# Tennant Co: Form 10-K for the period ended Dec 31, 2022

- Company: [Tennant Co](/companies/tnc.md) (CIK 97134)
- Form: 10-K
- Filed: 2023-02-23
- Accepted by EDGAR: Feb 23, 2023, 15:59 ET
- Period: 2022-12-31
- Accession: 0000097134-23-000019
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/97134/000009713423000019/tnc-20221231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/97134/000009713423000019/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2022-01-01 to 2022-12-31 | $1.09bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 12 months, 2022-01-01 to 2022-12-31 | $671.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 12 months, 2022-01-01 to 2022-12-31 | $420.9m | us-gaap:GrossProfit |
| Research and development | 12 months, 2022-01-01 to 2022-12-31 | $31.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 12 months, 2022-01-01 to 2022-12-31 | $306.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 12 months, 2022-01-01 to 2022-12-31 | $87.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 12 months, 2022-01-01 to 2022-12-31 | $13.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2022-01-01 to 2022-12-31 | $66.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2022-01-01 to 2022-12-31 | $3.55 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 12 months, 2022-01-01 to 2022-12-31 | $3.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2022-01-01 to 2022-12-31 | 18,697,255 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2022-01-01 to 2022-12-31 | −$25.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2022-01-01 to 2022-12-31 | $25.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 12 months, 2022-01-01 to 2022-12-31 | $18.9m | us-gaap:PaymentsOfDividends |
| Share repurchases | 12 months, 2022-01-01 to 2022-12-31 | $5.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2022-12-31 | $575.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-12-31 | $1.09bn | us-gaap:Assets |
| Current liabilities | at 2022-12-31 | $261.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-12-31 | $613.0m | us-gaap:Liabilities |
| Long-term debt | at 2022-12-31 | $300.3m | us-gaap:LongTermDebt |
| Current portion of debt | at 2022-12-31 | $5.2m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2022-12-31 | $470.8m | us-gaap:StockholdersEquity |

## Business

As filed, 16,214 characters.

### 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 our 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. The Company is committed to developing innovative and sustainable solutions that help our customers clean spaces more effectively with high-performance solutions that minimize waste, reduce costs, improve safety and further sustainability goals.

### Principal Products, Markets and Distribution

The Company offers products and solutions consisting of 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, including autonomous solutions, 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: factories and warehouses, distribution centers, office buildings, 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™, IRIS®, VLX™, IPC brands, Gaomei and Rongen brands as well as private-label brands. 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.

The Company's has an extensive global field service network. We sell products directly in 15 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, logistics and product development processes from third parties. The Company has experienced cost inflation and constrained supply of certain raw materials and component parts. 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. We expect cost inflation and market supply challenges to continue into 2023 which may negatively impact our financial results.

### 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.

### 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. However, small regional competitors are also significant competitors who vary by country, vertical market, product category or channel. The Company competes primarily on the basis of offering a broad line of high-quality, innovative products supported by an extensive sales and service network in major markets.

### Human Capital

Tennant Company has a commitment to our employees to foster a culture of integrity and stewardship as we manage our business. This holds us accountable to our colleagues to care for one another and work together to bring to market sustainable cleaning innovations that empower others to create a cleaner, safer, and healthier world. The following are key human capital measures and objectives that the Company currently focuses on:

#### Ethics and Employee Safety

Tennant conducts annual training and other engagement activities around our Code of Conduct. In 2022, we provided anti-bribery and data privacy training to all employees. Tennant Company has multiple avenues, including an ethics hotline, for employees to report concerns.

We prioritize the health and safety of all employees. We operate under our established safety programs and employ a team of employee health and safety specialists. In 2022, we continued enhancing our safety culture in our corporate, manufacturing and distribution facilities, and in our sales and service organizations through continuous improvement initiatives. In addition to our established safety programs, our teams have continued to execute our enhanced COVID-19 safety protocols in our manufacturing, distribution and office facilities. We continue to meet or exceed our safety goals and initiatives.

#### Diversity, Equity, and Inclusion

Tennant is proud to be an equal opportunity employer where we foster and maintain an ethical work environment free of discrimination. Employment decisions are made on the basis of individual skill, ability, reliability, productivity, and other factors important to performance. In 2022, we formally activated our enterprise-wide Diversity, Equity & Inclusion (DE&I) strategic initiative which is governed under our enterprise strategy office. This initiative is primarily focused on DE&I education, maturing our governance and growing our Employee Resources Group (ERG), which provides avenues for employee input around our strategy.

#### Diversity in Governance

As of December 31, 2022, women represented 67% of our executive management team and 33% of our Board of Directors.

#### 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 recent assessment found that the median total income for females was 100.5% of the median total income for males, suggesting there is no evidence of a gender pay gap in the United States at Tennant Company.

The following table represents employees by gender and region as of December 31, 2022:

|  | Female | Male | Total |
| --- | ---: | ---: | ---: |
| Americas | 414 | 1,784 | 2,198 |
| Europe, Middle East, Africa | 431 | 1,208 | 1,639 |
| Asia Pacific | 147 | 315 | 462 |
| Total | 992 | 3,307 | 4,299 |

#### Talent

Attraction, development, engagement and retention of talent is key to achieving our organizational objectives. We focus on creating a high-performance culture through our annual performance management process, which aligns with our employee and leadership competency framework. We engage in annual talent conversations to identify, develop and deploy talent to achieve our objectives and address talent risks.

#### 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. We evaluate the competitiveness of our pay levels annually 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 as appropriate.

### 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, Innovation and Technology

Barb Balinski (59) 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, Barb 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.

#### David W. Huml, President and Chief Executive Officer

David W. Huml (54) 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.

#### Carol E. McKnight, Senior Vice President, Chief Administrative Officer

Carol E. McKnight (55) joined the Company in June 2014 as Senior Vice President of Global Human Resources. In 2017, she was named Senior Vice President and Chief Administrative Officer. Prior to joining the Company, she was Vice President of Human Resources at Alliant Techsystems (ATK) where she held divisional and corporate leadership positions in the areas of compensation, talent management, talent acquisition and general human resource management from 2002 to 2014. Prior to ATK, she was with New Jersey-based NRG Energy, Inc.

#### Kristin A. Erickson, Senior Vice President, General Counsel and Corporate Secretary

Kristin A. Erickson (50) 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).

#### Fay West, Senior Vice President, Chief Financial Officer

Fay West (53) 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 (52) 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.

## Risk factors

As filed, 20,645 characters.

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, such as restructuring actions. 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.

### Uncertainty surrounding the impacts and duration of the COVID-19 pandemic.

The coronavirus ("COVID-19") pandemic continues to have a significant disruptive impact on global economies, supply chains and industrial production. We have effectively managed our global operations throughout the pandemic, implementing rigorous protocols focused on the health and safety of our employees and ensuring business continuity across our supplier, manufacturing and distribution networks. However, the impact of COVID-19, or any variant thereof, on our business and financial performance depends on evolving factors that we cannot accurately predict, including labor shortages, supply chain constraints, additional government mandated lockdowns or similar restrictions, and the pace of economic recovery stemming from the COVID-19 pandemic.

***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 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, 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 Business Ethics Guide. 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.

### 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 and expanding geographical footprint, coupled with suppliers’ potential credit issues, could lead to an increased risk of a breakdown in our supply chain. Our use of sole-source vendors creates a concentration risk. There is an increased risk of defects due to the highly configured nature of our purchased component parts that could result in quality issues, returns or production slowdowns. In addition, modularization may lead to more sole-sourced products, and as we seek to outsource the design of certain key components, we risk loss of proprietary control and becoming more reliant on a sole source. There is also a risk that the vendors we choose to supply our parts and equipment fail to comply with our quality expectations, thus damaging our reputation for quality and negatively impacting sales.

Global supplier production for various component parts is limited. We have experienced significant disruption of the supply of key component parts. We expect cost inflation and market supply challenges to continue which may negatively impact our financial results.

We have and may continue to experience higher than normal wage inflation due to skilled labor shortages. The labor shortages have unfavorably impacted our gross profit margins and could continue to do so if actions we are taking are not effective at offsetting these rising costs. Changes and uncertainties related to government fiscal and tax policies, including increased duties, tariffs, or other restrictions, could adversely affect demand for our products, the cost of the products we manufacture or our ability to cost-effectively source raw materials, all of which could have a negative impact on our financial results.

***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.

***We may not be able to upgrade and evolve our information technology systems as quickly as we wish and we may encounter difficulties as we upgrade and evolve these systems to support our growth strategy and business operations, which could adversely impact our abilities to accomplish anticipated future cost savings and better serve our customers.***

We have many information technology systems that are important to the operation of our business and are in need of upgrading in order to effectively implement our enterprise strategy. Given our greater emphasis on customer-facing technologies, we may not have adequate resources to upgrade our systems at the pace which the current business environment demands. Additionally, significantly upgrading and evolving the capabilities of our existing systems could lead to inefficient or ineffective use of our technology due to lack of training or expertise in these evolving technology systems. These factors, among other things, could lead to significant expenses, adversely impacting our results of operations and hindering our ability to offer better technology solutions to our customers.

***We may encounter risks to our 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 computer systems, manufacturing plants or distribution facilities for a significant period of time.***

We rely on our computer 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 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. The Company had to adjust quickly to new working conditions as a result of the COVID-19 pandemic, including making enhancements as new health information was received. In the future, the Company may not adapt to new health crises quickly enough, resulting in a decrease in resource capacity and overall health and wellness of our workforce that could cause fines, reputational damage, or business disruptions. Also, there may be further enhancements and costs to the Company related to any new health guidelines and protocols. Our manufacturing teams monitor the effectiveness of our wellness and safety programs, while the Company continues to implement more tailored health initiatives for those working from home. Managing additional health guidelines and protocols for the health and safety of our employees 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.

## Properties

As filed, 1,422 characters.

The Company’s corporate offices are owned by the Company and are located in the Minneapolis, Minnesota, metropolitan area. Manufacturing facilities located in Minneapolis, 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, IPC Group (IPC) uses 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.

## Management's discussion and analysis

As filed, 26,413 characters.

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, 2022 and 2021. 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, 2022 and December 31, 2021, unless stated otherwise. The discussion of 2020 results and related year-over-year comparisons as of and for the years ended December 31, 2021 and December 31, 2020 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, 2021.

### Overview

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 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

We continue to actively manage our business to respond to the COVID-19 pandemic and related impacts. 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 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 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.

In February 2022, the United States announced targeted economic sanctions on Russia in response to the military conflict in Ukraine. 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 been and may continue to be negatively impacted by supply chain constraints and inflationary pressures stemming from this conflict. 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, 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 cost inflation, and the potential decreased demand for our products.

### 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 actions and manage costs 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.

### Historical Results

The following table compares the historical results of operations for the years ended December 31, 2022, and 2021 in dollars and as a percentage of net sales (in millions, except per share amounts and percentages):

|  |  |  |
| --- | ---: | ---: |
|  | **2022%** | **2021%** |
| Net sales | $1,092.2 100.0 | $1,090.8 100.0 |
| Cost of sales | 671.3 61.5 | 652.8 59.8 |
| Gross profit | 420.9 38.5 | 438.0 40.2 |
| Selling and administrative expense | 306.3 28.0 | 321.9 29.5 |
| Research and development expense | 31.1 2.8 | 32.2 3.0 |
| Gain on sale of assets | (3.7) (0.3) | (9.8) (0.9) |
| Operating income | 87.2 8.0 | 93.7 8.6 |
| Interest expense, net | (7.1) (0.7) | (7.3) (0.7) |
| Net foreign currency transaction loss | (1.2) (0.1) | (0.7) (0.1) |
| Loss on extinguishment of debt | — — | (11.3) (1.0) |
| Other income (expense), net | 0.6 0.1 | (0.3) — |
| Income before income taxes | 79.5 7.3 | 74.1 6.8 |
| Income tax expense | 13.2 1.2 | 9.2 0.8 |
| Net income | 66.3 6.1 | 64.9 5.9 |
| Net income per share - diluted | $3.55 | $3.44 |

### Net Sales

Consolidated net sales in 2022 totaled $1,092.2 million, a 0.1% increase as compared to consolidated net sales of $1,090.8 million in 2021.

The 0.1% increase in consolidated net sales was driven by:

- Organic sales increase of approximately 4.2% primarily due to the impact of higher selling prices across all regions partially offset by volume declines due mostly to supply chain constraints impacting the availability of key component parts;
- A net unfavorable impact from foreign currency exchange across all business units of approximately 4.0%; and
- An unfavorable impact from the divestiture of our Coatings business in 2021 of 0.1%.

The following table sets forth annual net sales by geographic area and the related percentage change from the prior year (in millions, except percentages):

|  |  |  | 2021 |
| --- | ---: | ---: | ---: |
| Americas | $705.9 | 7.2 | $658.3 |
| Europe, Middle East and Africa (EMEA) | 301.6 | (9.1) | 331.9 |
| Asia Pacific (APAC) | 84.7 | (15.8) | 100.6 |
| Total | $1,092.2 | 0.1 | $1,090.8 |

#### Americas

Net sales in the Americas were $705.9 million in 2022, an increase of 7.2% from 2021. Organic sales grew 7.4%, mainly due to higher selling prices in all categories across the region and volume increases in Latin America. Diminished parts availability on certain component parts due to supply chain constraints limited the Company’s ability to increase production and address elevated backlog levels in the region. The divestiture of the Coatings business resulted in a decline in net sales of approximately 0.2% in 2022.

#### Europe, Middle East and Africa ("EMEA")

EMEA net sales were $301.6 million in 2022, a decrease of 9.1% from 2021. Foreign currency exchange within EMEA unfavorably impacted net sales by approximately 11.6%. Organic sales grew 2.5% in EMEA, primarily driven by higher selling prices in equipment and parts and consumables across the region, partially offset by volume declines due to supply chain constraints and softening demand in the region.

#### Asia Pacific ("APAC")

APAC net sales were $84.7 million in 2022, a decrease of 15.8% from 2021. Organic sales declined 11.4% in APAC, primarily due to volume declines in China as government shutdowns related to COVID-19 unfavorably impacted demand. This was partly offset by volume growth in Australian markets. Foreign currency exchange within APAC unfavorably impacted net sales by approximately 4.4% in 2022.

### Gross Profit

Gross profit margin of 38.5% was 170 basis points lower in 2022 compared to 2021. The margin rate decrease was primarily attributable to the broad effects of inflation on materials, labor, and freight costs, partly offset by higher selling prices and favorable sales mix.

### Operating Expenses

#### Selling and Administrative Expense

Selling and Administrative expense ("S&A expense") was $306.3 million in 2022, a decrease of $15.6 million compared to 2021. As a percentage of net sales, S&A expense in 2022 decreased 150 basis points to 28.0% from 29.5% in 2021. The S&A expense decrease was driven by lower variable employee compensation expenses partially offset by increased costs related to incremental consulting costs to address parts shortages.

#### Research and Development Expense

Research and Development ("R&D") expense was $31.1 million, or 2.8% of net sales, in 2022, nearly flat as a percentage of net sales compared to 2021.

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.

### Total Other Expense, Net

#### Interest Expense, Net

Interest expense, net was $7.1 million in 2022, a decrease of $0.2 million compared to 2021. The decrease reflected lower average outstanding debt in 2022, partially offset by higher interest rates.

Our debt portfolio as of December 31, 2022 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. On December 1, 2022, the Company entered into an aggregate $120 million notional amount of interest rate swaps that exchange a variable rate of interest for a fixed rate of interest of 4.076% over the term of the agreements.

#### Foreign Currency Transaction Loss

Net foreign currency transaction loss was $1.2 million in 2022, compared to $0.7 million in 2021. 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 2022 was 16.6% compared to 12.5% in 2021. The increase in the effective tax rate was primarily driven by certain nonrecurring tax items. The 2022 tax rate includes benefits related to a reduction to a deferred tax liability on undistributed foreign earnings. The 2021 tax rate included benefits from a foreign tax basis step-up election and a valuation allowance related to net operating loss carryovers. These nonrecurring events had a one-time impact of (7.2%) in 2022 and (11.5%) in 2021.

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.

### Backlog

Backlog is one of the many indicators of business conditions in the Company's markets. Our order backlog was approximately $326.4 million at December 31, 2022 compared to $169.7 million at December 31, 2021. The increase in our order backlog is primarily due to higher order rates coupled with persistent supply chain challenges that impacted our ability to obtain key component parts and increase production. We expect this level of backlog to continue in 2023. Backlog includes orders that can be cancelled or postponed at the option of the customer at any time without penalty.

### 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 $77.4 million at December 31, 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 2.2 as of December 31, 2022 and 1.8 as of December 31, 2021. Our primary working capital, which is comprised of accounts receivable, inventories and accounts payable was $332.0 million as of December 31, 2022 and $250.5 million as of December 31, 2021. Our debt-to-capital ratio was 40.9% as of December 31, 2022, compared to 38.1% as of December 31, 2021.

The Company's Board of Directors authorized a quarterly cash dividend of $0.265 per share payable on March 15, 2023, to shareholders of record at the close of business on March 3, 2023.

#### Cash Flow from Operating Activities

Net cash used in operating activities in 2022 was $25.1 million compared to net cash provided by operating activities of $69.4 million in 2021. The increase in cash used was primarily driven by an increase in working capital attributable to investments in inventory required to support an anticipated 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 income taxes.

#### Cash Flow from Investing Activities

Net cash used in investing activities in 2022 was $24.5 million compared to net cash provided by investing activities of $1.7 million in 2021. In 2022, we used $25.0 million for capital expenditures compared to $19.4 million in 2021. The prior year period included $24.7 million of cash proceeds from sale of assets, net of cash divested in 2021 compared to $4.1 million of cash proceeds from sale of asset, net of cash divested in 2022.

#### Cash Flow from Financing Activities

Net cash provided by financing activities in 2022 was $8.1 million compared to net cash used in financing activities of $84.5 million in 2021. The increase in cash provided was primarily due to a decrease in repayments of borrowing and share repurchases in 2022, partly offset by increased dividend payments.

### 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 $113 million for 2023.

### Newly Issued Accounting Guidance

See Note 2 to the consolidated financial statements for information on new accounting pronouncements.

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 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. 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. 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 2020, we changed the goodwill impairment assessment date from December 31 to October 1 to better align with the timing of our annual planning process. The change did not result in any adjustments to our consolidated financial statements.

In 2022, we elected to perform the quantitative goodwill test in lieu of the qualitative test on all reporting units. Our tests indicated the fair value in each reporting unit 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 $182.0 million and $193.1 million at December 31, 2022 and 2021, 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, 2022, a valuation allowance of $3.3 million was recorded against foreign and state tax credit carryforwards.

### 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.
- Uncertainty surrounding the COVID-19 pandemic.
- Ability to comply with global laws and regulations.
- 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 successfully upgrade and evolve our information technology systems.
- 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.

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.

## Market risk

As filed, 7,749 characters.

**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, 2022, 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, 2022, the Company's financial liabilities subject to changes in interest rates are $205.0 million of our revolving credit facility borrowings and $95.0 million of our term loan facility. 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 $1.4 million in 2022.

**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.

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, 2022 these cross-currency swaps included €84.8 million of total notional value. As of December 31, 2022, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to €9.8 million. The scheduled maturity and principal payment of the loan and related swaps of €75.0 million are due in April 2027. Based on the fair value hedges outstanding as of December 31, 2022, a 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $8.0 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, 2022, 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, 2022, a 10% appreciation of the U.S. dollar compared to the Euro, would result in a net gain of $8.0 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.

## Controls and procedures

As filed, 4,859 characters.

### 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, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer concluded that, as of December 31, 2022, 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

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, 2022.

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, 2022 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, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Filed Feb 23, 2023.
Source: SEC EDGAR, the filing index for accession 0000097134-23-000019. Last ingested by Listed: Nov 5, 2026, 14:03 ET. No prices; not investment advice.