UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 001-16191
TENNANT COMPANY
(Exact name of registrant as specified in its charter)
Minnesota
41-0572550
State or other jurisdiction of
(I.R.S. Employer
incorporation or organization
Identification No.)
10400 Clean Street
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
(Zip Code)
763-540-1200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Common Stock, par value $0.375 per share
TNC
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the
Securities Act.
þ
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act.
Yes
þ
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
þ
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files).
þ
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's
assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.
þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial
statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements.
o
Indicate by check mark whether any of those error corrections are restatements that required a recovery
analysis of incentive-based compensation received by any of the registrant's executive officers during the
relevant recovery period pursuant to §240.10D-1(b).
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
o
Yes
þ
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2024, was $1,846,101,525.
As of January 31, 2025, there were 18,816,067 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2025 annual meeting of shareholders (the “2025 Proxy Statement”) are incorporated by
reference in Part III.
1
Table of Contents
Tennant Company
Form 10–K
Table of Contents
PART I
Page
Item 1
Business
3
Item 1A
Risk Factors
8
Item 1B
Unresolved Staff Comments
13
Item 1C
Cybersecurity
13
Item 2
Properties
14
Item 3
Legal Proceedings
15
Item 4
Mine Safety Disclosures
15
PART II
Item 5
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
16
Item 6
[Reserved]
17
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
26
Item 8
Financial Statements and Supplementary Data
28
Report of Independent Registered Public Accounting Firm
28
Consolidated Financial Statements
32
Consolidated Statements of Income
32
Consolidated Statements of Comprehensive Income
33
Consolidated Balance Sheets
34
Consolidated Statements of Cash Flows
35
Consolidated Statements of Equity
36
Notes to the Consolidated Financial Statements
37
1
Summary of Significant Accounting Policies
37
2
Newly Adopted Accounting Pronouncements
42
3
Revenue
42
4
Management Actions
44
5
Acquisitions and Divestitures
45
6
Inventories
47
7
Property, Plant and Equipment
47
8
Goodwill and Intangible Assets
48
9
Debt
49
10
Other Current Liabilities
51
11
Derivatives
51
12
Fair Value Measurements
55
13
Retirement Benefit Plans
57
14
Shareholders' Equity
63
15
Leases
64
16
Commitments and Contingencies
65
17
Income Taxes
66
18
Share-Based Compensation
68
19
Income Attributable to Tennant Company Per Share
72
20
Segment Reporting
73
21
Subsequent Event
74
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
75
Item 9A
Controls and Procedures
75
Item 9B
Other Information
76
Item 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
76
PART III
Item 10
Directors, Executive Officers and Corporate Governance
77
Item 11
Executive Compensation
77
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
77
Item 13
Certain Relationships and Related Transactions, and Director Independence
77
Item 14
Principal Accountant Fees and Services
77
PART IV
Item 15
Exhibits and Financial Statement Schedules
78
Item 16
Form 10-K Summary
82
Signatures
83
2
Table of Contents
TENNANT COMPANY
2024
ANNUAL REPORT
Form 10–K
PART I
ITEM 1 – Business
General Development of Business
Founded in 1870 by George H. Tennant, Tennant Company ("the Company, we, us, or our"), headquartered in Eden Prairie, Minnesota, is a
world leader in designing, manufacturing and marketing of solutions that help create a cleaner, safer and healthier world. Tennant was
incorporated as a Minnesota corporation in 1909 and began as a one-man woodworking business, eventually evolving into a successful wood
flooring and wood products company, and finally into a manufacturer of floor cleaning equipment. Throughout its history, the Company has
remained focused on advancing its industry by aggressively pursuing new technologies and creating a culture that celebrates innovation.
Today, the Company has 11 global manufacturing locations and operates in three geographic areas including the Americas, Europe, Middle
East and Africa ("EMEA") and Asia Pacific ("APAC"). We aggregate our operating segments into one reportable segment that consists of the
design, manufacture, sale and servicing of products used primarily in the maintenance of nonresidential surfaces.
Our commitment to innovation and excellence extends across every aspect of our business—from product development and customer
service to manufacturing and marketing. We prioritize delivering high-performance solutions that minimize waste, lower costs, enhance safety,
and advance sustainability objectives. By dedicating resources to research, development and engineering, we continuously refine existing
products and introduce new ones that align with evolving market demands.
Over the past century, we have expanded our brand portfolio, diversified our product offerings, and advanced our technologies through
innovation and strategic acquisitions. This disciplined approach to growth ensures that each acquisition complements our existing capabilities
and adds value by enhancing our product range or improving technological expertise.
Principal Products, Markets and Distribution
The Company offers products and solutions consisting of manual and autonomous mechanized cleaning equipment for both industrial and
commercial use, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and
repair services, and business solutions such as financing, rental and leasing programs, and machine-to-machine asset management solutions.
The Company is committed to developing cleaning technologies which increase cleaning productivity. We have strong brand presence in the
global markets we serve, offering both premium and mid-tier products for each region to meet customer needs.
The Company's 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. The
Company markets its offerings under the following brands: Tennant , Nobles , Alfa Uma Empresa Tennant™, IPC, Gaomei and Rongen brands
as well as private-label brands. The Company has a portfolio of differentiated technology solutions that includes IRIS as an asset management
solution, ec-H2O NanoClean as a detergent-free cleaning solution, and ReadySpace as a rapid-drying carpet cleaning technology. The
Company's more than 40,000 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.
®
®
®
®
®
3
Table of Contents
The Company has an extensive global field service network. We sell products directly in 21 countries and through distributors in more than
100 countries.
Raw Materials and Component Parts
Steel, metal alloys and resin are the primary raw materials used to manufacture our mechanized cleaning equipment. We purchase various
component parts, electronics and services used in production and product development processes from third parties.
Our industry continues to be impacted by input cost inflation, supply chain disruptions and other global macroeconomic challenges. While in
recent years we experienced material increases to input costs and supply chain disruptions, during 2024, we experienced some moderation in
input cost inflation and increased supply chain stability, which we expect to continue into 2025.
The Company continues work to minimize the impact of cost inflation and market supply challenges by employing local-for-local and region-
for-region manufacturing and sourcing to allow us to manufacture our products closer to our customers. At the same time, our engineering teams
are evaluating platform design to allow for available parts and to increase our sourcing flexibility.
Intellectual Property
The Company owns a broad range of intellectual property rights in both the United States and a number of foreign countries. Our patents,
proprietary technologies and trade secrets, customer relationships, licenses, trademarks, trade names and brand names in the aggregate
constitute a valuable asset, but we do not regard our business as being materially dependent upon any single item or category of intellectual
property. We take appropriate measures to protect our intellectual property to the extent such intellectual property can be protected.
Research and Development
Research and development expenses include scientific research costs such as salaries, prototypes, shop supplies, testing, technical
information technology and administrative expenditures as well as an allocation of corporate costs. We conduct research and development
activities to develop new products and to enhance the functionality, effectiveness, ease of use and reliability of our existing products. We believe
that our research and development efforts have been, and continue to be, key drivers of our success in the marketplace, and we continue to
explore new technologies and methodologies that help improve the efficiency and sustainability of our products.
Seasonality
Although the Company’s business is not seasonal in the traditional sense, the percentage of revenues in each quarter typically ranges from
22% to 28% of the total year. The first quarter tends to be at the low end of the range reflecting customers’ initial slow ramp up of capital
purchases and the Company’s efforts to close out orders at the end of each year. The second and fourth quarters tend to be toward the high end
of the range and the third quarter is typically in the middle of the range.
Major Customers
The Company sells a wide range of products to a diversified base of customers around the world and has no material concentration of credit
risk or significant payment terms extended to customers.
Competition
Public industry data concerning global market share is limited; however, through an assessment of validated third-party sources and
sponsored third-party market studies, the Company is confident in its position as a world-leading manufacturer of floor maintenance and cleaning
equipment. Several global competitors compete with the Company in virtually every geography of the world. Additionally, small regional
competitors are also significant competitors who vary by country, vertical market, product category or channel. The Company primarily competes
by offering a diverse range of high-quality, innovative products supported by an extensive sales and service network in major markets.
4
Table of Contents
Human Capital
As of December 31, 2024, we had 4,632 employees worldwide, of which approximately 42.5% are located in the U.S. Our employees are
guided by our vision to design, manufacture and market sustainable solutions that help create a cleaner, safer and healthier world.
Ethics and Employee Safety
Tennant Company is committed to fostering and upholding a culture of integrity and stewardship among our employees, distributors, and
other business partners. We expect our employees not only to be aware of Tennant's ethical standards, but actively contribute to maintaining
them. Tennant has a Code of Conduct and other internal and public facing policies addressing ethics and compliance, and conducts annual
Code of Conduct training to empower our employees with the knowledge and tools to make ethical decisions in their roles. We understand the
importance of fostering an environment where concerns can be raised without fear of reprisal. To facilitate this, we offer various avenues for
reporting concerns, including a dedicated ethics hotline accessible both via phone and online.
We prioritize the health and safety of all employees. We operate under our established safety programs and employ an experienced team of
health and safety specialists to provide support to employees globally. All locations work diligently to meet and/or exceed regulatory standards
applicable to each site. Tennant employees are empowered to stop work anytime there is a potential hazard identified. Each site maintains public
and confidential ways for employees to report safety concerns to ensure employees feel free to report their concerns.
Talent
We believe attraction, development, engagement, and retention of a diverse group of employees is key to achieving our organizational
objectives. We focus on creating a high-performance culture, which includes our annual performance management process for all employees
which aligns with our employee and leadership competency frameworks.
To support employee development, we have deployed a number of resources and development tools for all employees. We also provide
leaders access to on-demand eLearnings and targeted live training sessions. In addition, we engage in annual talent conversations to help
identify, develop, and deploy talent to achieve our objectives and address talent risks.
We believe employee feedback is key to engagement, and we survey our employees regularly. Also, we provide other feedback and
engagement avenues such as all-employee quarterly town halls and leadership meetings. We take action to drive improvement in our ability to
engage and retain talent.
Diversity, Equity, and Inclusion ("DE&I")
Tennant Company believes that an inclusive and diverse workforce contributes to our business success. The inclusion of diverse
perspectives enables innovation and our ability to serve customers. We continue our DE&I focus through strategies which engage and educate
our employees and promote inclusion.
Tennant Company proudly continues our commitment to be an equal opportunity employer. We make employment decisions based on the
basis of individual skill, ability, reliability, productivity, and other factors important to performance.
Women represent 43% of our executive management team and 33% of our Board of Directors as of December 31, 2024.
Gender Equitable Pay
Tennant Company annually performs a gender wage gap for its United States employees that controls for title, grade and work location,
which are legitimate and non-discretionary reasons for pay differences. The most
5
Table of Contents
recent assessment found that the median total income for females was 99.9% of the median total income for males, suggesting there is no
evidence of a gender pay gap in the United States at Tennant Company.
Employee Gender Statistics
The following table represents employees by region and gender as of December 31, 2024:
Female
Male
Total
Americas
493
1,961
2,454
Europe, Middle East, Africa
479
1,220
1,699
Asia Pacific
139
340
479
Total
1,111
3,521
4,632
Total Rewards
Tennant Company’s philosophy is to reward employees competitively for the work they perform consistent with position, skill level,
experience, knowledge and geographic location. Each year, we evaluate the competitiveness of our pay levels against relevant labor markets
and adjust our programs as appropriate. We offer a comprehensive total rewards package to our employees that includes pay, benefits,
recognition, and well-being programs which are tailored by geographic location, statutory requirements, and competitive practice.
Available Information
The Company's internet address is www.tennantco.com. The Company makes available free of charge, through the Investor Relations
website at investors.tennantco.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon
as reasonably practicable when such material is filed electronically with, or furnished to, the Securities and Exchange Commission (“SEC”). The
SEC also maintains an internet site that contains reports, proxy and information statements, and other information, which can be accessed at
sec.gov.
Information About Our Executive Officers
The list below identifies those persons designated as executive officers of the Company, including their age, positions held with the
Company and their business experience during the past five or more years.
Barb Balinski, Senior Vice President, Chief Transformation Officer
Barb Balinski (61) has served as the Company's Senior Vice President, Chief Transformation Officer since May 2024. Ms. Balinski joined the
Company in 2018 as Vice President of Engineering and in March 2021, she was named Senior Vice President, Innovation and Technology,
leading Research & Development (R&D), Marketing, and Information Technology (IT) functions for Tennant Company. Prior to joining Tennant,
Ms. Balinski held leadership positions of increasing responsibility with the engineering team for the Integrated Business Units at Whirlpool
Corporation, a multinational manufacturer of home appliances, from 2005 to 2017, most recently as Director, Product Development, from 2013 to
2017. Prior to Whirlpool Corporation, she spent eleven years with Saturn Corporation, a subsidiary of General Motors.
Brock R. Christianson, Senior Vice President, Chief Human Resources Officer
Brock R. Christianson (55) joined the Company in November 2023 as Senior Vice President, Chief Human Resources Officer. From 2017 to
October 2023, Mr. Christianson served in various Human Resources Vice President roles at Thrivent, a Fortune 500 financial services company.
He held senior positions at Honeywell International from 2011 to 2017, including global Vice President of HR for the Environmental, Combustion,
and Controls business unit. From 1998 to 2011, he worked at Medtronic, a global healthcare technology leader, where he held HR leadership
roles in corporate, business units, and EMEA. Prior to Medtronic, he held HR and consulting roles with Emerson Electric and Ernst & Young.
6
Table of Contents
Kristin A. Erickson, Senior Vice President, General Counsel and Corporate Secretary
Kristin A. Erickson (52) has served as the Company's Senior Vice President, General Counsel and Corporate Secretary since December
2020. Ms. Erickson joined the Company's legal department in April 2008, serving in roles of increasing responsibility, including as Vice President,
Deputy General Counsel and Chief Compliance Officer from 2019 to 2020, and as Interim General Counsel and Corporate Secretary in 2020.
Prior to joining Tennant in 2008, she served as Senior Counsel and Assistant Secretary for MoneyGram International, Inc., from 2004 to 2008.
She started her career as a corporate attorney for Lindquist & Vennum, PLLP (n/k/a Ballard Spahr LLP).
David W. Huml, President and Chief Executive Officer
David W. Huml (56) has served as the Company's President and Chief Executive Officer since March 2021, after serving as Chief Operating
Officer from March 2020 to March 2021. Mr. Huml joined the Company in November 2014 as Senior Vice President, Global Marketing and was
named President and Chief Executive Officer March 1, 2021. In January 2016, he also assumed oversight for the Company's APAC business
unit, and in January 2017, he assumed oversight for the Company's EMEA business. From 2006 to October 2014, he held various positions with
Pentair plc, a global manufacturer of water and fluid solutions, valves and controls, equipment protection and thermal management products,
most recently as Vice President, Applied Water Platform. From 1992 to 2006, he held various positions with Graco Inc., a designer, manufacturer
and marketer of systems and equipment to move, measure, control, dispense and spray fluid and coating materials, including Worldwide
Director of Marketing, Contractor Equipment Division
Patrick W. Schottler, Senior Vice President, Chief Marketing and Technology Officer
Patrick W. Schottler (45) has served as the Company's Senior Vice President, Chief Marketing and Technology Officer since May 2024. Mr.
Schottler joined the Company in 2011 as Senior Program Manager. After holding leadership roles in R&D and regional business development, he
was named Vice President and General Manager of the Asia-Pacific Business Unit in 2017, a role he held for five years before assuming
responsibility for the Company's global marketing and product management functions in 2022. Prior to joining Tennant Company, Mr. Schottler
spent over a decade at Honeywell, where he held leadership roles in product development.
Fay West, Senior Vice President, Chief Financial Officer
Fay West (55) joined the Company in April 2021 as Senior Vice President and Chief Financial Officer. Prior to joining Tennant, she was
Senior Vice President and Chief Financial Officer of SunCoke Energy, Inc., a raw material processing and handling company, from 2014 to 2021.
Before joining SunCoke Energy, Inc., in 2011, as Vice President and Controller, she was Assistant Controller at United Continental Holdings, Inc.
Prior to that role, she served in several leadership roles at PepsiAmericas, Inc., including Vice President of Accounting and Financial Reporting,
and Director of Financial Reporting. Prior to joining PepsiAmericas, Inc., she was Vice President and Controller of GATX Rail Company.
Richard H. Zay, Senior Vice President, Chief Commercial Officer
Richard H. Zay (54) has served as the Company's Senior Vice President, Chief Commercial Officer since March 2021. Mr. Zay joined the
Company in June 2010 as Vice President, Global Marketing and was named Senior Vice President, Global Marketing in October 2013 and
Senior Vice President of the Americas business unit for the Company in 2014. In 2018, he assumed responsibility for Tennant Research and
Development as well. From 2006 to June 2010, he held various positions with Whirlpool Corporation, most recently as General Manager,
KitchenAid Brand. From 1993 to 2006, he held various positions with Maytag Corporation, including Vice President, Jenn-Air Brand, Director of
Marketing, Maytag Brand, and Director of Cooking Category Management.
7
Table of Contents
ITEM 1A – Risk Factors
The following are risk factors known to us that could materially adversely affect our business, financial condition or operating results.
Macroeconomic Risks
We may encounter financial difficulties if the United States or other global economies experience an additional or continued long-
term economic downturn, decreasing the demand for our products and negatively affecting our sales growth.
Our product sales are sensitive to declines in capital spending by our customers. Decreased demand for our products could result in
decreased revenues, profitability and cash flows and may impair our ability to maintain our operations and fund our obligations to others. In the
event of a continued long-term economic downturn in the U.S. or other global economies, our revenues could decline to the point that we may
have to take cost-saving measures. In addition, other fixed costs would have to be reduced to a level that is in line with a lower level of sales. A
long-term economic downturn that puts downward pressure on sales could also negatively affect investor perception relative to our publicly
stated profit targets.
Our operations could be adversely affected by global economic volatility, geopolitical tensions, and regulatory changes.
International operations could be adversely affected by changes in economic, political, regulatory, and social conditions, especially in Russia,
China, the Middle East, and other developing or emerging markets where we do business. An economic downturn in the businesses or
geographic areas in which we distribute our products could reduce demand for these products and result in a decrease in sales volume that
could have a negative impact on our results of operations.
Tariffs and other trade protection measures, anti-bribery and anti-corruption regulations, restrictions on repatriation of earnings and cash,
currency controls implemented by foreign governments, differing intellectual property rights and changes in legal and regulatory requirements
that restrict the sales of products or increase costs could adversely affect our results of operations. Tariffs may decrease the competitiveness of
our products in foreign markets or foreclose our sales entirely into those markets. We could experience a negative impact on our operating
results, profitability, customer relationships and future cash flows.
Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and
legal risk.
Due to the international scope of our operations, we are subject to a complex system of commercial, tax, compliance and trade regulations
around the world. Recent years have seen an increase in the development and enforcement of laws regarding trade, tax compliance, data
privacy, sustainability, labor and safety and anti-corruption, including the U.S. Foreign Corrupt Practices Act, and similar laws from other
countries. Our numerous foreign subsidiaries and affiliates are governed by laws, rules and business practices that differ from those of the U.S.,
but because we are a U.S.-based company, oftentimes they are also subject to U.S. laws which can create a conflict. Despite our due diligence,
there is a risk that we do not have adequate resources or comprehensive processes to stay current on changes in laws or regulations applicable
to us worldwide and maintain compliance with those changes. Increased compliance requirements may lead to increased costs and erosion of
desired profit margin. As a result, it is possible that the activities of these entities may not comply with U.S. laws or business practices or our
Code of Conduct. Violations of the U.S. or local laws may result in severe criminal or civil sanctions, could disrupt our business, and result in an
adverse effect on our reputation, business and results of operations or financial condition. We cannot predict the nature, scope or effect of future
regulatory requirements to which our operations might be subject or the manner in which existing laws might be administered or interpreted.
Changes in foreign currency exchange rates could adversely impact our net sales and earnings.
Fluctuations in foreign currency exchange rates could negatively affect our net sales, earnings, and financial condition. Many of our routine
transactions are conducted in foreign currencies, and changes in exchange rates have previously impacted, and may continue to impact, our
sales, material costs, earnings, and the valuation of foreign-denominated assets. While the majority of our manufacturing and cost structure is
8
Table of Contents
based in the U.S., a decline in the value of local currencies could make it more difficult for distributors and end users to afford our products.
Significant exchange rate volatility could adversely affect our operational results and overall financial stability.
Industry Risks
We may be unable to take advantage of product pricing due to the competitive marketplace and increased price sensitivity.
Simplification of our customer product pricing is a key initiative to reduce the complexity in which we operate. The current competitive
landscape, coupled with macroeconomic factors such as inflation, could impact our ability to achieve our pricing targets and influence demand.
These pressures, along with internal constraints, may limit our ability to sell our products at our expected prices and may result in a change to
the mix of product offerings that affect gross margin rates. Increasing our prices in this competitive market, where customers are very price
sensitive, could have an adverse effect on our financial condition or operating results.
We are subject to competitive risks associated with developing innovative products and technologies, including, but not limited
to, our inability to expand as rapidly or aggressively in the global market as our competitors, our customers ceasing to pay for
innovation and competitive challenges to our products, technology and the underlying intellectual property.
Our products are sold in competitive markets throughout the world. Competition is based on product features and design, brand recognition,
reliability, durability, technology, breadth of product offerings, price, customer relationships and after-sale service. Although we believe that the
performance and price of our products will produce competitive solutions for our customers’ needs, certain products are priced higher than our
competitors’ products. This is due to our dedication to innovation and continued investments in research and development. We believe that
customers will pay for the innovations and quality in our products. However, it may be difficult for us to compete with lower priced products
offered by our competitors and there can be no assurance that our customers will continue to choose our products over products offered by our
competitors. If our products, markets and services are not competitive, we may experience a decline in sales volume, an increase in price
discounting and a loss of market share, which would adversely impact our revenues, margin and the success of our operations.
Third parties may also initiate litigation to challenge the validity of our patents or claims, allege that we infringe upon their patents, violate our
patents or they may use their resources to design comparable products that avoid infringing our patents. Regardless of whether such litigation is
successful, such litigation could significantly increase our costs and divert management’s attention from the operation of our business, which
could adversely affect our results of operations and financial condition.
Disruption in the availability of, quality, or increases in the cost of, raw materials and components that we purchase or labor
required to manufacture our products could negatively impact our operating results or financial condition.
Our sales growth, expanding geographical footprint, and reliance on sole-source vendors heighten supply chain risks, including potential
credit issues among suppliers and disruptions due to limited global production capacity. Sole-sourcing increases concentration risk and
vulnerability to defects in highly customized components, which could lead to quality issues, returns, or production delays. Modularization and
outsourcing key component designs may further increase reliance on sole suppliers and risk loss of proprietary control.
Vendors failing to meet quality standards could harm our reputation and sales. Supply chain disruptions, cost inflation, and skilled labor
shortages negatively impact financial results and gross profit margins. Wage inflation from labor shortages may persist unless mitigated
effectively. Government fiscal policies, tariffs, and import restrictions could further raise costs, reduce product demand, or limit raw material
sourcing.
Global supply chain disruptions, natural disasters, tariffs, and limited supplier capacity have previously caused shortages of key components,
parts, and accessories. Reliance on single suppliers exacerbates these challenges. Continued or new disruptions due to financial hardship,
pandemics, natural disasters, or climate change-related events could impede our ability to source necessary materials, adversely affecting
production, operations, and financial performance.
9
Table of Contents
Increasing cost pressures could negatively impact our ability to achieve our strategic objectives and affect our financial results.
We are dependent on key suppliers to make certain materials available at a contracted price. Labor, overhead, and material costs have
increased and we may not be able to offset these increased manufacturing costs with a higher finished product price. We also may not be able
to push those direct cost increases onto our customers in a timely manner given the competitive environment. A decline in demand for our
products may have a direct impact on our ability to achieve better pricing through volume discounts.
We are subject to product liability claims and product quality issues that could adversely affect our operating results or financial
condition.
Our business exposes us to potential product liability risks that are inherent in the design, manufacturing and distribution of our products. If
products are used incorrectly by our customers, injury may result leading to product liability claims against us. Some of our products or product
improvements may have defects or risks that we have not yet identified that may give rise to product quality issues, liability and warranty claims.
Quality issues may also arise due to changes in parts or specifications with suppliers and/or changes in suppliers. If product liability claims are
brought against us for damages that are in excess of our insurance coverage or for uninsured liabilities and it is determined we are liable, our
business could be adversely impacted. Any losses we suffer from any liability claims, and the effect that any product liability litigation may have
upon the reputation and marketability of our products, may have a negative impact on our business and operating results. We could experience
a material design or manufacturing failure in our products, a quality system failure, other safety issues, or heightened regulatory scrutiny that
could warrant a recall of some of our products. Any unforeseen product quality problems could result in loss of market share, reduced sales and
higher warranty expense.
Operational Risks
Our ability to effectively operate our Company could be adversely affected if we are unable to attract and retain key personnel and
other highly skilled employees, provide employee development opportunities and create effective succession planning strategies.
Our growth strategy, expanding global footprint, changing workforce demographics and increased improvements in technology and business
processes designed to enhance the customer experience are putting increased pressure on human capital strategies designed to attract, retain
and develop top talent.
Our continued success will depend on, among other things, the skills and services of our executive officers and other key personnel. Our
ability to attract and retain highly qualified managerial, technical, manufacturing, research, sales and marketing personnel also impacts our ability
to effectively operate our business. As companies grow and increase their hiring activities, there is an inherent risk of increased employee
turnover and the loss of valuable employees in key positions, especially in emerging markets. We believe the increased loss of key personnel
within a concentrated region could adversely affect our sales performance.
We may not be able to develop or manage strategic planning and growth processes or the related operational plans to deliver on
our strategies and establish a broad organization alignment, thereby impairing our ability to achieve future performance expectations.
We are continuing to refine our global company strategy to guide our next phase of performance as our structure has become more
complex. We continue to consolidate and reallocate resources as part of our ongoing efforts to optimize our cost structure and to drive
synergies. Our operating results may be negatively impacted if we are unable to implement new processes and manage organizational changes,
which include changes to our go-to-market strategy, systems and processes; simultaneous focus on expense control and growth; and
introduction of alternative cleaning methods. In addition, if we do not effectively realize and sustain the benefits that these transformations are
designed to produce, we may not fully realize the anticipated savings of these actions or they may negatively impact our ability to serve our
customers or meet our strategic objectives.
10
Table of Contents
Complications with the design or implementation of our new Enterprise Resource Planning ("ERP") system that could adversely
impact our business and operations.
We rely extensively on information systems and technology to manage our business and support our growth strategy. Many of these
systems require significant upgrades to align with our enterprise strategy and meet the demands of the current business environment,
particularly with our focus on customer-facing technologies. However, limitations in resources and expertise may hinder our ability to upgrade
these systems efficiently, potentially resulting in significant expenses, operational inefficiencies, and challenges in delivering improved
technology solutions to our customers.
As part of our enterprise strategy, we are implementing a global enterprise resource planning ("ERP") system to modernize our financial and
operational systems, enhance functionality, and provide timely information to management. While we anticipate increased efficiencies by
standardizing processes and leveraging a common cloud-based system, the implementation process has been complex and resource-intensive,
requiring substantial financial and personnel investments.
Risks associated with this migration include:
•
Significant capital and operating expenditures;
•
Disruptions to domestic and international supply chains;
•
Disruption in customer experience;
•
Delays or inaccuracies in fulfilling orders or processing payments;
•
Disruption to internal controls and reporting processes; and
•
Increased demands on management and staff time, potentially detracting from other corporate initiatives.
If we are unable to successfully design, implement, and stabilize the ERP system, our financial position, operational performance, and
liquidity could be adversely impacted. Furthermore, ineffective system implementation or performance could comprise our internal controls over
financial reporting, delay required filings, or disrupt our ability to meet operational and customer demands.
We may encounter risks to our information technology ("IT") infrastructure, such as access and security, that may not be
adequately designed to protect critical data and systems from theft, corruption, unauthorized usage, viruses, sabotage or
unintentional misuse.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to IT systems to
sophisticated and targeted measures known as advanced persistent threats, directed at the Company, its products and its customers. We
experience cybersecurity threats and incidents from time to time; however, to date, none have been material. We seek to deploy comprehensive
measures to deter, prevent, detect, react to and mitigate these threats, including identity and access controls, data protection, vulnerability
assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems.
Despite these efforts, cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation,
destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the
disruption of business operations. The potential consequences of a material cybersecurity incident include financial loss, reputational damage,
litigation with third parties, theft of intellectual property, diminution in the value of our investment in research, development and engineering, and
increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could
adversely affect our competitiveness and results of operations.
We may be unable to conduct business if we experience a significant business interruption in our IT systems, manufacturing
plants or distribution facilities for a significant period of time.
We rely on our IT systems, manufacturing plants and distribution facilities to efficiently operate our business. If we experience an interruption
in the functionality in any of these items for a significant period of time for any reason, we may not have adequate business continuity planning
contingencies in place to allow us to
11
Table of Contents
continue our normal business operations on a long-term basis. In addition, the increase in customer-facing technology raises the risk of a lapse
in business operations. Therefore, significant long-term interruption in our business could cause a decline in sales, an increase in expenses and
could adversely impact our financial results.
Our ability to manage the health and safety of our global workforce may lead to increased business disruption and financial
penalties.
We remain focused on the health and safety measures that impact our business from a manufacturing perspective. Our manufacturing
teams monitor the effectiveness of our wellness and safety programs. The Company may be required to make enhancements and incur costs
related to any new health guidelines and protocols to adapt to new health crises, which may adversely affect our business, financial conditions,
or operating results.
We may consider acquisitions of suitable candidates to accomplish our growth objectives. We may not be able to successfully
integrate the businesses we acquire to achieve operational efficiencies, including synergistic and other benefits of acquisition.
We may consider, as part of our growth strategy, supplementing our organic growth through acquisitions of complementary businesses or
products. We have engaged in acquisitions in the past and we may determine that future acquisitions may provide meaningful opportunities to
grow our business and improve profitability. Acquisitions allow us to enhance the breadth of our product offerings and expand the market and
geographic participation of our products and services.
However, our success in growing by acquisition is dependent upon identifying businesses to acquire, integrating the newly acquired
businesses with our existing businesses and complying with the terms of our credit facilities. We may incur difficulties in the realignment and
integration of business activities when assimilating the operations and products of an acquired business or in realizing projected efficiencies,
cost savings, revenue synergies and profit margins. Acquired businesses may not achieve the levels of revenue, profit, productivity or otherwise
perform as expected. We are also subject to incurring unanticipated liabilities and contingencies associated with an acquired entity that are not
identified or fully understood in the due diligence process. Current or future acquisitions may not be successful or accretive to earnings if the
acquired businesses do not achieve expected financial results.
In addition, we may record significant goodwill or other intangible assets in connection with an acquisition. We are required to perform
impairment tests at least annually and whenever events indicate that the carrying value may not be recoverable from future cash flows. If we
determine that any intangible asset values need to be written down to their fair values, this could result in a charge that may be material to our
operating results and financial condition.
Inadequate funding or insufficient innovation of new technologies may result in an inability to develop and commercialize new
innovative products and services.
We strive to develop new and innovative products and services to differentiate ourselves in the marketplace. New product development
relies heavily on our financial and resource investments in both the short-term and long-term. If we fail to adequately fund product development
projects or fund a project which ultimately does not gain the market acceptance we anticipated, we risk not meeting our customers' expectations,
which could result in decreased revenues, declines in margin and loss of market share.
We may encounter risks related to our business transformation and strategic initiatives.
Our ability to achieve growth, competitiveness, and long-term successes depends on the effective execution of our ongoing business
transformation and global strategies. However, the scope and complexity of these initiatives present significant risks. Challenges in managing
this transformation effectively could result in operational disruptions, delays, or failure to realize anticipated benefits. Specific risks include:
•
Employee resistance and retention challenges: employees may resist changes due to concerns for job security, discomfort with new
technologies and processes, or misalignment with organizational priorities.
12
Table of Contents
Ineffective execution of our employee value proposition strategy could exacerbate these issues, resulting in retention challenges,
reduced morale, and lower workforce productivity.
•
Resource constraints: successful business transformation requires adequate financial, human, and technological resources. Insufficient
or ineffective allocation of these resources could impede our ability to execute transformation initiatives.
Completion of our business transformation may take longer than expected, and there is no guarantee that the intended outcomes will be fully
realized or realized within the anticipated timeframe. If we are unable to effectively manage these risks, our business, financial condition and
operating results may be materially and adversely affected.
ITEM 1B – Unresolved Staff Comments
None.
ITEM 1C – Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity processes to safeguard our
information systems and protect the confidentiality, integrity, and availability of our data. Our approach to assessing, prioritizing, and effecting
cybersecurity processes and projects is based on standards from the National Institute of Standards and Technology ("NIST").
We have established an enterprise risk management ("ERM") program that considers our enterprise strategy, information from internal
stakeholders, and information from external sources (e.g., emerging risks and trends, evaluations by third parties, and best practices) to identify,
assess, categorize, and monitor risks including cybersecurity risks. The ERM program develops enterprise risk profiles to address individual risk
drivers, develop action plans, and monitor against key risk indicators. At least annually, the ERM program is presented to our Board, Audit
Committee, and members of management.
We have strategically integrated cybersecurity risk management into our broader ERM program to promote a company-wide culture of
cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making
processes. Our strategy includes regular employee training and awareness on cybersecurity risks and related best practices, required password
complexity, the use of multi-factor authentication, information security protocols, anti-virus and anti-ransomware software, a patch management
program, the execution of tabletop exercises on a periodic basis, established policies and protocols for cyber incident response planning and
reporting, and ongoing internal cybersecurity testing. Our risk management team works closely with our IT department to continuously evaluate
and address cybersecurity risks in alignment with our business objectives and operational needs.
We test our ability to respond to cybersecurity incidents on a recurring basis. Additionally, we engage third-party service providers to assist
with the ongoing monitoring for cybersecurity events and incidents, as well as to complete risk quantification analysis and perform penetration
and vulnerability testing. If any gaps are identified, the third-party service providers also assist with incident assessment and response. We
conduct thorough up-front security assessments of all third-party providers before engagement, led by our Vice President, Chief Information
Office ("CIO") and our cybersecurity team, and we maintain ongoing monitoring to ensure compliance with our cybersecurity standards. This
approach is designed to mitigate risks related to security incidents originating from third parties.
We have not encountered cybersecurity incidents or identified risks from cybersecurity threats that have materially impaired our operations
or financial standing.
Governance
Within our organization, we have a management team responsible for assessing and managing cybersecurity risks. The team is led by our
CIO and consists of the Cyber Security Incident Response Team ("CSIRT") and internal audit personnel. The CSIRT is comprised of IT
management and experienced cybersecurity personnel. The role of the CSIRT is to promptly handle an incident so that containment,
investigation, and recovery can occur quickly. Where third-party services are leveraged, they ensure they are
13
Table of Contents
engaged as necessary. The CSIRT Leader oversees and prioritizes actions during an incident's detection, analysis, and containment. They are
also responsible for conveying the special requirements of high severity incidents to the rest of the organization as well as communicating
potential impacts to the CIO. Additionally, they are responsible for understanding the service level agreements ("SLAs") in place with third
parties, and the role third parties may play in specific response scenarios. Effective February 2, 2024, our CIO retired from employment and
continued to serve as our CIO as a contractor through May 2024. During that time, he continued his existing duties including oversight and
management of cybersecurity risk. In June 2024, the Company announced the hiring of a new CIO who will lead the enterprise technology team.
The new CIO has over 30 years of experience in IT, enterprise security, and cyber risk management and has previously held global IT
infrastructure and business solutions roles. In addition, our CSIRT Leader has 30 years of technology and cybersecurity experience and has
previously held data security and global IT infrastructure positions at risk management and asset protection services companies.
The CIO and CSIRT, in combination with the Senior Vice President, Chief Transformation Officer and CEO, play a pivotal role in informing
the Audit Committee of the Board of Directors on cybersecurity risks. The Audit Committee is central to the Board's oversight of cybersecurity
risks and bears the primary responsibility for this domain. The Audit Committee is composed of Board members with diverse expertise including
risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
The Vice President, CIO provides comprehensive quarterly briefings to the Audit Committee. These briefings encompass a broad range of
topics, including:
•
Current cybersecurity landscape and emerging threats;
•
Status of ongoing cybersecurity initiatives and strategies;
•
Incident reports and learnings from any cybersecurity events; and
•
Compliance with regulatory requirements and industry standards.
In addition to our quarterly meetings, the Audit Committee, CIO and CEO maintain an ongoing dialogue regarding emerging or potential
cybersecurity risks. The CIO and CEO provide updates on any significant developments in the cybersecurity domain, ensuring the Board's
oversight is proactive and responsive. The Audit Committee actively participates in strategic decisions related to cybersecurity, as well as
tabletop exercises for tactical response readiness. This involvement ensures that cybersecurity considerations are integrated into the broader
strategic objectives of Tennant Company. The Audit Committee conducts an annual review of the Company's cybersecurity posture and the
effectiveness of its risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of
cybersecurity efforts with the overall risk management framework.
ITEM 2 – Properties
The Company’s corporate offices are owned by the Company and are located in the Minneapolis, Minnesota metropolitan area.
Manufacturing facilities located in Golden Valley, Minnesota; Holland, Michigan; Uden, The Netherlands; and the Italian cities of Venice,
Cremona and Reggio Emilia and in the Province of Padua are owned by the Company. Manufacturing facilities located in Louisville, Kentucky;
São Paulo, Brazil; Hefei, China; and another facility in the Province of Padua are leased to the Company. In addition, we use a dedicated, third-
party plant in Germany that specially manufactures heavy-duty stainless steel scrubbers and sweepers to IPC designs. IPC also owns a minor
tools and supplies assembly operation in China to service local customers. The facilities are in good operating condition, suitable for their
respective uses and adequate for current needs.
Sales offices, warehouse and storage facilities are leased in various locations in the United States, Canada, Mexico, Brazil, Portugal, Spain,
Italy, Germany, France, The Netherlands, Belgium, Norway, the United Kingdom, Japan, China, India, Australia, and New Zealand. The
Company’s facilities are in good operating condition, suitable for their respective uses and adequate for current needs.
Further information regarding the Company’s property and lease commitments is included in Note 15 to the consolidated financial
statements.
14
Table of Contents
ITEM 3 – Legal Proceedings
Refer to Note 16. Commitments and Contingencies in the consolidated financial statements.
ITEM 4 – Mine Safety Disclosures
Not applicable.
15
Table of Contents
PART II
ITEM 5 – Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
MARKET INFORMATION – Tennant's common stock is traded on the New York Stock Exchange, under the ticker symbol TNC. As of
February 7, 2025, there were 246 shareholders of record.
DIVIDEND INFORMATION – Cash dividends on Tennant’s common stock have been paid for 80 consecutive years. Tennant’s annual cash
dividend payout increased for the 53 consecutive year to $1.135 per share in 2024, an increase of $0.06 per share over 2023. Dividends are
generally declared each quarter. On February 11, 2025, the Company announced a quarterly cash dividend of $0.295 per share payable March
14, 2025, to shareholders of record on February 28, 2025.
DIVIDEND REINVESTMENT OR DIRECT DEPOSIT OPTIONS – Shareholders have the option of reinvesting quarterly dividends in
additional shares of Company stock or having dividends deposited directly to a bank account. The Transfer Agent should be contacted for
additional information.
TRANSFER AGENT AND REGISTRAR – Shareholders with a change of address or questions about their account may contact:
Equiniti Trust Company
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0854
(800) 468-9716
SHARE REPURCHASES – Share repurchases are made from time to time in the open market or through privately negotiated transactions.
During the twelve months ended December 31, 2024, the Company paid $19.6 million to repurchase 198,352 shares of its common stock. On
October 31, 2016, the Board of Directors authorized the repurchase of 1,000,000 shares of our common stock. Under the share repurchase
program, 623,061 shares remain authorized.
For the Quarter Ended
December 31, 2024
Total Number of
Shares
Purchased
Average Price Paid
Per Share
Total Number of
Shares Purchased
as Part
of Publicly
Announced Plans
or
Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
October 1–31, 2024
— $
—
—
651,059
November 1–30, 2024
28,505 $
89.29
27,998
623,061
December 1–31, 2024
— $
—
—
623,061
Total
28,505 $
79.50
27,998
623,061
Includes 507 shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by employees who
exercised stock options or restricted stock under employee share-based compensation plans.
On February 11, 2025, the Board of Directors authorized the repurchase of up to 2,000,000 shares. For further information regarding
stock repurchase activity, see Note 14 Shareholders' Equity to the consolidated financial statements.
rd
(a)
(b)
(a)
(b)
16
Table of Contents
STOCK PERFORMANCE GRAPH – The following graph compares the cumulative total shareholder return on Tennant’s common stock to
two indices: S&P SmallCap 600 and S&P 500 Industrials (Sector). The graph below compares the performance for the last five fiscal years,
assuming an investment of $100 on December 31, 2019, including the reinvestment of all dividends.
2019
2020
2021
2022
2023
2024
Tennant Company
$
100
$
91
$
107
$
82
$
126
$
112
S&P SmallCap 600
$
100
$
111
$
141
$
118
$
137
$
149
S&P 500 Industrials (Sector) (TR)
$
100
$
111
$
135
$
127
$
150
$
176
Source: Zacks Investment Research, Inc.
ITEM 6 – [Reserved]
17
Table of Contents
ITEM 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") provides a comparison of
the Company's results of operations, as well as liquidity and capital resources for the years ended December 31, 2024 and 2023. The MD&A
should be read in conjunction with the Company's consolidated financial statements and notes included in Item 8 of this Annual Report.
Throughout this MD&A, the Company refers to measures used by management to evaluate performance, including financial measures that are
not defined under generally accepted accounting principles ("GAAP") in the U.S. Net sales excluding foreign currency translation (i.e., organic
sales) is not a measure of financial performance under GAAP; however, the Company believes it is useful in understanding its financial results
and provides comparable measures for understanding the operating results of the Company between different periods.
The year-over-year comparisons in this MD&A are as of and for the years ended December 31, 2024 and December 31, 2023, unless stated
otherwise. The discussion of 2022 results and related year-over-year comparisons as of and for the years ended December 31, 2023 and
December 31, 2022 are found in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of
our Form 10-K for the year ended December 31, 2023.
Overview
Tennant Company is a world leader in designing, manufacturing and marketing solutions that 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 factories and warehouses, distribution centers, office buildings, public venues such as arenas and stadiums, 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.
Macroeconomic Events
Recent geopolitical and macroeconomic events have led to economic uncertainty and volatility globally. Additionally, shifts in the U.S. and
international government policies and priorities such as changes in tariffs, trade barriers, and price and exchange controls could impact demand
for our products and services, disrupt supply chain, and ultimately have an adverse effect on our business.
Our business is influenced by customer spending and global demand for our products. We are closely monitoring challenging business
conditions in APAC, especially in China, which continues to experience market saturation, leading to decreased demand for our mid-tier products
and heightened pricing pressures in the region. In Australia, there are signals of reduced demand as customers are delaying equipment orders
or moving to rental units. To address these pressures, we've implemented adaptive measures, such as streamlining operations and refining cost
management strategies.
Amid the uncertainty of a slowing global economy, global inflation, and geopolitical challenges, we continue to remain focused on long-term
resilience. While we are unable to predict the full effect of these geopolitical and macroeconomic events and how they might evolve, we are
committed to supporting our customers, maintaining operational stability, and navigating the volatile global landscape with a focus on sustainable
growth.
See the "Risk Factors" section in Part I, Item 1A of this Annual Report for further discussion of the possible impact of the above conflicts and
macroeconomic events on our business and financial results.
Outlook
As we look ahead to 2025, while we expect to face a significant backlog headwind in 2025, the underlying business continues to drive year-
over-year order growth. Given the robust reception to our recent product
18
Table of Contents
introductions and a solid pipeline of upcoming products, combined with expanded go-to-market strategies and a disciplined pricing approach, we
are well positioned to continue to execute our enterprise growth strategy effectively.
Historical Results
The following table compares the historical results of operations for the years ended December 31, 2024, and 2023 in dollars and as a
percentage of net sales (in millions, except per share amounts and percentages):
2024
%
2023
%
Net sales
$
1,286.7
100.0
$
1,243.6
100.0
Cost of sales
736.7
57.3
715.8
57.6
Gross profit
550.0
42.7
527.8
42.4
Selling and administrative expense
391.9
30.5
352.6
28.4
Research and development expense
43.8
3.4
36.6
2.9
Operating income
114.3
8.9
138.6
11.1
Interest expense, net
(9.1)
(0.7)
(13.5)
(1.1)
Net foreign currency transaction gain
0.1
—
0.3
—
Other expense, net
(0.5)
—
(1.6)
(0.1)
Income before income taxes
104.8
8.1
123.8
10.0
Income tax expense
21.1
1.6
14.3
1.1
Net income
83.7
6.5
109.5
8.8
Net income per share - diluted
$
4.38
$
5.83
Net Sales
Consolidated net sales in 2024 totaled $1,286.7 million, a 3.5% increase as compared to consolidated net sales of $1,243.6 million in 2023.
The components of the consolidated net sales change were as follows:
Twelve Months Ended
December 31,
2024 vs. 2023
Price
2.5%
Volume
0.7%
Organic growth
3.2%
Acquisitions
0.7%
Foreign currency
(0.4)%
Total growth
3.5%
The 3.5% increase in consolidated net sales was driven by:
•
Organic sales growth of 3.2% attributed to price realization across all regions, favorable product and channel mix, and higher equipment
sales in the Americas, partly offset by volume declines in the EMEA and APAC regions;
•
Inorganic sales growth of 0.7% driven by the acquisition of TCS; partly offset by
•
A net unfavorable impact from foreign currency exchange of approximately 0.4%.
19
Table of Contents
The following table sets forth annual net sales by geographic area and the related percentage change from the prior year (in millions, except
percentages):
2024
%
2023
%
Americas
$
888.5
5.7
$
840.3
7.2
Europe, Middle East and Africa (EMEA)
318.5
1.3
314.4
(9.1)
Asia Pacific (APAC)
79.7
(10.3)
88.9
(15.8)
Total
$
1,286.7
3.5
$
1,243.6
0.1
Americas
Net sales in the Americas were $888.5 million in 2024, an increase of 5.7% from 2023 driven by:
•
Organic sales growth of 6.3%, primarily due to price realization and volume increases in equipment and service, partly offset by volume
declines in parts and consumables in North America; and
•
A net unfavorable impact from foreign currency exchange of approximately 0.6%.
Europe, Middle East and Africa ("EMEA")
EMEA net sales were $318.5 million in 2024, an increase of 1.3% from 2023 driven by:
•
Inorganic sales growth of 2.6% driven by the acquisition of TCS;
•
A net favorable impact from foreign currency exchange of approximately 0.3%; partly offset by
•
Organic sales decrease of 1.6%, primarily due to volume declines in both equipment sales and parts and consumables, partly offset by
price realization in all categories. EMEA volumes were impacted by weak economic conditions and a small contribution from backlog
reduction.
Asia Pacific ("APAC")
APAC net sales were $79.7 million in 2024, a decrease of 10.3% from 2023 driven by:
•
Organic sales decrease of 9.5%, primarily driven by volume declines partly offset by price realization in China and Australia; and
•
A net unfavorable impact from foreign currency exchange of approximately 0.8%.
Backlog
Backlog is one of the many indicators of business conditions in the Company's markets. Our order backlog was approximately $61.5 million
at December 31, 2024, compared to $186.2 million at December 31, 2023. From 2020 to 2022, our backlog grew to unusually high levels due to
supply chain constraints resulting from the COVID-19 pandemic. This trend began to reverse in 2023 as supply chain conditions improved,
allowing us to obtain key component parts and increase production levels. As a result, our order backlog at December 31, 2024 reflects a return
to normalized levels.
Gross Profit
Gross profit margin of 42.7% was 30 basis points higher in 2024 compared to 2023. The margin rate increase was the result of pricing and
cost-out initiative efforts, which outpaced the impact of inflation in the year. Strong margin rates are also supported by favorable product mix,
including the reduction of industrial equipment backlog in the first half of 2024.
Operating Expenses
Selling and Administrative Expense
Selling and Administrative expense ("S&A expense") was $391.9 million in 2024, an increase of $39.3 million compared to 2023. As a
percentage of net sales, S&A expense in 2024 increased 210 basis points to 30.5% from 28.4% in 2023. The S&A expense increase was
primarily driven by Enterprise Resource Planning
20
Table of Contents
("ERP") modernization costs, legal contingency costs related to an intellectual property dispute, restructuring-related charges associated with our
global workforce realignment, and transaction and integration costs.
Research and Development Expense
Research and Development ("R&D") expense was $43.8 million, or 3.4% of net sales, in 2024, with R&D as a percentage of sales increasing
50 basis points compared to 2023.
We continue to invest in developing innovative products and technologies at levels necessary to propel our technology, innovative leadership
position and drive growth.
Total Other Expense, Net
Interest Expense, Net
Interest expense, net was $9.1 million in 2024, a decrease of $4.4 million compared to 2023. The decrease was the result of lower weighted
average outstanding borrowings. The following table compares the weighted average outstanding borrowings, average interest rate, interest
expense and interest income for the years ended December 31 (in millions, except percentages):
2024
2023
Weighted Average Outstanding Borrowings
$
211.8
$
270.4
Average interest rate
6.42 %
6.27 %
Interest expense
13.6
17.0
Interest income
(4.5)
(3.5)
Interest expense, net
$
9.1
$
13.5
Our debt portfolio as of December 31, 2024 was comprised of debt predominately in U.S. dollars. The Company manages its floating rate
debt exposure using fixed rate interest rate swaps to reduce the Company's risk of the possibility of increased interest costs.
Foreign Currency Transaction Gain/Loss
Net foreign currency transaction gain was $0.1 million in 2024, compared to a $0.3 million gain in 2023. The favorable impact was primarily
due to hedging gains on foreign denominated receivables.
Income Taxes
The effective tax rate for 2024 was 20.1% compared to 11.6% in 2023. The increase in the effective tax rate was primarily driven by the
value of certain non-cash exceptional tax items. Both the 2024 and 2023 tax rates include benefits related to a reduction to a deferred tax liability
on undistributed foreign earnings as those cumulative earnings were reduced by current year statutory book losses. We do not expect similar
benefits in future years. These non-cash events had impacts of (3.7%) in 2024 and (12.0%) in 2023. Absent these benefits the effective tax rate
for 2024 and 2023 would be 23.8% and 23.6%, respectively.
In December 2021, the Organization for Economic Cooperation and Development ("OECD"), which is an international public policy setting
organization comprised of member countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15%
(the "Pillar Two rule"). Member states have begun implementing the rules through local legislation and the OECD continues to refine technical
guidance. Member states have begun implementing the rules through local legislation and the OECD continues to refine technical guidance. We
have considered the applicable developments under the Pillar Two rules and there is no material impact on the 2024 consolidated financial
statements.
In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when
the tax impact is zero or immaterial. No deferred taxes have been provided for withholding taxes or other taxes that would result in repatriation of
our foreign investments to the U.S.
21
Table of Contents
Liquidity and Capital Resources
Liquidity
Our primary liquidity needs are to fund working capital, fund investments, service our debt, maintain cash reserves and invest in capital
expenditures. Our sources of liquidity include cash generated from operations, borrowings under our revolving credit facility and from time to
time, debt and equity offerings. We believe our current resources are sufficient to meet our working capital requirements for our current business
for at least the next 12 months and thereafter for the foreseeable future.
Cash, cash equivalents and restricted cash totaled $99.8 million at December 31, 2024, as compared to $117.1 million as of December 31,
2023. Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to subsidiaries as
needed. Our current ratio was 2.0 as of December 31, 2024 and 2.1 as of December 31, 2023. Our primary working capital, which is comprised
of accounts receivable, inventories and accounts payable was $316.0 million as of December 31, 2024 and $312.1 million as of December 31,
2023. Our debt-to-capital ratio was 24.3% as of December 31, 2024, compared to 25.8% as of December 31, 2023.
As of December 31, 2024, we had letters of credit and bank guarantees outstanding in the amount of $3.2 million, leaving approximately
$449.3 million of unused borrowing capacity on our revolving facility.
On February 11, 2025, the Company's Board of Directors authorized a quarterly cash dividend of $0.295 per share payable on March 14,
2025, to shareholders of record at the close of business on February 28, 2025.
Cash Flow from Operating Activities
Net cash provided by operating activities in 2024 was $89.7 million compared to net cash provided by operating activities of $188.4 million in
2023. The decrease in cash provided was the result of consumption of working capital, mainly related to inventories, accounts receivable and
bonus payouts, and spend on our ERP modernization project of $37.3 million.
Cash Flow from Investing Activities
Net cash used in investing activities in 2024 was $78.4 million compared to net cash used in investing activities of $23.2 million in 2023. The
increase in cash outflows was primarily driven by cash used for the investment in Brain Corp of $32.1 million and cash used, net of cash
acquired, for the acquisition of TCS of $25.7 million.
Cash Flow from Financing Activities
Net cash used in financing activities in 2024 was $25.2 million compared to net cash used in financing activities of $122.6 million in 2023.
The decrease in cash outflows was primarily driven by proceeds from exercises of stock options decreased net repayments of borrowings, partly
offset by dividend payments and share repurchases.
Stock Repurchase Program
On February 11, 2025, our board of directors authorized the repurchase of up to 2,000,000 shares of our common stock. This increase was
in addition to the remaining authorized shares under our prior common stock repurchase program that was authorized on October 31, 2016 (the
"Program"). Share repurchases may be made on an opportunistic basis through open market transactions, privately negotiated transactions, or
by other means in accordance with applicable federal securities laws. We are not obligated to purchase any shares, and there is no set date that
the program will expire. Our board of directors, at its discretion, may increase or decrease the number of authorized shares or terminate the
Program at any time.
During the year ended December 31, 2024, we repurchased 198,352 shares under the Program, with 623,061 shares of common stock
remaining.
For more information related to our stock repurchases, see Note 14, Shareholders' Equity, of the Notes to Consolidated Financial
Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.
22
Table of Contents
Cash Requirements
The Company believes the liquidity available from the combination of expected cash generated by operating activities, existing cash and
available credit under existing credit facilities will be sufficient to meet its short-term and long-term cash requirements. Significant contractual
obligations include principal and interest payments on long-term debt (Note 9) and operating lease commitments (Note 15). We also have
contractual purchase obligations of approximately $62 million for 2025.
Newly Issued Accounting Guidance
See Note 2 to the consolidated financial statements for information on newly adopted accounting pronouncements.
In October 2023, the FASB issued ASU 2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure
Update and Simplification Initiative, which aims to clarify or improve disclosure and presentation requirements on a variety of topics and align the
requirements in the FASB accounting standard with the Securities and Exchange Commission regulations. This guidance is effective for the
Company no later than June 30, 2027. We do not expect the amendments in this update to have a material impact on our consolidated financial
statements.
In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended
to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for
enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendments in
this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial
statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is
permitted. We are currently evaluating the impact of adoption on our financial disclosures.
In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Topic 220) - Disaggregation of Income Statement Expenses, which requires disaggregation of certain income statement expense
captions into specified categories to be disclosed within the notes to the financial statements, but does not change the expense captions on the
consolidated income statement. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal
years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued
for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial
statements. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
No other new accounting pronouncements issued but not yet effective have had, or are expected to have, a material impact on our results of
operations or financial position.
Critical Accounting Policies and Estimates
Our consolidated financial statements are based on the selection and application of accounting principles generally accepted in the United
States of America, which require us to make estimates and assumptions about future events that affect the amounts reported in our consolidated
financial statements and the accompanying notes. Our significant accounting policies are described in Note 1 to the consolidated financial
statements. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the
exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to the consolidated financial
statements. We believe that the following policies may involve a higher degree of judgment and complexity in their application and represent the
critical accounting policies used in the preparation of our consolidated financial statements. If different assumptions or conditions were to prevail,
the results could be materially different from our reported results.
Goodwill – Goodwill represents the excess of cost over the fair value of net assets of businesses acquired and is allocated to our reporting
units at the time of the acquisition. We analyze goodwill on an annual basis and when an event occurs or circumstances change that may reduce
the fair value of a reporting unit below its carrying amount. We have the option of first analyzing qualitative factors to determine whether it is
more likely
23
Table of Contents
than not that the fair value of any reporting unit is less than its carrying amount. However, we may elect to perform a quantitative goodwill
impairment test in lieu of the qualitative test. An entity must recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting unit’s fair value. Subsequent reversal of goodwill impairment charges is not permitted.
When we perform a qualitative goodwill test, we analyze qualitative factors to determine whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill
impairment test. If the qualitative test indicates there may be an impairment, we perform the quantitative test, which measures the amount of the
goodwill impairment, if any. To perform the quantitative test, we calculate the fair value of each reporting unit, primarily utilizing the income
approach and market approach. The income approach is based on discounted cash flow models that use reporting unit estimates for forecasted
future financial performance, including revenues, margins, operating expenses, capital expenditures, depreciation, amortization, tax and discount
rates. The market approach is based on assumptions related to earnings before interest, taxes, depreciation, and amortization ("EBITDA")
multiples. These estimates are developed as part of our planning process based on assumed growth rates, along with historical data and various
internal estimates. Projected future cash flows are then discounted to a present value employing a discount rate that properly accounts for the
estimated risk-adjusted weighted-average cost of capital relevant to each reporting unit.
We perform our annual goodwill impairment analysis as of October 1 and when an event occurs or circumstances change that may reduce
the fair value of a reporting unit below its carrying amount.
In 2024, we elected to perform the quantitative test on the EMEA and APAC reporting units. Our test indicated that the fair value was
substantially in excess of its carrying value. There was no goodwill impairment in any of our reporting units as of our annual assessment date.
We had goodwill of $185.6 million and $187.4 million at December 31, 2024 and 2023, respectively.
Income Taxes – We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves
estimating our actual current tax obligations based on expected income, statutory tax rates and tax planning opportunities in the various
jurisdictions. We also establish reserves for uncertain tax matters that are complex in nature and uncertain as to the ultimate outcome. Although
we believe that our tax return positions are fully supportable, we consider our ability to ultimately prevail in defending these matters when
establishing these reserves. We adjust our reserves in light of changing facts and circumstances, such as the closing of a tax audit. We believe
that our current reserves are adequate. However, the ultimate outcome may differ from our estimates and assumptions and could impact the
income tax expense reflected in our consolidated statements of income.
Tax law requires certain items to be included in our tax return at different times than the items are reflected in our results of operations.
Some of these differences are permanent, such as expenses that are not deductible in our tax returns, and some differences will reverse over
time, such as depreciation expense on property, plant and equipment. These temporary differences result in deferred tax assets and liabilities,
which are included within our consolidated balance sheets. Deferred tax assets generally represent items that can be used as a tax deduction or
credit in our tax returns in future years but have already been recorded as an expense in our consolidated statements of income. We assess the
likelihood that our deferred tax assets will be recovered from future taxable income, and, based on management’s judgment, to the extent we
believe that recovery is not more likely than not, we establish a valuation allowance against those deferred tax assets. The deferred tax asset
valuation allowance could be materially different from actual results because of changes in the mix of future taxable income, the relationship
between book and taxable income and our tax planning strategies. As of December 31, 2024, a valuation allowance of $3.3 million was recorded
against foreign and state tax credit carryforwards.
24
Table of Contents
Cautionary Factors Relevant to Forward-Looking Information
This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7, contains certain statements that are considered “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,”
“will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue” or similar words or the negative thereof. These statements do
not relate to strictly historical or current facts and provide current expectations of forecasts of future events. Any such expectations or forecasts
of future events are subject to a variety of factors. Particular risks and uncertainties presently facing us include:
•
Geopolitical and economic uncertainty throughout the world.
•
Ability to comply with global laws and regulations.
•
Changes in foreign currency translation rates.
•
Ability to adapt to price sensitivity.
•
Competition in our business.
•
Fluctuations in the cost, quality or availability of raw materials and purchased components.
•
Ability to adjust pricing to respond to cost pressures.
•
Unforeseen product liability claims or product quality issues.
•
Ability to attract, retain and develop key personnel and create effective succession planning strategies.
•
Ability to effectively manage strategic plan or growth processes.
•
Ability to implement our new ERP system.
•
Ability to successfully protect our information technology systems from cybersecurity risks.
•
Occurrence of a significant business interruption.
•
Ability to maintain the health and safety of our workforce.
•
Ability to complete and integrate acquisitions.
•
Ability to develop and commercialize new innovative products and services.
•
Ability to execute our business transformation strategy.
We caution that forward-looking statements must be considered carefully and that actual results may differ in material ways due to risks and
uncertainties both known and unknown. Information about factors that could materially affect our results can be found in Part I, Item 1A "Risk
Factors" of this Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking
statements and are cautioned not to place undue reliance on such forward-looking statements.
We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise, except as required by law. Investors are advised to consult any further disclosures by us in our filings with the SEC and in other
written statements on related subjects. It is not possible to anticipate or foresee all risk factors, and investors should not consider any list of such
factors to be an exhaustive or complete list of all risks or uncertainties.
25
Table of Contents
ITEM 7A – Quantitative and Qualitative Disclosures About Market Risk
Commodity Risk – We are subject to exposures resulting from potential cost increases related to our purchase of raw materials or other
product components. We do not use derivative commodity instruments to manage our exposures to changes in commodity prices such as steel,
oil, gas, lead and other commodities.
Various factors beyond our control affect the price of oil and gas, including, but not limited to, worldwide and domestic supplies of oil and
gas, political instability or armed conflict in oil-producing regions, the price and level of foreign imports, the level of consumer demand, the price
and availability of alternative fuels, domestic and foreign governmental regulation, weather-related factors and the overall economic
environment. We purchase petroleum-related component parts for use in our manufacturing operations. In addition, our freight costs associated
with shipping and receiving product and sales and service vehicle fuel costs are impacted by fluctuations in the cost of oil and gas.
We continue to focus on mitigating the risk of future raw material or other product component cost increases through supplier negotiations,
ongoing optimization of our supply chain, the continuation of cost-reduction actions and product pricing. The success of these efforts will depend
upon our ability to leverage our commodity spend in the current global economic environment. If the commodity prices increase significantly and
we are not able to offset the increases with higher selling prices, our results may be unfavorably impacted in the future.
Interest Rate Risk – Our debt portfolio as of December 31, 2024, was comprised of debt predominately denominated in U.S. dollars. We
are exposed to changes in interest rates as a result of borrowing activities with variable interest rates that impact interest incurred. The Company
manages its floating rate debt exposure using interest rate swaps. Fixed rate swaps are used to reduce the Company's risk of the possibility of
increased interest costs.
As of December 31, 2024, the Company's financial liabilities subject to changes in interest rates are $197.5 million of our revolving credit
facility borrowings. The Company entered into an aggregate $120 million notional amount of interest rate swaps effective December 1, 2022 that
exchange a variable rate of interest for a fixed rate of interest of 4.076% over the term of the agreements, which mature on December 1, 2026.
Assuming a hypothetical 50 basis point increase in short-term interest rates, with all other variables remaining constant, interest expense, net
would have increased by approximately $0.45 million in 2024.
Foreign Currency Exchange Rate Risk – Due to the global nature of our operations, we are subject to exposures resulting from foreign
currency exchange fluctuations in the normal course of business. Our primary exchange rate exposures are with the Euro, Australian and
Canadian dollars, British pound, Japanese yen, Chinese renminbi, Brazilian real and Mexican peso against the U.S. dollar. The direct financial
impact of foreign currency exchange includes the effect of translating profits from local currencies to U.S. dollars, the impact of currency
fluctuations on the transfer of goods between our operations in the United States and our international operations and transaction gains and
losses. In addition to the direct financial impact, foreign currency exchange has an indirect financial impact on our results, including the effect on
sales volume within local economies and the impact of pricing actions taken as a result of foreign exchange rate fluctuations.
In the normal course of business, we actively manage the exposure of our foreign currency exchange rate market risk by entering into
various hedging instruments with counterparties that are highly rated financial institutions. We may use foreign exchange purchased options or
forward contracts to hedge our foreign currency denominated forecasted revenues or forecasted sales to wholly owned foreign subsidiaries.
Additionally, we hedge our net recognized foreign currency assets and liabilities with foreign exchange forward contracts. We hedge these
exposures to reduce the risk that our net earnings and cash flows will be adversely affected by changes in foreign exchange rates. We do not
enter into any of these instruments for speculative or trading purposes to generate revenue.
These contracts are carried at fair value and have maturities between one and 12 months. The gains and losses on these contracts
generally approximate changes in the value of the related assets, liabilities or forecasted transactions. Some of the derivative instruments we
enter into do not meet the criteria for cash flow hedge accounting treatment; therefore, changes in fair value are recorded in foreign currency
transaction losses on our consolidated statements of income.
We use foreign currency exchange rate derivatives to hedge our exposure to fluctuations in exchange rates for anticipated intercompany
cash transactions between the Company and its subsidiaries.
26
Table of Contents
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps associated with an intercompany loan from a
wholly owned European subsidiary. We enter into these foreign exchange cross-currency swaps to hedge the foreign currency risk associated
with this intercompany loan, and accordingly, they are not speculative in nature. These cross-currency swaps are designated as fair value
hedges. As of December 31, 2024, these cross-currency swaps included €75.0 million of total notional value. As of December 31, 2024, the
aggregated scheduled interest payments over the course of the loan and related swaps amounted to €5.3 million. The scheduled maturity and
principal payment of the loan and related interest payments of €80.3 million are due in April 2027. Based on the fair value hedges outstanding as
of December 31, 2024, a 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $7.8 million in the fair value of
these contracts.
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps to hedge our exposure to adverse foreign
currency exchange rate movements between Tennant Company and a wholly owned European subsidiary. We enter into these fixed-to-fixed
cross-currency swap agreements to protect a designated monetary amount of the Company’s net investment in its Euro functional currency
subsidiary against the risk of changes in the Euro to U.S. dollar foreign exchange rate. These cross-currency swaps are designated as net
investment hedges. As of December 31, 2024, the cross-currency swaps included €75.0 million of total notional values. These swaps are
scheduled to mature in April 2027. Based on the net investment hedges outstanding as of December 31, 2024, a 10% appreciation of the U.S.
dollar compared to the Euro would result in a net gain of $7.8 million in the fair value of these contracts.
For further information regarding our foreign currency derivatives and hedging programs, see Note 11 to the consolidated financial
statements.
For details of the estimated effects of currency translation on the operations of our operating segments, see Part II, Item 7 – "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Other Matters – Management regularly reviews our business operations with the objective of improving and maximizing our financial
performance. As a result of this ongoing process to improve financial performance, we may incur additional restructuring charges in the future
which, if taken, could be material to our financial results.
27
Table of Contents
ITEM 8 – Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Tennant Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tennant Company and subsidiaries (the "Company") as of December 31,
2024 and 2023, the related consolidated statements of income, comprehensive income, cash flows, and equity, for each of the three years in the
period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in
conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 18, 2025,
expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill – EMEA Reporting Unit - Refer to Notes 1 and 8 of the consolidated financial statements
Critical Audit Matter Description
The Company’s annual evaluation of goodwill for impairment involved the comparison of the EMEA reporting unit’s fair value to its carrying
value. The Company determined the fair value using a combination of income and market approaches. The income approach utilized a
discounted cash flow model, which required management to make significant estimates and assumptions related to forecasts of future revenue,
profit margins, long-term growth rate, and discount rate. The market approach required management to make significant assumptions
28
Table of Contents
related to earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples. As of December 31, 2024, the goodwill balance for
the EMEA reporting unit was $151.1 million. The fair value of the EMEA reporting unit exceeded its carrying value, and therefore, no impairment
was recognized.
Given the significant judgments made by management to estimate the fair value of the EMEA reporting unit and the differences between its fair
value and carrying value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions regarding
forecasts of future revenue, profit margins, long-term growth rate, discount rate, and EBITDA multiples required a high degree of auditor
judgment and an increased extent of effort, including the need to involve fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenue, profit margins, long-term growth rate, discount rate, and EBITDA multiples for
the EMEA reporting unit included the following, among others:
•
We tested the effectiveness of controls over goodwill, including those over the underlying assumptions to forecast future revenue, long-
term growth rate, profit margins, the selection of the discount rate, and the selection of the EBITDA multiples.
•
We evaluated management’s ability to accurately forecast future revenues and profit margins by comparing actual results to
management’s historical forecasts.
•
We evaluated the reasonableness of management’s forecasted revenue and profit margins by comparing the forecasts to (1) historical
results, (2) internal communications between management and the Board of Directors, and (3) information included in Company press
releases as well as in analyst and industry reports of the Company and companies in its peer group.
•
With the assistance of our fair value specialists, we evaluated the valuation methodologies, the long-term growth rate and discount rate,
including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of
independent estimates and comparing those to the long-term growth rate and discount rate selected by management.
•
With the assistance of our fair value specialists, we evaluated the EBITDA multiples used in estimating fair value, including testing the
underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to
its guideline companies.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 18, 2025
We have served as the Company's auditor since 2019.
29
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Tennant Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Tennant Company and subsidiaries (the “Company”) as of December 31, 2024,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 18, 2025,
expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal
control over financial reporting at TCS EMEA GmbH ("TCS"), which was acquired on February 29, 2024, and whose financial statements
constitute $37.2 million of total assets and $22.0 million of total revenues included within the consolidated financial statement amounts of
Tennant Company as of and for the year ended December 31, 2024. Accordingly, our audit did not include the internal control over financial
reporting at TCS.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
30
Table of Contents
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 18, 2025
31
Table of Contents
Consolidated Statements of Income
TENNANT COMPANY AND SUBSIDIARIES
(In millions, except shares and per share data)
Years ended December 31
2024
2023
2022
Net sales
$
1,286.7
$
1,243.6
$
1,092.2
Cost of sales
736.7
715.8
671.3
Gross profit
550.0
527.8
420.9
Selling and administrative expense
391.9
352.6
306.3
Research and development expense
43.8
36.6
31.1
Gain on sale of assets
—
—
(3.7)
Operating income
114.3
138.6
87.2
Interest expense, net
(9.1)
(13.5)
(7.1)
Net foreign currency transaction gain (loss)
0.1
0.3
(1.2)
Other (expense) income, net
(0.5)
(1.6)
0.6
Income before income taxes
104.8
123.8
79.5
Income tax expense
21.1
14.3
13.2
Net income
$
83.7
$
109.5
$
66.3
Net income per share
Basic
$
4.46
$
5.92
$
3.58
Diluted
$
4.38
$
5.83
$
3.55
Weighted average shares outstanding:
Basic
18,786,871
18,509,523
18,494,356
Diluted
19,096,138
18,783,633
18,697,255
See accompanying notes to consolidated financial statements.
32
Table of Contents
Consolidated Statements of Comprehensive Income
TENNANT COMPANY AND SUBSIDIARIES
(In millions)
Years ended December 31
2024
2023
2022
Net income
$
83.7
$
109.5
$
66.3
Other comprehensive (loss) income:
Foreign currency translation adjustments (net of related tax (expense) benefit of
$(0.2), $0.8, and $(1.2), respectively)
(29.6)
8.3
(17.9)
Pension and postretirement medical benefits (net of related tax benefit (expense)
of $0.3, $(0.3), and $(1.6), respectively)
(0.9)
1.0
4.8
Derivative financial instruments (net of tax benefit (expense) of $0.0, $0.4, and
$(0.3), respectively)
(0.1)
(1.4)
0.8
Unrealized gain on debt securities (net of tax benefit of $0.1, $0.0, and $0.0,
respectively)
0.2
—
—
Total other comprehensive (loss) income, net of tax
(30.4)
7.9
(12.3)
Comprehensive income
$
53.3
$
117.4
$
54.0
See accompanying notes to consolidated financial statements.
33
Table of Contents
Consolidated Balance Sheets
TENNANT COMPANY AND SUBSIDIARIES
(In millions, except shares and per share data)
December 31
2024
2023
ASSETS
Cash, cash equivalents, and restricted cash
$
99.8
$
117.1
Receivables, less allowances of $7.1 and $7.2, respectively
259.1
247.6
Inventories
183.8
175.9
Prepaid and other current assets
33.9
28.5
Total current assets
576.6
569.1
Property, plant and equipment, less accumulated depreciation of $310.9 and $304.0, respectively
184.4
187.7
Operating lease assets
54.6
41.7
Goodwill
185.6
187.4
Intangible assets, net
58.7
63.1
Other assets
130.2
64.4
Total assets
$
1,190.1
$
1,113.4
LIABILITIES AND TOTAL EQUITY
Current portion of long-term debt
$
1.3
$
6.4
Accounts payable
126.9
111.4
Employee compensation and benefits
60.5
67.3
Other current liabilities
103.5
88.6
Total current liabilities
292.2
273.7
Long-term debt
198.2
194.2
Long-term operating lease liabilities
36.3
27.4
Employee-related benefits
13.5
13.3
Deferred income taxes
4.9
5.0
Other liabilities
22.9
21.5
Total long-term liabilities
275.8
261.4
Total liabilities
568.0
535.1
Commitments and contingencies (Note 16)
Common stock, $0.375 par value per share, 60,000,000 shares authorized; 18,849,456 and
18,631,384 issued and outstanding, respectively
7.1
7.0
Additional paid-in capital
76.7
64.9
Retained earnings
609.7
547.4
Accumulated other comprehensive loss
(72.7)
(42.3)
Total Tennant Company shareholders' equity
620.8
577.0
Noncontrolling interest
1.3
1.3
Total equity
622.1
578.3
Total liabilities and total equity
$
1,190.1
$
1,113.4
See accompanying notes to consolidated financial statements.
34
Table of Contents
Consolidated Statements of Cash Flows
TENNANT COMPANY AND SUBSIDIARIES
(In millions)
December 31
2024
2023
2022
OPERATING ACTIVITIES
Net income
$
83.7
$
109.5
$
66.3
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense
40.1
36.4
32.8
Amortization expense
15.0
14.7
15.9
Deferred income tax benefit
(9.8)
(26.9)
(15.6)
Share-based compensation expense
11.9
11.6
7.8
Bad debt and returns expense
3.4
3.4
2.3
Gain on sale of assets
—
—
(3.7)
Other, net
0.6
1.3
1.0
Changes in operating assets and liabilities:
Receivables
(15.0)
4.1
(46.3)
Inventories
(33.0)
14.3
(68.3)
Accounts payable
15.4
(15.3)
7.7
Employee compensation and benefits
(5.2)
22.3
(14.8)
Other assets and liabilities
(17.4)
13.0
(10.2)
Net cash provided by (used in) operating activities
89.7
188.4
(25.1)
INVESTING ACTIVITIES
Purchases of property, plant and equipment
(20.9)
(22.8)
(25.0)
Purchase of investment
(32.1)
—
—
Payments made in connection with business acquisition, net of cash acquired
(25.7)
—
—
Investment in leased assets
(0.5)
(1.2)
(4.3)
Cash received from leased assets
0.8
0.8
0.6
Proceeds from sale of assets, net of cash divested
—
—
4.1
Other, net
—
—
0.1
Net cash used in investing activities
(78.4)
(23.2)
(24.5)
FINANCING ACTIVITIES
Proceeds from borrowings
40.9
20.0
52.0
Repayments of borrowings
(42.5)
(120.0)
(19.1)
Payment of debt financing costs
(2.2)
—
—
Change in finance lease obligations
—
0.2
—
Proceeds from exercise of stock options, net of employee tax withholdings obligations of
$3.8, $1.7 and $2.0, respectively
19.6
19.0
(0.9)
Dividends paid
(21.4)
(20.1)
(18.9)
Repurchases of common stock
(19.6)
(21.7)
(5.0)
Net cash (used in) provided by financing activities
(25.2)
(122.6)
8.1
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(3.4)
(2.9)
(4.7)
Net (decrease) increase in cash, cash equivalents and restricted cash
(17.3)
39.7
(46.2)
Cash, cash equivalents and restricted cash at beginning of year
117.1
77.4
123.6
Cash, cash equivalents and restricted cash at end of year
$
99.8
$
117.1
$
77.4
SUPPLEMENTAL CASH FLOW INFORMATION
Years ended December 31
2024
2023
2022
Cash paid for income taxes
$
30.2
$
39.5
$
34.1
Cash paid for interest
$
13.6
$
17.1
$
7.6
Supplemental non-cash investing and financing activities:
Capital expenditures in accounts payable
$
6.4
$
3.5
$
4.1
See accompanying notes to consolidated financial statements.
35
Table of Contents
Consolidated Statements of Equity
TENNANT COMPANY AND SUBSIDIARIES
(In millions, except shares and per
share data)
Common
Shares
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Tennant
Company
Shareholders'
Equity
Noncontrolling
Interest
Total Equity
Balance, December 31, 2021
18,535,116 $
7.0
$
54.1
$
410.6 $
(37.9)
$
433.8
$
1.3
$
435.1
Net income
—
—
—
66.3
—
66.3
—
66.3
Other comprehensive loss
—
—
—
—
(12.3)
(12.3)
—
(12.3)
Issue stock for directors,
employee benefit and stock plans,
net of related tax withholdings of
27,653 shares
66,125
—
(0.9)
—
—
(0.9)
—
(0.9)
Share-based compensation
—
—
7.8
—
—
7.8
—
7.8
Dividends paid $1.015 per
common share
—
—
—
(18.9)
—
(18.9)
—
(18.9)
Repurchases of common stock
(79,756)
—
(5.0)
—
—
(5.0)
—
(5.0)
Other
—
—
—
—
—
—
—
—
Balance, December 31, 2022
18,521,485 $
7.0
$
56.0
$
458.0 $
(50.2)
$
470.8
$
1.3
$
472.1
Net income
—
—
—
109.5
—
109.5
—
109.5
Other comprehensive income
—
—
—
—
7.9
7.9
—
7.9
Issue stock for directors,
employee benefit and stock plans,
net of related tax withholdings of
23,622 shares
400,819
—
19.0
—
—
19.0
—
19.0
Share-based compensation
—
—
11.6
—
—
11.6
—
11.6
Dividends paid $1.075 per
common share
—
—
—
(20.1)
—
(20.1)
—
(20.1)
Repurchases of common stock
(290,920)
—
(21.7)
—
—
(21.7)
—
(21.7)
Balance, December 31, 2023
18,631,384 $
7.0
$
64.9
$
547.4 $
(42.3)
$
577.0
$
1.3
$
578.3
Net income
—
—
—
83.7
—
83.7
—
83.7
Other comprehensive loss
—
—
—
—
(30.4)
(30.4)
—
(30.4)
Issue stock for directors,
employee benefit and stock plans,
net of related tax withholdings of
34,511 shares
416,424
0.1
19.5
—
—
19.6
—
19.6
Share-based compensation
—
—
11.9
—
—
11.9
—
11.9
Dividends paid $1.135 per
common share
—
—
—
(21.4)
—
(21.4)
—
(21.4)
Repurchases of common stock
(198,352)
—
(19.6)
—
—
(19.6)
—
(19.6)
Balance, December 31, 2024
18,849,456 $
7.1
$
76.7
$
609.7 $
(72.7)
$
620.8
$
1.3
$
622.1
See accompanying notes to consolidated financial statements.
36
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
1. Operations and Summary of Significant Accounting Policies
Nature of Operations – 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.
Consolidation – The consolidated financial statements include the accounts of the Company and all subsidiaries in which we have a
controlling financial interest. All intercompany transactions and accounts are eliminated in consolidation.
Translation of Non-U.S. Currency – Foreign currency-denominated assets and liabilities have been translated to U.S. dollars at year-end
exchange rates, while income and expense items are translated at average exchange rates prevailing during the year. Gains or losses resulting
from translation are included as a separate component of accumulated other comprehensive loss. The majority of translation adjustments are
not adjusted for income taxes as substantially all translation adjustments relate to permanent investments in non-U.S. subsidiaries. Net foreign
currency transaction losses are included in income before income taxes on the consolidated statements of income.
Use of Estimates – The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting
principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in these consolidated financial
statements and accompanying notes, disclosures of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Estimates are used in determining, among other items, sales promotions and
incentives accruals, inventory valuation, warranty reserves, allowance for doubtful accounts, pension and postretirement accruals, useful lives
for intangible assets, valuing investments, and future cash flows associated with impairment testing for goodwill and other long-lived assets.
Actual results could differ from our estimates.
Cash and Cash Equivalents – We consider all highly liquid investments with original maturities of three months or less from the date of
purchase to be cash equivalents.
Restricted Cash – We have a total of $0.2 million as of December 31, 2024 and 2023 that serves as collateral backing certain bank
guarantees and is therefore restricted. This money is invested in time deposits. Restricted cash is recorded in cash, cash equivalents and
restricted cash on the consolidated balance sheets.
Receivables – Credit is granted to our customers in the normal course of business. Receivables are recorded at original carrying value less
reserves for estimated uncollectible accounts and sales returns. To assess the collectability of these receivables, we perform ongoing credit
evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be
able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based
on the best facts available to us and are reevaluated and adjusted as additional information becomes available.
37
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Our reserves are also based on amounts determined by using percentages applied to trade receivables, using a loss rate method. We
considered the following in determining the expected loss rate: (1) historical loss rate, (2) macroeconomic factors, and (3) creditworthiness of
customers. The historical loss rate is calculated by taking the yearly write-off expense, net of collections, as a percentage of the annual average
balance of trade receivables for each of the past three years. An account is considered past-due or delinquent when it has not been paid within
the contractual terms. Uncollectible accounts are written off against the reserves when it is deemed that a customer account is uncollectible.
Inventories – Inventories are valued at the lower of cost or net realizable value. Cost is determined on a first-in, first-out (“FIFO”) basis
except for inventories in North America, which are determined on a last-in, first-out (“LIFO”) basis.
Cloud Computing Arrangements – We capitalize implementation costs incurred in cloud computing (i.e., hosting arrangements) during the
application development phase, and depreciate the costs over the non-cancellable term of the cloud computing arrangements plus any optional
renewal periods that are reasonably certain to be exercised or for which the exercise is controlled by the service provider. We classify the
amortization of capitalized implementation costs in the same line item in the consolidated statements of income as the fees associated with the
hosting service (i.e., operating and selling and administrative expense) and classify the related payments in the consolidated statements of cash
flows in the same manner as payments made for fees associated with the hosting service (i.e. cash flows from operating activities). In addition,
the capitalization of implementation costs is reflected in the consolidated balance sheets consistent with the location of prepayment of fees for
the hosting element (i.e., within prepaid and other current assets). As of December 31, 2024 and 2023, there was $23.3 million and $0.2 million,
respectively, recorded in prepaid and other current assets in the consolidated balance sheets. Amortization expense for the years ended
December 31, 2024 and 2023 was not material.
Property, Plant and Equipment – Property, plant and equipment is carried at cost. Additions and improvements that extend the lives of the
assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. We generally depreciate buildings and
improvements by the straight-line method over a life of 30 years. Other property, plant and equipment are generally depreciated using the
straight-line method based on lives of 3 years to 15 years.
Leases – We assess whether an arrangement is a lease at inception.
Operating leases with an initial term of 12 months or less are expensed as incurred as short-term lease cost. We have elected the practical
expedient to not separate lease and non-lease components for all asset classes. Operating lease assets and operating lease liabilities are
calculated based on the present value of the future lease payments over the lease term at the lease commencement date. When future lease
payments are based on an index or rate, operating lease assets and operating lease liabilities are calculated using the prevailing index or rate at
the lease commencement date. As the implicit rate is not readily determinable, we use our incremental borrowing rate based on the information
available at the lease start date in determining the present value of future payments. Information used in determining the incremental borrowing
rates for the Company's leases includes: (1) the market yield on the Company's traded bond, adjusted for the presence of collateral and the
difference in terms of the bond and the leases, (2) consideration of the currency in which each lease was denominated, and (3) the lease term.
The operating lease asset is increased by any lease payments made at or before the lease start date, increased by initial direct costs incurred,
and reduced by lease incentives. The lease term includes options to renew or terminate the lease when it is reasonably certain that we will
exercise that option. The exercise of lease renewal options is at our sole discretion. The useful life of lease assets and leasehold improvements
are limited by the lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain leases also include
options to purchase the leased asset. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Certain
leases contain variable lease payments for items such as index-based changes in rent, fuel and common area maintenance, which we expense
as incurred as variable lease cost.
Finance leases are not material to our consolidated financial statements.
Goodwill – Goodwill represents the excess of cost over the fair value of net assets of businesses acquired and is allocated to our reporting
units at the time of the acquisition. We analyze goodwill on an annual basis as
38
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
of October 1 and when an event occurs, or circumstances change that may reduce the fair value of one of our reporting units below its carrying
amount. We have the option of first analyzing qualitative factors to determine whether it is more likely than not that the fair value of any reporting
unit is less than its carrying amount. However, we may elect to perform a quantitative goodwill impairment test even if no indications of a
potential impairment exist.
During 2024, we performed a qualitative goodwill assessment on all reporting units except for Europe, Middle East and Africa ("EMEA") and
Asia-Pacific ("APAC") for which we performed a quantitative goodwill assessment. Our assessments indicated that there was no goodwill
impairment in any of our reporting units as of our annual assessment date.
During 2023, we performed a qualitative goodwill assessment on all reporting units. Our assessment indicated that there was no goodwill
impairment in any of our reporting units as of our annual assessment date.
Intangible Assets – Intangible assets consist of definite lived customer lists, trade names and technology. Generally, intangible assets
classified as trade names are amortized on a straight-line basis and intangible assets classified as customer lists or technology are amortized
using an accelerated method of amortization.
Impairment of Long-Lived Assets and Assets Held for Sale – We periodically review our intangible and long-lived assets for impairment
and assess whether events or circumstances indicate that the carrying amount of the assets may not be recoverable. We generally deem an
asset group to be impaired if an estimate of undiscounted future operating cash flows are less than its carrying amount. If impaired, an
impairment loss is recognized based on the excess of the carrying amount of the individual asset group over its fair value.
Assets held for sale are measured at the lower of their carrying value or fair value less costs to sell. Upon retirement or disposition, the asset
cost and related accumulated depreciation or amortization are removed from the accounts and a gain or loss is recognized based on the
difference between the fair value of proceeds received and carrying value of the assets held for sale.
Purchase of Common Stock – We repurchase our common stock under a 2016 repurchase program authorized by our Board of Directors.
This program allows us to repurchase up to an aggregate of 1,000,000 shares of our common stock, and 623,061 shares remain authorized
under the program. Upon repurchase, the par value is charged to common stock and the remaining purchase price is charged to additional paid-
in capital. If the amount of the remaining purchase price causes the additional paid-in capital account to be in a negative position, this amount is
then reclassified to retained earnings. Common stock repurchased is included in shares authorized but is not included in shares outstanding.
Warranty – We record a liability for estimated warranty claims at the time of sale. The amount of the liability is based on the trend in the
historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other
factors. In the event we determine that our current or future product repair and replacement costs exceed our estimates, an adjustment to these
reserves would be charged to earnings in the period such determination is made. Warranty terms on machines range from one to four years.
Warranty costs are recorded as a component of selling and administrative expense in the consolidated statements of income.
Pension and Profit Sharing Plans – Substantially all U.S. employees are covered by various retirement benefit plans, including
postretirement medical plans and defined contribution savings plans. Retirement benefits for eligible employees in foreign locations are funded
principally through defined benefit plans, annuity or government programs.
Postretirement Benefits – We accrue and recognize the cost of retiree health benefits over the employees’ period of service based on
actuarial estimates. Benefits are only available for U.S. employees hired before January 1, 1999.
Derivative Financial Instruments – The Company uses cross-currency swaps, interest rate swaps and foreign exchange forward and
option contracts to manage risks generally associated with foreign exchange rate and interest rate volatility. We account for our hedging
instruments as either assets or liabilities on the consolidated balance sheets and measure them at fair value. Gains and losses resulting from
changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for
39
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
hedge accounting. Gains and losses for all instruments that do not qualify for hedge accounting are recorded each period to net foreign currency
transaction loss in our consolidated statements of income. Changes in the fair value of designated hedges are reported in accumulated other
comprehensive loss on the consolidated balance sheet until a related transaction occurs. If the underlying hedged transaction ceases to exist, all
changes in fair value of the related derivatives that have not been settled are recorded in our consolidated statements of income.
Revenue Recognition – Revenue is recognized when control transfers under the terms of the contract with our customers. Revenue is
measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales and other taxes
we collect concurrently with revenue-producing activities are excluded from revenue. We do not account for shipping and handling as a distinct
performance obligation as we generally perform shipping and handling activities after we transfer control of goods to the customer. We have
elected to account for shipping and handling costs associated with outbound freight after control of goods has transferred to a customer as a
fulfillment cost. Incidental items that are immaterial in the context of the contract are not recognized as a separate performance obligation. We
do not have any significantly extended payment terms as payment is generally received within one year of the point of sale.
In general, we transfer control and recognize a sale at the point in time when products are shipped from our manufacturing facilities both
direct to consumers and to distributors. Service revenue is recognized in the period the service is performed or ratably over the period of the
related service contract. Consideration related to service contracts is deferred if the proceeds are received in advance of the satisfaction of the
performance obligations and recognized over the contract period as the performance obligation is met. We use an output method to measure
progress toward completion for certain prepaid service contracts, as this method appropriately depicts performance toward satisfaction of the
performance obligations.
For contracts with multiple performance obligations (i.e., a product and service component), we allocate the transaction price to the
performance obligations in proportion to their stand-alone selling prices. We use an observable price to determine the stand-alone selling price
for separate performance obligations. When allocating on a relative stand-alone selling price basis, any discounts contained within the contract
are allocated proportionately to all of the performance obligations in the contract.
We generally expense the incremental costs of obtaining a contract when incurred because the amortization period would be less than one
year. These costs relate primarily to sales commissions and are recorded in selling and administrative expense in the consolidated statements of
income.
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. In
addition, we do not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract
inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or
service will be one year or less.
Share-Based Compensation – We account for share-based compensation awards on a fair value basis. The estimated grant date fair value
of each option award is recognized in income on a straight-line basis over the requisite service period (generally the vesting period). The
estimated fair value of each option award is calculated using the Black-Scholes option-pricing model. From time to time, we have elected to
modify the terms of the original grant. These modified grants are accounted for as a new award and measured using the fair value method,
resulting in the inclusion of additional compensation expense in our consolidated statements of income.
Restricted share awards and units are recorded as compensation cost over the requisite service periods based on the market value on the
date of grant. To determine the amount of compensation cost to be recognized in each period for these awards and for option awards, we
account for forfeitures as they occur.
Performance share awards ("PSUs") are stock awards where the ultimate number of shares issued will be contingent on the Company’s
performance against certain performance goals. The Compensation Committee can adjust performance goals or modify the manner of
measuring or evaluating a performance goal using its discretion. The fair value of each PSU is based on the market value on the date of grant.
We recognize expense related to the estimated vesting of our PSUs granted. The estimated vesting of the PSUs is based on the
40
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
probability of achieving certain performance metrics over the specified performance period. To determine the amount of compensation cost to be
recognized in each period, we estimate forfeitures.
Research and Development – Research and development costs are expensed as incurred.
Advertising Costs – We advertise products, technologies and solutions to customers and prospective customers through a variety of
marketing campaign and promotional efforts. These efforts include tradeshows, online advertising, e-mail marketing, mailings, sponsorships and
telemarketing. Advertising costs are expensed as incurred. In 2024, 2023 and 2022, such activities amounted to $5.7 million, $4.6 million and
$4.0 million, respectively.
Income Taxes – Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the book and tax bases of existing assets and liabilities. A valuation allowance is provided when, in management’s judgment, it is more
likely than not that some portion or all of the deferred tax asset will not be realized. We have established uncertain tax position accruals using
management’s best judgment. We adjust these accruals as facts and circumstances change. Interest expense is recognized in the first period
the interest would begin accruing. Penalties are recognized in the period we claim or expect to claim the position in our tax return. Interest and
penalty expenses are classified as an income tax expense.
Earnings Per Share – Basic earnings per share is computed by dividing net earnings attributable to Tennant Company by the weighted
average shares outstanding during the period. Diluted earnings per share assumes conversion of potentially dilutive stock options, performance
shares, restricted shares and restricted stock units. These are not included in our computation of diluted earnings per share if we have a net loss
attributable to the Company in a reporting period or if the instrument's effects are anti-dilutive.
Investments, Available-for-Sale – As described in Note 12, debt securities classified as available-for-sale securities are carried at fair
market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income (loss) and reported in
shareholders' equity. These investments are subject to periodic impairment review.
Investments, Measurement Alternative – The Company's investments as described in Note 12 which are valued under the measurement
alternative include equity securities for which the Company does not have significant influence and fair value is not readily determinable.
Accounting Standard Update ("ASU") 2016-01 requires equity securities to be recorded at cost and adjusted to fair value at each reporting
period. However, the guidance allows for a measurement alternative, which is to record investments at cost, less impairment, if any, and
subsequently adjust for observable price changes of identical or similar investments of the same issuer.
Due to the lack of readily determinable fair values for such investments, for which the Company does not have significant influence, the
Company accounts for these investments under the measurement alternative at cost, less impairment.
The Company performs qualitative impairment assessments on its investments recorded under the measurement alternative.
41
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
2. Newly Adopted Accounting Pronouncements
Segment Reporting
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-07,
Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which amends the existing segment reporting guidance (ASC Topic 280 —
Segment Reporting (“ASC 280”)) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about
significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported
measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition, the title and
position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment
performance and deciding how to allocate resources. We have adopted the new standard effective December 31, 2024. While the adoption has
no impact on our consolidated financial statements, it has resulted in incremental disclosures within the footnotes to our consolidated financial
statements. Refer to Note 20, Segment Reporting for the inclusion of the new required disclosures.
3. Revenue
Revenue is recognized upon the transfer of control of promised products or services to customers in an amount that reflects the
consideration we expect to receive in exchange for those products and services. Generally, these criteria are met at the time the product is
shipped.
We also enter into contracts that can include combinations of products and services, which are generally capable of being distinct and are
accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from
customers, which are subsequently remitted to governmental authorities.
Disaggregation of Revenue
The following tables illustrate the disaggregation of revenue by geographic area, groups of similar products and services and sales channels
for the years ended December 31:
Net sales by geographic area
2024
2023
2022
Americas
$
888.5
$
840.3
$
705.9
Europe, Middle East and Africa (EMEA)
318.5
314.4
301.6
Asia Pacific (APAC)
79.7
88.9
84.7
Total
$
1,286.7
$
1,243.6
$
1,092.2
Net sales are attributed to each geographic area based on the end user country and are net of intercompany sales.
42
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Net sales by groups of similar products and services
2024
2023
2022
Equipment
$
808.7
$
776.4
$
664.0
Parts and consumables
274.3
279.5
263.1
Service and other
203.7
187.7
165.1
Total
$
1,286.7
$
1,243.6
$
1,092.2
Net sales by sales channel
2024
2023
2022
Sales direct to consumer
$
905.7
$
854.4
$
712.6
Sales to distributors
381.0
389.2
379.6
Total
$
1,286.7
$
1,243.6
$
1,092.2
Contract Liabilities
Sales Returns
The right of return may exist explicitly or implicitly with our customers. When the right of return exists, we adjust the transaction price for the
estimated effect of returns. We estimate the expected returns using the expected value method by assessing historical sales levels and the
timing and magnitude of historical sales return levels as a percent of sales and projecting this experience into the future.
Sales Incentives
Our sales contracts may contain various customer incentives, such as volume-based rebates or other promotions. We reduce the
transaction price for certain customer programs and incentive offerings that represent variable consideration. Sales incentives given to our
customers are recorded using the most likely amount approach for estimating the amount of consideration to which the Company will be entitled.
We forecast the most likely amount of the incentive to be paid at the time of sale, update this forecast quarterly, and adjust the transaction price
accordingly to reflect the new amount of incentives expected to be earned by the customer. The majority of our customer incentives are settled
within one year. We record our accruals for volume-based rebates and other promotions in other current liabilities on our consolidated balance
sheets.
The change in our sales incentive accrual balance for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
Beginning balance
$
21.2
$
20.0
Additions to sales incentive accrual
22.4
29.5
Contract payments
(27.2)
(28.5)
Foreign currency fluctuations
(0.3)
0.2
Ending balance
$
16.1
$
21.2
Deferred Revenue
We provide separately priced prepaid contracts to our customers, collecting payment at the start of the agreement. Revenue recognition is
deferred until we meet our future performance obligations. Our deferred revenue balance includes autonomous subscription sales and prepaid
maintenance contracts on our machines ranging from 12 months to 60 months. In circumstances where prepaid contracts are sold
simultaneously with machines, we use an observable price to determine stand-alone selling price for separate performance obligations.
43
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The change in the deferred revenue balance for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
Beginning balance
$
10.3
$
9.3
Increase in deferred revenue representing our obligation to satisfy future performance obligations
31.7
21.7
Decrease in deferred revenue for amounts recognized in net sales for satisfied performance
obligations
(20.8)
(20.8)
Foreign currency fluctuations
(0.6)
0.1
Ending balance
$
20.6
$
10.3
As of December 31, 2024, $9.8 million and $10.8 million of deferred revenue was reported in other current liabilities and other liabilities,
respectively, on our consolidated balance sheets. Of this, we expect to recognize the following approximate amounts in net sales in the following
periods:
2025
$
9.8
2026
4.7
2027
3.3
2028
1.7
2029
1.0
Thereafter
0.1
Total
$
20.6
As of December 31, 2023, $7.9 million and $2.4 million of deferred revenue was reported in other current liabilities and other liabilities,
respectively, on our consolidated balance sheets.
4. Management Actions
Restructuring Actions
In 2024 and 2023, we incurred restructuring expenses as part of our ongoing global reorganization efforts. The following pre-tax restructuring
charges were included in the consolidated statements of income:
2024
2023
Severance-related costs - Selling and administrative expense
$
8.2
$
1.9
Severance-related costs - Cost of sales
—
0.7
Other costs - Selling and administrative expense
—
0.3
Total pre-tax restructuring costs
$
8.2
$
2.9
Includes facility exit costs associated with facility moves.
Our restructuring actions represent the continued execution of a multi-year enterprise strategy to drive increased productivity throughout our
operations. The charges in 2024 impacted all operating segments and
(a)
(a)
44
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
were related to a global workforce realignment to support our key strategic initiatives. The charges in 2023 impacted the Europe, Middle East
and Africa ("EMEA") and Asia Pacific ("APAC") operating segments.
A reconciliation to the ending liability balance of severance and related costs as of December 31, 2024 and 2023 is as follows:
2024
2023
Beginning balance
$
2.4
$
1.7
New charges
8.8
3.2
Cash payments
(2.3)
(1.9)
Foreign currency adjustments
0.3
—
Adjustment to accrual
(0.6)
(0.6)
Ending balance
$
8.6
$
2.4
5. Acquisitions and Divestitures
Acquisition of M&F Management and Financing GmbH
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 year ended December 31, 2024 include $22.0 million of revenue and $0.2 million of net income
related to TCS. The proforma impact of this acquisition is immaterial to our operations.
The purchase price has been allocated based on the estimated fair value of assets acquired and liabilities assumed at the date of the
acquisition.
The following table summarizes the fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:
45
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
March 31,
2024
Adjustments
June 30,
2024
Adjustments
December 31,
2024
Components of purchase price:
Cash paid
$
30.8
$
0.2
$
31.0
$
—
$
31.0
Settlement of preexisting transactions
3.9
—
3.9
—
3.9
Total purchase price
34.7
0.2
34.9
—
34.9
ASSETS
Cash
5.3
0.1
5.4
—
5.4
Other current assets
8.0
(0.7)
7.3
1.6
8.9
Intangible assets subject to amortization
Customer lists
13.6
(0.4)
13.2
—
13.2
Backlog
0.6
—
0.6
—
0.6
Other assets
5.3
0.3
5.6
0.1
5.7
Total identifiable assets acquired
32.8
(0.7)
32.1
1.7
33.8
LIABILITIES
Current liabilities
(1.5)
—
(1.5)
(1.6)
Long-term liabilities
(5.0)
(0.2)
(5.2)
(1.5)
(6.7)
Total identifiable liabilities assumed
(6.5)
(0.2)
(6.7)
(1.6)
(8.3)
Net assets acquired
26.3
(0.9)
25.4
0.1
25.5
Goodwill
$
8.4
$
1.1
$
9.5
$
(0.1)
$
9.4
The total purchase price includes cash paid of $31.0 million and the settlement of $3.9 million of preexisting transactions. In connection with
the acquisition, we paid cash totaling $30.8 million on the acquisition date of February 29, 2024 and $0.2 million in the second quarter of 2024.
The adjustments made to the purchase price allocation in the fourth quarter of 2024 relate to the finalization of the impacts associated with
income taxes.
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.
Sale of Building
During the second quarter of 2022, we sold a building located in Golden Valley, Minnesota. The resulting pre-tax gain was $3.7 million and is
reflected as a gain on sale of assets in the consolidated statements of income. Proceeds from the sale of assets were $4.1 million.
46
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
6. Inventories
Inventories as of December 31 consisted of the following:
2024
2023
Inventories carried at LIFO:
Finished goods
$
85.4
$
74.7
Raw materials and work-in-process
38.4
38.5
Excess of FIFO over LIFO cost
(50.4)
(47.7)
Total LIFO inventories
$
73.4
$
65.5
Inventories carried at FIFO:
Finished goods
$
53.2
$
52.8
Raw materials and work-in-process
57.2
57.6
Total FIFO inventories
$
110.4
$
110.4
Total inventories
$
183.8
$
175.9
Finished goods include machines, parts and consumables and component parts that are used in our products.
The difference between replacement cost and the stated LIFO inventory value is not materially different from the reserve for the LIFO
valuation method.
7. Property, Plant and Equipment
Property, plant and equipment and related accumulated depreciation, including equipment under finance leases, as of December 31,
consisted of the following:
2024
2023
Property, plant and equipment:
Land
$
24.1
$
21.0
Buildings and improvements
134.1
137.6
Machinery and manufacturing equipment
210.4
209.5
Office equipment
122.2
116.0
Construction in progress
4.5
7.6
Total property, plant and equipment
495.3
491.7
Less: accumulated depreciation
(310.9)
(304.0)
Property, plant and equipment, net
$
184.4
$
187.7
Depreciation expense was $40.1 million, $36.4 million and $32.8 million in 2024, 2023 and 2022, respectively.
(a)
(b)
(a)
(a)
(b)
47
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
8. Goodwill and Intangible Assets
For purposes of performing our goodwill impairment analysis, we have identified our reporting units as North America, Latin America, EMEA
and APAC.
The changes in the carrying amount of goodwill were as follows:
Goodwill
Accumulated
Impairment
Losses
Total
Balance as of December 31, 2024
$
218.1
$
(32.5)
$
185.6
Additions
9.4
—
9.4
Foreign currency fluctuations
(12.0)
0.8
(11.2)
Balance as of December 31, 2023
$
220.7
$
(33.3)
$
187.4
Foreign currency fluctuations
1.9
3.5
5.4
Balance as of December 31, 2022
$
218.8
$
(36.8)
$
182.0
There has been no impairment of goodwill for any of the years presented.
The additions recorded to goodwill during 2024 were related to the acquisition of TCS, as described further in Note 5.
The balances of acquired intangible assets, excluding goodwill, were as follows:
Customer
Lists
Trade
Names
Technology
Total
Balance as of December 31, 2024
Original cost
$
154.6
$
27.6
$
15.2
$
197.4
Accumulated amortization
(104.9)
(20.8)
(13.0)
(138.7)
Carrying amount
$
49.7
$
6.8
$
2.2
$
58.7
Weighted-average original life (in years)
15
11
11
Balance as of December 31, 2023
Original cost
$
150.6
$
29.3
$
16.3
$
196.2
Accumulated amortization
(100.8)
(19.2)
(13.1)
(133.1)
Carrying amount
$
49.8
$
10.1
$
3.2
$
63.1
Weighted-average original life (in years)
15
11
11
As part of our acquisition of TCS, we acquired customer lists and backlog with a combined fair value of $13.8 million. Further details
regarding the purchase price allocation of TCS are described further in Note 5.
Amortization expense of intangible assets was $15.0 million, $14.7 million and $15.9 million for the years ended December 31, 2024, 2023
and 2022, respectively.
48
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Estimated aggregate amortization expense based on the current carrying amount of amortizable intangible assets for each of the five
succeeding years is as follows:
2025
$
12.6
2026
11.4
2027
8.2
2028
6.6
2029
6.0
Thereafter
13.9
Total
$
58.7
9. Debt
On April 5, 2021, we and certain of our foreign subsidiaries entered into an Amended and Restated Credit Agreement (the “2021 Credit
Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent. The 2021 Credit Agreement provides us and certain of our foreign
subsidiaries access to a senior secured credit facility until April 3, 2026, consisting of a term loan facility in an amount up to $100.0 million and a
revolving facility in an amount up to $450.0 million with an option to expand the credit facility by up to $275.0 million, with the consent of the
lenders willing to provide additional borrowings in the form of increases to their revolving facility commitment or funding of incremental term
loans. Borrowings may be denominated in U.S. dollars or certain other currencies.
On November 10, 2022, we further 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. All other material terms included in the 2021 Credit Agreement remain unchanged as a result of the Amendment.
On August 7, 2024, we and certain of our foreign subsidiaries entered into an Amended and Restated Credit Agreement (the "2024 Credit
Agreement") with JPMorgan Chase Bank, N.A. as administrative agent, which amends and restates the 2021 Credit Agreement as amended by
the Amendment. The 2024 Credit Agreement provides us and certain of our foreign subsidiaries access to a senior secured credit facility until
August 7, 2029, consisting of a revolving facility in an amount up to $650.0 million, with an option to expand the revolving facility or obtain
incremental term loans by up to $325.0 million, with the consent of the lenders willing to provide additional borrowings in the form of increases to
their revolving facility commitment or funding of incremental term loans. Borrowings may be denominated in U.S. dollars or certain other
currencies.
The fee for undrawn committed funds under the revolving facility of the 2024 Credit Agreement ranges from an annual rate of 0.15% to
0.30%, depending on our leverage ratio. Borrowings denominated in U.S. dollars under the 2024 Credit Agreement bear interest at a rate per
annum equal to (a) the greatest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the 2024 Credit Agreement) plus 0.50% and (iii) the
Adjusted Term SOFR Rate (as defined in the 2024 Credit Agreement) for a one month period plus 1%; but in any case not less than 1%, plus an
additional spread of 0.25% to 1%, depending on our leverage ratio, (b) the Adjusted Term SOFR Rate plus an additional spread of 1.25% to 2%,
depending on our leverage ratio, or (c) the Adjusted Daily
49
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Simple RFR (as defined in the 2024 Credit Agreement) plus an additional spread of 1.25% to 2%, depending on our leverage ratio.
In connection with the 2024 Credit Agreement, we reaffirmed our security interest in favor of the lenders in substantially all our personal
property and pledged the stock of certain of our domestic and foreign subsidiaries. The obligations under the 2024 Credit Agreement are also
guaranteed by certain of our subsidiaries and those subsidiaries also provided a security interest in their similar personal property.
The 2024 Credit Agreement contains customary representations, warranties and covenants, including but not limited to covenants restricting
our ability to incur indebtedness and liens and merge or consolidate with another entity. Further, the 2024 Credit Agreement contains the
following covenants:
•
a covenant requiring us to maintain an indebtedness to EBITDA ratio, determined as of the end of each fiscal quarter, of no greater than
3.75 to 1.00, with certain alternative requirements for permitted acquisitions of at least $50.0 million;
•
a covenant requiring us to maintain an EBITDA to interest expense ratio for a period of four consecutive fiscal quarters as of the end of
each quarter of no less than 3.00 to 1; and
•
a covenant restricting us from paying dividends or repurchasing stock if, after giving effect to such payments and assuming no default
exists or would result from such payment, our leverage ratio is greater than 2.50 to 1, in such case limiting such payments to the greater
of 10% of consolidated total assets or $100.0 million during any fiscal year.
We were in compliance with the financial covenants as of December 31, 2024.
Debt outstanding as of December 31 consisted of the following:
2024
2023
Credit facility borrowings:
Revolving credit facility borrowings
$
197.5
$
110.0
Term loan facility borrowings
—
90.0
Finance lease liabilities
1.2
0.6
Bank overdrafts
0.8
—
Total debt
199.5
200.6
Less: current portion of long-term debt
(1.3)
(6.4)
Long-term debt
$
198.2
$
194.2
As of December 31, 2024, the Company is required to repay $0.8 million in bank overdrafts and $0.5 million of current maturities of
finance lease liabilities over the next 12 months.
As of December 31, 2024, we had outstanding borrowings of $197.5 million under our revolving credit facility. We had letters of credit and
bank guarantees outstanding in the amount of $3.2 million, leaving approximately $449.3 million of unused borrowing capacity on our revolving
facility. Commitment fees on unused lines of credit for the year ended December 31, 2024 were $0.6 million. The overall weighted average cost
of debt is approximately 6.1% and net of a related cross-currency swap and interest rate swap instruments is approximately 4.3%. Further
details regarding the cross-currency swap instrument are discussed in Note 11.
(a)
(a)
50
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The aggregate maturities of our outstanding debt, excluding unamortized debt issuance costs, as of December 31, 2024, are as follows:
2025
$
1.3
2026
0.2
2027
0.2
2028
0.2
2029
197.6
Thereafter
—
Total aggregate maturities
$
199.5
10. Other Current Liabilities
Other current liabilities as of December 31 consisted of the following:
2024
2023
Other current liabilities:
Taxes
$
13.1
$
11.3
Warranty reserve
6.9
7.4
Deferred revenue
9.8
7.9
Customer sales incentives
16.1
21.3
Freight
4.0
3.9
Restructuring
8.5
2.4
Operating leases
18.5
14.4
Miscellaneous accrued expenses
26.6
20.0
Total other current liabilities
$
103.5
$
88.6
11. Derivatives
Hedge Accounting and Hedging Programs
We recognize all derivative instruments as either assets or liabilities in our consolidated balance sheets and measure them at fair value.
Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and
qualifies for hedge accounting.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge. We evaluate hedge
effectiveness on our hedges that are designated and qualify for hedge accounting at the inception of the hedge prospectively, as well as
retrospectively, and record any ineffective portion of the hedging instruments in net foreign currency transaction loss on our consolidated
statements of income. The time value of purchased contracts is recorded in net foreign currency transaction loss in our consolidated statements
of income. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from
period to period are recorded in net foreign currency transaction losses in our consolidated statements of income.
Our hedging policy establishes maximum limits for each counterparty to mitigate any concentration of risk.
51
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Balance Sheet Hedges
We hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk
that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities
that are denominated in foreign currencies and are carried at fair value as either assets or liabilities on the consolidated balance sheets with
changes in the fair value recorded to net foreign currency transaction gain 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 December 31, 2024 and December 31, 2023, the notional amounts of foreign
currency forward exchange contracts outstanding not designated as hedging instruments were $70.2 million and $73.0 million, respectively.
Cash Flow Hedges
The Company manages its floating rate debt exposure using interest rate swaps. Fixed rate swaps are used to reduce the Company's risk of
the possibility of increased interest costs. The Company entered into an aggregate $120.0 million notional amount of interest rate swaps
effective December 1, 2022, that exchange a variable rate of interest for a fixed rate of interest of 4.076%. These interest rate swaps are
designated as cash flow hedges. These swaps are scheduled to mature on December 1, 2026.
Fair Value Hedges
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps associated with an intercompany loan from a
wholly owned European subsidiary. We enter into these foreign exchange cross-currency swaps to hedge the foreign currency risk associated
with this intercompany loan, and accordingly, they are not speculative in nature. These cross-currency swaps are designated as fair value
hedges. As of December 31, 2024, these cross-currency swaps included €75.0 million of total notional value. As of December 31, 2024, the
aggregated scheduled interest payments over the course of the loan and related swaps amounted to €5.3 million. The scheduled maturity and
principal payment of the loan and related interest payments of €80.3 million are due in April 2027.
Net Investment Hedges
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross-currency swaps to hedge our exposure to adverse foreign
currency exchange rate movements between Tennant Company and a wholly owned European subsidiary. We enter into these fixed-to-fixed
cross-currency swap agreements to protect a designated monetary amount of the Company’s net investment in its Euro functional currency
subsidiary against the risk of changes in the Euro to U.S. dollar foreign exchange rate. These cross-currency swaps are designated as net
investment hedges. As of December 31, 2024, the cross-currency swaps included €75.0 million of total notional values. These swaps are
scheduled to mature in April 2027.
52
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The fair value of derivative instruments on our consolidated balance sheets as of December 31 consisted of the following:
Derivative Assets
Derivative Liabilities
Balance Sheet
Location
December 31,
2024
December 31,
2023
Balance Sheet
Location
December 31,
2024
December 31,
2023
Derivatives designated as cash
flow hedges:
Interest rate swaps
Other current
assets
0.1
0.8
Other current
liabilities
—
—
Interest rate swaps
Other assets
—
—
Other liabilities
0.2
1.9
Derivatives designated as fair
value hedges:
Cross-currency swaps
Other current
assets
1.5
1.3
Other current
liabilities
—
—
Cross-currency swaps
Other assets
0.5
—
Other liabilities
—
3.3
Derivatives designated as net
investment hedges:
Cross-currency swaps
Other current
assets
1.2
1.2
Other current
liabilities
—
—
Cross-currency swaps
Other assets
0.2
—
Other liabilities
—
3.4
Derivatives not designated as
hedging instruments:
Foreign currency forward
contracts
Other current
assets
0.8
—
Other current
liabilities
—
1.6
Contracts that mature within the next 12 months are included in other current assets and other current liabilities for asset derivatives and liabilities
derivatives, respectively, on our consolidated balance sheets. Contracts with maturities greater than 12 months are included in other assets and other
liabilities for asset derivatives and liability derivatives, respectively, in our consolidated balance sheets. Amounts included in our consolidated balance
sheets are recorded net where a right of offset exists with the same derivative counterparty.
As of December 31, 2024, we anticipate reclassifying approximately $2.5 million of gains from accumulated other comprehensive loss to net
income during the next 12 months.
(a)
(a)
53
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The following tables include the amounts in the consolidated statements of income in which the effects of derivative instruments are
recorded and the effects of derivative instruments activity on these line items for the years ended December 31, 2024 and December 31, 2023:
2024
2023
Total
Gain (Loss) on
Hedge Activity
Total
Gain (Loss) on
Hedge Activity
Derivatives designated as cash flow hedges:
Interest expense, net
(9.1)
1.0
(13.5)
0.9
Net foreign currency transaction gain
0.1
—
0.3
—
Derivatives designated as fair value hedges:
Interest expense, net
(9.1)
1.1
(13.5)
1.1
Net foreign currency transaction gain (loss)
0.1
3.9
0.3
(1.9)
Derivatives designated as net investment hedges:
Interest expense, net
(9.1)
1.0
(13.5)
1.0
The effect of derivative instruments designated as hedges and derivative instruments not designated as hedges in our consolidated
statements of income for the three years ended December 31 were as follows:
2024
2023
2022
Derivatives designated as cash flow hedges:
Net gain recognized in other comprehensive (loss) income, net of tax
$
1.8
$
0.6
$
3.1
Net gain reclassified from accumulated other comprehensive loss into income, net of tax,
effective portion to interest expense, net
1.0
2.0
0.5
Net gain (loss) reclassified from accumulated other comprehensive loss into income, net of
tax, effective portion to net foreign currency transaction losses
—
—
3.6
Derivatives designated as fair value hedges:
Net gain recognized in other comprehensive (loss) income, net of tax
0.2
—
2.7
Net gain reclassified from accumulated other comprehensive loss into income, net of tax,
effective portion to interest expense, net
1.1
—
0.9
Derivatives designated as net investment hedges:
Net gain recognized in other comprehensive (loss) income, net of tax
3.8
2.0
4.2
Net gain reclassified from accumulated other comprehensive loss into income, net of tax,
ineffective portion to interest expense, net
1.0
1.0
0.7
Derivatives not designated as hedging instruments:
Net gain recognized in income
$
6.1
$
1.7
$
1.0
Net change in the fair value of the effective portion classified in other comprehensive (loss) income.
Classified in net foreign currency transaction gain (loss).
(a)
(a)
(a)
(b)
(a)
(b)
54
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
12. Fair Value Measurements
Financial Instruments
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.
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 accumulated other comprehensive income (loss). The securities will be measured to
fair value based on Level 3 inputs.
As of December 31, 2024, and December 31, 2023, a comparison of cost and market values of our debt and equity securities was as
follows:
Cost
Fair Value
Gross Unrealized Gains
Gross Unrealized Losses
2024
2023
2024
2023
2024
2023
2024
2023
Available-for-sale debt
securities
$
12.1 $
—
$
12.3 $
—
$
0.2 $
—
$
— $
—
Equity securities
20.0
—
20.0
—
—
—
—
—
Total debt and equity
securities
$
32.1
—
32.3 $
—
$
0.2 $
—
$
— $
—
The aggregate unrealized gains and losses on available-for-sale debt securities, net of tax effects, are classified in accumulated other
comprehensive loss within shareholders' equity.
Scheduled maturities of our debt securities were as follows:
Cost
Fair Value
After 5 years through 10 years
$
12.1 $
12.3
Total debt securities
$
12.1 $
12.3
Fair Value Measurements and Financial Statement Presentation
Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair
value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The
framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of
future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief
description of those three levels:
•
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
55
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
•
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Our population of assets and liabilities subject to fair value measurements as of December 31, 2024 were as follows:
Fair Value
Level 1
Level 2
Level 3
Assets:
Equity securities
$
20.0
$
—
$
—
$
20.0
Debt securities
12.3
—
—
12.3
Foreign currency forward contracts
0.8
—
0.8
—
Cross-currency swaps
3.4
—
3.4
—
Interest rate swaps
0.1
—
0.1
—
Total assets
36.6
—
4.3
32.3
Liabilities:
Foreign currency forward contracts
—
—
—
—
Cross-currency swaps
—
—
—
—
Interest rate swaps
0.2
—
0.2
—
Total liabilities
$
0.2
$
—
$
0.2
$
—
Our population of assets and liabilities subject to fair value measurements as of December 31, 2023 were as follows:
Fair Value
Level 1
Level 2
Level 3
Assets:
Cross-currency swaps
$
2.5
$
—
$
2.5
$
—
Interest rate swaps
0.8
—
0.8
—
Total assets
3.3
—
3.3
—
Liabilities:
Foreign currency forward contracts
1.6
—
1.6
—
Cross-currency swaps
6.7
—
6.7
—
Interest rate swaps
1.9
—
1.9
—
Total liabilities
$
10.2
—
$
10.2
$
—
Our foreign currency forward exchange contracts, cross-currency swaps and interest rate swaps are valued using observable Level 2 market
expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount. Further
details regarding our foreign currency forward exchange and option contracts are discussed in Note 11.
There were no transfers into or out of Level 3 investments in 2024 or 2023.
The fair value and carrying value of total debt, including current portion, was $235.9 million and $199.5 million, respectively, as of
December 31, 2024. The fair value was estimated using Level 3 inputs based on the borrowing rates currently available to us for bank loans with
similar terms and remaining maturities.
56
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
13. Retirement Benefit Plans
Substantially all U.S. employees are covered by various retirement benefit plans, including defined contribution savings plans and
postretirement medical plans. Retirement benefits for eligible employees in foreign locations are funded principally through defined benefit plans,
annuity or government programs. The total cost of benefits for our plans was $15.7 million, $16.6 million and $11.6 million in 2024, 2023 and
2022, respectively.
We had a qualified, funded defined benefit retirement plan (the “U.S. Pension Plan”) covering certain current and retired employees in the
U.S. During 2015, the plan was amended to freeze benefits for all participants effective January 31, 2017. On February 15, 2017, the Board of
Directors approved the termination of the U.S. Pension Plan, effective May 15, 2017. Participants who elected an immediate lump sum
distribution were paid out in December 2017. Assets for participants who elected or are currently receiving annuity payments and those who
have elected to defer their benefits were transferred to the annuity company, Pacific Life, in December 2017. Excess assets were transferred
from the Tennant Company Pension Trust to the Tennant Company Retirement Savings Plan to deliver future discretionary benefits to plan
participants. During 2023, all remaining excess assets were utilized, and none remained outstanding as of December 31, 2023.
We have a U.S. postretirement medical benefit plan (the “U.S. Retiree Plan”) to provide certain healthcare benefits for U.S. employees hired
before January 1, 1999. Eligibility for those benefits is based upon a combination of years of service with us and age upon retirement.
Our defined contribution savings plan (“401(k) plan”) covers substantially all U.S. employees. Under this plan, we match up to 3% of the
employee’s annual compensation in cash to be invested per their election. We also make a discretionary profit sharing contribution to the 401(k)
plan for employees with more than one year of service in accordance with our Profit Sharing Plan. This contribution is based upon our financial
performance and can be funded in the form of a direct deposit into the employees 401(k) account, cash, or a combination of both. Expenses for
the 401(k) plan, including profit sharing contributions, were $10.0 million, $10.5 million and $6.0 million during 2024, 2023 and 2022,
respectively.
We have a U.S. nonqualified supplemental benefit plan (the “U.S. Nonqualified Plan”) to provide additional retirement benefits for certain
employees whose benefits under our 401(k) plan or U.S. Pension Plan are limited by either the Employee Retirement Income Security Act or the
Internal Revenue Code.
We also have defined benefit pension plans in the United Kingdom, Germany, France and Italy (the “U.K. Pension Plan”, the “German
Pension Plan,” "French Pension Plan" and the "Italian Pension Plan"). The U.K. Pension Plan, French Pension Plan, German Pension Plan and
Italian Pension Plan cover certain current and retired employees and all plans are closed to new participants.
In December 2018, the U.K. Pension Plan was amended to close all future accrual of benefits to existing active members.
In December 2024, the Trustees of the U.K. Pension Plan entered into an agreement with an insurer to acquire an insurance policy that
operates as an investment asset, with the intent of matching part of the U.K. Pension Plan’s future cash outflow arising from the accrued pension
liabilities of 26 non-insured pensioner members. Such an arrangement is commonly termed as a “partial buy-in.” The benefit obligation was not
transferred to the insurer and remains with the Company. The partial buy-in insurance contract is classified as a Level 3 investment. The value of
the insurance contract is based on significant unobservable inputs including plan participant demographics, in addition to observable inputs
which include expected return on assets and estimated value premium.
The partial buy-in arrangement also allows for the possible future conversion into a buy-out arrangement where the insurance company
would assume responsibility for paying the insured benefits directly to the members of the U.K. Pension Plan, at which time the Company would
derecognize the assets and liabilities of the pension plan but would, however, remain responsible for any residual risks once the U.K. Pension
Plan is wound-up.
57
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The Italian Plan is an employee termination indemnity mandated by Italian law to all employees employed prior to 2008. Benefits are paid
out when employees covered under the plan are terminated for any reason. Due to changes in Italian law, such termination indemnities are no
longer available to new participants.
We expect to contribute less than $0.1 million to our U.S. Nonqualified Plan and $0.5 million to our U.S. Retiree Plan in 2024. We expect
contributions to our U.K. Pension Plan, German Pension Plan, French Pension Plan and Italian Pension Plans to be $0.3 million in 2024.
Weighted-average asset allocations by asset category of the U.K. Pension Plan as of December 31, 2024 were as follows:
Quoted Prices in
Active Markets for
Identical Assets
Significant
Observable Inputs
Significant
Unobservable
Inputs
Asset category
Fair Value
(Level 1)
(Level 2)
(Level 3)
Investment account held by pension plan
$
6.7
$
—
$
—
$
6.7
Buy-in Insurance Contract
5.9
—
—
5.9
Total
$
12.6
$
—
$
—
$
12.6
This category is comprised of investments in insurance contracts.
This represents the U.K. Pension Plan partial buy-in assets comprised of investments in insurance contracts.
Weighted-average asset allocations by asset category of the U.K. Pension Plan as of December 31, 2023 were as follows:
Quoted Prices in
Active Markets
for
Identical Assets
Significant
Observable
Inputs
Significant
Unobservable Inputs
Asset category
Fair Value
(Level 1)
(Level 2)
(Level 3)
Investment account held by pension plan
$
12.7
—
—
$
12.7
Total
$
12.7
$
—
$
—
$
12.7
This category is comprised of investments in insurance contracts.
Estimates of the fair value of the U.K. Pension Plan are based on the framework established in the accounting guidance for fair value
measurements. A brief description of the three levels can be found in Note 12. The Investment Account held by the U.K. Pension Plan invests in
insurance contracts for purposes of funding the U.K. Pension Plan and is classified as Level 3. The fair value of the Investment Account is the
cash surrender values as determined by the provider which are the amounts the plan would receive if the contracts were cashed out at year-end.
The underlying assets held by these contracts are primarily invested in assets traded in active markets.
(a)
(b)
(a)
(b)
(a)
(a)
58
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
A reconciliation of the beginning and ending balances of the Level 3 investments of our U.K. Pension Plan during the years ended
December 31 was as follows:
2024
2023
Fair value at beginning of year
$
12.7
$
11.3
Purchases, sales, issuances and settlements, net
(0.4)
(0.3)
Net (loss) gain
(0.2)
1.1
Net transfer in
0.7
—
Foreign currency
(0.2)
0.6
Fair value at end of year
$
12.6
$
12.7
The primary objective of our U.K. Pension Plan is to meet retirement income commitments to plan participants at a reasonable cost to us
and to maintain a sound actuarial funded status. This objective is accomplished through growth of capital and safety of funds invested. Assets
are invested in securities to achieve growth of capital over inflation through appreciation and accumulation and reinvestment of dividend and
interest income. Investments are diversified to control risk. The U.K. Pension Plan is invested in insurance contracts with underlying investments
primarily in equity and fixed income securities. All other Pension Plans are unfunded, which is customary.
Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows:
U.S. Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2024
2023
2024
2023
2024
2023
Discount rate
5.42 %
5.07 %
4.65 %
4.26 %
5.39 %
5.06 %
Rate of compensation
increase
— %
— %
3.00 %
3.00 %
— %
— %
Weighted-average assumptions used to determine net periodic benefit costs as of December 31 were as follows:
U.S. Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2024
2023
2022
2024
2023
2022
2024
2023
2022
Discount rate
5.07 %
5.37 %
2.54 %
4.26 %
4.68 %
1.55 %
5.06 %
5.37 %
2.53 %
Expected long-term rate of
return on plan assets
— %
— %
— %
6.10 %
6.10 %
3.20 %
— %
— %
— %
Rate of compensation
increase
— %
— %
— %
3.00 %
2.25 %
1.50 %
— %
— %
— %
The discount rate is used to discount future benefit obligations back to today’s dollars. Our discount rates were determined based on high-
quality fixed income investments. The resulting discount rates are consistent with the duration of plan liabilities. The Mercer Above Mean Yield
Curve for high-quality corporate bonds is used in determining the discount rate for the U.S. Nonqualified Plan in 2024. The Mercer Yield Curve is
used in determining the discount rate for the Non-U.S. Plans in 2024. Before 2019, the FTSE (formerly known as Citigroup) Above Median Spot
rates for high-quality corporate bonds were used in determining the discount rate for the U.S. Plans. Before 2021, the iBoxx € Corporates AA 7-
10 and iBoxx € Corporates AA 10+ Benchmark were used to determine the discount rate for the Italian Pension Plan.
The expected return on assets assumption on the investment portfolios for the pension plans is based on the long-term expected returns for
the investment mix of assets currently in the portfolio. Management uses
59
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
historic return trends of the asset portfolio combined with recent market conditions to estimate the future rate of return.
The accumulated benefit obligations as of December 31 for all defined benefit plans were as follows:
2024
2023
U.S. Nonqualified Plan
$
0.8
$
0.9
U.K. Pension Plan
6.3
6.2
German Pension Plan
0.9
1.0
French Pension Plan
0.5
0.4
Italian Pension Plan
2.4
2.5
Information for our plans with an accumulated benefit obligation in excess of plan assets as of December 31 was as follows:
2024
2023
Accumulated benefit obligation
$
4.6
$
4.8
As of December 31, 2024 and 2023, the U.S. Nonqualified, the German Pension, the French Pension and the Italian Pension Plans had an
accumulated benefit obligation in excess of plan assets.
Information for our plans with a projected benefit obligation in excess of plan assets as of December 31 was as follows:
2024
2023
Projected benefit obligation
$
4.9
$
5.0
As of December 31, 2024 and 2023, the U.S. Nonqualified, the German Pension, the French Pension and the Italian Pension Plans had a
projected benefit obligation in excess of plan assets.
Assumed healthcare cost trend rates as of December 31 were as follows:
2024
2023
Healthcare cost trend rate assumption for the next year Pre-65
7.20 %
8.00 %
Healthcare cost trend rate assumption for the next year Post-65
7.90 %
8.80 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
4.00 %
4.00 %
Year that the rate reaches the ultimate trend rate
2047
2047
60
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Summaries related to changes in benefit obligations and plan assets and to the funded status of our defined benefit and postretirement
medical benefit plans were as follows:
U.S. Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2024
2023
2024
2023
2024
2023
Change in benefit obligation:
Benefit obligation at beginning of
year
$
0.9
$
0.9
$
10.4
$
10.3
$
4.6
$
5.4
Service cost
—
—
0.1
0.1
—
—
Interest cost
—
—
0.4
0.5
0.2
0.3
Actuarial loss (gain)
—
0.1
(0.2)
(0.3)
0.1
(0.7)
Foreign exchange
—
—
(0.4)
0.5
—
—
Net transfer in
—
—
0.7
—
—
—
Benefits paid
(0.1)
(0.1)
(0.7)
(0.7)
(0.6)
(0.4)
Benefit obligation at end of year
$
0.8
$
0.9
$
10.3
$
10.4
$
4.3
$
4.6
Change in fair value of plan
assets and net accrued
liabilities:
Fair value of plan assets at
beginning of year
$
—
$
—
$
12.7
$
11.3
$
—
$
—
Actual return on plan assets
—
—
(0.2)
1.1
—
—
Employer contributions
0.1
0.1
0.3
0.3
0.6
0.4
Foreign exchange
—
—
(0.2)
0.6
—
—
Net transfer in
—
—
0.7
—
—
—
Benefits paid
(0.1)
(0.1)
(0.7)
(0.6)
(0.6)
(0.4)
Fair value of plan assets at end of
year
—
—
12.6
12.7
—
—
Funded status at end of year
$
(0.8)
$
(0.9)
$
2.3
$
2.3
$
(4.3)
$
(4.6)
Amounts recognized in the
consolidated balance sheets
consist of:
Noncurrent other assets
$
—
$
—
$
6.4
$
6.5
$
—
$
—
Current liabilities
(0.1)
(0.1)
(0.3)
(0.3)
(0.5)
(0.6)
Long-term liabilities
(0.7)
(0.8)
(3.8)
(3.9)
(3.8)
(4.0)
Net accrued liability
$
(0.8)
$
(0.9)
$
2.3
$
2.3
$
(4.3)
$
(4.6)
Amounts recognized in
accumulated other
comprehensive loss consist of:
Prior service cost
$
—
$
—
$
(0.1)
$
(0.1)
$
—
$
—
Net actuarial (loss) gain
(0.7)
(0.7)
2.7
3.6
1.4
1.8
Accumulated other
comprehensive (loss) income
$
(0.7)
$
(0.7)
$
2.6
$
3.5
$
1.4
$
1.8
61
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The components of the net periodic benefit cost (credit) for the three years ended December 31 were as follows:
U.S. Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2024
2023
2022
2024
2023
2022
2024
2023
2022
Service cost
$
—
$
—
$
—
$
0.1
$
0.1
$
0.3
$
—
$
—
$
—
Interest cost
—
—
—
0.4
0.5
0.2
0.2
0.3
0.2
Expected return on plan assets
—
—
—
(0.8)
(0.7)
(0.4)
—
—
—
Amortization of net actuarial
loss (gain)
0.1
0.1
0.1
(0.1)
(0.1)
—
(0.3)
(0.2)
—
Net periodic benefit cost
(credit)
$
0.1
$
0.1
$
0.1
$
(0.4)
$
(0.2)
$
0.1
$
(0.1)
$
0.1
$
0.2
The changes in accumulated other comprehensive loss for the three years ended December 31 were as follows:
U.S. Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2024
2023
2022
2024
2023
2022
2024
2023
2022
Net actuarial loss (gain)
0.1
0.1
(0.1)
0.8
(0.9)
(5.0)
0.1
(0.7)
(1.1)
Foreign exchange
—
—
—
0.1
—
—
—
—
—
Amortization of net actuarial
(loss) gain
(0.1)
(0.1)
(0.1)
0.1
0.1
—
0.3
0.2
—
Total recognized in other
comprehensive (income) loss
$
—
$
—
$
(0.2)
$
1.0 $
(0.8)
$
(5.0)
$
0.4 $
(0.5)
$
(1.1)
Total recognized in net benefit
cost (credit) and other
comprehensive (income) loss
$
0.1 $
0.1 $
(0.1)
$
0.6 $
(1.0)
$
(4.9)
$
0.3 $
(0.4)
$
(0.9)
The following benefit payments, which reflect expected future service, are expected to be paid:
U.S.
Nonqualified Plan
Non-U.S.
Pension Benefits
Postretirement
Medical Benefits
2025
$
0.1
$
0.7
$
0.5
2026
0.1
0.7
0.5
2027
0.1
0.6
0.5
2028
0.1
0.8
0.5
2029
0.1
0.7
0.5
2028 to 2031
0.3
3.8
1.9
Total
$
0.8
$
7.3
$
4.4
62
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
14. Shareholders' Equity
Authorized Shares
We are authorized to issue an aggregate of 60,000,000 shares, all of which are designated as Common Stock having a par value of $0.375
per share. The Board of Directors is authorized to establish one or more series of preferred stock, setting forth the designation of each such
series, and fixing the relative rights and preferences of each such series.
Accumulated Other Comprehensive Loss
The changes in components of accumulated other comprehensive loss, net of tax, were as follows:
Foreign Currency
Translation
Adjustments
Pension and
Postretirement
Medical Benefits
Derivative
Financial
Instruments
Unrealized Gain
on Debt
Securities
Total
December 31, 2022
$
(53.9)
$
2.7
$
1.0
$
—
$
(50.2)
Other comprehensive (loss)
income before reclassifications
9.3
1.0
0.6
—
10.9
Amounts reclassified from
accumulated other comprehensive
loss
(1.0)
—
(2.0)
—
(3.0)
Net current period other
comprehensive (loss) income
8.3
1.0
(1.4)
—
7.9
December 31, 2023
$
(45.6)
$
3.7
$
(0.4)
$
—
$
(42.3)
Other comprehensive (loss)
income before reclassifications
(28.6)
(0.9)
2.0
0.2
(27.3)
Amounts reclassified from
accumulated other comprehensive
loss
(1.0)
—
(2.1)
—
(3.1)
Net current period other
comprehensive (loss) income
(29.6)
(0.9)
(0.1)
0.2
(30.4)
December 31, 2024
$
(75.2)
$
2.8
$
(0.5)
$
0.2
$
(72.7)
Accumulated other comprehensive loss associated with pension and postretirement benefits, derivative financial instruments, and unrealized
gain on debt securities is included in Notes 13, 11 and 9, respectively.
Repurchase of Common Stock
On October 31, 2016, the Board of Directors authorized the repurchase of 1,000,000 shares of our common stock. On February 11, 2025,
the Board of Directors authorized the repurchase of up to 2,000,000 shares. Our stock repurchase program is not subject to an expiration date.
During the year ended December 31, 2024, the Company paid $19.6 million to repurchase 198,352 shares of its common stock at an
average price of $98.92 per share. As of December 31, 2024, 623,061 shares were available to be repurchased. The Company paid $21.7
million to repurchase 290,920 shares during the year ended December 31, 2023.
63
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
15. Leases
We lease facilities, vehicles and equipment under the operating lease agreements, which include both monthly and longer-term
arrangements.
Certain operating leases for vehicles contain residual value guarantee provisions, which would generally become due at the expiration of the
operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. As of December 31, 2024, the
aggregate residual value guarantee related to these leases was approximately $24.0 million. We believe the likelihood of funding the guarantee
obligation under any provision of the operating lease agreement is remote.
The lease assets and liabilities as of December 31 were as follows:
Leases
Classification
2024
2023
Assets
Operating lease assets
Operating lease assets
$
54.6
$
41.7
Finance lease assets
Property, plant and equipment
1.1
0.6
Total leased assets
$
55.7
$
42.3
Liabilities
Current:
Operating
Other current liabilities
$
18.5
$
14.4
Finance
Current portion of long-term debt
0.5
0.1
Noncurrent:
Operating
Long-term operating lease liabilities
36.3
27.4
Finance
Long-term debt
0.7
0.4
Total lease liabilities
$
56.0
$
42.3
Finance lease assets are recorded net of accumulated amortization of $0.3 million and $0.1 million as of December 31, 2024 and
December 31, 2023, respectively.
The lease cost for the three years ended December 31 was as follows:
Lease Cost
2024
2023
2022
Operating lease cost
$
30.1
$
28.9
$
26.2
Finance lease cost
0.2
0.1
0.1
Total lease cost
$
30.3
$
29.0
$
26.3
Includes short-term lease costs of $6.2 million and $5.9 million and variable lease costs of $2.4 million and $4.2 million for the years
ended December 31, 2024 and December 31, 2023, respectively.
Includes amortization of leased assets and interest on lease liabilities.
(a)
(a)
(a)
(b)
(a)
(b)
64
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The maturity of lease liabilities as of December 31, 2024 was as follows:
Maturity of Lease Liabilities
Operating Leases
Finance Leases
Total
2025
$
21.0
$
0.5
$
21.5
2026
17.6
0.3
17.9
2027
12.8
0.2
13.0
2028
6.1
0.2
6.3
2029
2.2
0.1
2.3
Thereafter
1.5
—
1.5
Total lease payments
$
61.2
$
1.3
$
62.5
Less: Interest
(6.4)
(0.1)
(6.5)
Present value of lease liabilities
$
54.8
$
1.2
$
56.0
The lease term and discount rate as of December 31 were as follows:
Lease Term and Discount Rate
2024
2023
Weighted-average remaining lease term (years):
Operating leases
3.5
3.8
Finance leases
4.0
4.7
Weighted-average discount rate:
Operating leases
6.1%
6.0%
Finance leases
5.2%
6.0%
Other information related to cash paid related to lease liabilities and lease assets obtained for the years ended December 31 was as follows:
Other Information
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
21.3
$
18.9
Financing cash flows from finance leases
0.2
0.1
Lease assets obtained in exchange for new finance lease liabilities
1.0
0.7
Lease assets obtained in exchange for new operating lease liabilities
34.2
18.8
16. Commitments and Contingencies
In the ordinary course of business, we may become liable with respect to pending and threatened litigation, tax, environmental and other
matters. Legal costs associated with such matters are expensed as incurred.
Oxygenator Water Techs vs. Tennant Company
On November 25, 2024, the Company received an adverse jury verdict in an intellectual property damages dispute in the United States
District Court for the District of Minnesota. In the dispute, Oxygenator Water Technologies, Inc. (OWT) alleges that between 2015 and 2023
Tennant Company infringed certain of OWT’s patents through the Company’s manufacture and sale of certain component parts in ecH2O and
nanoclean system options included on commercial floor scrubbers. A jury ruled against the Company and awarded $9.8 million, plus
prejudgment interest of $4.7 million, in favor of OWT. The Company strongly disagrees with the verdict and is exploring all available options,
including seeking to overturn the verdict and the resulting judgment through an appeals process. However, based on the jury verdict, the
Company has recorded an accrued expense in selling and administrative expense in the Company's Consolidated Statements of Income
65
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
and a current liability in the Company's Consolidated Balance Sheets for the total amount of $14.5 million. As the litigation process is not
predictable and can lead to unexpected results, it is possible that the Company's exposure to loss could change after the issuance of these
financials.
The ruling does not impact the Company's ability to sell any of its products and is not expected to affect the Company's long-term business
objectives.
Other Matters
In addition to the above matter, the Company is involved in various other claims and litigation incidental to its business. Although the
outcome of these matters cannot be determined with certainty, we do not expect that the final outcome will have a material effect on the
Company's consolidated results of operations or financial position.
17. Income Taxes
Income before income taxes for the three years ended December 31 was as follows:
2024
2023
2022
U.S. operations
$
92.3
$
94.2
$
58.9
Foreign operations
12.5
29.6
20.6
Total
$
104.8
$
123.8
$
79.5
Income tax expense (benefit) for the three years ended December 31 was as follows:
2024
2023
2022
Current:
Federal
$
19.1
$
28.7
$
17.1
Foreign
7.9
8.5
7.9
State
3.6
4.0
3.8
Total current
$
30.6
$
41.2
$
28.8
Deferred:
Federal
$
(1.8)
$
(8.7)
$
(6.3)
Foreign
(7.7)
(17.3)
(8.5)
State
—
(0.9)
(0.8)
Total deferred
$
(9.5)
$
(26.9)
$
(15.6)
Total:
Federal
$
17.3
$
20.0
$
10.8
Foreign
0.2
(8.8)
(0.6)
State
3.6
3.1
3.0
Total income tax expense
$
21.1
$
14.3
$
13.2
In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when
the tax impact is zero or immaterial. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result
upon repatriation of our approximately $119.3 million of undistributed earnings from foreign subsidiaries to the United States as those earnings
continue to be permanently reinvested.
In December 2021, the Organization for Economic Cooperation and Development (OECD), which is an international public policy setting
organization comprised of member countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15%
(the "Pillar Two rule"). Member states have
66
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
begun implementing the rules through local legislation and the OECD continues to refine technical guidance. We have considered the applicable
developments under the Pillar Two rules and there is no material impact on the 2024 consolidated financial statements.
Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31 as follows:
2024
2023
2022
Tax at statutory rate
21.0 %
21.0 %
21.0 %
Increases (decreases) in the tax rate from:
State and local taxes, net of federal benefit
3.4
2.4
2.4
Effect of foreign operations
(2.2)
(10.9)
(4.9)
Effect of changes in valuation allowances
—
(0.2)
(1.2)
Nondeductible executive compensation
2.5
1.0
1.1
Stock based compensation
(2.9)
0.1
(0.4)
Research and development credit
(1.6)
(1.3)
(1.5)
Other, net
(0.1)
(0.5)
0.1
Effective income tax rate
20.1 %
11.6 %
16.6 %
The effect of foreign operations line item includes (3.7%) and (12.0%) benefits for 2024 and 2023, respectively, associated with reductions to
deferred tax liabilities on undistributed foreign earnings as those cumulative earnings were reduced by current year statutory book losses.
Deferred tax assets and liabilities were comprised of the following as of December 31:
2024
2023
Deferred tax assets:
Inventory
$
2.2
$
3.8
Compensation and employee benefits
12.3
13.2
Warranty reserves
2.2
2.4
Allowance for doubtful accounts and deferred revenue
2.8
2.7
Operating lease liabilities
11.0
9.0
Tax loss carryforwards
7.7
6.9
Tax credit carryforwards
3.6
3.7
Capitalized research and development costs
19.0
12.3
Goodwill and intangible assets
7.0
4.5
Other
2.5
1.2
Gross deferred tax assets
$
70.3
$
59.7
Less: valuation allowance
(3.3)
(3.2)
Total net deferred tax assets
$
67.0
$
56.5
Deferred tax liabilities:
Operating lease assets
$
11.3
$
9.5
Fixed assets
9.2
9.5
Capitalized implementation costs
5.0
—
Total deferred tax liabilities
$
25.5
$
19.0
Net deferred tax assets
$
41.5
$
37.5
67
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Tax credit carryforwards consist of $3.1 million of U.S. federal and state tax credits and $1.2 million of Netherlands tax credits. We have non-
U.S. cumulative tax losses of $29.8 million in various countries ($7.7 million tax effected). Cumulative losses can be used to offset the income
tax liabilities on future income in these countries. Of these losses, $29.5 million have unlimited carryforward periods. Less than $0.3 million of
these losses have a limited carryforward period.
The valuation allowance as of December 31, 2024 principally applies to foreign net operating losses as well as foreign and domestic tax
credit carryforwards which, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits
related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. In 2024, we
recorded a net valuation allowance increase of $0.1 million due to the acquisition of TCS and internal restructuring. As of December 31, 2024,
we believe it is more likely than not that the remainder of our deferred tax assets are realizable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
2024
2023
Beginning balance
$
4.1
$
4.2
(Decreases) as a result of tax positions taken during a prior period
—
—
Increases as a result of tax positions taken during the current year
0.9
1.2
Increase relating to prior period tax positions of acquired entities
1.4
—
Decreases relating to settlement with tax authorities
—
(0.2)
Decreases as a result of a lapse of the applicable statute of limitations
(0.5)
(1.1)
Decreases as a result of foreign currency fluctuations
—
—
Ending balance
$
5.9
$
4.1
Included in the balance of unrecognized tax benefits as of December 31, 2024 and 2023 are potential benefits of $5.5 million and $3.7
million, respectively, that if recognized, would affect the effective tax rate.
We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In
addition to the liability of $5.9 million and $4.1 million for unrecognized tax benefits as of December 31, 2024 and 2023, there was approximately
$0.6 million and $0.5 million, respectively, for accrued interest and penalties. To the extent interest and penalties are not assessed with respect
to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are
generally no longer subject to U.S. 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 final outcome of these examinations cannot be currently determined, we believe that
we have adequate reserves with respect to these examinations.
18. Share-Based Compensation
We have five plans under which we have awarded share-based compensation grants: The 1997 Non-Employee Directors Option Plan
("1997 Plan"), which provided for stock option grants to our non-employee Directors, the 2007 Stock Incentive Plan (“2007 Plan”), the Amended
and Restated 2010 Stock Incentive Plan, as Amended (“2010 Plan”), the 2017 Stock Incentive Plan ("2017 Plan") and the 2020 Amended and
Restated Stock Incentive Plan ("2020 Plan").
As of December 31, 2024, there were 148,502 shares subject to outstanding compensation awards under the 2007 Plan, the 2010 Plan, and
the 2017 Plan. As of December 31, 2024, there were 1,846,357 shares available for issuance under the 2020 Plan. The Compensation
Committee of the Board of Directors determines the number of shares awarded and the grant date, subject to the terms of our equity award
policy.
68
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
We recognized total share-based compensation expense of $11.9 million, $11.6 million and $7.8 million, respectively, during the years ended
2024, 2023 and 2022. The total excess tax benefit recognized for share-based compensation arrangements during the years ended 2024, 2023
and 2022 was $3.1 million, $0.1 million and $0.3 million, respectively.
Stock Option Awards
We determined the fair value of our stock option awards using the Black-Scholes valuation model that uses the assumptions noted in the
table below. The expected term selected for stock options granted during the year represents the period of time that the stock options are
expected to be outstanding based on historical data of stock option holder exercise and termination behavior of similar grants. The risk-free
interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury rate over the expected life at the time of
grant. Expected volatility is based upon historical volatility of our stock over a period equal to the expected life of each stock option grant.
Dividend yield is estimated over the expected life based on our dividend policy and historical dividends paid. To determine the amount of
compensation cost to be recognized in each period, we account for forfeitures as they occur. We did not grant any stock options during 2024.
The following table illustrates the valuation assumptions used for the 2023 and 2022 stock option grants:
2023
2022
Expected volatility
35 %
34 - 34%
Weighted-average expected volatility
35 %
34 %
Expected dividend yield
1.6 %
1.2 - 1.2%
Weighted-average expected dividend yield
1.6 %
1.2 %
Expected term, in years
5
5
Risk-free interest rate
4.2 - 4.2%
1.9 - 1.9%
New stock option awards granted vest one-third each year over a three-year period and have a ten-year contractual term. Compensation
expense equal to the grant date fair value is recognized for these awards on a straight-line basis over the awards' vesting period. Stock options
granted to employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the applicable equity
and inventive plan.
The following table summarizes the activity during the year ended December 31, 2024 for stock option awards:
Shares
Weighted-
Average Exercise
Price
Outstanding at beginning of year
642,431 $
70.43
Granted
—
—
Exercised
(340,027)
68.88
Forfeited
—
—
Expired
—
—
Outstanding at end of year
302,404 $
72.18
Exercisable at end of year
247,575 $
71.59
There were no options granted during the year ended December 31, 2024. The weighted-average grant date fair value of stock options
granted during the years ended 2023 and 2022 was $24.21 and $23.45, respectively.
69
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $14.5 million, $5.9
million and $0.4 million, respectively. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2024 was $2.9
million and $2.5 million, respectively. The weighted-average remaining contractual life for options outstanding and exercisable as of
December 31, 2024 was 5.3 years and 4.8 years, respectively.
As of December 31, 2024, there was unrecognized compensation cost related to nonvested stock options of $0.6 million, which is expected
to be recognized over a weighted-average period of 0.9 years.
Restricted Share Awards
Restricted share awards for employees generally have a three-year vesting period from the effective date of the grant. Restricted share
awards to non-employee directors vest upon a change of control or upon termination of service as a director occurring at least six months after
grant date of the award so long as termination is for one of the following reasons: death; disability; retirement in accordance with Tennant policy
(e.g., age, term limits, etc.); resignation at request of Board (other than for gross misconduct); resignation following at least six months’ advance
notice; failure to be renominated (unless due to unwillingness to serve) or reelected by shareholders; or removal by shareholders. We use the
closing share price the day before the grant date to determine the fair value of our restricted share awards. Expenses for these awards are
recognized over the vesting period.
The following table summarizes the activity during the year ended December 31, 2024 for nonvested restricted share awards:
Shares
Weighted-
Average Grant
Date Fair
Value
Nonvested at beginning of year
84,966 $
63.48
Granted
28,753
110.16
Vested
(27,514)
59.92
Forfeited
—
—
Nonvested at end of year
86,205 $
80.18
The weighted-average grant date fair value of restricted share awards granted during the years ended December 31, 2024, 2023 and 2022
was $110.16, $72.88 and $78.78, respectively.
The total fair value of restricted shares vested during the years ended December 31, 2024, 2023 and 2022 was $1.6 million, $0.4 million and
$1.7 million, respectively. As of December 31, 2024, there was $2.9 million of total unrecognized compensation cost related to restricted share
awards, which is expected to be recognized over a weighted-average period of 1.9 years.
Performance Share Awards
We grant performance share awards to key employees as a part of our long-term management compensation program. These awards are
earned based upon achievement of certain financial performance targets over a three year period. The number of shares of common stock a
participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of the
financial performance targets. We use the closing share price the day before the grant date to determine the fair value of our performance share
awards. Expenses on these awards are recognized over a three-year performance period. Performance shares are granted in restricted stock
units. They are payable in stock and vest solely upon achievement of certain financial performance targets during this three-year period.
70
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The following table summarizes the activity during the year ended December 31, 2024 for nonvested performance share awards:
Shares
Weighted-
Average Grant
Date Fair
Value
Nonvested at beginning of year
153,148 $
76.44
Granted
50,846
108.97
Vested
(51,712)
79.30
Forfeited
(2,665)
107.73
Nonvested at end of year
149,617 $
85.94
The weighted-average grant date fair value of performance share awards granted during the years ended December 31, 2024, 2023 and
2022 was $108.97, $73.12 and $77.19, respectively.
As of December 31, 2024, there was $6.0 million of total unrecognized compensation costs related to performance share awards, which is
expected to be recognized over a weighted-average period of 1.5 years.
Restricted Stock Units
We grant restricted stock units to employees and non-employee directors, which generally vest within three years from the date of the grant.
Vested restricted stock units are paid out in stock. We use the closing share price the day before the grant date to determine the fair value of our
restricted stock units. Expenses on these awards are recognized on a straight-line basis over the vesting period of the award.
The following table summarizes the activity during the year ended December 31, 2024 for nonvested restricted stock units:
Shares
Weighted-
Average Grant
Date Fair
Value
Nonvested at beginning of year
129,219 $
73.89
Granted
52,357
106.54
Vested
(30,443)
73.30
Forfeited
(18,990)
86.99
Nonvested at end of year
132,143 $
85.08
The weighted-average grant date fair value of restricted stock units granted during the years ended December 31, 2024, 2023 and 2022 was
$106.54, $77.59 and $68.48, respectively.
The total fair value of shares vested during the years ended December 31, 2024, 2023 and 2022 was $2.2 million, $3.0 million and $0.5
million, respectively. As of December 31, 2024, there was $4.2 million of total unrecognized compensation cost related to restricted stock units,
which is expected to be recognized over a weighted-average period of 1.5 years.
Share-Based Liabilities
As of December 31, 2024 and 2023, we had $0.4 million and $0.4 million in total share-based liabilities recorded on our consolidated
balance sheets, respectively.
71
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
19. Income Attributable to Tennant Company Per Share
The computations of basic and diluted earnings attributable to Tennant Company per share for the years ended December 31 were as
follows:
2024
2023
2022
Numerator:
Net income
$
83.7
$
109.5
$
66.3
Denominator:
Basic - weighted average shares outstanding
18,786,871
18,509,523
18,494,356
Effect of dilutive securities
309,267
274,110
202,899
Diluted - weighted average shares outstanding
19,096,138
18,783,633
18,697,255
Basic earnings per share
$
4.46
$
5.92
$
3.58
Diluted earnings per share
$
4.38
$
5.83
$
3.55
Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation
plans of 97,463, 249,690 and 649,054 shares of common stock during 2024, 2023 and 2022, respectively. These exclusions were made if the
exercise prices of these 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 shares outstanding in the options, or if we have a net loss, as these effects
are anti-dilutive.
72
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
20. Segment Reporting
We are organized into four operating segments: North America; Latin America; Europe, Middle East, Africa; and Asia Pacific. We combine
our North America and Latin America operating segments into the "Americas" for reporting net sales by geographic area. In accordance with the
objective and basic principles of the applicable accounting guidance, we aggregate our operating segments into one reportable segment that
consists of the design, manufacture and sale of products used primarily in the maintenance of nonresidential surfaces.
The Company's chief operating decision maker ("CODM") is our chief executive officer.
The CODM uses net income, that is also reported on the income statement as consolidated net income, to evaluate return on assets and
decide whether to reinvest profits into segments or other areas, such as acquisitions or dividends. It is also used to monitor budget versus actual
results, conduct competitive analysis by benchmarking against the Company's competitors, and assess segment performance. Additionally, the
CODM uses net income to allocate resources, evaluate performance, and make key operating decisions, considering budget-to-actual variances
on a quarterly basis. The CODM also uses gross profit to evaluate pricing, allocate resources, and assess segment performance by comparing
actual results to historical and forecasted data.
Significant expenses within net income include cost of sales, research and development, and selling and administrative expenses, which are
each separately presented on the Company’s Consolidated Statements of Income. Other segment items within net income include net foreign
currency transaction gain (loss), interest expense, net, other (expense) income, net, and income tax expense.
The measure of segment assets is reported on the balance sheet as total consolidated assets. The following table presents net sales by
geographic area for the three years ended December 31:
2024
2023
2022
Net Sales:
United States
$
766.9
$
726.8
$
618.8
Other Americas
121.6
113.5
87.1
Americas
888.5
840.3
705.9
Europe, Middle East, Africa
318.5
314.4
301.6
Asia Pacific
79.7
88.9
84.7
Total
$
1,286.7
$
1,243.6
$
1,092.2
Accounting policies of the operations in various operating segments are the same as those described in Note 1. Net sales are attributed to
each operating segment based on the end user country and are net of intercompany sales. Apart from the United States shown in the table
above, there were no individual foreign locations which had net sales which represented more than 10% of our consolidated net sales. No single
customer represents more than 10% of our consolidated net sales.
73
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The following table presents long-lived assets by geographic area as of December 31:
2024
2023
2022
Long-lived assets:
United States
$
166.6
$
104.2
$
105.9
Other Americas
29.0
31.9
26.4
Americas
195.6
136.1
132.3
Italy
193.7
218.0
223.5
Other Europe, Middle East, Africa
93.6
75.6
69.6
Europe, Middle East, Africa
287.3
293.6
293.1
Asia Pacific
29.6
30.4
32.1
Total
$
512.5
$
460.1
$
457.5
Long-lived assets consist of property, plant and equipment, goodwill, intangible assets and certain other assets. Apart from the United States
and Italy shown in the table above, there are no other individual foreign locations which have long-lived assets which represent more than 10%
of our consolidated long-lived assets.
21. Subsequent Event
On February 11, 2025, the Board of Directors authorized the repurchase of up to 2,000,000 shares of our common stock from time to time in
the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program. The share repurchase
program is in addition to the 2016 share repurchase program.
74
Table of Contents
ITEM 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A – Controls and Procedures
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer, have conducted an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) as of December 31, 2024. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer and Principal Accounting Officer concluded that, as of December 31, 2024, our disclosure controls and
procedures were effective.
For purposes of Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are
designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15
U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its
Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Rule 13a-15(f) under the Exchange Act.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that:
(i)
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company;
(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis.
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer and Principal Accounting Officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring
75
Table of Contents
Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, our Chief Executive Officer and Chief
Financial Officer and Principal Accounting Officer concluded that our internal control over financial reporting was effective as of December 31,
2024.
We acquired M&F Management and Financing GmbH ("M&F"), the parent company of TCS EMEA GmbH ("TCS") in February 2024, which
was accounted for as a business combination. Management excluded from its assessment of the effectiveness of our internal control over
financial reporting as of and for the year ended December 31, 2024 TCS's internal control over financial reporting associated with $37.2 million
of total assets and $22.0 million of total revenues included in the consolidated financial statements of the Company as of and for the year ended
December 31, 2024. This exclusion is in accordance with the SEC's guidance, which permits companies to omit an acquired business's internal
control over financial reporting from management's assessment for up to one year from the date of the acquisition.
Deloitte & Touche LLP, our independent registered public accounting firm, has audited the effectiveness of the Company's internal control
over financial reporting as of December 31, 2024 and has issued a report which is included in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no significant changes in the Company's internal control over financial reporting during the quarter ended December 31, 2024
that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B – Other Information
During the three months ended December 31, 2024, no director or officer of the Company adopted, modified, or terminated a "Rule 10b5-1
trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
76
Table of Contents
PART III
ITEM 10 – Directors, Executive Officers and Corporate Governance
Information required under this item with respect to directors is contained in the section entitled “Board of Directors” as part of our 2025
Proxy Statement and is incorporated herein by reference. See also Item 1, Information About Our Executive Officers in Part I hereof.
Code of Conduct
We have adopted the Tennant Company Code of Conduct, which applies to all of our employees, directors, consultants, agents and anyone
else acting on our behalf. The Code of Conduct includes particular provisions applicable to our senior financial management, which includes our
Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and other employees performing similar functions. A copy of our Code of
Conduct is available on the Investor Relations website at investors.tennantco.com. We intend to post on our website any amendment to, or
waiver from, a provision of our Code of Conduct that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting
Officer, Chief Accounting Officer and other persons performing similar functions promptly following the date of such amendment or waiver. In
addition, we have also posted copies of our Corporate Governance Principles and the Charters for our Audit, Compensation, Governance and
Executive Committees on our website.
ITEM 11 – Executive Compensation
Information required under this item is contained in the sections entitled “Director Compensation," “Executive Compensation Information”
and "Pay Ratio" as part of our 2025 Proxy Statement and is incorporated herein by reference.
ITEM 12 – Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information required under this item is contained in the sections entitled “Security Ownership of Certain Beneficial Owners and
Management” and "Equity Compensation Plan Information" as part of our 2025 Proxy Statement and is incorporated herein by reference.
ITEM 13 – Certain Relationships and Related Transactions, and Director Independence
Information required under this item is contained in the sections entitled “Director Independence” and “Related-Person Transaction Approval
Policy” as part of our 2025 Proxy Statement and is incorporated herein by reference.
ITEM 14 – Principal Accountant Fees and Services
Information required under this item is contained in the section entitled “Fees Paid to Independent Registered Public Accounting Firm” as
part of our 2025 Proxy Statement and is incorporated herein by reference.
77
Table of Contents
PART IV
ITEM 15 – Exhibits and Financial Statement Schedules
A.
The following documents are filed as a part of this report:
1.
Financial Statements
Consolidated financial statements and related notes, together with the reports of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm (PCAOB ID No. 34), appear in Part II Item 8. Financial Statements and Supplementary Data of this Form 10-K.
2.
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
(In millions)
2024
2023
2022
Allowance for doubtful accounts:
Balance at beginning of year
$
7.2
$
6.1
$
5.3
Charged to costs and expenses
2.6
4.4
1.9
Charged to other accounts
—
—
0.1
Deductions
(2.7)
(3.3)
(1.2)
Balance at end of year
$
7.1
$
7.2
$
6.1
Sales returns reserve:
Balance at beginning of year
$
1.9
$
1.4
$
1.0
Charged to costs and expenses
1.1
2.0
0.9
Deductions
(0.8)
(1.5)
(0.5)
Balance at end of year
$
2.2
$
1.9
$
1.4
Allowance for excess and obsolete inventories:
Balance at beginning of year
$
17.2
$
14.2
$
14.3
Charged to costs and expenses
2.8
8.9
0.5
Charged to other accounts
0.1
0.1
0.2
Deductions
(4.9)
(6.0)
(0.8)
Balance at end of year
$
15.2
$
17.2
$
14.2
Valuation allowance for deferred tax assets:
Balance at beginning of year
$
3.2
$
3.3
$
4.8
Charged to costs and expenses
(0.3)
(0.3)
(1.4)
Charged to other accounts
0.4
0.2
(0.1)
Balance at end of year
$
3.3
$
3.2
$
3.3
Warranty reserve:
Balance at beginning of year
$
11.2
$
10.9
$
10.4
Charged to costs and expenses
9.5
12.2
9.9
Charged to other accounts
(0.1)
(0.1)
(0.1)
Deductions
(10.1)
(11.8)
(9.3)
Balance at end of year
$
10.5
$
11.2
$
10.9
Primarily includes impact from foreign currency fluctuations.
Includes accounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged
against reserves.
Includes inventory identified as excess, slow moving or obsolete and charged against reserves.
(a)
(b)
(b)
(a)
(c)
(a)
(a)
(d)
(a)
(b)
(c)
78
Table of Contents
Includes warranty claims charged against reserves.
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements
or notes thereto.
3. Exhibits
Item #
Description
Method of Filing
3.1
Restated Articles of Incorporation
Incorporated by reference to Exhibit 3i to the Company’s Form 10-Q for
the quarter ended June 30, 2006.
3.2
Amended and Restated By-Laws
Incorporated by reference to Exhibit 3.2 to the Company’s Current
Report on Form 8-K dated January 13, 2023.
3.3
Articles of Amendment of Restated Articles of Incorporation of Tennant
Company
Incorporated by reference to Exhibit 3iii to the Company's Form 10-Q
for the quarter ended March 31, 2018.
4.1
Description of Securities
Incorporated by reference to Exhibit 4.1 to the Company's Form 10-K
for the year ended December 31, 2022.
10.1
Tennant Company Executive Nonqualified Deferred Compensation
Plan, as restated effective January 1, 2009, as amended*
Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q
for the quarter ended September 30, 2012.
10.2
Form of Amended and Restated Management Agreement and
Executive Employment Agreement*
Incorporated by reference to Exhibit 10.3 to the Company's Form 10-K
for the year ended December 31, 2011.
10.3
Schedule of parties to Management and Executive Employment
Agreement
Filed herewith electronically.
10.4
Tennant Company Non-Employee Director Stock Option Plan (as
amended and restated effective May 6, 2004)*
Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q
for the quarter ended June 30, 2004.
10.5
Tennant Company Amended and Restated 1999 Stock Incentive Plan*
Incorporated by reference to Appendix A to the Company’s Proxy
Statement for the 2006 Annual Meeting of Shareholders filed on March
15, 2006.
10.6
Tennant Company 2007 Stock Incentive Plan*
Incorporated by reference to Appendix A to the Company’s Proxy
Statement for the 2007 Annual Meeting of Shareholders filed on March
15, 2007.
10.7
Amended and Restated 2010 Stock Incentive Plan, as Amended*
Incorporated by reference to Appendix A to the Company's Proxy
Statement for the 2013 Annual Meeting of Shareholders filed on March
11, 2013.
10.8
2017 Stock Incentive Plan*
Incorporated by reference to Appendix A on the Company's Proxy
Statement for the 2017 Annual Meeting of Shareholders filed March 15,
2017.
10.9
Form of Tennant Company 2017 Stock Incentive Plan Non-Statutory
Stock Option Agreement*
Incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q
for the quarter ended June 30, 2017.
10.10
Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock
Agreement*
Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q
for the quarter ended June 30, 2017.
10.11
Form of Tennant Company 2017 Stock Incentive Plan Non-Employee
Director Restricted Stock Agreement*
Incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q
for the quarter ended June 30, 2017.
10.12
Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock
Unit Agreement*
Incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q
for the quarter ended June 30, 2017.
10.13
Form of Tennant Company 2017 Stock Incentive Plan Non-Employee
Director Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended June 30, 2018.
(d)
79
Table of Contents
10.14
Tennant Company Executive Officer Cash Incentive Plan*
Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed August 20, 2018.
10.15
Tennant Company Executive Officer Severance Plan and Summary
Plan Description*
Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed October 10, 2018.
10.16
Tennant Company 2020 Stock Incentive Plan*
Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.17
Form of Tennant Company 2020 Stock Incentive Plan Non-Statutory
Stock Option Agreement*
Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.18
Form of Tennant Company 2020 Stock Incentive Plan Restricted Stock
Agreement*
Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.19
Form of Tennant Company 2020 Stock Incentive Plan Restricted Stock
Unit Agreement*
Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.20
Form of Tennant Company 2020 Stock Incentive Plan Non-Employee
Director Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.21
Form of Tennant Company 2020 Stock Incentive Plan Performance
Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.22
Form of Tennant Company 2020 Stock Incentive Plan Special
Performance Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.9 to the Company’s Form 10-Q
for the quarter ended June 30, 2020.
10.23
Amendment to Employment Agreement with David Huml*
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q
for the quarter ended March 31, 2021.
10.24
Non-Statutory Stock Option Agreement (Inducement Grant), between
Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.1 to the Company’s Registration
Statement on Form S-8 filed on May 10, 2021.
10.25
Restricted Stock Agreement (Inducement Grant), between Fay West
and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.2 to the Company’s Registration
Statement on Form S-8 filed on May 10, 2021.
10.26
Restricted Stock Unit Agreement (Performance Based Inducement
Grant), between Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.3 to the Company’s Registration
Statement on Form S-8 filed on May 10, 2021.
10.27
Restricted Stock Unit Agreement (Inducement Grant), between Fay
West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.4 to the Company’s Registration
Statement on Form S-8 filed on May 10, 2021.
10.28
Second Amended and Restated Credit Agreement, dated August 7,
2024
Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on August 7, 2024.
10.29
Offer Letter with Fay West commencing April 15, 2021*
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q
for the quarter ended June 30, 2021.
19
Insider Trading Policy
Filed herewith electronically.
21
Subsidiaries of the Registrant
Filed herewith electronically.
23.1
Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm
Filed herewith electronically.
24.1
Powers of Attorney
Included on signature page.
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Filed herewith electronically.
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Filed herewith electronically.
32.1
Section 1350 Certification of Chief Executive Officer
Filed herewith electronically.
80
Table of Contents
32.2
Section 1350 Certification of Chief Financial Officer
Filed herewith electronically.
97
Compensation Recoupment Policy
Incorporated by reference to Exhibit 97 to the Company’s Annual
Report on Form 10-K filed on February 22, 2024.
101
The following financial information from Tennant Company’s annual
report on Form 10-K for the period ended December 31, 2024, filed with
the SEC on February 18, 2025, formatted in Inline Extensible Business
Reporting Language (iXBRL): (i) the Consolidated Statements of
Income for the years ended December 31, 2024, 2023, and 2022, (ii)
the Consolidated Statements of Comprehensive Income for the years
ended December 31, 2024, 2023, and 2022, (iii) the Consolidated
Balance Sheets as of December 31, 2024 and 2023, (iv) the
Consolidated Statements of Cash Flows for the years ended December
31, 2024, 2023, and 2022, (v) the Consolidated Statements of Equity
for the years ended December 31, 2024, 2023, and 2022, and (vi)
Notes to the Consolidated Financial Statements.
Filed herewith electronically.
104
Inline Extensible Business Reporting language (iXBRL) for the cover
page of this Annual Report on Form 10-K, included in Exhibit 101
Filed herewith electronically.
*
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on Form 10-K.
81
Table of Contents
ITEM 16 – Form 10-K Summary
None.
82
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TENNANT COMPANY
By
/s/ David W. Huml
David W. Huml
President, CEO and
Board of Directors
Date
February 18, 2025
Each of the undersigned hereby appoints David W. Huml and Kristin A. Erickson, and each of them (with full power to act alone), as
attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file
with the Securities and Exchange Commission under the Securities Exchange Act of 1934, any and all amendments and exhibits to this annual
report on Form 10-K and any and all applications, instruments, and other documents to be filed with the Securities and Exchange Commission
pertaining to this annual report on Form 10-K or any amendments thereto, with full power and authority to do and perform any and all acts and
things whatsoever requisite and necessary or desirable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
By
/s/ David W. Huml
By
/s/ Andrew P. Hider
David W. Huml
Andrew P. Hider
President, CEO and Board of Directors
Board of Directors
Date
February 18, 2025
Date
February 18, 2025
By
/s/ Fay West
By
/s/ Timothy R. Morse
Fay West
Timothy R. Morse
Chief Financial Officer and Principal Accounting Officer
Board of Directors
Date
February 18, 2025
Date
February 18, 2025
By
/s/ Azita Arvani
By
/s/ Donal L. Mulligan
Azita Arvani
Donal L. Mulligan
Board of Directors
Board of Directors
Date
February 18, 2025
Date
February 18, 2025
By
/s/ Carol S. Eicher
By
/s/ Mark W. Sheahan
Carol S. Eicher
Mark W. Sheahan
Board of Directors
Board of Directors
Date
February 18, 2025
Date
February 18, 2025
By
/s/ Maria C. Green
By
/s/ David Windley
Maria C. Green
David Windley
Board of Directors
Board of Directors
Date
February 18, 2025
Date
February 18, 2025
83
Table of Contents
HIDDEN IXBRL
84
Exhibit 10.3
SCHEDULE OF PARTIES TO
MANAGEMENT AND EXECUTIVE EMPLOYMENT AGREEMENT
Parties to current form of amended and restated management agreement:
Name
Title
David W. Huml
President and Chief Executive Officer
Carol E. McKnight
Senior Vice President, Chief Administrative Officer
Richard H. Zay
Senior Vice President, Chief Commercial Officer
Exhibit 19
INSIDER TRADING POLICY
General Statement
Tennant Company (“Tennant”) has adopted the following policies for all employees, members of its board of directors (“directors”)
and officers of Tennant. Tennant may also determine that other persons should be subject to these policies, such as contractors or
consultants who have access to material non-public information.
From time to time you may know about material information concerning Tennant which has not been disclosed to the public
(sometimes referred to “insider information”). Because of the possible penalties imposed by law resulting from insider trading
(which are very substantial), because Tennant's reputation is among its most important assets, and because of the damage to your
and Tennant's reputations if you are accused of insider trading, Tennant has adopted the following policies. Please read and follow
them carefully.
Pursuant to the policies set forth below under “What You Cannot Do,” you may not discuss any material non-public information with,
or disclose it to, people outside Tennant, including family members, friends, or work associates. Also, you cannot discuss the
information with, or disclose it to, people at Tennant unless they are authorized to receive it.
Pursuant to the policies set forth below under "What You Cannot Do," you may not trade (buy or sell) Tennant stock when you are
aware of material non-public information. That means, if you have oral or written material non-public information regarding, for
example, Tennant’s financial performance (either positive or negative) or a significant event or development, which has not been
publicly disclosed, you may not buy or sell Tennant stock (subject to limited exceptions described below) and you may not make
any recommendations to anyone else that would encourage them to buy or sell such stock.
If you have been notified that you are an Access Person as defined in the attached Supplemental Policy, you are also subject to
additional restrictions.
From time to time, Tennant may engage in transactions in its own securities. It is the Company’s policy that any transactions by the
Company will comply with applicable laws with respect to insider trading.
Material Non-public Information
Material information is information that a reasonable investor would find important to making an investment decision in the
company’s stock (such as whether to buy, sell or hold the stock). This material information may be positive or negative and may
include, among other information, the following:
•
company or business unit revenue, margins, earnings (or losses) or other financial or operating results, as well as future
projections thereof;
•
potential acquisitions or divestitures of businesses, joint ventures or similar transactions;
•
significant technological advances, technological setbacks, cybersecurity matters or operating or production problems;
•
significant expansion or restructuring plans or changes in such plans;
•
significant litigation or regulatory actions;
•
the gain or loss of a major supplier or customer or a major order;
•
changes in dividend policies or the pending declaration of a stock split or stock dividend; or
•
changes in senior management.
Information is not considered to become known to the public until after it has been disclosed generally to the public, usually through
a press release, SEC filing or pre-announced, broadly-accessible webcast or conference call. Accordingly, do not buy or sell stock
unless a suitable period of time has passed after the public disclosures is issued to allow the public to react to the information.
In all cases, the responsibility for determining whether an individual is aware of material non-public information rests with that
individual, and any action on the part of Tennant, the General Counsel or any other employee or director pursuant to these policies
(or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws.
What You Cannot Do
1.
Prohibition on Trading While Aware of Material Non-public Information – You cannot buy or sell Tennant stock
(including the purchase or sale of other securities such as options to purchase any shares of Tennant stock or the purchase
or sale of securities convertible into or exchangeable for shares of Tennant stock) when you are aware of material non-
public information about Tennant. References in this policy to Tennant includes any other securities of Tennant.
2.
Prohibition on Tipping Material Nonpublic Information – You cannot give anyone else, including relatives, friends or
work associates, any material non-public information orally or in writing. This applies whether or not you believe the recipient
or any of their contacts might use the information in buying or selling Tennant securities. In addition, you must not make any
recommendations that could be used by anyone to buy or sell Tennant securities if you have material non-public information
(even if you do not actually disclose the information resulting in such recommendations).
3.
Prohibition on Short Selling and Derivative Transactions – Purchases of Tennant securities should be made as long-
term investments. It is also a policy of Tennant that you cannot sell short any Tennant stock. You also should not engage in
other speculative trading in Tennant securities, including writing or trading in options, warrants, puts and calls on Tennant’s
stock.
4.
Margin Accounts and Pledges – Securities held in a margin account or pledged as collateral for a loan may be sold
without your consent by the broker if you fail to meet a margin call or by the lender in foreclosure if you default on the loan.
Because a margin
sale or foreclosure sale may occur at a time when you are aware of material, non-public information or otherwise are not
permitted to trade in Tennant securities, you are prohibited from holding Tennant securities in a margin account or pledging
Tennant securities as collateral for a loan.
5.
Hedging and Speculative Trading – Certain forms of hedging or monetization transactions, such as zero-cost collars and
forward sale contracts, may allow you to lock in much of the value of your Tennant securities, often in exchange for all or
part of the potential upside appreciation in the securities, which precludes you from having the full risks and rewards of
ownership. As a result, you are prohibited from any speculative trading or hedging of positions in Tennant securities and
from entering into any transactions specifically designed to protect or hedge against a decrease in the value of Tennant
securities.
These prohibitions apply even if you want to make the proposed transaction for reasons having nothing to do with your possession
of the insider information, such as your desire to raise money for unanticipated expenditures. There are no exceptions to these
prohibitions except as set forth herein.
Event Specific Blackout Periods
From time to time, an event may occur that is material to Tennant and is known by only a few directors, officers and/or employees.
So long as the event remains material and non-public, the persons designated by the General Counsel may not trade Tennant
securities. If the existence of an event-specific trading restriction period is communicated to you, you should not disclose this
information to others. Even if the General Counsel has not designated you as a person who should not trade due to an event-
specific restriction, you should not trade while aware of material non-public information.
Responsibility for Transactions by Your Family Members and Related Entities
These policies also apply to your family members and others living in your household. These policies also apply to any family
members who do not live in your household but whose transactions in Tennant securities are directed by you or are subject to your
influence or control, such as parents or children who consult with you before they trade in securities. Furthermore, these policies
apply to entities, including a trust, corporation, partnership or other association, whose transactions in Tennant securities are
influenced or controlled by you. You are expected to be responsible for the compliance of your immediate family and other persons
and entities subject to these policies.
Trading in Other Companies’ Securities
In the course of your services to Tennant, you may become aware of material non-public information regarding other companies,
such as customers, suppliers, competitors or acquisition targets. You may not trade in the securities of those other companies when
you are aware of material non-public information about those companies, and you may not disclose that information to other
persons.
Gifts of Tennant Securities
Bona fide gifts of Tennant stock are not subject to these policies so long as either (i) the gift is being made to someone who is
subject to this policy and the Supplemental Policy, if applicable, to the same extent as the person making the gift, or (ii) the person
making the gift has a reasonable basis to believe that the recipient will not sell the Tennant stock during a closing trading in effect
for the person making the gift at the time of the gift.
Employee Equity and Company Sponsored Programs
Stock Options - These policies do not relate to the exercise of options granted by Tennant, because the stock purchases are made
directly from Tennant rather than from the public (e.g., a cash exercise, stock swap or net exercise where the shares acquired are
held by you). They do, however, relate to sales of such stock acquired upon exercise of the options, including sales to pay the
exercise price and tax withholding (e.g., a broker-assisted cashless exercise).
Restricted Stock, RSUs and PSUs – These policies do not apply to the vesting of restricted stock or restricted stock units
(including performance-based restricted stock or units), or the forfeiture of shares to satisfy tax withholding requirements upon the
vesting of any such award. These policies do apply, however, to any sale of shares received upon vesting or settlement of such
awards.
Dividend Reinvestment – These policies also do not relate to purchases of Tennant stock through a Tennant sponsored dividend
reinvestment plan, including dividend reinvestment within the Tennant Company stock funds of the Tennant Company Retirement
Savings Plan.
Tennant Stock Fund under Retirement Savings Plan - These policies do apply, however, to voluntary transfers into and out of
the Tennant Company stock funds of the Tennant Company Retirement Savings Plan, including any asset allocation changes
impacting the Tennant Company stock funds.
Post-Termination Transactions
If you cease to be subject to these policies when you are aware of material non-public information, the applicable provisions will
continue to apply to you until that information has become public or is no longer material.
What May Happen
If you buy or sell Tennant stock shortly before something happens or is disclosed which changes Tennant's stock price in a way that
makes it appear you knew something not then known to the public, you may be investigated by the Securities and Exchange
Commission, the Department of Justice, FINRA or others even if you in fact had no insider information. Defending against such a
charge is very difficult and embarrassing, not only to you but also to Tennant. Although it is impossible to assure that your trading in
Tennant stock will not occur shortly before such a price change, it is very important that you do your best to avoid even an
appearance that you might have traded while aware of insider financial or other information.
Possible Penalties for Trading on Insider Information
A civil penalty of up to three times the profit made or loss avoided.
A criminal fine (no matter how small the profit was) of up to $5 million ($25 million for entities).
A prison term of up to 20 years.
In addition, if you violate any of these policies, Tennant may take any disciplinary action that it determines to be appropriate, which
may include termination of your employment for cause.
Compliance Procedures
Tennant will post a copy of the current version of this policy on its intranet, and you may request a copy from the General Counsel.
The Company will distribute a calendar of quarterly blackout periods to Access Persons subject to the Supplemental Policy. The
Company provides training on this policy and the insider trading rules to Company personnel from time to time, and you are
required to attend all trainings assigned to you.
Contacts for Assistance
For questions regarding this policy or about specific transactions, please contact the General Counsel of Tennant or others
designated by the General Counsel whose names are found on Tennant’s Intranet site.
Remember, however, that the ultimate responsibility for adhering to these policies and avoiding improper transactions rests with
you.
TENNANT COMPANY
SUPPLEMENTAL POLICY FOR ACCESS PERSONNEL
TO
POLICIES AS TO CONFIDENTIALITY AND SECURITIES
TRADING
To ensure that its Policies as to Confidentiality and Securities Trading (the “Policy”) are effectively implemented, Tennant Company
(“Tennant”) is requiring all members of its Board of Directors, executive officers and other employees of Tennant with frequent
access to material, non-public information regarding Tennant (individually an “Access Person” and collectively “Access Personnel”)
to comply with this supplemental policy (the “Supplemental Policy”). Tennant will inform you if you have been designated as an
Access Person.
Pre-Clearance. All transactions (purchases, sales, etc.) by Access Personnel in securities of Tennant (other than the limited
transactions exempt from these policies), including voluntary transfers and asset allocation changes into and out of the Tennant
Company stock funds of the Tennant Company Retirement Savings Plan, must be pre-cleared with Tennant's General Counsel or
Designated Approvers.
Quarterly Blackout Periods. No transaction by Access Personnel in securities of Tennant (other than the limited transactions exempt
from these policies), including voluntary transfers and asset allocation changes into and out of the Tennant Company stock funds of
the Tennant Company Retirement Savings Plan, may be made during the following blackout periods: for Tennant's fiscal year-end
(December 31) and for Tennant's first, second and third fiscal quarter-ends (March 31, June 30 and September 30, respectively),
during the period beginning on the 10th day of the last month of each such period and ending after two full trading days have
passed following the public release of the annual or quarterly results.
Transactions Pursuant to Certain Contracts, Instructions or Plans. You may buy, sell, or effect transactions in securities of Tennant
pursuant to certain contracts, instructions and plans (e.g., 10b5-1 trading plans) regardless of whether you have material, non-
public information so long as you are not aware of material, non-public information when you enter into or adopt the contract,
instructions or plan and the plan and your trades comply with the requirements set forth on Appendix A. Prior to entering into any
such contract, instruction or plan, you must pre-clear the arrangement with the General Counsel. The General Counsel may request
that the existence of the contract, instruction or plan be disclosed publicly.
Reasons for Supplemental Policy
Because of the greater access you have as an Access Person to sensitive information regarding Tennant, and even though you
may not believe that you possess any material, non‑public information at that time, you are required to pre-clear with Tennant all
trading activity in securities of Tennant. Pre-clearance is being required to avoid even the appearance of an improper transaction
and to provide some uniformity to the definition of “material, non-public information” among Tennant personnel. Therefore, prior to
making any purchase or sale of
Tennant securities, including voluntary transfers and asset allocation changes into and out of the Tennant Company stock funds of
the Tennant Company Retirement Savings Plan, you must contact the General Counsel or Designated Approvers others designated
by him or her, to determine whether a trade at such time is permitted under the Policy. The General Counsel will be advised by the
Board of Directors and management of Tennant, on an on-going basis, any time there exists any material, non-public information
regarding Tennant. Based upon such advice, the General Counsel or Designated Approvers will advise you if a trade may take
place without contravention of the Policy. The General Counsel and Designated Approvers are responsible for keeping a record of
the inquiry and the response given.
If you are advised that the trade may occur, then you may proceed with your proposed transaction. A response by the General
Counsel or Designated Approver that a trade may occur in compliance with the Policy is effective from the time of response for five
trading days or, if earlier, until the next blackout period begins, unless you are otherwise advised by the General Counsel prior to
trading.
If you are advised that the trade may not occur, then the proposed transaction may not be affected. To avoid signaling to others that
something material and non-public is happening with respect to Tennant, you should keep this response confidential and not
disclose it to anyone. Such confidentiality will be easier to maintain if you go through the required pre-clearance procedures prior to
discussing a proposed trade with others. If you talk to others first and then get a response that the trade cannot be made, you may
be in the position of having to provide an explanation for your change of mind. To further minimize such potential signaling issues,
you should make an effort to avoid divulging the existence and nature of Tennant's pre‑clearing procedures to anyone who is not
subject to this Supplemental Policy.
The fact that you receive a response from the General Counsel or Designated Approver that a trade may occur without
contravention of the Supplemental Policy should not be interpreted by you as approval by Tennant of the advisability of the
proposed trade or its compliance with other applicable policies, laws and regulations. It is your responsibility to ascertain whether a
contemplated transaction is within the scope of these other restrictions. In any event, you should not effect the proposed trade if
you are, in fact, in possession of material non-public information about Tennant.
In addition, because of the access you may have to internal financial information concerning Tennant prior to the public distribution
of such information, this Supplemental Policy provides that, subject to limited exceptions, no trade by Access Personnel may be
made during certain blackout periods. These blackout periods begin at a time when information regarding the financial performance
of Tennant during any fiscal period begins to come into focus and to be generally available for internal review and ends after such
information has been publicly disseminated.
APPENDIX A
Guidelines for Rule 10b5-1 Trading Plans
The following guidelines apply to all Rule 10b5-1 trading plans entered into by Access Persons:
•
Access Persons may not enter into or modify a Rule 10b5-1 trading plan when the trading window is closed or while
otherwise aware of material nonpublic information.
•
For directors and officers subject to Section 16 of the Securities Exchange Act of 1934 (“Section 16 Persons”), no
transaction may take place under a Rule 10b5-1 trading plan until expiration of a cooling-off period consisting of the later of
(i) 90 days after adoption or modification (e.g., a change in the amount, price or timing) of the Rule 10b5-1 trading plan or (ii)
two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the fiscal
quarter (the Company’s fourth fiscal quarter in the case of a Form 10-K) in which the Rule 10b5-1 trading plan was adopted
or modified, but in any event, this required cooling-off period is subject to a maximum of 120 days after adoption or
modification of the Rule 10b5-1 trading plan.
•
For Access Persons who are not Section 16 Persons, no transaction may take place under a Rule 10b5-1 trading plan until
the expiration of a cooling-off period that is 30 days following the adoption or modification of a Rule 10b5-1 trading plan.
•
Subject to certain limited exceptions specified in Rule 10b5-1, an Access Person may not have more than one Rule 10b5-1
trading plan in effect at any same time.
•
Subject to certain limited exceptions specified in Rule 10b5-1, an Access Person may only enter into a Rule 10b5-1 trading
plan that is designed to effect an open market purchase or sale of the total amount of securities subject to the Rule 10b5-1
trading plan as a single transaction (a “single-transaction plan”) if the Access Person has not entered into a “single-
transaction plan” in the prior 12 months.
•
The Access Person must act in good faith with respect to a Rule 10b5-1 trading plan. A Rule 10b5-1 trading plan cannot be
entered into as part of a plan or scheme to evade the prohibitions of Rule 10b-5.
•
Section 16 Persons must include a representation in the Rule 10b5-1 trading plan that (i) the person is not aware of material
nonpublic information about the Company or Company securities and (ii) the person is adopting the plan in good faith and
not as part of plan or scheme to evade the prohibitions of Rule 10b-5.
The Company and the Section 16 Persons must make certain disclosures in SEC filings concerning Rule 10b5-1 trading plan.
Accordingly, such directors and officers must provide any information requested by the Company regarding Rule 10b5-1 trading
plan for the purpose of providing the required disclosures or any other disclosures that the Company deems to be appropriate
under the circumstances.
Exhibit 21
Subsidiaries of the Registrant
Listed below are subsidiaries of Tennant Company as of December 31, 2024
Subsidiary
Jurisdiction of Organization
Anhui Rongen Environmental Protection Technology Co., Ltd.
People’s Republic of China
Applied Kehrmaschinen GmbH
Federal Republic of Germany
CT Corporation Ltd.
People’s Republic of China
Foma Norge AS
Kingdom of Norway
Hefei Gaomei Cleaning Machines Co., Ltd.
People’s Republic of China
Hofmans Machinefabriek en Constructiebedrijf B.V.
Netherlands
IP Cleaning India Pvt. Ltd.
Republic of India
IP Cleaning S.r.l.
Italian Republic
IPC Eagle Corporation
Minnesota
IPC Industria e Comercio Ltda.
Federative Republic of Brazil
IPC Tools S.p.A.
Italian Republic
IRC Refurbishment & Recycle Center SRL
Romania
M&F Management & Financing GmbH
Austria
Sociedade Alfa Ltda.
Federative Republic of Brazil
TCS EMEA GmbH
Austria
TCS Ceska Republika s.r.o.
Czech Republic
TCS Middle East DMCC
United Arab Emirates
TCS Slovenská Republika, s.r.o.
Slovak Republic
Tennant Asia Pacific Holdings Pte Ltd.
Republic of Singapore
Tennant Australia Pty Limited
Australia
Tennant Cleaning Solutions Ireland Limited
Ireland
Tennant Cleaning Systems and Equipment (Shanghai) Co., Ltd.
People’s Republic of China
Tennant Company Far East Headquarters Pte Ltd.
Republic of Singapore
Tennant Company (Thailand) Ltd.
Thailand
Tennant Company Japan, Ltd.
Japan
Tennant Europe B.V.
Netherlands
Tennant Europe N.V.
Belgium
Tennant GmbH & Co. KG
Federal Republic of Germany
Tennant Holding B.V.
Netherlands
Tennant International Holding B.V.
Netherlands
Tennant Magyarország Korlátolt Felelősségű Társaság
Hungary
Tennant NL B.V.
Netherlands
Tennant N.V.
Netherlands
Tennant Netherland Holding B.V.
Netherlands
Tennant New Zealand Ltd.
New Zealand
Tennant Portugal E. de L., S.U., L. da
Portuguese Republic
Tennant S.A.
French Republic
Tennant SA Holdings LLC
Minnesota
Exhibit 21
Tennant Sales & Service Canada ULC
British Columbia, Canada
Tennant Sales and Service Company
Minnesota
Tennant Sales and Service Spain, S.A.
Kingdom of Spain
Tennant Scotland Limited
United Kingdom
Tennant Sverige AB
Kingdom of Sweden
Tennant UK Cleaning Solutions Ltd.
United Kingdom
Tennant Ventas & Servicios de Mexico
United Mexican States
Tennant Verwaltungs-gesellschaft GmbH
Federal Republic of Germany
TenRom Cleaning Solutions Srl
Romania
Vaclensa Ltd.
United Kingdom
Joint Ventures
I-Team North America B.V.
Netherlands
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-279110, 333-255979, 333-238160, 333-219833, 333-188151,
333-166342, and 333-142581 on Form S-8 of our reports dated February 18, 2025, relating to the financial statements of Tennant Company and
the effectiveness of Tennant Company’s internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended
December 31, 2024.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 18, 2025
Exhibit 31.1
CERTIFICATIONS
I, David W. Huml, certify that:
1.
I have reviewed this annual report on Form 10-K of Tennant Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
February 18, 2025
/s/ David W. Huml
David W. Huml
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Fay West, certify that:
1.
I have reviewed this annual report on Form 10-K of Tennant Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
February 18, 2025
/s/ Fay West
Fay West
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Tennant Company (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, David W. Huml, President and Chief Executive Officer, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this periodic report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:
February 18, 2025
/s/ David W. Huml
David W. Huml
President and Chief Executive Officer
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Tennant Company (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, Fay West, Senior Vice President and Chief Financial Officer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this periodic report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:
February 18, 2025
/s/ Fay West
Fay West
Senior Vice President and Chief Financial Officer