TENNANT CO
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
TNC$71.50+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000097134-24-000016
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000097134-24-000030
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 87 current paragraphs.
40 unchanged; 19 reworded; 27 added; 13 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
We are impacted by customer spend and global demand for our products. We are monitoring a weaker-than-expected economic environment in our EMEA region and facing challenging business conditions in APAC, especially in China, where government efforts to support manufacturing amid weaker demand are resulting in market oversupply and pricing pressure.
Current report
With growing volatility in global economics, including political relations between major economies, we remain agile as we continue to manage these evolving conditions. Despite the challenging economic environment, particularly in EMEA and APAC, we remain confident in the long-term growth prospects for our products and services across the markets we service.
Current report
•Organic sales growth of 2.7% was primarily due to price realization and higher equipment sales in the Americas, partly offset by lower organic sales in the EMEA and APAC regions;
Current report
•A net unfavorable impact from foreign currency exchange of approximately 0.6%.
Current report
•Organic sales growth of 1.8% attributed to price realization across the regions and higher equipment sales in the Americas, partly offset by lower sales in the EMEA and APAC regions;
Current report
•Inorganic growth of 0.6% driven by the acquisition of TCS; partly offset by
Current report
•A net unfavorable impact from foreign currency exchange across all regions of approximately 0.1%.
Current report
Americas net sales were $227.8 million for the second quarter of 2024, an increase of 5.2% from the second quarter of 2023 driven by:
Current report
•Organic sales growth of 5.5% was driven primarily by price realization and favorable product and channel mix across the region, partly offset by unit volume decreases in North America commercial equipment; partly offset by
Current report
•A net unfavorable impact from foreign currency exchange of approximately 0.3%.
Current report
Americas net sales were $443.4 million for the first six months of 2024, an increase of 5.3% from the first six months of 2023 driven by:
Current report
•Organic sales growth of 5.3% driven by price realization and higher equipment sales, including a favorable product and channel mix across the region, partly offset by unit volume declines in North America commercial equipment.
Current report
EMEA net sales were $81.5 million for the second quarter of 2024, an increase of 1.9% from the second quarter of 2023 driven by:
Current report
•Inorganic sales increase of 3.1% due to the acquisition of TCS; partly offset by
Current report
•A net unfavorable impact from foreign currency exchange of approximately 0.9%; and
Current report
•Organic sales decline of 0.3% driven by volume declines in both equipment and parts and consumables attributed to weaker-than-expected economic conditions, partly offset by price realization.
Current report
EMEA net sales were $158.3 million for the first six months of 2024, a decrease of 2.3% from the first six months of 2023 driven by:
Current report
•A net favorable impact from foreign currency exchange of approximately 0.3%.
Current report
APAC net sales were $21.7 million for the second quarter of 2024, a decrease of 13.5% from the second quarter of 2023 driven by:
Current report
•A net unfavorable impact from foreign currency exchange of approximately 1.6%.
Current report
APAC net sales were $40.3 million for the first six months of 2024, a decrease of 9.2% from the first six months of 2023 driven by:
Current report
•Organic sales decline of 7.1% attributed to product mix and volume declines, particularly in China, partly offset by price realization; and
Current report
•A net unfavorable impact from foreign currency exchange of approximately 2.1%.
Current report
Gross profit margin of 43.1% was 30 basis points lower in the second quarter of 2024 compared to the second quarter of 2023. The slight margin rate decrease is attributed to higher inflation, offset by price realization, while the overall margin rate is supported by favorable channel and product mix. Gross profit margin of 43.6% was 140 basis points higher in the first six months of 2024 compared to the first six months of 2023. The margin rate increase was driven by price realization and cost saving initiatives, which more than offset the effects of inflation. Strong margin rates are also supported by favorable product mix, including higher industrial equipment sales, and a shift to direct channel sales.
Current report
S&A expense was $182.8 million for the first six months of 2024, an increase of $14.1 million compared to the first six months of 2023. S&A expense as a percentage of net sales for the first six months of 2024 increased 160 basis points to 28.5% from 26.9% in the first six months of 2023. The S&A expense increase was driven by higher costs linked to our strategic investments and higher compensation expense related to incremental resources to support the Company's enterprise growth strategy.
Current report
Net Foreign Currency Transaction Gain
Current report
The effective tax rate for the second quarter of 2024 was 24.4% compared to 21.6% for the second quarter of 2023. The increase was primarily due to an increase in nondeductible executive compensation and unfavorable changes in the mix in forecasted earnings by country.
Removed paragraphs (13)
Previous report
We are impacted by customer spend and global demand for our products. We have been able to successfully manage volatility in demand through our broad and expanding product offerings.
Previous report
While global economic conditions continue to be uncertain, including the ability to attract and retain skilled labor, lingering and targeted supply chain disruptions, and evolving compliance regulations, we remain agile as we continue to manage evolving conditions. We are confident in the long-term growth trends for all our products and services in the markets we service.
Previous report
•Organic sales growth of 0.9% primarily due to equipment sales growth, particularly in the Americas;
Previous report
•A net favorable impact from foreign currency exchange of approximately 0.5%; and
Previous report
Americas net sales were $215.6 million for the first quarter of 2024, an increase of 5.5% from the first quarter of 2023 driven by:
Previous report
•Organic sales growth of 5.1% was driven primarily by price realization in North America and price realization and volume increases in Latin America. This was partially offset by volume decreases in North America; and
Previous report
•A net favorable impact from foreign currency exchange of approximately 0.4%.
Previous report
EMEA net sales were $76.8 million for the first quarter of 2024, a decrease of 6.5% from the first quarter of 2023 driven by:
Previous report
•A net favorable impact from foreign currency exchange of approximately 1.4%; and
Previous report
APAC net sales were $18.6 million for the first quarter of 2024, a decrease of 3.6% from the first quarter of 2023 driven by:
Previous report
•A net unfavorable impact from foreign currency exchange of approximately 2.5%; and
Previous report
Gross profit margin of 44.2% was 320 basis points higher in the first quarter of 2024 compared to the first quarter of 2023. The increase was driven by pricing realization and cost saving initiatives. Gross profit margin expansion year over year was also due to mix shift to higher margin sectors, including industrial equipment and the direct sales channel.
Previous report
Net Foreign Currency Transaction Loss
Reworded paragraphs (19)
Previous wording
Supply chain challenges continue to impact the global economy. Our operating performance during the first quarter of 2024 has benefited from fewer supply chain disruptions enabling us to obtain key component parts, increase production and reduce backlog.
Current wording
Supply chain challenges continue to impact the global economy. Our operating performance during the second quarter of 2024 has benefited from fewer supply chain disruptions enabling us to obtain key component parts, increase production and reduce backlog.
Previous wording
The following table compares the results of operations for the three months ended March 31, 2024 and 2023, respectively (in millions, except per share data and percentages):
Current wording
The following table compares the results of operations for the three and six months ended June 30, 2024 and 2023, respectively (in millions, except per share data and percentages):
Previous wording
Consolidated net sales for the first quarter of 2024 totaled $311.0 million, a 1.7% increase as compared to consolidated net sales of $305.8 million in the first quarter of 2023. The components of the consolidated net sales change were as follows:
Current wording
Consolidated net sales for the second quarter of 2024 totaled $331.0 million, a 2.9% increase as compared to consolidated net sales of $321.7 million in the second quarter of 2023. The components of the consolidated net sales change were as follows:
Previous wording
The 1.7% increase in consolidated net sales in the first quarter of 2024 as compared to the same period in 2023 was driven by:
Current wording
The 2.9% increase in consolidated net sales in the second quarter of 2024 as compared to the same period in 2023 was driven by:
Previous wording
•Inorganic growth of 0.3% driven by the acquisition of TCS.
Current wording
•Inorganic growth of 0.8% driven by the acquisition of TCS; partly offset by
Previous wording
The following table sets forth the net sales by geographic area for the three months ended March 31, 2024 and 2023 (in millions, except percentages):
Current wording
The following table sets forth the net sales by geographic area for the three and six months ended June 30, 2024 and 2023 (in millions, except percentages):
Previous wording
•Organic sales decline of 9.2% driven by volume declines in both equipment and parts and consumables partly offset by price realization in all product categories;
Current wording
•Organic sales decline of 4.8% driven by volume declines in both equipment and parts and consumables, partly offset by price realization; and
Previous wording
•Inorganic sales increase of 1.3% driven by the acquisition of TCS.
Current wording
•Inorganic sales increase of 2.2% due to the acquisition of TCS.
Previous wording
•Organic sales decline of 1.1% driven by volume declines in China and Australia, partly offset by price realization in Australia.
Current wording
•Organic sales decline of 11.9% driven by volume declines in China and Australia, partly offset by price realization in Australia; and
Previous wording
Selling and administrative expense ("S&A expense") was $89.9 million for the first quarter of 2024, an increase of $8.2 million compared to the first quarter of 2023. As a percentage of net sales, S&A expense for the first quarter of 2024 increased 220 basis points to 28.9% from 26.7% in the first quarter of 2023. The S&A expense increase was primarily driven by annualization of resources to support growth and investment in enterprise initiatives.
Current wording
Selling and administrative expense ("S&A expense") was $92.9 million for the second quarter of 2024, an increase of $5.9 million compared to the second quarter of 2023. As a percentage of net sales, S&A expense for the second quarter of 2024 increased 110 basis points to 28.1% from 27.0% in the second quarter of 2023. The S&A expense increase was driven by higher costs linked to our strategic investments and higher compensation and benefits expense related to incremental resources to support the Company's enterprise growth strategy.
Previous wording
Research and development expense ("R&D expense") was $10.1 million, or 3.2% of net sales, for the first quarter of 2024, with R&D expense as a percentage of net sales increasing 60 basis points compared to the first quarter of 2023.
Current wording
Research and development expense ("R&D expense") was $11.2 million, or 3.4% of net sales, for the second quarter of 2024, with R&D expense as a percentage of net sales increasing 60 basis points compared to the second quarter of 2023. R&D expense was $21.3 million, or 3.3% of net sales, for the first six month of 2024, increasing 60 basis points compared to the first six months of 2023.
Previous wording
Interest expense, net was $2.3 million in the first quarter of 2024 compared to $3.7 million in the same period of 2023. The decrease was the result of lower weighted average outstanding borrowings. The following table compares the debt levels, average interest rate, interest income and interest expense for the three months ended March 31, 2024 and 2023, respectively (in millions, except percentages):
Current wording
Interest expense, net was $2.5 million in the second quarter of 2024 compared to $4.0 million in the same period of 2023. The decrease was the result of lower weighted average outstanding borrowings. The following table compares the debt levels, average interest rate, interest income and interest expense for the three and six months ended June 30, 2024 and 2023, respectively (in millions, except percentages):
Previous wording
Net foreign currency transaction loss was $0.2 million in the third quarter of 2024 compared to $0.1 million in the first quarter of 2023. The unfavorable impact was primarily due to the strengthening of the U.S. dollar relative to the Brazilian real and other currencies.
Current wording
Net foreign currency transaction gain was $0.7 million in the second quarter of 2024 compared to $1.0 million in the second quarter of 2023. Net currency transaction gain was $0.5 million in the first six months of 2024 compared to a gain of $0.9 million in the first six months of 2023. The favorable impact in both periods was primarily due to the strengthening of the U.S. dollar relative to the Euro and other currencies.
Previous wording
The effective tax rate for the first quarter of 2024 was 19.1% compared to 24.1% for the first quarter of 2023. The decrease was primarily due to an increase in discrete tax benefits associated with share-based compensation.
Current wording
The effective tax rate for the first six months of 2024 was 21.8% compared to 22.7% for the first six months of 2023. The decrease was primarily due to an increase in discrete tax benefits associated with share-based compensation partly offset by an increase in nondeductible executive compensation.
Previous wording
Backlog is one of the many indicators of business conditions in the Company's markets. Our order backlog was $136.7 million at March 31, 2024 compared to $186.2 million at December 31, 2023. The decrease was the result of the Company's ability to obtain key component parts and drive strong production levels. Backlog includes orders that can be cancelled or postponed at the option of the customer at any time without penalty.
Current wording
Backlog is one of the many indicators of business conditions in the Company's markets. Our order backlog was $110.0 million at June 30, 2024 compared to $186.2 million at December 31, 2023. The decrease was the result of the Company's ability to obtain key component parts and drive strong production levels. Backlog includes orders that can be cancelled or postponed at the option of the customer at any time without penalty.
Previous wording
Cash, cash equivalents and restricted cash totaled $88.8 million at March 31, 2024 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 2.2 as of March 31, 2024 and 2.1 as of December 31, 2023. Our primary working capital, which is comprised of accounts receivable, inventories and accounts payables, was $313.8 million as of March 31, 2024 and $312.1 million as of December 31, 2023. Our debt-to-capital ratio was 25.8% as of March 31, 2024 compared to 25.8% as of December 31, 2023.
Current wording
Cash, cash equivalents and restricted cash totaled $84.6 million at June 30, 2024 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 2.2 as of June 30, 2024 and 2.1 as of December 31, 2023. Our primary working capital, which is comprised of accounts receivable, inventories and accounts payables, was $329.8 million as of June 30, 2024 and $312.1 million as of December 31, 2023. Our debt-to-capital ratio was 25.4% as of June 30, 2024 compared to 25.8% as of December 31, 2023.
Previous wording
Net cash provided by operating activities during the three months ended March 31, 2024 was $2.9 million compared to net cash provided by operating activities of $31.1 million during the three months ended March 31, 2023. The decrease was the result of consumption of working capital, mainly related to bonus payouts and spend on our ERP modernization project, which was partly offset strong operating performance.
Current wording
Net cash provided by operating activities during the six months ended June 30, 2024 was $21.5 million compared to net cash provided by operating activities of $70.2 million during the six months ended June 30, 2023. The decrease was the result of consumption of working capital and spend on our ERP modernization project, which was partly offset by strong operating performance.
Previous wording
Net cash used in investing activities during the three months ended March 31, 2024 was $60.6 million compared to net cash used by investing activities of $6.8 million during the three months ended March 31, 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 $25.5 million.
Current wording
Net cash used in investing activities during the six months ended June 30, 2024 was $64.9 million compared to net cash used by investing activities of $12.0 million during the six months ended June 30, 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.
Previous wording
Net cash provided by financing activities during the three months ended March 31, 2024 was $26.9 million compared to net cash used by financing activities of $10.3 million during the three months ended March 31, 2023. The increase in cash inflows was primarily driven by proceeds from exercises of stock options, in addition to net borrowings.
Current wording
Net cash provided by financing activities during the six months ended June 30, 2024 was $12.4 million compared to net cash used by financing activities of $38.1 million during the six months ended June 30, 2023. The increase in cash inflows was primarily driven by proceeds from exercises of stock options and net proceeds from borrowings, partly offset by share repurchases and dividend payments.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The 2.3% increase in consolidated net sales in the first six months of 2024 as compared to the same period in 2024 was driven by: