment

( 8.4 )  

Contingent consideration payment

( 0.5 )  

Contingent consideration payments

Change in finance lease obligations

1 unchanged sentence

Dividends paid

( 8.6 )  

Repurchases of common stock

Net cash used in financing activities

( 58.6 )  

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

( 1.8 )  

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

( 5.9 )  

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

$ 135.1  

$ 99.3  

SUPPLEMENTAL CASH FLOW INFORMATION

Six Months Ended

Nine Months Ended

September 30,

Cash paid for income taxes

54 unchanged sentences

$ 437.5  

Other comprehensive income

( 7.5 )  

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 18 shares

20,401  

Share-based compensation

Dividends paid $0.23 per common share

( 4.3 )  

Repurchases of common stock

( 102,229 )  

( 7.5 )  

Balance, September 30, 2021

18,583,237  

$ 60.8  

$ 407.4  

$ ( 33.4 )  

$ 441.8  

$ 443.1  

Tennant Company Shareholders

43 unchanged sentences

$ 373.1  

Other comprehensive income

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 1,321 shares

17,687  

Share-based compensation

Dividends paid $0.22 per common share

( 4.1 )  

Balance, September 30, 2020

18,473,149  

$ 52.2  

$ 365.0  

$ ( 30.2 )  

$ 393.9  

$ 395.3  

See accompanying notes to consolidated financial statements.

10 unchanged sentences

Reclassification –

We reclassified $ 1.1 million and $ 2.4 million of costs from selling and administrative expense to cost of sales in the consolidated statements of income for the three and six months ended June 30, 2020, respectively.

We reclassified $ 1.2 million and $ 3.5 million of costs from selling and administrative expense to cost of sales in the consolidated statements of income for the three and nine months ended September 30, 2020, respectively.

These reclassifications were made as part of a global alignment of cost across all regions.

We documented the summary of significant accounting policies in the notes to consolidated financial statements in our annual report on Form 10 -K for the fiscal year ended December 31, 2020 .

We documented the summary of significant accounting policies in the notes to consolidated financial statements in our annual report on Form 10 -K for the year ended December 31, 2020 .

There have been no material changes to our accounting policies since the filing of that report.

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

$ 166.7  

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

$ 168.6  

13 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Sales direct to consumer

21 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Beginning balance

5 unchanged sentences

Foreign currency fluctuations

( 0.1 )  

Divestiture of business

8 unchanged sentences

The change in the deferred revenue balance was as follows:

Six Months Ended

Nine Months Ended

September 30,

Beginning balance

7 unchanged sentences

$ 10.2  

At June 30, 2021 , $ 6.6 million and $ 3.5 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets.

At September 30, 2021 , $ 6.7 million and $ 3.3 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:

12 unchanged sentences

The charge impacted our APAC operating segment. We expect no further charges related to this restructuring action.

We estimate the savings will offset the pre-tax charge approximately one year from the date of the action.

In the first quarter of 2020, we implemented a restructuring action in an effort to streamline our operating model in Japan.

14 unchanged sentences

Foreign currency fluctuations

June 30, 2021 balance

September 30, 2021 balance

Other Actions

7 unchanged sentences

The financial results for Gaomei have been included in our consolidated financial results since the date of closing.

The purchase price included contingent consideration. A payment of $ 0.5 million was paid in the first quarter of 2021.

Final payments totaling $ 2.0 million are expected to be paid in the second half of 2021.

The purchase price included contingent consideration. A payment of $ 0.5 million was paid in the first quarter of 2021, and final payments totaling $ 2.0 million were paid in the third quarter of 2021.

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

September 30,

Inventories carried at LIFO:

21 unchanged sentences

Goodwill and Intangible Assets

The changes in the carrying value of goodwill for the six months ended June 30, 2021 were as follows:

The changes in the carrying value of goodwill for the nine months ended September 30, 2021 were as follows:

Balance as of December 31, 2020

5 unchanged sentences

( 9.3 )  

( 0.2 )  

Balance as of June 30, 2021

Balance as of September 30, 2021

$ 238.5  

4 unchanged sentences

Customer Lists

Balance as of June 30, 2021

Balance as of September 30, 2021

Original cost

29 unchanged sentences

Amortization expense on intangible assets for the 

three and six months ended June 30, 2021 was $ 5.0 million and $ 10.3 million, respectively. 

three and nine months ended September 30, 2021 was $ 4.8 million and $ 15.1 million, respectively. 

Amortization expense on intangible assets for the 

three and six months ended June 30, 2020 was $ 5.0 million and $ 10.0 million, respectively.

three and nine months ended September 30, 2020 was $ 5.3 million and $ 15.3 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:

18 unchanged sentences

dollars under the 

2021  Credit Agreement bear interest at a rate per annum equal to (a) the greatest of (i) the prime rate, (ii) the federal funds rate plus 

0.50 % and (iii) the adjusted LIBO rate for a 

one  month period, but in any case, 

not  less than 

1 %, plus, in any such case, 

1.0 %, plus an additional spread of 

0.10 % to 

0.70 %, depending on our leverage ratio, or (b) the LIBO Rate, as adjusted for statutory reserve requirements for eurocurrency liabilities, but in any case, 

not  less than 

0 %, plus an additional spread of 

1.10 % to 

1.70 %, depending on our leverage ratio.

2021  Credit Agreement bear interest at a rate per annum equal to (a) the Adjusted LIBO Rate, as adjusted for statutory reserve requirements for eurocurrency liabilities, 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 which is the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50 % and (iii) the adjusted LIBO 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.

In connection with the 

5 unchanged sentences

first -tier domestic subsidiaries, and those subsidiaries also provided a security interest in their similar personal property.

Our 2021 Credit Agreement restricts the payment of dividends or repurchasing of stock requiring that, after giving effect to such payments, no default exists or would result from such payment. 

Additionally, cash dividends are restricted to $ 7.5 million per quarter and approved levels of other restricted payments range from $ 60.0 million to unlimited based on our net leverage ratio ( not taking into account any acquisition holiday) after giving effect to such payment.

2021  Credit Agreement contains customary representations, warranties and covenants, including but 

19 unchanged sentences

Debt outstanding consisted of the following:

September 30,

Senior unsecured notes

11 unchanged sentences

$ 297.6  

As of June 30, 2021 , the Company is required to repay $ 2.5 million in outstanding credit facility borrowings, $ 0.6 million of current maturities of secured borrowings and $ 0.1 million of current maturities of finance lease liabilities over the next 12 months.

As of June 30, 2021 , we had outstanding borrowings of $ 100.0 million and $ 168.0 million under our term loan facility and revolving facility, respectively.

As of September 30, 2021 , the Company is required to repay $ 3.1 million in outstanding credit facility borrowings and $ 0.6 million of current maturities of secured borrowings over the next 12 months.

As of September 30, 2021 , we had outstanding borrowings of $ 99.4 million and $ 168.0 million under our term loan facility and revolving facility, respectively.

We had letters of credit and bank guarantees outstanding in the amount of $ 2.9 million, leaving approximately $ 279.1 million of unused borrowing capacity on our revolving facility.

Commitment fees on unused lines of credit for the six months ended June 30, 2021 were $ 0.5 million.

Commitment fees on unused lines of credit for the nine months ended September 30, 2021 were $ 0.6 million.

The overall weighted average cost of debt is approximately 

7 unchanged sentences

The changes in warranty reserves were as follows:

Six Months Ended

Nine Months Ended

September 30,

Beginning balance

16 unchanged sentences

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 June 30, 2021 and December 31, 2020 , the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $ 44.3 million and $ 57.3 million, respectively.

At September 30, 2021 and December 31, 2020 , the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $ 46.7 million and $ 57.3 million, respectively.

Cash Flow Hedging

5 unchanged sentences

We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business, and accordingly, they are not speculative in nature.

The notional amounts of outstanding foreign currency forward contracts designated as cash flow hedges were $ 2.9 million as of June 30, 2021 and $ 2.7 million as of December 31, 2020 .

The notional amounts of outstanding foreign currency option contracts designated as cash flow hedges were $ 5.9 million and $ 8.2 million as of June 30, 2021 and December 31, 2020 , respectively.

The notional amounts of outstanding foreign currency forward contracts designated as cash flow hedges were $ 3.3 million as of September 30, 2021 and $ 2.7 million as of December 31, 2020 .

The notional amounts of outstanding foreign currency option contracts designated as cash flow hedges were $ 3.0 million and $ 8.2 million as of September 30, 2021 and December 31, 2020 , respectively.

Foreign Currency Derivatives

4 unchanged sentences

These cross-currency swaps are designated as cash flow hedges.

The hedged cash flows as of June 30, 2021 and December 31, 2020 included 

156.0 million and 

159.6 million of total notional values, respectively.

As of June 30, 2021 , the aggregate scheduled interest payments over the course of the loan and related swaps amounted to 

The hedged cash flows as of September 30, 2021 and December 31, 2020 included 

€154.2 million and 

€159.6 million of total notional values, respectively.

As of September 30, 2021 , the aggregate scheduled interest payments over the course of the loan and related swaps amounted to 

€4.2 million.

The scheduled maturity and principal payment of the loan and related swaps of 

150.0 million are due in April 2022.

There were no new cross-currency swaps designated as cash flow hedges as of June 30, 2021 .

€150.0 million are due in April 2022.

There were no new cross-currency swaps designated as cash flow hedges as of September 30, 2021 .

The fair value of derivative instruments on our consolidated balance sheets was as follows:

2 unchanged sentences

Balance Sheet Location

June 30, 2021

September 30, 2021

December 31, 2020

Balance Sheet Location

June 30, 2021

September 30, 2021

December 31, 2020

10 unchanged sentences

Other current liabilities

As of June 30, 2021 , we anticipate reclassifying approximately $ 0.8 million of gains from accumulated other comprehensive loss to net income during the next 12 months.

As of September 30, 2021 , we anticipate reclassifying approximately $ 0.6 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 cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Amount of Gain (Loss) on Cash Flow Hedge Activity

13 unchanged sentences

( 13.4 )  

Net foreign currency transaction (loss) gain

Net foreign currency transaction loss

( 0.7 )  

1 unchanged sentence

( 7.3 )  

( 0.2 )  

( 5.0 )  

The effect of foreign currency derivative instruments designated as hedges and of foreign currency derivative instruments not designated as hedges in our consolidated statements of income was as follows:

Three Months Ended

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

Foreign Currency Option Contracts

3 unchanged sentences

Derivatives in cash flow hedging relationships:

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

$ ( 1.3 )  

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

Net loss reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net sales

( 0.2 )  

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

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

( 1.5 )  

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

Derivatives not designated as hedging instruments:

Net (loss) gain recognized in income (b)

( 0.7 )  

Net gain recognized in income (b)

Three Months Ended

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Foreign Currency Option Contracts

3 unchanged sentences

Derivatives in cash flow hedging relationships:

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

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

$ ( 0.1 )  

$ ( 5.8 )  

$ ( 0.1 )  

Net loss reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net sales

( 0.1 )  

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

2 unchanged sentences

Derivatives not designated as hedging instruments:

Net (loss) gain recognized in income (b)

Net loss recognized in income (b)

( 1.7 )  

14 unchanged sentences

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

Our population of assets and liabilities subject to fair value measurements at June 30, 2021 is as follows:

Our population of assets and liabilities subject to fair value measurements at September 30, 2021 is as follows:

Foreign currency forward exchange contracts

19 unchanged sentences

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, were $ 268.0 million and $ 269.2 million, respectively, as of June 30, 2021 .

The fair value and carrying value of total debt, including current portion, were $ 270.0 million and $ 268.4 million, respectively, as of September 30, 2021 .

The fair value and carrying value of total debt, including current portion, were $ 323.4 million and $ 308.5 million, respectively, as of December 31, 2020 .

4 unchanged sentences

Legal costs associated with such matters are expensed as incurred.

Accumulated Other Comprehensive Loss

Stockholders' Equity

Accumulated Other Comprehensive Income

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

3 unchanged sentences

December 31, 2020

$ ( 19.1 )  

$ ( 1.7 )  

Other comprehensive (loss) income before reclassifications

( 5.8 )  

Amounts reclassified from accumulated other comprehensive loss

( 4.8 )  

Net current period other comprehensive (loss) income

( 5.8 )  

( 0.1 )  

June 30, 2021

$ ( 24.9 )  

$ ( 1.6 )  

The effective tax rate for the second quarter of 

2021 was ( 37.0% ) compared to 19.7 % for the second quarter of 2020.

The negative effective tax rate for the current quarter was primarily driven by a tax benefit of $ 3.4 million associated with the reversal of a valuation allowance related to tax loss carryovers in the Netherlands. The reversal was driven by a law change allowing an unlimited loss carryover period.

September 30, 2021

Repurchase of Common Stock

The Board of Directors has authorized the repurchase of our common stock.

During the nine months ended September 30, 2021, the Company paid $ 7.5 million to repurchase 102,229 shares of its common stock at an average price of $ 73.34 per share. 

As of September 30, 2021, 1,288,167 shares were available to be repurchased.

There were no share repurchases during the nine months ended September 30, 2020.

The effective tax rate for the third quarter of 2021 was 3.8 % compared to 9.7 % for the third quarter of 2020.

The decrease in the effective tax rate was primarily driven by a tax benefit resulting from an election to step-up the tax basis of certain assets for Italian tax purposes.

We and our subsidiaries are subject to U.S.

4 unchanged sentences

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

In addition to the liability of $ 4.7 million for unrecognized tax benefits as of June 30, 2021 , there was approximately $ 0.6 million for accrued interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of June 30, 2021 was $ 4.6 million.

In addition to the liability of $ 4.6 million for unrecognized tax benefits as of September 30, 2021 , there was approximately $ 0.7 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, 2021 was $ 4.4 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, 2020 .

During the three months ended June 30, 2021 and 2020 , we recognized total share-based compensation expense of $ 3.9 million and less than $ 0.1 million, respectively.

During the six months ended 

June 30, 2021 and 2020 , we recognized total share-based compensation expense of $ 7.0 million and $ 2.8 million, respectively.

The total excess tax benefit recognized for share-based compensation arrangements during the six months ended June 30, 2021 and 2020 was $ 0.4 million and $ 0.3 million, respectively.

During the three months ended September 30, 2021 and 2020 , we recognized total share-based compensation expense of $ 2.5 million and $ 1.9 million, respectively.

During the nine months ended 

September 30, 2021 and 2020 , we recognized total share-based compensation expense of $ 9.5 million and $ 4.7 million, respectively.

The total excess tax benefit recognized for share-based compensation arrangements during the nine months ended September 30, 2021 and 2020 was $ 0.4 million and $ 0.3 million, respectively.

Earnings Attributable to Tennant Company Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income attributable to Tennant Company

2 unchanged sentences

$ 57.0  

$ 31.2  

Basic - weighted average shares outstanding

26 unchanged sentences

148,747 and 

818,912 shares of common stock during the three months ended June 30, 2021 and 2020 , respectively.

578,858 shares of common stock during the three months ended September 30, 2021 and 2020 , respectively.

Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation plans of 

198,853 and 

532,564 shares of common stock during the six months ended 

June 30, 2021 and 2020 , respectively.

620,605 shares of common stock during the nine months ended 

September 30, 2021 and 2020 , 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 are 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