Insight

Tennant Company 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.

Macroeconomic events

We continue to actively manage our business to respond to the COVID-19 pandemic
and related impacts. We maintain our commitment to protect the health and safety
of our employees and customers. We have enhanced our on-site safety protocols at
our manufacturing facilities and continue to monitor the evolving situation and
guidance from local authorities. Governments across the world have taken
actions, including stay-at-home orders, to limit the spread of COVID-19. These
actions, specifically in China, have and may continue to reduce operating
activities and negatively impact financial results.

We continue to experience disruption in the supply of key component parts, as
well as price inflation and inefficiencies as a result of supply chain issues.
We have established frequent communications with suppliers to review, track and
prioritize high-risk components. We have also identified and activated
alternative suppliers, materials and components as needed. We continue to work
closely with our suppliers to achieve a deeper integration into our suppliers'
supply chains, including the procurement of sub-component parts. The Company
continues work to minimize the impact of price inflation on inputs 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 increase our sourcing flexibility.

The crisis in Russia and Ukraine that began in February 2022 continues as of the
date of this Form 10-Q. While we do not have any direct operations or employees
in Russia or Ukraine and have suspended sales to Russia and Belarus, our
operating results have and may continue to be negatively impacted by supply
chain constraints and inflationary pressures stemming from this conflict. Sales
to Russia and Belarus represented less than 1% of consolidated net sales and
less than 2% of Europe, Middle East and Africa net sales for the year ended
December 31, 2021. In addition to fully adhering to all sanctions, we will
continue to monitor developments in the region, including the impact of rising
commodity and energy prices.

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. 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.
Volatility in the foreign exchange market has and may continue to negatively
impact the financial results of our international operations.

As described in Part I, Item 1A - Risk Factors, in the annual report on Form
10-K for the fiscal year ended December 31, 2021, we may encounter financial
difficulties if the United States or other global economies experience an
additional or continued long-term economic downturn as our product sales are
sensitive to declines in capital spending by our customers. Any sustained
adverse impacts to our business, the industries in which we operate, market
demand for our products, and/or certain suppliers or customers may also affect
our future results of operations, financial position, or cash flows. We are
actively monitoring the macroeconomic environment, especially the potential
impact of global supply chain constraints on material inflation, and the
potential decreased demand for our products.
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Outlook

Global economic conditions continue to be highly volatile and uncertainty
remains regarding the timing of a full recovery from supply chain challenges and
inflationary trends. We continue to monitor costs in the current inflationary
environment and will take pricing action accordingly. We anticipate that we will
need to remain agile as we continue to manage evolving challenges. We remain
confident in the long-term growth trends for all our products and services in
the markets we serve.

Results

The following table compares the results of operations for the three and nine
months ended September 30, 2022 and 2021, respectively (in millions, except per
share data and percentages):

                                                       Three Months Ended                                         Nine Months Ended
                                                          September 30,                                             September 30,
                                         2022              %           2021           %            2022             %           2021           %
Net sales                          $    262.9              100.0    $ 272.0           100.0    $    801.2           100.0    $ 814.4           100.0
Cost of sales                           162.2               61.7      162.8            59.9         495.5            61.8      477.0            58.6
Gross profit                            100.7               38.3      109.2            40.1         305.7            38.2      337.4            41.4
Selling and administrative expense       71.4               27.2       76.9            28.3         227.1            28.3      242.5            29.8
Research and development expense          7.9                3.0        8.4             3.1          23.5             2.9       24.1             3.0
Gain on sale of assets                      -                  -          -               -          (3.7)           (0.5)      (9.8)           (1.2)
Operating income                         21.4                8.1       23.9             8.8          58.8             7.3       80.6             9.9
Interest expense, net                    (2.2)              (0.8)      (0.6)           (0.2)         (3.7)           (0.5)      (6.6)           (0.8)
Net foreign currency transaction
(loss) gain                                 -                  -       (0.7)           (0.3)         (0.4)              -       (0.2)              -
Loss on extinguishment of debt              -                  -          -               -             -               -      (11.3)           (1.4)
Other (expense) income, net               0.6                0.2       (0.3)           (0.1)          0.1               -          -               -
Income before income taxes               19.8                7.5       22.3             8.2          54.8             6.8       62.5             7.7
Income tax expense                        4.2                1.6        0.8             0.3          12.3             1.5        5.5             0.7
Net income                         $     15.6                5.9    $  21.5             7.9    $     42.5             5.3    $  57.0             7.0
Net income per share - diluted     $     0.83                       $  1.14                    $     2.27                    $  3.02


Net Sales

Consolidated net sales for the third quarter of 2022 totaled $262.9 million, a
3.3% decrease as compared to consolidated net sales of $272.0 million in the
third quarter of 2021. Consolidated net sales for the first nine months of 2022
were $801.2 million, a 1.6% decrease compared to consolidated net sales of
$814.4 million in the first nine months of 2021.

The 3.3% decrease in consolidated net sales in the third quarter of 2022 compared to the same period in 2021 is explained by:

•A net unfavorable impact from foreign currency exchange across all regions of
approximately 5.0%; partly offset by
•An organic sales increase of approximately 1.7%, which excludes the effects of
foreign currency exchange. The organic sales increase was primarily due to the
impact of higher selling prices across all regions partially offset by volume
declines due to supply chain constraints impacting the availability of certain
component parts.
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The 1.6% decrease in consolidated net sales in the first nine months of 2022 compared to the same period in 2021 is explained by:

•A net unfavorable impact from foreign currency exchange across all regions of
approximately 3.8%;
•An organic sales increase of approximately 2.3%, which excludes the effects of
foreign currency exchange and divestitures. The organic sales increase was
primarily due to the impact of higher selling prices across all regions,
partially offset by volume declines resulting from continued supply chain
constraints; and
•An unfavorable impact from the divestiture of our Coatings business in the
first quarter of 2021 of 0.1%.

The following table sets forth the net sales by geographic area for the three
and nine months ended September 30, 2022 and 2021 (in millions, except
percentages):

                                           Three Months Ended                         Nine Months Ended
                                              September 30,                             September 30,
                                     2022          2021        % Change        2022          2021        % Change
Americas                         $    174.0      $ 166.7          4.4  %    $   512.7      $ 491.7          4.3  %
Europe, Middle East and Africa         69.0         80.7        (14.5) %        225.0        246.8         (8.8) %
Asia Pacific                           19.9         24.6        (19.1) %         63.5         75.9        (16.3) %
Total                            $    262.9      $ 272.0         (3.3) %    $   801.2      $ 814.4         (1.6) %


Americas

Americas net sales were $174.0 million for the third quarter of 2022, an
increase of 4.4% from the third quarter of 2021. Organic sales grew 4.6% in the
Americas, mainly due to higher selling prices across the region, volume
increases in Latin America, and growth in parts and consumables in North
America. This was partially offset by volume declines on equipment in North
America. Diminished parts availability on certain component parts due to global
supply chain constraints has limited our ability to increase production.
Additionally, foreign currency exchange within the Americas unfavorably impacted
net sales by approximately 0.2% in the third quarter of 2022.

Americas net sales were $512.7 million for the first nine months of 2022, an
increase of 4.3% from the first nine months of 2021. Organic sales grew 4.5% in
the Americas, mainly due to higher selling prices, partially offset by lower
volume. This was partially offset by the divestiture of the Coatings business in
the first nine months of 2021 resulting in a decline in net sales of
approximately 0.2% in the first nine months of 2022.

Europe, Middle East and Africa (“EMEA”)

EMEA net sales were $69.0 million for the third quarter of 2022, a decrease of
14.5% from the third quarter of 2021. Foreign currency exchange within EMEA
unfavorably impacted net sales by approximately 15.1%. Organic sales grew 0.6%
in EMEA, primarily due to higher selling prices and growth in parts and
consumables. This was partially offset by volume declines as lack of component
parts due to global supply chain constraints has limited our ability to increase
production.

EMEA net sales were $225.0 million for the first nine months of 2022, a decrease
of 8.8% from the first nine months of 2021. Foreign currency exchange within
EMEA unfavorably impacted net sales by approximately 11.4%. Organic sales grew
2.6% in EMEA, primarily due to higher selling prices, growth in services, and
higher sales of parts and consumables.

Asia Pacific (“APAC”)

APAC net sales were $19.9 million for the third quarter of 2022, a decrease of
19.1% from the third quarter of 2021. Organic sales declined 14.0% in APAC,
primarily due to volume declines in China as government shutdowns related to
COVID-19 continue to unfavorably impact demand. Foreign currency exchange within
APAC unfavorably impacted net sales by approximately 5.1% in the third quarter
of 2022.


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APAC net sales were $63.5 million for the first nine months of 2022, a decrease
of 16.3% from the first nine months of 2021. Organic sales declined 12.6% in
APAC, primarily due to government shutdowns in China related to COVID-19
outbreaks impacting our ability to deliver finished goods to customers. This was
partly offset by volume growth in Australian markets. Foreign currency exchange
within APAC unfavorably impacted net sales by approximately 3.7% in the first
nine months of 2022.

Gross Profit

Gross profit margin of 38.3% was 180 basis points lower in the third quarter of
2022 compared to the third quarter of 2021. The decrease was attributable to the
broad effects of inflation on materials, labor, and freight costs, partly offset
by higher selling prices. Inflation contributed to a $2.1 million LIFO charge
during the third quarter of 2022 compared to $3.7 million in the third quarter
of 2021.

Gross profit margin of 38.2% was 320 basis points lower in the first nine months
of 2022 compared to the first nine months of 2021. The decrease was due to
inflation on materials, labor, and higher freight costs, partly offset by price
increases. Inflation contributed to a LIFO charge of $8.1 million during the
first nine months of 2022 compared to $5.9 million in the first nine months of
2021.

Operating Expense

Selling and administrative expenses

Selling and administrative expense ("S&A expense") was $71.4 million for the
third quarter of 2022, a decrease of $5.5 million compared to the third quarter
of 2021. As a percentage of net sales, S&A expense for the third quarter of 2022
decreased 110 basis points to 27.2% from 28.3% in the third quarter of 2021. The
S&A expense decrease in the third quarter of 2022 was primarily driven by lower
variable employee compensation expenses and cost containment initiatives.

S&A expense was $227.1 million for the first nine months of 2022, a decrease of
$15.4 million compared to the first nine months of 2021. As a percentage of net
sales, S&A expense for the first nine months of 2022 decreased 150 basis points
to 28.3% from 29.8% in the first nine months of 2021. The S&A expense decrease
in the first nine months of 2022 was primarily driven by lower variable employee
compensation expenses partially offset by increased costs related to strategic
initiatives to address limited availability of component parts.

Research and development costs

Research and development expense ("R&D expense") was $7.9 million, or 3.0% of
net sales, for the third quarter of 2022, essentially flat compared to the third
quarter of 2021. R&D expense was $23.5 million, or 2.9% of net sales, for the
first nine months of 2022, flat as a percentage of net sales compared to the
first nine months of 2021.

We continue to invest in the development of innovative products and technologies at the levels necessary to propel our position as a technology and innovation leader.

Total Other Expense, Net

Interest Expense, Net

Interest expense, net was $2.2 million in the third quarter of 2022 compared to
$0.6 million in the same period of 2021. The increase was the result of rising
interest rates on our variable interest rate debt.

Interest expense, net was $3.7 million in the first nine months of 2022 compared
to $6.6 million in the same period of 2021. The decrease was a result of
restructuring of debt in the second quarter of 2021, which resulted in lower
interest expense due to a lower amount of outstanding debt.

Our debt portfolio at September 30, 2022 consisted mainly of debts in WE dollars. We are exposed to changes in interest rates due to variable interest rate borrowing activities which affect the interest incurred.

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Net foreign currency transaction loss

Net foreign currency transaction loss was less than $0.1 million and $0.7
million in the third quarter of 2022 and 2021, respectively. Net foreign
currency transaction loss was $0.4 million and $0.2 million in the first nine
months of 2022 and 2021, respectively. The unfavorable impact was primarily due
to strengthening of the U.S. dollar relative to the Brazilian real on foreign
denominated liabilities.

Income Taxes

The effective tax rate for the third quarter of 2022 was 21.2% compared to 3.6%
for the third quarter of 2021. The effective tax rate for the first nine months
of 2022 was 22.4% compared to 8.8% for the first nine months of 2021. The
effective tax rate for both the third quarter and the first nine months of 2022
increased primarily due to a high level of discrete tax benefit items in 2021
compared to 2022 and the mix in expected full year taxable earnings by country.
The discrete tax benefits in 2021 included a tax benefit resulting from an
election to step-up the tax basis of certain assets for Italian tax purposes, as
well as the release of certain valuation allowances related to net operating
loss carryovers. The valuation allowance release was driven by a change in law
providing an unlimited carryforward period.

In general, it is our practice and intention to permanently reinvest the profits of our foreign subsidiaries and to repatriate profits only when the tax impact is nil or insignificant. No deferred tax has been provided for withholding taxes or other taxes that would result from the repatriation of our foreign investments in United States.

Back

Backlog is one of the many indicators of business conditions in the Company's
markets. Our order backlog was approximately $281.7 million at September 30,
2022 compared to $288.7 million at June 30, 2022 and $169.7 million at December
31, 2021. The increase in our order backlog is primarily due to persistent
supply chain challenges that impacted our ability to obtain key component parts.
Unless these factors change, we expect our backlog level to remain elevated.
Backlog includes orders that can be cancelled or postponed at the option of the
customer at any time without penalty.

Cash and capital resources

Liquidity

Cash, cash equivalents and restricted cash totaled $59.2 million at
September 30, 2022, as compared to $123.6 million as of December 31, 2021.
Wherever possible, cash management is centralized and intercompany financing is
used to provide working capital to subsidiaries as needed. Our current ratio was
2.1 as of September 30, 2022 and 1.8 as of December 31, 2021, and our primary
working capital, which is comprised of accounts receivable, inventories and
accounts payables, was $308.9 million and $250.5 million, respectively. Our
debt-to-capital ratio was 39.8% as of September 30, 2022, compared to 38.1% as
of December 31, 2021.

From September 30, 2022we had outstanding letters of credit and bank guarantees in the amount of $3.1 millionleaving about $261.9 million
unused borrowing capacity on our revolving credit facility.

Cash flow from operating activities

Net cash used in operating activities during the nine months ended September 30,
2022 was $38.8 million compared to net cash provided by operating activities of
$62.9 million during the nine months ended September 30, 2021. The increase in
cash used was primarily driven by an increase in working capital attributable to
investments in inventory to support a ramp in production, higher accounts
receivables due to increased sales to customers with extended payment terms, and
increased cash payments for employee compensation and benefits and taxes. We
anticipate that inventory levels will begin to decrease in the fourth quarter as
production increases. We also actively manage our accounts receivable portfolio
and expect increased collection activity in the fourth quarter.

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Cash flow from investing activities

Net cash used in investing activities during the nine months ended September 30,
2022 was $19.0 million compared to net cash provided by investing activities of
$12.6 million during the nine months ended September 30, 2021. The increase of
cash outflows was primarily the result of lower cash proceeds from the prior
year sale of our Coatings business in 2021.

Cash flow from financing activities

Net cash used in financing activities decreased during the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021
primarily due to a decrease in repayments of borrowings in the first nine month
of 2022. The Company used the proceeds from borrowings to invest in constrained
component parts to prepare for a ramp in production.

Newly published accounting guidelines

See note 2 to the consolidated financial statements for information on the new accounting standards.

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 condition.

Caution Regarding Forward-Looking Information

This Form 10-Q, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 2, contains 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; uncertainty
surrounding the impacts and duration of the COVID-19 pandemic; our ability to
comply with global laws and regulations; our ability to adapt to customer
pricing sensitivities; the competition in our business; fluctuations in the
cost, quality or availability of raw materials and purchased components; our
ability to adjust pricing to respond to cost pressures; unforeseen product
liability claims or product quality issues; our ability to attract, retain and
develop key personnel and create effective succession planning strategies; our
ability to effectively develop and manage strategic planning and growth
processes and the related operational plans; our ability to successfully upgrade
and evolve our information technology systems; our ability to successfully
protect our information technology systems from cybersecurity risks; the
occurrence of a significant business interruption; our ability to maintain the
health and safety of our workers; our ability to integrate acquisitions; and our
ability to develop and commercialize new innovative products and services.

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. 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.
Additional information about factors that could materially affect our results
can be found in Part I, Item 1A, Risk Factors in our annual report on Form 10-K
for the year ended December 31, 2021.

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.

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