Tennant(US:TNC)2025-02-18 21:31Company Operations - The Company operates 11 global manufacturing locations and serves three geographic areas: Americas, EMEA, and APAC[16]. - The Company has a diverse customer base with over 40,000 customers, including contract cleaners and businesses performing facilities maintenance[20]. - The Company employs local-for-local manufacturing strategies to mitigate cost inflation and supply chain challenges[24]. - The company operates through a large direct sales and service organization, supported by a network of authorized distributors worldwide[199]. Financial Performance - Consolidated net sales in 2024 totaled $1,286.7 million, a 3.5% increase compared to $1,243.6 million in 2023[118]. - Net income for 2024 was $83.7 million, a decrease of 23.6% from $109.5 million in 2023, with net income per share diluted at $4.38[117]. - Operating income decreased to $114.3 million in 2024 from $138.6 million in 2023, indicating a decline of 17.5%[188]. - Comprehensive income for 2024 was $53.3 million, significantly lower than $117.4 million in 2023, reflecting a decline of 54.6%[190]. - Total assets increased to $1,190.1 million in 2024, up from $1,113.4 million in 2023, reflecting a growth of about 6.9%[192]. - Cash, cash equivalents, and restricted cash totaled $99.8 million at December 31, 2024, down from $117.1 million at the end of 2023[132]. - Net cash provided by operating activities in 2024 was $89.7 million, a significant decrease from $188.4 million in 2023[134]. - Total current liabilities rose to $292.2 million in 2024, compared to $273.7 million in 2023, marking an increase of about 6.9%[192]. - Long-term debt increased slightly to $198.2 million in 2024 from $194.2 million in 2023, showing a growth of about 2.0%[192]. Research and Development - Research and development efforts are key drivers of success, with a focus on enhancing product functionality and sustainability[26]. - Research and Development expense was $43.8 million, or 3.4% of net sales, reflecting a 50 basis point increase compared to 2023[125]. - Research and development expenses increased to $43.8 million in 2024, up from $36.6 million in 2023, showing a growth of 19.6%[188]. - The company is committed to developing sustainable cleaning innovations and has a broad suite of products used in various environments, enhancing its market position[110]. Sustainability and Corporate Responsibility - The Company is committed to sustainability, focusing on high-performance solutions that minimize waste and enhance safety[17]. - Tennant Company focuses on sustainable cleaning innovations, enhancing its product suite including floor maintenance and cleaning equipment[197]. - Women represent 43% of the executive management team and 33% of the Board of Directors as of December 31, 2024[37]. Risks and Challenges - The company may face financial difficulties if the U.S. or global economies experience a long-term economic downturn, potentially leading to decreased revenues and profitability[53]. - International operations are at risk due to geopolitical tensions and regulatory changes, particularly in markets like Russia and China, which could negatively impact sales volume[54]. - Fluctuations in foreign currency exchange rates could adversely affect net sales and earnings, impacting financial stability[57]. - The competitive landscape and macroeconomic factors such as inflation may limit the company's ability to achieve pricing targets, affecting gross margin rates[59]. - Supply chain disruptions and increased costs of raw materials could negatively impact operating results and financial condition[62]. - The company is subject to risks associated with developing innovative products and technologies, which may impact sales volume and market share if not competitive[60]. - The company faces risks related to business transformation and strategic initiatives, including employee resistance and resource constraints, which could hinder effective execution[82]. Acquisitions and Goodwill - The company may consider acquisitions to achieve growth objectives, but successful integration of acquired businesses is critical for realizing operational efficiencies[78]. - The company has experienced challenges in integrating acquired businesses, which may not achieve expected revenue or profit levels, potentially impacting overall financial results[79]. - Significant goodwill or intangible assets may be recorded from acquisitions, requiring annual impairment tests that could materially affect operating results if values need to be written down[80]. - Goodwill was reported at $185.6 million and $187.4 million as of December 31, 2024, and 2023, respectively[150]. - The goodwill balance for the EMEA reporting unit was $151.1 million as of December 31, 2024, with no impairment recognized[176]. - No goodwill impairment was identified in any reporting units during the annual assessments for both 2023 and 2024[213][214]. Shareholder Returns - The company has paid cash dividends for 80 consecutive years, with an increase to $1.135 per share in 2024, marking a $0.06 increase from 2023[102]. - During the twelve months ended December 31, 2024, the company repurchased 198,352 shares for $19.6 million, with 623,061 shares remaining authorized for repurchase[103]. - The company's stock performance has shown a cumulative total shareholder return of $112 from an initial investment of $100 in 2019, compared to $149 for the S&P SmallCap 600[106]. Financial Reporting and Accounting - The company is evaluating the impact of new accounting standards on its financial disclosures, including ASU 2023-09 and ASU 2024-03[142][143]. - The company does not expect new accounting pronouncements to have a material impact on its financial position[144]. - The company has elected to not separate lease and non-lease components for all asset classes, impacting the calculation of operating lease assets and liabilities[210]. - Operating lease assets and liabilities are calculated based on the present value of future lease payments, using the company's incremental borrowing rate[210]. - The consolidated financial statements include all subsidiaries where the company has a controlling financial interest, ensuring comprehensive financial reporting[200].