PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Tennant Company's unaudited consolidated financial statements for Q2 2025, including Income, Comprehensive Income, Balance Sheets, Cash Flows, Equity, and detailed Notes Consolidated Statements of Income Q2 2025 net sales decreased to $318.6 million, with net income falling to $20.2 million and diluted EPS to $1.08, reflecting a similar trend for the six-month period Consolidated Statements of Income (Q2 & H1 2025 vs 2024) | (In millions, except per share data) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :---: | :---: | | | 2025 | 2024 | 2025 | 2024 | | Net sales | $318.6 | $331.0 | $608.6 | $642.0 | | Gross profit | $134.1 | $142.7 | $254.1 | $280.2 | | Operating income | $30.6 | $38.6 | $50.2 | $76.1 | | Net income | $20.2 | $27.9 | $33.3 | $56.3 | | Diluted EPS | $1.08 | $1.45 | $1.77 | $2.94 | Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1,241.5 million, with total liabilities at $587.8 million and total equity at $653.7 million Consolidated Balance Sheet Highlights | (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :---: | :---: | | Total current assets | $574.6 | $576.6 | | Total assets | $1,241.5 | $1,190.1 | | Total current liabilities | $274.8 | $292.2 | | Total liabilities | $587.8 | $568.0 | | Total equity | $653.7 | $622.1 | Consolidated Statements of Cash Flows H1 2025 operating cash flow was $22.1 million, investing activities used $10.6 million, and financing activities used $32.8 million, resulting in a $19.7 million net cash decrease Cash Flow Summary (Six Months Ended June 30) | (In millions) | 2025 | 2024 | | :--- | :---: | :---: | | Net cash provided by operating activities | $22.1 | $21.5 | | Net cash used in investing activities | $(10.6) | $(64.9) | | Net cash (used in) provided by financing activities | $(32.8) | $12.4 | | Net decrease in cash and cash equivalents | $(19.7) | $(32.5) | | Cash and cash equivalents at end of period | $80.1 | $84.6 | Notes to Consolidated Financial Statements Detailed notes explain accounting policies, financial results, revenue disaggregation, debt, derivatives, and recent segment reporting changes and acquisitions - The company designs, manufactures, and markets cleaning solutions for various environments, reaching customers through direct sales and a distributor network272829 - Effective December 31, 2024, the company adopted ASU 2023-07, which enhances disclosures about reportable segments, although it had no impact on the consolidated financial statements themselves33 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial results, noting a 3.7% net sales decrease to $318.6 million and a 100 bps gross margin contraction, while managing macroeconomic challenges and maintaining strong liquidity - The company is facing macroeconomic challenges including geopolitical tensions, elevated interest rates, and trade policy uncertainty, particularly U.S. tariffs which could increase input costs100101 - Demand trends are mixed globally: China's recovery is slow, uncertainty in Mexico is delaying spending, and Europe faces heightened competition102 - To manage challenges, the company is focusing on cost control, operational improvements, proactive pricing, and supply-chain initiatives to mitigate tariff impacts103106 Results of Operations Q2 2025 net sales declined 3.7% to $318.6 million due to lower volumes, gross margin contracted by 100 bps, and operating income dropped to $30.6 million Net Sales Change Components (2025 vs. 2024) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :---: | :---: | | Price | 1.8% | 0.9% | | Volume | (6.3)% | (5.6)% | | Organic decline | (4.5)% | (4.7)% | | Acquisitions | —% | 0.2% | | Foreign currency | 0.8% | (0.7)% | | Total | (3.7)% | (5.2)% | Net Sales by Geographic Area (Q2 2025 vs 2024) | (In millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :---: | :---: | :---: | | Americas | $213.5 | $227.8 | (6.3)% | | EMEA | $84.7 | $81.5 | 3.9% | | Asia Pacific | $20.4 | $21.7 | (6.0)% | | Total | $318.6 | $331.0 | (3.7)% | - The gross profit margin decrease was primarily attributed to a shift in product/customer mix, inflation, and lower productivity, partially offset by price realization. Prior-year periods benefited from a significant reduction in backlog of higher-margin products112 - S&A expense increased in Q2 2025 due to strategic investments (including ERP costs) and a bad debt charge, partly offset by lower variable compensation113 Liquidity and Capital Resources As of June 30, 2025, cash was $80.1 million, operating cash flow was $22.1 million, and financing activities used $32.8 million, with $434.3 million unused borrowing capacity - Cash and cash equivalents decreased to $80.1 million at June 30, 2025, from $99.8 million at December 31, 2024123 - Net cash from operating activities for H1 2025 was $22.1 million, slightly up from $21.5 million in H1 2024, despite a $28.4 million spend on an ERP project125 - Net cash used in financing activities was $32.8 million in H1 2025, a significant shift from $12.4 million provided in H1 2024, driven by increased common stock repurchases127 - The company had approximately $434.3 million of unused borrowing capacity on its revolving facility as of June 30, 2025124 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk have occurred since December 31, 2024 - There have been no material changes in the company's market risk since December 31, 2024136 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective137 - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls138 PART II - OTHER INFORMATION Item 1. Legal Proceedings No material developments in legal proceedings were reported during the quarter - There have been no material developments in any legal proceedings that require reporting in this Form 10-Q139 Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the 2024 Form 10-K filing - No material changes to the company's risk factors have occurred since the filing of the 2024 Form 10-K140 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 183,749 shares at an average of $73.85 per share in Q2 2025, with 2,207,371 shares remaining authorized for repurchase Share Repurchases for the Quarter Ended June 30, 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Programs | | :--- | :---: | :---: | :---: | | April 1-30, 2025 | 58,263 | $72.17 | 58,169 | | May 1-31, 2025 | 66,413 | $73.78 | 62,582 | | June 1-30, 2025 | 59,073 | $75.57 | 59,073 | | Total | 183,749 | $73.85 | 179,824 | - On February 11, 2025, the Board of Directors authorized the repurchase of an additional 2,000,000 shares of common stock141 Item 5. Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025143 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL financial data - The report includes CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and financial statements in iXBRL format as exhibits144
Tennant(TNC) - 2025 Q2 - Quarterly Report