What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-11-02 · 180 added, 321 removed, 520 unchanged (49% of the section changed)

3 unchanged sentences

Three Months Ended

Nine Months Ended

(In millions, except shares and per share data)

September 30,

$ 258.1  

$ 263.3  

Cost of sales

Research and development expense

Selling and administrative expense

Research and development expense

Gain on sale of business

Operating income

Interest expense, net

Net foreign currency transaction loss

Loss on extinguishment of debt

Other expense, net

( 0.3 )  

Net foreign currency transaction gain

Other (expense) income, net

( 0.2 )  

Income before income taxes

Income tax expense

Net income including noncontrolling interest

Net income attributable to Tennant Company

Net income attributable to Tennant Company per share

Weighted average shares outstanding

See accompanying notes to consolidated financial statements.

TENNANT COMPANY

CONSOLIDATED  

STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

(In millions)

September 30,

Net income including noncontrolling interest

$ 10.3  

$ 25.7  

Net income attributable to Tennant Company per share

$ 0.56  

$ 1.39  

Other comprehensive (loss) income:

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

$ 0.55  

$ 1.37  

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)

Weighted average shares outstanding

18,463,419  

1 unchanged sentence

18,799,732  

Total other comprehensive (loss) income, net of tax

18,831,423  

TENNANT COMPANY

CONSOLIDATED  

STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

(In millions)

Net income attributable to Tennant Company

$ 10.3  

Total comprehensive income including noncontrolling interest

Comprehensive income attributable to Tennant Company

$ 25.7  

Other comprehensive loss:

Foreign currency translation adjustments (net of related tax (expense) benefit of $ (0.4) and $ 0.1 , respectively)

( 3.8 )  

Cash flow hedge (net of related tax benefit (expense) of $ 0.1 and $ 0.0 , respectively)

( 0.2 )  

Total other comprehensive loss, net of tax

( 4.0 )  

Comprehensive income attributable to Tennant Company

$ 15.0  

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited)  

September 30,

(In millions, except shares and per share data)

10 unchanged sentences

$ 1,061.7  

LIABILITIES AND TOTAL EQUITY

LIABILITIES AND EQUITY

Current portion of long-term debt

$ 10.9  

Accounts payable

27 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(In millions)

September 30,

OPERATING ACTIVITIES

Net income including noncontrolling interest

$ 10.3  

$ 25.7  

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

Amortization of intangible assets

Deferred income taxes

Depreciation expense

Amortization expense

Deferred income tax expense (benefit)

( 1.3 )  

Share-based compensation expense

Bad debt and returns expense

Acquisition contingent consideration adjustment

Gain on sale of business

Debt extinguishment cost

Changes in operating assets and liabilities:

( 29.0 )  

Accounts payable

Employee compensation and benefits

( 12.6 )  

Other assets and liabilities

Net cash provided by operating activities

( 4.7 )  

Net cash (used in) provided by operating activities

( 10.1 )  

INVESTING ACTIVITIES

Purchases of property, plant and equipment

Proceeds from disposals of property, plant and equipment

( 5.0 )  

Proceeds from sale of business, net of cash divested

Purchase of intangible assets

Net cash provided by (used in) investing activities

Investment in leased assets

( 3.7 )  

Cash received from leased assets

Net cash (used in) provided by investing activities

( 8.6 )  

FINANCING ACTIVITIES

Proceeds from borrowings

Repayments of debt

Debt extinguishment payment

Repayments of borrowings

( 0.9 )  

Contingent consideration payments

Change in finance lease obligations

Proceeds from issuance of common stock

(Repurchases) proceeds from exercise of stock options, net of employee tax withholdings obligations

( 1.2 )  

Dividends paid

Repurchases of common stock

Net cash used in financing activities

( 4.6 )  

Net cash provided by (used in) financing activities

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

( 2.8 )  

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

( 13.2 )  

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

$ 110.4  

$ 175.2  

SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended

September 30,

Three Months Ended

Cash paid for income taxes

2 unchanged sentences

Operating cash flows from operating leases

Financing cash flows from financing leases

Lease assets obtained in exchange for new finance lease liabilities

Lease assets obtained in exchange for new operating lease liabilities

24 unchanged sentences

44,700  

Share-based compensation

Dividends paid $0.23 per common share

( 1.2 )  

Balance, March 31, 2021

18,606,486  

$ 59.1  

$ 384.8  

$ ( 30.8 )  

$ 420.1  

$ 421.4  

Other comprehensive income

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 3,305 shares

58,579  

Share-based compensation

2 unchanged sentences

( 4.6 )  

Balance, June 30, 2021

( 0.1 )  

$ 390.2  

$ ( 25.9 )  

$ 436.2  

$ 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

Balance, March 31, 2022

18,579,816  

27 unchanged sentences

( 4.2 )  

( 0.1 )  

Balance, March 31, 2021

5 unchanged sentences

$ 421.4  

Other comprehensive income

Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 3,399 shares

20,647  

Dividends paid $0.22 per common share

( 4.0 )  

Balance, June 30, 2020

18,455,462  

$ 49.4  

$ 357.4  

$ ( 42.0 )  

$ 371.7  

$ 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.

3 unchanged sentences

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, significantly reduce environmental impact and help create a cleaner, safer, healthier world.

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 Securities and Exchange Commission (“SEC”) requirements for interim reporting.

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.

1 unchanged sentence

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Reclassification –

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 year ended December 31, 2020 .

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

Newly Adopted Accounting Pronouncements

On January 1, 2021, we adopted Accounting Standards Update ("ASU") No.

Reference Rate Reform

March 2020, 

the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update (“ASU”) 

2020 - 04,  

Income Taxes (Topic  

Simplifying the Accounting for Income Taxes,  which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 

The impact of this amended guidance on our consolidated financial statements and related disclosures was immaterial.

Reference Rate Reform (Topic  

 This ASU provides optional expedients to applying generally accepted accounting principles to certain contract modifications, hedging relationships, and other transactions affected by the reference rate reform, which affects the London Interbank Offered Rate, if certain criteria are met.

The amendments are effective 

March 12, 2020 

through 

December 31, 2022.

We continue to monitor our contracts and transactions for potential application of this ASU.

Disaggregation of Revenue

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

$ 160.3  

$ 157.8  

$ 491.7  

$ 466.6  

Europe, Middle East and Africa

1 unchanged sentence

$ 263.3  

$ 814.4  

$ 728.0  

Net sales are attributed to each geographic area based on the end user country and are net of intercompany sales.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

$ 158.1  

$ 160.9  

$ 506.6  

$ 456.3  

Parts and consumables

3 unchanged sentences

$ 263.3  

$ 814.4  

$ 728.0  

(a) On February 1, 2021, we sold our Coatings business. 

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Sales direct to consumer

1 unchanged sentence

$ 169.0  

$ 517.3  

$ 488.2  

Sales to distributors

1 unchanged sentence

$ 263.3  

$ 814.4  

$ 728.0  

Contract Liabilities

11 unchanged sentences

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

Nine Months Ended

September 30,

Three Months Ended

Beginning balance

5 unchanged sentences

Foreign currency fluctuations

Divestiture of business

( 0.2 )  

7 unchanged sentences

The change in the deferred revenue balance was as follows:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance

7 unchanged sentences

$ 10.0  

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.

At March 31, 2022 , $ 8.7 million and $ 3.5 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

In the second quarter of 2021, we implemented a restructuring action impacting our Europe, Middle East and Africa ("EMEA") operating segment. The pre-tax charge of $ 0.9 million consisted of severance-related costs included in selling and administrative expense in the consolidated statements of income in 2021.

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 fourth quarter of 2020, we implemented a restructuring action as part of our global reorganization efforts. The pre-tax charge of $ 3.5 million consisted of severance-related costs included in selling and administrative expense in the consolidated statements of income in 2020.

 The charge primarily impacted our EMEA operating segment but also impacted the Americas and Asia Pacific ("APAC") operating segments. 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 third quarter of 2020, we implemented a restructuring action to consolidate our Gaomei business and our existing China business in order to deliver cost synergies and improve profitability.

The pre-tax charge of $ 3.1 million consisted of $ 1.4 million of severance-related costs and $ 1.7 million of other costs in 2020.

Of the restructuring costs, $ 1.2 million were included in cost of sales and $ 1.9 million in selling and administrative expense in the consolidated statements of income.

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

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

The pre-tax charge of $ 2.0 million consisted of $ 1.3 million of severance-related costs and $ 0.7 million of other costs in 2020.

Of the restructuring costs, $ 0.3 million were included in cost of sales and $ 1.7 million in selling and administrative expense in the consolidated statements of income. The charge impacted our APAC operating segment.

We expect no further charges related to this restructuring action.

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

A reconciliation of the beginning and ending liability balances is as follows:

Severance-related costs

December 31, 2019 balance

2020 activity:

During the three months ended March 31, 2022 and March 31, 2021, we implemented restructuring actions as part of our global reorganization efforts.

The pre-tax severance-related charges were as follows:

Three Months Ended

Selling and administrative expense

Cost of sales

Total pre-tax severance-related costs

The charges in 2022 primarily impacted the Americas operating segment.

The charges in 2021 primarily impacted the EMEA and APAC operating segments.

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

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

Three Months Ended

Beginning balance

Cash payments

( 0.7 )  

Foreign currency fluctuations

( 0.1 )  

Adjustments to accrual

December 31, 2020 balance

2021 activity:

Cash payments

Foreign currency fluctuations

September 30, 2021 balance

Other Actions

In 2019, we made the decision to discontinue certain product lines.

In the first quarter of 2020, we recorded an additional $ 1.7 million in cost of sales in the consolidated statements of income to reflect our estimate of inventory that will not be sold.

( 0.6 )  

Ending balance

Acquisition and Divestiture

During the first quarter of 2021, we sold the Coatings business. The resulting pre-tax gain was $ 9.8 million and is reflected within selling and administrative expense in the consolidated statements of income.

During the first quarter of 2021, we sold the Coatings business. The resulting pre-tax gain was $ 9.8 million and is reflected within gain on sale of business in the consolidated statements of income.

Proceeds from sale of business, net of cash divested, was $ 24.7 million.

On January 4, 2019, we completed the acquisition of Hefei Gaomei Cleaning Machines Co., Ltd.

2 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, and final payments totaling $ 2.0 million were paid in the third quarter of 2021.

The purchase price included contingent consideration payments totaling $ 2.5 million paid in 2021.

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

September 30,

Inventories carried at LIFO:

Finished goods

Finished goods (a)

$ 57.8  

$ 54.0  

Raw materials, production parts and work-in-process

Excess of FIFO over LIFO cost (a)

Raw materials and work-in-process

Excess of FIFO over LIFO cost (b)

(44.1)  

3 unchanged sentences

Inventories carried at FIFO:

Finished goods

Finished goods (a)

$ 58.6  

$ 53.8  

Raw materials, production parts and work-in-process

Raw materials and work-in-process

Total FIFO inventories

4 unchanged sentences

$ 160.6  

(a) The difference between replacement cost and the stated LIFO inventory value is not materially different from the reserve for the LIFO valuation method.

(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.

Goodwill and Intangible Assets

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

The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:

Balance as of December 31, 2021

2 unchanged sentences

$ 193.1  

( 1.7 )  

Foreign currency fluctuations

( 4.3 )  

Balance as of September 30, 2021

Balance as of March 31, 2022

$ 229.6  

1 unchanged sentence

$ 190.0  

The divestiture of goodwill during the first quarter of 2021 was the result of the sale of the Coatings business discussed in Note 5.

The balances of acquired intangible assets, excluding goodwill, were as follows:

Customer Lists

Balance as of September 30, 2021

Balance as of March 31, 2022

Original cost

27 unchanged sentences

Weighted average original life (in years)

During the first quarter of 2021, we divested identified intangible assets, excluding goodwill, with a carrying value of $ 0.9 million and $ 1.4 million in the categories of customer lists and trade names, respectively, as a result of the sale of the Coatings business discussed in Note 5.

Amortization expense on intangible assets for the 

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 nine months ended September 30, 2020 was $ 5.3 million and $ 15.3 million, respectively.

Amortization expense on intangible assets for the three months ended March 31, 2022 and 2021 was $ 4.5 million and $ 5.3 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:

1 unchanged sentence

$ 12.2  

$ 91.6  

2021 Credit Agreement

23 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.

20 unchanged sentences

Debt outstanding consisted of the following:

September 30,

Senior unsecured notes

$ 300.0  

Credit facility borrowings:

Revolving credit facility borrowings

$ 183.0  

$ 168.0  

Term loan facility borrowings

1 unchanged sentence

Finance lease liabilities

Unamortized debt issuance costs

current portion of long-term debt (a)

3 unchanged sentences

$ 263.4  

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.

As of March 31, 2022 , the Company is required to repay $ 4.4 million in outstanding credit facility borrowings and $ 0.3 million of current maturities of secured borrowings over the next 12 months.

As of March 31, 2022 , we had outstanding borrowings of $ 183.0 million and $ 98.1 million under our revolving facility and term loan facility, respectively.

We had letters of credit and bank guarantees outstanding in the amount of $ 2.9 million, leaving approximately $ 264.1 million of unused borrowing capacity on our revolving facility.

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

Commitment fees on unused lines of credit for the three months ended March 31, 2022 were $ 0.2 million.

The overall weighted average cost of debt is approximately 

7 unchanged sentences

The changes in warranty reserves were as follows:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance

4 unchanged sentences

( 1.9 )  

( 7.1 )  

Ending balance

9 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 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, 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.

At March 31, 2022 and December 31, 2021 , the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $ 52.7 million and $ 45.0 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 $ 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.

As of March 31, 2022 and December 31, 2021, we had no outstanding foreign currency forward contracts or foreign currency option contracts designated as cash flow hedges.

Foreign Currency Derivatives

4 unchanged sentences

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

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

€154.2 million and 

The hedged cash flows as of March 31, 2022 and December 31, 2021 included 

150.6 million and 

€152.4 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.

As of March 31, 2022, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to €

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 September 30, 2021 .

151.2 million are due in April 2022.

There were no new cross-currency swaps designated as cash flow hedges as of March 31, 2022 .

In April 2022, we entered into new cross-currency swaps.

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

150 million are due in April 2027.

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

2 unchanged sentences

Balance Sheet Location

September 30, 2021

March 31, 2022

December 31, 2021

Balance Sheet Location

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

$ 10.4  

Foreign currency forward contracts

Other liabilities

Derivatives not designated as hedging instruments:

2 unchanged sentences

Other current liabilities

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.

As of March 31, 2022 , we anticipate reclassifying less than $ 0.1 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

Nine Months Ended

September 30,

Amount of Gain (Loss) on Cash Flow Hedge Activity

$ 258.1  

$ 263.3  

$ ( 0.1 )  

$ 814.4  

$ ( 0.3 )  

$ 728.0  

Interest expense, net

( 0.3 )  

( 4.4 )  

( 6.6 )  

( 13.4 )  

Net foreign currency transaction loss

( 0.7 )  

( 0.9 )  

( 7.3 )  

( 0.2 )  

( 5.0 )  

Net foreign currency transaction gain

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:

Foreign Currency Forward Contracts  

Three Months Ended

Nine Months Ended

September 30, 2021

Foreign Currency Option Contracts

Foreign Currency Forward Contracts

Foreign Currency Option Contracts

Foreign Currency Forward Contracts

Derivatives in cash flow hedging relationships:

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

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

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

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

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

Derivatives not designated as hedging instruments:

Net gain recognized in income (b)

Three Months Ended

Nine Months Ended

September 30, 2020

Foreign Currency Option Contracts

Foreign Currency Forward Contracts

Foreign Currency Option Contracts

Foreign Currency Forward Contracts

Derivatives in cash flow hedging relationships:

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

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

( 5.7 )  

Derivatives not designated as hedging instruments:

Net loss recognized in income (b)

( 1.7 )  

Net change in the fair value of the effective portion classified in other comprehensive loss.

Classified in net foreign currency transaction gain (loss).

Classified in net foreign currency transaction gain.

Fair Value Measurements

11 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, 2021 is as follows:

Our population of assets and liabilities subject to fair value measurements at March 31, 2022 were as follows:

Foreign currency forward exchange contracts

$ 14.5  

Total liabilities

$ 14.5  

Our population of assets and liabilities subject to fair value measurements at 

December 31, 2020 is as follows:

December 31, 2021 were as follows:

Foreign currency forward exchange contracts

$ 25.5  

Contingent consideration

Total liabilities

3 unchanged sentences

Further details regarding our foreign currency forward exchange and option contracts are discussed in Note 10.

Contingent consideration is valued using a probability-weighted analysis of projected gross profit and integration milestones. Actual results may differ significantly from those used in the estimate above, which may affect future payments. Changes in future payments will be reflected in future operating results as they occur.

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 $ 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 .

The fair value and carrying value of total debt, including current portion, was $ 284.2 million and $ 281.6 million, respectively, as of March 31, 2022 .

The fair value and carrying value of total debt, including current portion, was $ 271.2 million and $ 267.6 million, respectively, as of December 31, 2021 .

The fair value was calculated based on the borrowing rates currently available to us for bank loans with similar terms and remaining maturities, which is a Level 2 in the fair value hierarchy.

3 unchanged sentences

Legal costs associated with such matters are expensed as incurred.

Stockholders' Equity

Accumulated Other Comprehensive Income

Shareholders' Equity

Accumulated Other Comprehensive Loss

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

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

Foreign Currency Translation Adjustments

1 unchanged sentence

Cash Flow Hedge

December 31, 2020

Foreign Currency Translation Adjustments

Pension and Post-Retirement Medical Benefits

Cash Flow Hedge

Beginning balance

$ ( 36.0 )  

$ ( 2.1 )  

$ ( 37.9 )  

$ ( 19.1 )  

$ ( 1.7 )  

Other comprehensive (loss) income before reclassifications

( 3.8 )  

( 10.7 )  

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

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.

( 4.0 )  

( 6.0 )  

Net current period other comprehensive loss

( 3.8 )  

( 0.2 )  

( 4.0 )  

( 10.7 )  

Ending balance

$ ( 39.8 )  

$ ( 2.1 )  

$ ( 41.9 )  

$ ( 29.8 )  

$ ( 1.7 )  

We and our subsidiaries are subject to U.S.

1 unchanged sentence

We are generally no longer subject to U.S.

federal tax examinations for taxable years before 2018 and, with limited exceptions, state and foreign income tax examinations for taxable years before 2015.

 We are currently undergoing income tax examinations in various foreign jurisdictions. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

federal tax examinations for taxable years before 2018.

The number of years which remain open for audit for U.S.

state or foreign tax purposes varies by jurisdiction but generally ranges from 3 - 5 years.

We are currently undergoing income tax examinations in various foreign jurisdictions.

Although the outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

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

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.

In addition to the liability of $ 4.8 million for unrecognized tax benefits as of March 31, 2022 , there was approximately $ 0.8 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, 2022 was $ 4.6 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, 2021 .

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

During the three months ended March 31, 2022 and 2021 , we recognized total share-based compensation expense of $ 1.8 million and $ 3.1 million, respectively.

The total excess tax benefit recognized for share-based compensation arrangements during the three months ended March 31, 2022 and 2021 was $ 0.3 million and $ 0.2 million, respectively.

Income Attributable to Tennant Company Per Share

The computations of basic and diluted earnings per share were as follows:

Three Months Ended

Nine Months Ended

September 30,

Net income attributable to Tennant Company

1 unchanged sentence

$ 25.7  

$ 57.0  

$ 31.2  

Basic - weighted average shares outstanding

1 unchanged sentence

18,456,079  

18,519,523  

18,335,430  

Effect of dilutive securities:

Share-based compensation plans

336,313  

375,344  

350,375  

288,537  

Diluted - weighted average shares outstanding

1 unchanged sentence

18,831,423  

18,869,898  

18,623,967  

Basic earnings per share attributable to Tennant Company

1 unchanged sentence

$ 1.39  

$ 3.08  

$ 1.70  

Diluted earnings per share attributable to Tennant Company

1 unchanged sentence

$ 1.37  

$ 3.02  

$ 1.68  

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

191,587 and 

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 

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.

142,027 shares of common stock during the three months ended March 31, 2022 and 2021 , respectively.

Subsequent Event

On April 14, 2022, we sold a building located in Golden Valley, Minnesota .

Proceeds from sale of the building totaled $ 4.1 million.

We expect to record a gain on sale of approximately $ 3.7 million in the second quarter of 2022 in our consolidated statements of income. 

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