UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
[ü]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
For the fiscal year ended December 31, 2017
ORo
[]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
For the transition period from __________ to __________.
Commission File Number001-16191
tennantcompanylogo.jpg
TENNANT COMPANY
(Exact name of registrant as specified in its charter)
Minnesota41-0572550
Minnesota41-0572550
State or other jurisdiction of(I.R.S. Employer
incorporation or organizationIdentification No.)
10400 Clean Street
701 North Lilac Drive, P.O. Box 1452
Minneapolis, Minnesota 55440
(Address of principal executive offices) (Zip Code)
Eden Prairie,Minnesota 55344

(Address of principal executive offices)
Registrant’s(Zip Code)
763-540-1200
(Registrant's telephone number, including area code 763-540-1200code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.375 per shareTNCNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.üþYesNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YesYesþüNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.üþYesNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).üþYesNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerüþAccelerated filero
Non-accelerated filero(Do not check if a smaller reporting company)
Smaller reporting company
o
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o[ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).oYesüþNo
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2017, was $1,292,419,327.
As of January 31, 2018, there were 17,881,327 shares of Common Stock outstanding.

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2023, was $1,486,501,585.
As of January 31, 2024, there were 18,620,098 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 20182023 annual meeting of shareholders (the “2018“2023 Proxy Statement”) are incorporated by reference in Part III.
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PART I    Page
 
Item 1
Business
4
 
Item 1A
Risk Factors
6
 
Item 1B
Unresolved Staff Comments
9
 
Item 2
Properties
9
 
Item 3
Legal Proceedings
9
 
Item 4
Mine Safety Disclosures
9
PART II     
 
Item 5
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
10
 
Item 6
Selected Financial Data
12
 
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations
13
 
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
23
 
Item 8
Financial Statements and Supplementary Data
25
   
Report of Independent Registered Public Accounting Firm
25
   
Consolidated Financial Statements
26
   
Consolidated Statements of Operations
26
   
Consolidated Statements of Comprehensive Income
27
   
Consolidated Balance Sheets
28
   
Consolidated Statements of Cash Flows
29
   
Consolidated Statements of Equity
31
   
Notes to the Consolidated Financial Statements
31
   
1
Summary of Significant Accounting Policies
32
   
2
Newly Adopted Accounting Pronouncements
35
   
3
Investment in Joint Venture
35
   
4
Management Actions
35
   
5
Acquisitions
35
   
6
Inventories
38
   
7
Property, Plant and Equipment
38
   
8
Goodwill and Intangible Assets
39
   
9
Debt
40
   
10
Other Current Liabilities
42
   
11
Derivatives
43
   
12
Fair Value Measurements
45
   
13
Retirement Benefit Plans
45
   
14
Shareholders' Equity
51
   
15
Commitments and Contingencies
51
   
16
Income Taxes
52
   
17
Share-Based Compensation
55
   
18
Earnings Per Share
57
   
19
Segment Reporting
57
   
20
Consolidated Quarterly Data (Unaudited)
58
   
21
Related Party Transactions
58
   
22
Separate Financial Information of Guarantor Subsidiaries
59
   
23
Subsequent Event
66
 
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
67
 
Item 9A
Controls and Procedures
67
 
Item 9B
Other Information
68
PART III     
 
Item 10
Directors, Executive Officers and Corporate Governance
68
 
Item 11
Executive Compensation
68
 
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
68
 
Item 13
Certain Relationships and Related Transactions, and Director Independence
68
 
Item 14
Principal Accountant Fees and Services
68
PART IV     
 
Item 15
Exhibits and Financial Statement Schedules
69
 
Item 16
Form 10-K Summary
72
  
Signatures
73

Table of Contents
TENNANT COMPANY
20172023
ANNUAL REPORT
Form 10–K
(Pursuant to Securities Exchange Act of 1934)
PART I
ITEM 1 – Business
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 incorporated in 1909 and began as a one-man woodworking business, evolvedeventually evolving into a successful wood flooring and wood products company, and eventuallyfinally into a manufacturer of floor cleaning equipment. Throughout its history, Tennantthe Company has remained focused on advancing our industry by aggressively pursuing new technologies and creating a culture that celebrates innovation.
Today, Tennantthe Company is a recognized leader of the cleaning industry. We are passionate about developing innovativehas 11 global manufacturing locations and sustainable solutions that help our customers clean spaces more effectively, addressing indoor and outdoor cleaning challenges. Tennant Company operates in three geographic business unitsareas including the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC). In April 2017, Tennant Company completed its acquisitionWe aggregate our operating segments into one reportable segment that consists of the IPC Group, a multi-brand manufacturerdesign, manufacture, sale and servicing of a broad range of cleaning and accessory equipment. With primary operations in Italy, the IPC Group significantly enhances Tennant's positionproducts used primarily in the EMEA region and brings to Tennant a broader product offering.
Tennantmaintenance of nonresidential surfaces. The Company is committed to empoweringdeveloping innovative and sustainable solutions that help our customers to create a cleaner, safer and healthier worldclean spaces more effectively with high-performance solutions that minimize waste, reduce costs, improve safety and further sustainability goals.
Segment and Geographic Area Financial Information
The Company has one reportable business segment. Sales to customers geographically located in the United States were $543.7 million, $525.3 million and $517.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. Long-lived assets located in the United States were $108.0 and $109.2 million as of the years ended December 31, 2017 and 2016, respectively. Additional financial information on the Company’s segment and geographic areas is provided throughout Item 8 and Note 19 to the Consolidated Financial Statements.
Principal Products, Markets and Distribution
The Company offers products and solutions consisting of manual and mechanized cleaning equipment for both industrial and commercial use, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings,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: Retail establishments,factories and warehouses, distribution centers, factories and warehouses,office buildings, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets, and more. The Company markets its offerings under the following brands: Tennant®, Nobles®, Green Machines™, Alfa Uma Empresa Tennant™Tennant™, IRIS®, Superior Anodes, WaterstarIPC, Gaomei and OrbioRongen brands as well as private-label brands. The Company has a portfolio of differentiated technology solutions that includes IRIS®. Orbio Technologies, which marketsas an asset management solution, ec-H2O NanoClean® as a detergent-free cleaning solution, and sells Orbio-branded products and solutions, isReadySource® as a group created by the Company to focus on expanding the opportunities for the emerging category of On-Site Generation (OSG). OSG technologies create and dispense effectiverapid-drying carpet cleaning and antimicrobial solutions on site within a facility. Customerstechnology. 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.
In April 2017, the Company completed its acquisition of the IPC Group business ("IPC"). IPC manufactures a complete range of commercial cleaning products including mechanized cleaning equipment, wet & dry vacuum cleaners, cleaning tools & carts and high pressure washers. These products are sold into similar vertical market applications as those listed above, but also into office cleaning and hospitality vertical markets through a global direct sales and service organization and network of distributors. IPC markets products and services under the following valued brands: IPC, Gansow, Vaclensa, Portotecnica, Soteco and private-label brands.
Raw Materials
The Company has not experienced any significant or unusual problemsan extensive global field service network. We sell products directly in 15 countries and through distributors in more than 100 countries.
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Raw Materials and Component Parts
Steel, metal alloys and resin are the availability ofprimary raw materials or otherused to manufacture our mechanized cleaning equipment. We purchase various component parts, electronics and services used in production, logistics and product components.development processes from third parties. The Company has sole-source vendorsexperienced 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 certain components. A disruption in supply from such vendors may disrupt the Company’s operations. However, the Company believes that it can find alternate sources in the event there is a disruption in supply from such vendors.
available parts and to increase our sourcing flexibility.
Intellectual Property
AlthoughThe Company owns a broad range of intellectual property rights in both the Company considers that itsUnited 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, it doesbut we do not regard itsour 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 towardstoward the high end of the range and the third quarter is typically in the middle of the range.


Working Capital
The Company funds operations through a combination of cash and cash equivalents and cash flows from operations. Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to subsidiaries as needed. In addition, credit facilities are available for additional working capital needs or investment opportunities.
Major Customers
The Company sells itsa wide range of products to a wide varietydiversified base of customers nonearound the world and has no material concentration of which are of material importance in relationcredit risk or significant payment terms extended to the business as a whole. The customer base includes several governmental entities which generally have terms similar to other customers.
Backlog
The Company processes orders within two weeks, on average. Therefore, no significant backlogs existed at December 31, 2017 and 2016.
Competition
Public industry data concerning global market share is limited; however, through an assessment of validated third partythird-party sources and sponsored third partythird-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 Tennantthe Company in virtually every geography of the world. However,Additionally, 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.

Research
Human Capital
As of December 31, 2023, we employed approximately 4,457 employees who are guided by our vision to design, manufacture and Developmentmarket sustainable solutions that help create a cleaner, safer and healthier world.

Ethics and Employee Safety

4
Tennant Company has a historycommitment to our employees to foster and uphold a culture of developing innovative technologiesintegrity and stewardship. We ensure that our employees are not only aware of ethical standards, but actively contribute to createmaintaining them. As part of this commitment, Tennant conducts annual Code of Conduct training that empowers our staff with the knowledge and tools to make ethical decisions in their roles. We understand the importance of fostering an environment where concerns can be raised without fear of reprisal. To facilitate this, we offer various avenues for reporting concerns, including a cleaner, safer, healthier world. The Companydedicated ethics hotline accessible both via phone and online.

We prioritize the health and safety of all employees. We operate under our established safety programs and employ an experienced team of health and safety specialists to provide support to employees globally. All locations work diligently to meet and/or exceed regulatory standards applicable to each site. Tennant employees are empowered to stop work anytime there is committeda potential hazard identified. Each site maintains public and confidential ways for employees to its innovationreport safety concerns to ensure employees feel free to report their concerns.
Talent
We believe attraction, development, engagement, and retention of a diverse group of employees is key to achieving our organizational objectives. We focus on creating a high-performance culture, which includes our annual performance management process for all employees which aligns with our employee and leadership position through fulfilling its goalcompetency frameworks.
To support employee development, we have deployed a number of resources including our philosophy and development tools for all employees via our intranet. We also provide leaders access to annually invest 3%on-demand eLearnings and targeted live training sessions. In addition, we engage in annual talent conversations to 4% of annual saleshelp identify, develop, and deploy talent to researchachieve our objectives and development. The Company’s innovation efforts arefocused on solvingaddress talent risks.
We believe talent feedback is key to engagement and survey our customers’ needs holistically addressing a broad array of issues,employees regularly. Also, we provide other feedback and engagement avenues such as managing labor costs, enhancingall employee quarterly town halls and leadership meetings. We take action to drive improvement in our ability to engage and retain talent.
Diversity, Equity, and Inclusion (DE&I)

Tennant Company believes that an inclusive and diverse workforce contributes to our business success. The inclusion of diverse perspectives enables innovation and our ability to serve customers. We continue our DE&I focus through strategies which engage and educate our employees, promote inclusion, and drive effective governance.

Tennant Company proudly continues our commitment to be an equal opportunity employer. We make employment decisions based on the basis of individual skill, ability, reliability, productivity, and making cleaning processes more efficientother factors important to performance.

Women represent 50% of our executive management team and sustainable.  Through core product development, partnerships and technology enablement we are creating new growth avenues for Tennant. These new avenues for growth go beyond cleaning equipment into business insights and service solutions. In 2017, 2016 and 2015, the Company spent $32.0 million, $34.7 million and $32.4 million on research and development, respectively.
Environmental Compliance
Compliance with Federal, State and local provisions which have been enacted or adopted regulating the discharge33% of materials into the environment, or otherwise relating to the protectionour Board of the environment, has not had, and the Company does not expect it to have, a material effect upon the Company’s capital expenditures, earnings or competitive position.
Employees
The Company employed approximately 4,300 people in worldwide operationsDirectors as of December 31, 2017.2023.
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 99.6% of the median total income for males, suggesting there is no evidence of a gender pay gap in the United States at Tennant Company.

Employee Gender Statistics
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The following table represents employees by region and gender as of December 31, 2023:
FemaleMaleTotal
Americas4391,9102,349
Europe, Middle East, Africa4461,1951,641
Asia Pacific140327467
Total1,0253,4324,457
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. Each year, we evaluate the competitiveness of our pay levels 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.
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 of the Registrant
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.
David W. Huml,Barb Balinski, Senior Vice President, EMEA, APACInnovation and GlobalTechnology
Barb Balinski (60) 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, Ms. Balinski 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, (49)President and Chief Executive Officer
David W. Huml (55) 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.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.
H. Chris Killingstad, President and Chief Executive Officer
H. Chris Killingstad (62) joined the Company in April 2002 as Vice President, North America and was named President and CEO in 2005. From 1990 to 2002, he was employed by The Pillsbury Company, a consumer foods manufacturer. From 1999 to 2002 he served as Senior Vice President and General Manager of Frozen Products for Pillsbury North America; from 1996 to 1999 he served as Regional Vice President and Managing Director of Pillsbury Europe, and from 1990 to 1996 was Regional Vice President of Häagen-Dazs Asia Pacific. He held the position of International Business Development Manager at PepsiCo Inc., from 1982-1990 and Financial Manager for General Electric, from 1978-1980.
Carol E. McKnight, Senior Vice President, Chief Administrative Officer
Carol E. McKnight (50) joined the Company in June 2014 as Senior Vice President of Global Human Resources. In 2017, Carol was named SVP and Chief Administrative Officer. Prior to joining Tennant, she was Vice President of Human Resources at ATK (Alliant Techsystems) where she held divisional and corporate leadership positions in the areas of compensation, talent management, talent acquisition and general human resource management. Prior to ATK, she was with New Jersey-based NRG Energy, Inc.
Jeffrey C. Moorefield, Senior Vice President, Global Operations
Jeffrey C. Moorefield (54) joined the Company in April 2015 as Senior Vice President, Global Operations. From 2001 to 2008 and 2010 to March 2015, 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 Global Vice President of Operation - Technical Solutions. From 2008 to 2010, he was Head of Operations for Netshape Technology, a technical start-up company. From 1987 to 2001, he held various positions with Emerson Electric Company, a worldwide technology and engineering company, culminating in Vice President, Operations. From 1985 to 1987, he was a Design Engineer at Smith & Proffit Machine & Engineering, a custom equipment engineering company.
Thomas Paulson, Senior Vice President and Chief Financial Officer
Thomas Paulson (61) joined the Company in March 2006 as Vice President and Chief Financial Officer and was named Senior Vice President and Chief Financial Officer in October 2013. Prior to joining Tennant, he was Chief Financial Officer and Senior Vice President of Innovex from 2001 to February 2006. Prior to joining Innovex, a manufacturer of electronic interconnect solutions, he worked for The Pillsbury Company for over 19 years. He became a Vice President at Pillsbury in 1995 and was the Vice President of Finance for the $4 billion North American Foods Division for over two years before joining Innovex.6

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Jeffrey L. Cotter,Kristin A. Erickson, Senior Vice President, General Counsel and Corporate Secretary
Jeffrey L. Cotter (50) joinedKristin A. Erickson (51) has served as the Company in September 2017 asCompany's Senior Vice President, General Counsel and Corporate Secretary. Previously, he was with G&K Services, Inc., starting since December 2020. Ms. Erickson joined the Company's legal department in 2006 and fromApril 2008, to 2017 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.Secretary in 2020. Prior to G&K Services,joining Tennant in 2008, she served as Senior Counsel and Assistant Secretary for MoneyGram International, Inc., he wasfrom 2004 to 2008. She started her career as a shareholder at Leonard, Street and Deinard P.A.corporate attorney for Lindquist & Vennum, PLLP (n/k/a Stinson Leonard StreetBallard Spahr LLP).
Fay West, Senior Vice President, Chief Financial Officer
Fay West (54) 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, The Americas and R&DChief Commercial Officer
Richard H. Zay (47)(53) 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. In 2014, he was named2013 and Senior Vice President of the Americas business unit for Tennant andthe 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, a manufacturer of major home appliances, 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.
Brock R. Christianson, Senior Vice President, Chief Human Resources Officer
Brock R. Christianson (54) joined the Company in November 2023 as Senior Vice President, Chief Human Resources Officer. From 2017 to October 2023, Mr. Christianson served in various Human Resources Vice President roles at Thrivent, a Fortune 500 financial services company. He held senior positions at Honeywell International from 2011 to 2017, including global Vice President of HR for the Environmental, Combustion, and Controls business unit. From 1998 to 2011, he worked at Medtronic, a global healthcare technology leader, where he held HR leadership roles in corporate, business units, and EMEA. Prior to Medtronic, he held HR and consulting roles with Emerson Electric and Ernst & Young.
ITEM 1A – Risk Factors
The following are significantrisk factors known to us that could materially adversely affect our business, financial condition or operating results.
We may not be able to effectively manage organizational changes which could negatively impact our operating results or financial condition.Macroeconomic Risks
We are continuing to implement global standardized processes in our business despite lean staffing levels. We continue to consolidate and reallocate resources as part of our ongoing efforts to optimize our cost structure in the current economy. Our operating results may be negatively impacted if we are unable to implement new processes and manage organizational changes, which includes 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.
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 recruit, 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 the economy recovers and 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 growth.
In addition, there is a risk that we may not have adequate talent acquisition resources and employee development resources to support our future hiring needs and provide training and development opportunities to all employees. This, in turn, could impede our workforce from embracing change and leveraging the improvements we have made in technology and other business process enhancements.
We are subject to competitive risks associated with developing innovative products and technologies, including but not limited to, not expanding as rapidly or aggressively in the global market as our competitors, our customers not continuing 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 characteristics of our products will produce competitive solutions for our customers’ needs, our products are generally 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 adversely impacts revenues, margin and the success of our operations.
Competitors 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.
Increases in the cost of, quality, or disruption in the availability of, raw materials and components that we purchase to manufacture our products could negatively impact our operating results or financial condition.
Our sales growth, expanding geographical footprint and continued use of sole source vendors (concentration risk), coupled with suppliers’ potential credit issues, could lead to an increased risk of a breakdown in our supply chain. 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 slow-downs. 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.

The SEC has adopted rules regarding disclosure of the use of “conflict minerals” (commonly referred to as tin, tantalum, tungsten and gold) which are mined from the Democratic Republic of the Congo in products we manufacture or contract to manufacture. These rules have required and will continue to require due diligence and disclosure efforts. There are and will continue to be costs associated with complying with this disclosure requirement, including costs to determine which of our products are subject to the rules and the source of any "conflict minerals" used in these products. Since our supply chain is complex, ultimately we may not be able to sufficiently discover the origin of the conflict minerals used in our products through the due diligence procedures that we implement. If we are unable to or choose not to provide appropriate disclosure, customers may choose not to purchase our products. Alternatively, if we choose to use only suppliers offering conflict free minerals, we cannot be sure that we will be able to obtain metals, if necessary, from such suppliers in sufficient quantities or at competitive prices. Any one or a combination of these various factors could harm our business, reduce market demand for our products, and adversely affect our profit margins, net sales, and overall financial results.
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 growth 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 could lead to significant expenses, adversely impacting our results of operations and hinder our ability to offer better technology solutions to our customers.
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.
We may consider acquisition 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, such as the acquisition of the IPC Group, and we believe 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.
We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
In April 2017, in connection with the acquisition of IPC Cleaning S.p.A., we entered into a new senior credit facility and indenture, and issued debt totaling approximately $400,000, consisting of a $100,000 term loan and $300,000 of senior notes, which funded the acquisition and replaced our current debt facility. The new senior credit facility also includes a revolving facility in an amount up to $200,000. We cannot provide assurance that our business will generate sufficient cash flow from operations to meet all our debt service requirements, to pay dividends, to repurchase shares of our common stock, and to fund our general corporate and capital requirements.
Our ability to satisfy our debt obligations will depend upon our future operating performance. We do not have complete control over our future operating performance because it is subject to prevailing economic conditions, and financial, business and other factors.
Our current and future debt service obligations and covenants could have important consequences. These consequences include, or may include, the following:
our ability to obtain financing for future working capital needs or acquisitions or other purposes may be limited;
our funds available for operations, expansions, dividends or other distributions, or stock repurchases may be reduced because we dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our indebtedness;
our ability to conduct our business could be limited by restrictive covenants; and
our vulnerability to adverse economic conditions may be greater than less leveraged competitors and, thus, our ability to withstand competitive pressures may be limited.
Restrictive covenants in our senior credit facility and in our indenture place limits on our ability to conduct our business. Covenants in our senior credit facility and indenture include those that restrict our ability to make acquisitions, incur debt, encumber or sell assets, pay dividends, engage in mergers and consolidations, enter into transactions with affiliates, make investments and permit our subsidiaries to enter into certain restrictive agreements. The senior credit facility additionally contains certain financial covenants. We cannot provide assurance that we will be able to comply with these covenants in the future.

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 growthprofit targets.
We may encounter risks to our IT infrastructure, such as access and security, that may not
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Our operations could be adequately designed to protect critical data and systems from theft, corruption, unauthorized usage, viruses, sabotageadversely affected by geopolitical tensions 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 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.health epidemics.
We may be unable to conduct business if we experience a significant business interruption inadversely impacted by factors outside of our computer systems, manufacturing plantscontrol, including geopolitical tensions or distribution facilities for a significant periodpublic health epidemics. Geopolitical tensions, acts 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, weviolence or war, or other international conflicts 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 couldalso adversely impact our financial results.operations. Public health epidemics, such as the COVID-19 pandemic, have impacted economic markets, manufacturing operations, supply chains, employment and consumer behavior in nearly every geographic region and industry across the world, and we have been, and may in the future be, adversely affected as a result.
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, compliance 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, sustainability, labor and safety and anti-corruption, such asincluding 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. basedU.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.Code of Conduct. 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
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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 for certain parts 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 foregoing,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 European Union adopted a comprehensive General Data Privacy Regulation (the "GDPR") in May 2016 that will replace the current EU Data Protection Directivevendors we choose to supply our parts and related country-specific legislation. The GDPR will become fully effective in May 2018. GDPR requires companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves. Failureequipment fail to comply with GDPR requirementsour quality expectations, thus damaging our reputation for quality and negatively impacting sales.
Global supplier production for various component parts is limited. We may experience disruption of the supply of key component parts. Cost inflation and market supply challenges 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 result in penalties of upcontinue to 4% of worldwide revenue.
Actions of activist investors or others could disrupt our business.
Public companies have been the target of activist investors. One investor which owns approximately 5% of our outstanding common stock recently filed a Schedule 13D with the Securitiesdo so if actions we are taking are not effective at offsetting these rising costs. Changes and Exchange Commission which stated its belief that we should undertake a strategic review process regarding a consolidation transaction with a third party. In the event such investor or another third party, such as an activist investor, continuesuncertainties related to pursue such belief or proposes to change our governancegovernment fiscal and tax policies, board of directors,including increased duties, tariffs, or other aspects of our operations, our review and consideration of such proposals may create a significant distractionrestrictions, could adversely affect demand for our management and employees. Thisproducts, 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 executeachieve our business plansstrategic objectives and may require our management to expend significant time and resources. Such proposals may also create uncertainties with respect toaffect our financial positionresults.
We are dependent on key suppliers to make certain materials available at a contracted price. Labor, overhead, and operationsmaterial costs have increased and we may adversely affectnot 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 attract and retain key employees.

Foreign currency exchange rate fluctuations, particularly the strengthening of the U.S. dollar against other major currencies, could result in declines in our reported net sales and net earnings.
We earn revenues, pay expenses, own assets and incur liabilities in countries using functional currencies other than the U.S. dollar. Because our consolidated financial statements are presented in U.S. dollars, we translate revenues and expenses into U.S. dollars at the average exchange rate during each reporting period, as well as assets and liabilities into U.S. dollars at exchange rates in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect our net revenues, net earnings, earnings per share and the value of balance sheet items denominated in foreign currencies as we translate them into the U.S. dollar reporting currency. We use derivative financial instruments to hedge our estimated transactional or translational exposure to certain foreign currency-denominated assets and liabilities as well as our foreign currency denominated revenue. While we actively manage the exposure of our foreign currency market risk in the normal course of business by utilizing various foreign exchange financial instruments, these instruments involve risk and may not effectively limit our underlying exposure from foreign currency exchange rate fluctuations or minimize the effects on our net earnings and the cash volatility associated with foreign currency exchange rate changes. Fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, could materially affect our financial results.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.
The integration
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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 additional risks foreffective 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 internal controls over financial reporting.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 intend to integrate IPC into our control environment and subject it to internal control testing during 2018, which means that deficiencies in our internal control over financial reporting as a combined company may not be identified until then. Any such undiscovered deficiencies,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 material,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 resultadversely 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 misstatementsneed 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, including ERP modernization, 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 restatementsand 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.
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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 statements,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. Our manufacturing teams monitor the effectiveness of our wellness and safety programs. The Company may be required to make enhancements and incur costs related to any new health guidelines and protocols to adapt to new health crises, which 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
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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 the trading pricemargin and loss of our common stock or otherwise have a material adverse effect on our business, reputation, results of operations, financial condition or cash flows.market share.
ITEM 1B – Unresolved Staff Comments
None.

ITEM 1C – Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity processes to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. Our approach to assessing, prioritizing, and effecting cybersecurity processes and projects is based on standards from the National Institute of Standards and Technology (NIST).
We have established an enterprise risk management (ERM) program that considers our enterprise strategy, information from internal stakeholders, and information from external sources (e.g., emerging risks and trends, evaluations by third parties, and best practices) to identify, assess, categorize, and monitor risks including cybersecurity risks. The ERM program develops enterprise risk profiles to address individual risk drivers, develop action plans, and monitor against key risk indicators. At least annually, the ERM program is presented to our Board, Audit Committee, and members of management.
We have strategically integrated cybersecurity risk management into our broader ERM program to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes. Our strategy includes regular employee training and awareness on cybersecurity risks and related best practices, required password complexity, the use of multi-factor authentication, information security protocols, anti-virus and anti-ransomware software, a patch management program, the execution of table top exercises on a periodic basis, established policies and protocols for cyber incident response planning and reporting, and ongoing internal cybersecurity testing. Our risk management team works closely with our IT department to continuously evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
We test our ability to respond to cybersecurity incidents on a recurring basis. Additionally, we engage third-party service providers to assist with the ongoing monitoring for cybersecurity events and incidents, as well as to complete risk quantification analysis and perform penetration and vulnerability testing. If any gaps are identified, the third-party service providers also assist with incident assessment and response. We conduct thorough up-front security assessments of all third-party providers before engagement, led by our Vice President, Chief Information Office (CIO) and our cybersecurity team, and we maintain ongoing monitoring to ensure compliance with our cybersecurity standards. This approach is designed to mitigate risks related to security incidents originating from third-parties.
We have not encountered cybersecurity incidents or identified risks from cybersecurity threats that have materially impaired our operations or financial standing.
Governance
Within our organization, we have a management team responsible for assessing and managing cybersecurity risks. The team is led by our CIO and consists of the Cyber Security Incident Response Team (CSIRT) and internal audit personnel. The CSIRT is comprised of IT management and experienced cybersecurity personnel. The role of the CSIRT is to promptly handle an incident so that containment, investigation, and recovery can occur quickly. Where third-party services are leveraged, they ensure they are engaged as necessary. The CSIRT Leader oversees and prioritizes actions during an incident's detection, analysis, and containment. They are also responsible for conveying the special requirements of high severity incidents to the rest of the organization as well as communicating potential impacts to the CIO. Additionally, they are responsible for understanding the SLAs in place with third parties, and the role third parties may play in specific response scenarios. Our CIO has more than 30 years of experience in IT, enterprise security, and cyber risk management and has previously held global IT infrastructure and business solutions roles, including nearly 20 years in such positions in the manufacturing industry. In addition, our CSIRT Leader has 30 years of
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technology and cybersecurity experience and has previously held data security and global IT infrastructure positions at risk management and asset protection services companies. Effective February 2, 2024, our CIO has retired from employment and continues to serve as our CIO as a contractor through April 2024. During this time, he will continue his existing duties including oversight and management of cybersecurity risks. An active search is underway for a new CIO.
The CIO and CSIRT, in combination with the Senior Vice President, Technology and Innovation and CEO, play a pivotal role in informing the Audit Committee of the Board of Directors on cybersecurity risks. The Audit Committee is central to the Board's oversight of cybersecurity risks and bears the primary responsibility for this domain. The Audit Committee is composed of board members with diverse expertise including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
The Vice President, CIO provides comprehensive quarterly briefings to the Audit Committee. These briefings encompass a broad range of topics, including:
•Current cybersecurity landscape and emerging threats;
•Status of ongoing cybersecurity initiatives and strategies;
•Incident reports and learnings from any cybersecurity events; and
•Compliance with regulatory requirements and industry standards.
In addition to our quarterly meetings, the Audit Committee, CIO and CEO maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. The CIO and CEO provide updates on any significant developments in the cybersecurity domain, ensuring the Board's oversight is proactive and responsive. The Audit Committee actively participates in strategic decisions related to cybersecurity, as well as tabletop exercises for tactical response readiness. This involvement ensures that cybersecurity considerations are integrated into the broader strategic objectives of Tennant Company. The Audit Committee conducts an annual review of the Company's cybersecurity posture and the effectiveness of its risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk management framework.
ITEM 2 – Properties
The Company’s corporate offices are owned by the Company and are located in the Minneapolis, Minnesota metropolitan area. Manufacturing facilities located in Minneapolis,Golden Valley, Minnesota; Holland, Michigan; Chicago, Illinois;Uden, The Netherlands; and Uden, the NetherlandsItalian 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 Shanghai, Chinaanother facility in the Province of Padua are leased to the Company. Sales offices, warehouse and storage facilities are leased in various locations in North America, Europe, Japan, China, Australia, New Zealand and Latin America. The Company’s facilities are in good operating condition, suitable for their respective uses and adequate for current needs.
In April 2017, the Company completed its acquisition of IPC. IPC has five major manufacturing facilities, all located in Italy, and 11 sales branches located in the United States, Brazil, Europe, India and China. IPC owns its manufacturing facilities located in the Italian cities of Venice, Cremona and Reggio Emilia as well as its manufacturing facility located in the Province of Padua. Another manufacturing facility located in the Province of Padua is leased to IPC. In addition, IPC useswe use a dedicated, third partythird-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 the Contractual Obligations section of Item 7 and in Note 15 to the Consolidated Financial Statements.consolidated financial statements.
ITEM 3 – Legal Proceedings
There are no material pending legal proceedings other than ordinary routine litigation incidental to the Company’s business.
13
Table of Contents
ITEM 4 – Mine Safety Disclosures
Not applicable.
14

Table of Contents
PART II
ITEM 5 – Market for Registrant’s Common Equity, Related StockholderShareholder Matters and Issuer Purchases of Equity Securities
MARKET INFORMATION – Tennant's common stock is traded on the New York Stock Exchange, under the ticker symbol TNC. As of February 15, 2018,10, 2024, there were 324254 shareholders of record. The common stock price was $61.80 per share on February 15, 2018. The accompanying chart shows the high and low sales prices for the Company’s shares for each full quarterly period over the past two years as reported by the New York Stock Exchange:
 2017 2016
 High Low High Low
First Quarter$76.10
 $64.30
 $55.71
 $45.92
Second Quarter75.00
 69.15
 56.33
 49.97
Third Quarter76.80
 60.05
 66.54
 52.51
Fourth Quarter73.15
 60.30
 76.80
 60.21
DIVIDEND INFORMATION – Cash dividends on Tennant’s common stock have been paid for 7379 consecutive years. Tennant’s annual cash dividend payout increased for the 46th52nd consecutive year to $0.84$1.075 per share in 2017,2023, an increase of $0.03$0.06 per share over 2016.2022. Dividends are generally declared each quarter. On February 15, 2018,13, 2024, the Company announced a quarterly cash dividend of $0.21$0.28 per share payable March 15, 2018,2024, to shareholders of record on February 28, 2018.29, 2024.
DIVIDEND REINVESTMENT OR DIRECT DEPOSIT OPTIONS – Shareholders have the option of reinvesting quarterly dividends in additional shares of Company stock or having dividends deposited directly to a bank account. The Transfer Agent should be contacted for additional information.
TRANSFER AGENT AND REGISTRAR – Shareholders with a change of address or questions about their account may contact:
Equiniti Trust Company
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0854
(800) 468-9716
EQUITY COMPENSATION PLAN INFORMATION – The following table provides information about shares of the Company's Common Stock that may be issued under the Company's equity compensation plans, as of December 31, 2017.
Plan Category 
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights(1)
 
(b) Weighted-average exercise price of outstanding options, warrants and rights(2)
 (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a))
Equity compensation plans approved by security holders 1,304,385 $47.47 1,155,110
Equity compensation plans not approved by security holders — — —
Total 1,304,385 $47.47 1,155,110
(1)Amount includes outstanding awards under the 1997 Non-Employee Director Stock Option Plan, the 2007 Stock Incentive Plan, the Amended and Restated 2010 Stock Incentive Plan, each as amended, and the 2017 Stock Incentive Plan (the "Plans"). Amount includes shares of Common Stock that may be issued upon exercise of outstanding stock options under the Plans. Amount also includes shares of Common Stock that may be paid in cash upon exercise of outstanding stock appreciation rights under the Plans. Amount also includes shares of Common Stock that may be issued upon settlement of restricted stock units and deferred stock units (phantom stock) under the Plans. Stock appreciation rights, restricted stock units and deferred stock units may be settled in cash, stock or a combination of both. Column (a) includes the number of shares that could be issued upon a complete distribution of all outstanding stock options and stock appreciation rights (1,135,608) and restricted stock units and deferred stock units (168,777).
(2)Column (b) includes the weighted-average exercise price for outstanding stock options and stock appreciation rights.

SHARE REPURCHASES – On October 31, 2016, the Board of Directors authorized the repurchase of an additional 1,000,000 shares of our common stock. This is in addition to the 393,965 shares remaining under our prior repurchase program. Share repurchases are made from time to time in the open market or through privately negotiated transactions, primarilytransactions. During the twelve months ended December 31, 2023, the Company paid $21.7 million to offsetrepurchase 290,920 shares of its common stock. The most recent share repurchase program approved by the dilutive effectBoard of Directors on October 31, 2016 authorized the repurchase of 1,000,000 shares issued throughof our common stock.
For the Quarter Ended
December 31, 2023
Total Number of Shares
Purchased(a)
Average Price Paid
Per Share		Total Number of Shares Purchased as Part
of Publicly Announced Plans or
Programs		Maximum Number of Shares that May
Yet Be Purchased Under the Plans or
Programs
October 1–31, 202369,447$75.19 69,447877,788
November 1–30, 202353,979$84.66 53,332824,456
December 1–31, 20233,043$86.06 3,043821,413
Total126,469$79.50 125,822821,413
(a)Includes 647 shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by employees who exercised stock options or restricted stock under employee share-based compensation programs. Asplans.

15
Table of December 31, 2017, our 2017 Credit Agreement restricts the payment of dividends or repurchasing of stock if, after giving effect to such payments and assuming no default exists or would result from such payment, our leverage ratio is greater than 2.50 to 1, in such case limiting such payments to an amount ranging from $50.0 million to $75.0 million during any fiscal year based on our leverage ratio after giving effect to such payment. Our Senior Notes due 2025 also contain certain restrictions, which are generally less restrictive than those contained in the 2017 Credit Agreement.
Contents
For the Quarter Ended
December 31, 2017
Total Number of Shares Purchased(1)
 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1–31, 2017228
 $68.94
 —
 1,393,965
November 1–30, 2017922
 67.35
 —
 1,393,965
December 1–31, 2017—
 —
 —
 1,393,965
Total1,150
 $67.66
 —
 1,393,965
(1)
Includes 1,150 shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by employees who exercised stock options or restricted stock under employee share-based compensation plans.
STOCK PERFORMANCE GRAPH – The following graph compares the cumulative total shareholder return on Tennant’s common stock to two indices: S&P SmallCap 600 and MorningstarS&P 500 Industrials Sector.(Sector). The graph below compares the performance for the last five fiscal years, assuming an investment of $100 on December 31, 2012,2018, including the reinvestment of all dividends.

549755817791
5-YEAR CUMULATIVE TOTAL RETURN COMPARISON
201820192020202120222023
Tennant Company$100 $152 $138 $162 $125 $190 
S&P SmallCap 600$100 $123 $137 $173 $145 $169 
S&P 500 Industrials (Sector) (TR)$100 $129 $144 $174 $164 $194 
Source: Zacks Investment Research, Inc.



 2012 2013 2014 2015 2016 2017
Tennant Company$100 $156 $168 $133 $171 $176
S&P SmallCap 600$100 $141 $149 $147 $144 $163
Morningstar Industrials Sector$100 $142 $155 $151 $179 $219

ITEM 6 – Selected Financial Data
(In thousands, except shares and per share data)[Reserved]
16
Years Ended December 312017  2016  2015  2014  2013 
Financial Results:              
Net Sales$1,003,066
  $808,572
  $811,799
  $821,983
  $752,011
 
Cost of Sales598,645
(1) 456,977
  462,739
  469,556
  426,103
 
Gross Margin - %40.3


43.5


43.0


42.9


43.3
 
Research and Development Expense32,013
  34,738
  32,415
  29,432
  30,529
 
% of Net Sales3.2


4.3


4.0


3.6


4.1
 
Selling and Administrative Expense345,364
(1) 248,210
  252,270
(2) 250,898
  232,976
(3)
% of Net Sales34.4


30.7


31.1


30.5


31.0
 
Profit from Operations27,044
(1) 68,498
  53,176
(2) 72,097
  62,403
(3)
% of Net Sales2.7


8.5


6.6


8.8


8.3
 
Income Tax Expense4,913
(1) 19,877
  18,336
(2) 18,887
  19,647
(3)
Effective Tax Rate - %(380.2)

29.9


36.4


27.2


32.8
 
Net (Loss) Earnings Attributable to Tennant Company(6,195)(1) 46,614
  32,088
  50,651
  40,231
 
% of Net Sales(0.6)  5.8
  4.0
  6.2
  5.3
 
Per Share Data:              
Basic Net (Loss) Earnings Attributable to Tennant Company$(0.35)(1) $2.66
  $1.78
(2) $2.78
  $2.20
(3)
Diluted Net (Loss) Earnings Attributable to Tennant Company$(0.35)(1) $2.59
  $1.74
(2) $2.70
  $2.14
(3)
Diluted Weighted Average Shares17,695,390
  17,976,183
  18,493,447
  18,740,858
  18,833,453
 
Cash Dividends$0.84
  $0.81
  $0.80
  $0.78
  $0.72
 
Financial Position:              
Total Assets$993,977
  $470,037
  $432,295
  $486,932
  $456,306
 
Total Debt376,839
  36,194
  24,653
  28,137
  31,803
 
Total Tennant Company Shareholders’ Equity296,503
  278,543
  252,207
  280,651
  263,846
 
Current Ratio1.8
  2.2
  2.2
  2.4
  2.4
 
Debt-to-Capital Ratio56.0%  11.5%  8.9%  9.1%  10.8% 
Cash Flows:              
Net Cash Provided by Operations$54,174
  $57,878
  $45,232
  $59,362
  $59,814
 
Capital Expenditures, Net of Disposals(17,926)  (25,911)  (24,444)  (19,292)  (14,655) 
Free Cash Flow36,248
  31,967
  20,788
  40,070
  45,159
 
Other Data:              
Depreciation and Amortization$43,253
  $18,300
  $18,031
  $20,063
  $20,246
 
Number of employees at year-end4,297
  3,236
  3,164
  3,164
  3,087
 
The results
Table of operations from our 2017 acquisition of the IPC Group have been included in the Selected Financial Data presented above since its acquisition date on April 6, 2017.Contents
(1)
2017 includes a fair value step-up adjustment to acquired inventory in cost of sales of $7,245 pre-tax ($5,237 after-tax, or $0.30 per diluted share), pre-tax acquisition costs, restructuring charges and a pension settlement charge in selling and administrative expense of $10,560, $10,519 and $6,373, respectively ($9,748, $7,559 and $4,020 after-tax, or $0.55, $0.43 and $0.23 per diluted share, respectively). 2017 also includes pre-tax acquisition-related financing costs and acquisition costs in total other expense, net of $7,378 and $814, respectively ($4,619 and $660 after-tax, or $0.26 and $0.04 per diluted share, respectively). In addition, 2017 net loss attributable to Tennant Company includes a $2,388 net income tax expense ($0.14 per diluted share) as a result of the impacts of the 2017 tax reform legislation.
(2)
2015 includes restructuring charges of $3,744 pre-tax ($3,095 after-tax or $0.17 per diluted share) and a non-cash impairment of long-lived assets of $11,199 pre-tax ($10,822 after-tax or $0.58 per diluted share).
(3)
2013 includes restructuring charges of $3,017 pre-tax ($2,938 after-tax or $0.15 per diluted share) and a tax benefit of $582 (or $0.03 per diluted share) related to the retroactive reinstatement of the 2012 U.S. Federal Research and Development ("R&D") Tax Credit.

ITEM 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, 2023 and 2022. 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, 2023 and December 31, 2022, unless stated otherwise. The discussion of 2021 results and related year-over-year comparisons as of and for the years ended December 31, 2022 and December 31, 2021 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, 2022.
Overview
Tennant Company is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, significantly reduce environmental impact and help create a cleaner, safer, healthier world. TennantThe Company is committed to creating and commercializing breakthrough, sustainable cleaning innovations to enhance its broad suite of products, including:including floor maintenance and outdoor cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings and asset management solutions. TennantOur products are used in many types of environments, including: Retail establishments,including factories and warehouses, distribution centers, factories and warehouses,office buildings, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets, 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.
In April 2017,
Macroeconomic Events
Supply chain challenges continue to impact the Company completed its acquisitionglobal economy. Our operating performance throughout 2023 has benefited from fewer supply chain disruptions enabling us to obtain key component parts, increase production and reduce backlog. We continue to address and adapt to these temporary supply chain disruptions by employing local-for-local and region-for-region manufacturing and sourcing strategies, which allows us to contain costs and manufacture our products closer to our customers. At the same time, our engineering teams are evaluating our platform design to increase our sourcing flexibility.
We are impacted by customer spend and global demand for our products. We have been able to successfully manage volatility in demand through our broad and expanding product offerings.
The global nature of our operations subjects us to exposures resulting from both foreign currency exchange fluctuations in the IPC Group business. IPC manufactures a complete rangenormal course of commercial cleaningbusiness and geopolitical risks stemming from global conflicts. While we do not have any direct operations or employees in areas experiencing conflict, our operating results have been and may continue to be negatively impacted by supply chain constraints and inflationary pressures stemming from these conflicts.
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.
17
Outlook
While global economic conditions continue to be uncertain, including mechanized cleaning equipment, wet & dry vacuum cleaners, cleaning tools & cartsthe ability to attract and high pressure washers. These productsretain skilled labor, lingering and targeted supply chain disruptions, and evolving compliance regulations, we remain agile as we continue to manage evolving conditions. We are sold into similar vertical market applications as those listed above, but also into office cleaning and hospitality vertical markets through a global direct sales and service organization and network of distributors. IPC marketsconfident in the long-term growth trends for all our products and services underin the following valued brands: IPC, Gansow, Vaclensa, Portotecnica, Soteco and private-label brands.markets we serve.

Historical Results
The following table compares the historical results of operations for the years ended December 31, 2017, 20162023, and 20152022 in dollars and as a percentage of Net Salesnet sales (in thousands,millions, except per share amounts and percentages):
 2017 % 2016 % 2015 %
Net Sales$1,003,066
 100.0
 $808,572
 100.0
 $811,799
 100.0
Cost of Sales598,645
 59.7
 456,977
 56.5
 462,739
 57.0
Gross Profit404,421
 40.3
 351,595
 43.5
 349,060
 43.0
Operating Expense:           
Research and Development Expense32,013
 3.2
 34,738
 4.3
 32,415
 4.0
Selling and Administrative Expense345,364
 34.4
 248,210
 30.7
 252,270
 31.1
Impairment of Long-Lived Assets—
 —
 —
 —
 11,199
 1.4
Loss on Sale of Business—
 —
 149
 —
 —
 —
Total Operating Expense377,377
 37.6
 283,097
 35.0
 295,884
 36.4
Profit from Operations27,044
 2.7
 68,498
 8.5
 53,176
 6.6
Other Income (Expense):           
Interest Income2,405
 0.2
 330
 —
 172
 —
Interest Expense(25,394) (2.5) (1,279) (0.2) (1,313) (0.2)
Net Foreign Currency Transaction Losses(3,387) (0.3) (392) —
 (954) (0.1)
Other Expense, Net(1,960) (0.2) (666) (0.1) (657) (0.1)
Total Other Expense, Net(28,336) (2.8) (2,007) (0.2) (2,752) (0.3)
(Loss) Profit Before Income Taxes(1,292) (0.1) 66,491
 8.2
 50,424
 6.2
Income Tax Expense4,913
 0.5
 19,877
 2.5
 18,336
 2.3
Net (Loss) Earnings Including Noncontrolling Interest(6,205) (0.6) 46,614
 5.8
 32,088
 4.0
Net Loss Attributable to Noncontrolling Interest(10) —
 —
 —
 —
 —
Net (Loss) Earnings Attributable to Tennant Company$(6,195) (0.6) $46,614
 5.8
 $32,088
 4.0
Net (Loss) Earnings Attributable to Tennant Company per Share$(0.35)   $2.59
  
 $1.74
  
2023%2022%
Net sales$1,243.6 100.0 $1,092.2 100.0 
Cost of sales715.8 57.6 671.3 61.5 
Gross profit527.8 42.4 420.9 38.5 
Selling and administrative expense352.6 28.4 306.3 28.0 
Research and development expense36.6 2.9 31.1 2.8 
Gain on sale of assets— — (3.7)(0.3)
Operating income138.6 11.1 87.2 8.0 
Interest expense, net(13.5)(1.1)(7.1)(0.7)
Net foreign currency transaction gain (loss)0.3 — (1.2)(0.1)
Other (expense) income, net(1.6)(0.1)0.6 0.1 
Income before income taxes123.8 10.0 79.5 7.3 
Income tax expense14.3 1.1 13.2 1.2 
Net income109.5 8.8 66.3 6.1 
Net income per share - diluted$5.83 $3.55 

Net Sales
Net SalesConsolidated net sales in 20172023 totaled $1,003.1$1,243.6 million, a 24.1%13.9% increase as compared to Net Salesconsolidated net sales of $808.6$1,092.2 million in 2016.2022.
The components of the consolidated Net Sales change for 2017 as compared to 2016, and 2016 as compared to 2015, were as follows:
Growth Elements2017 v. 2016 2016 v. 2015
Organic Growth:   
Volume(0.1%) 1.1%
Price1.5% —%
Organic Growth1.4% 1.1%
Foreign Currency0.5% (1.0%)
Acquisitions22.2% (0.5%)
Total24.1% (0.4%)
The 24.1% 13.9% increase in consolidated Net Sales for 2017 as compared to 2016net sales was driven by:
•
22.2% from the April 2017 acquisition of the IPC Group and the expansion of our commercial floor coatings business through the August 2016 acquisition of the Florock® brand.
An organic•Organic sales increase of approximately 1.4% which excludes the effects of foreign currency exchange and acquisitions, due to an approximate 1.5% price increase, partially offset by a volume decrease of 0.1%. The price increase was the result of selling price increases, typically in the range of 2% to 4% in most geographies, with an effective date of February 1, 2017. The impact to gross margin was minimal as these selling price increases were taken to offset inflation. The slight volume decrease was13.6% primarily due to increased sales in Latin Americathe impact of higher selling prices across all regions and EMEA being more than offset by volume decreases in North America. Sales of new products introduced within the past three years totaled 48% of equipment revenue in 2017. This compares to 37% of equipment revenue in 2016 from sales of new products introduced within the past three years.
increases; and
•A net favorable impact from foreign currency exchange across all business units of approximately 0.5%0.3%.
The 0.4% decrease in consolidated Net Sales for 2016 as compared to 2015 was primarily due to the following:
An unfavorable impact from foreign currency exchange of approximately 1.0%.
An unfavorable net impact of 0.5% resulting from the sale of our Green Machines outdoor city cleaning line, partially offset by the acquisition of the Florock brand.
AnOur strong organic sales increase was mainly supported by our ability to reduce backlog through the procurement of approximately 1.1% which excludes the effects of foreign currency exchange and acquisitions and divestitures, duekey component parts to an approximate 1.1% volume increase. The volume increase was primarily due to strong sales of industrial equipment and sales of new products, particularly in the Americas region, being somewhat offset by lower sales of commercial equipment, particularly within the APAC region. Sales of new products introduced within the past three years totaled 37% of equipment revenue in 2016. This compares to 26% of equipment revenue in 2015 from sales of new products introduced within the past three years. There was essentially no price increase in 2016 due to no significant new selling list price increases since prior year selling list price increases with an effective date of February 1, 2015.facilitate increased production output.
The following table sets forth annual Net Salesnet sales by geographic area and the related percentage change from the prior year (in thousands,millions, except percentages):
2023%2022%
Americas$840.3 19.0 $705.9 7.2 
Europe, Middle East and Africa (EMEA)314.4 4.2 301.6 (9.1)
Asia Pacific (APAC)88.9 5.0 84.7 (15.8)
Total$1,243.6 13.9 $1,092.2 0.1 
18
 2017 % 2016 % 2015
Americas$640,274
 5.5
 $607,026
 2.6
 $591,405
Europe, Middle East and Africa273,738
 112.1
 129,046
 (7.7) 139,834
Asia Pacific89,054
 22.8
 72,500
 (10.0) 80,560
Total$1,003,066
 24.1
 $808,572
 (0.4) $811,799
Americas
Americas – In 2017,Net sales in the Americas Net Sales increased 5.5% to $640.3 million as compared with $607.0were $840.3 million in 2016. The direct impact2023, an increase of the IPC Group19.0% from 2022. Organic sales grew 18.9%, driven equally by price realization and Florock acquisitions favorably impacted Net Sales by approximately 4.4%. In addition, a favorable direct impact of foreignincreased volume across all geographies. Foreign currency translation exchange effects within the Americas impacted Net Sales by approximately 0.4% in 2017. As a result, organic sales growth in the Americas favorably impacted Net Salesnet sales by approximately 0.7% due to strong sales performance in Latin America, particularly Brazil and Mexico, from focused go-to-market strategies in our direct channel. This was partially offset by lower sales in North America, where sales growth through the distribution channel were more than offset by service sales.0.1%.
In 2016, Americas Net Sales increased 2.6% to $607.0 million as compared with $591.4 million in 2015. The primary drivers of the increase in Net Sales were strong sales of industrial equipment, sales of new products and robust sales in Latin America. The direct impact of the Florock acquisition favorably impacted Net Sales by approximately 0.7%. An unfavorable direct impact of foreign currency translation exchange effects within the Americas impacted Net Sales by approximately 0.5% in 2016. As a result, organic sales increased approximately 2.4% in 2016 within the Americas.
Europe, Middle East and Africa – EMEA Net Sales in 2017 increased 112.1% to $273.7 million as compared to 2016 Net Sales of $129.0 million. In 2017, the direct impact of the IPC Group acquisition favorably impacted Net Sales by approximately 105.3%. In addition, a favorable direct impact of foreign currency translation exchange effects within EMEA impacted Net Sales by approximately 1.3% in 2017. As a result, organic sales growth in EMEA favorably impacted Net Sales in 2017 by approximately 5.5% due to strong sales growth in most European countries from strong demand in both the direct and distributor channels being partially offset by lower sales in the UK.
EMEA Net Sales in 2016 decreased 7.7% to $129.0 million as compared to 2015 Net Sales of $139.8 million. In 2016, organic sales growth was achieved in all regions except the UK and the Central Eastern Europe, Middle East and Africa markets primarily due("EMEA")
EMEA net sales were $314.4 million in 2023, an increase of 4.2% from 2022. Organic sales grew 2.6% in EMEA, driven by price realization in all product categories, partially offset by lower EMEA volumes that were impacted by weaker-than-expected market conditions. Foreign currency exchange within EMEA favorably impacted net sales by approximately 1.6%.
Asia Pacific ("APAC")
APAC net sales were $88.9 million in 2023, an increase of 5.0% from 2022. Organic sales grew 8.6% in APAC, driven by price realization in Australia and volume increases in Australia and China. Foreign currency exchange within APAC unfavorably impacted net sales by approximately 3.6% in 2023.
Backlog
Backlog is one of the many indicators of business conditions in the Company's markets. Our order backlog was approximately $186.2 million at December 31, 2023 compared to Brexit and challenging economic conditions, respectively. In 2016, there was an unfavorable impact on Net Sales of approximately 5.9% as a$326.4 million at December 31, 2022. The decrease in our order backlog is the result of the sale of our Green Machines outdoor city cleaning line in January 2016. In addition,Company's ability to obtain key component parts and increase production levels. Backlog includes orders that can be cancelled or postponed at the direct impact of foreign currency exchange effects within EMEA unfavorably impacted Net Sales by approximately 2.0% in 2016. As a result, organic sales increased approximately 0.2% in 2016 within EMEA.
Asia Pacific – APAC Net Sales in 2017 increased 22.8% to $89.1 million as compared to 2016 Net Sales of $72.5 million. In 2017, the direct impact option of the IPC Group acquisition favorably impacted Net Sales by approximately 22.7%. In addition, a favorable direct impact of foreign currency translation exchange effects within APAC impacted Net Sales by approximately 0.1% in 2017. As a result, organic sales growth in APAC was essentially flat due to sales growth in China from strong sales through the direct and distributor channels being offset by sales declines primarily in Korea and Singapore resulting from a challenging economic environment.
customer at any time without penalty.

APAC Net Sales in 2016 decreased 10.0% to $72.5 million as compared to 2015 Net Sales of $80.6 million. Organic sales decreased approximately 10.0% in 2016 with lower sales of commercial and industrial equipment. Organic sales declines in all of our Asian markets were primarily due to economic slowdowns in the region and fewer large deals. Direct foreign currency translation exchange effects had essentially no impact on Net Sales in 2016 within APAC.
Gross Profit
Gross Profitprofit margin of 42.4% was 320390 basis points lowerhigher in 20172023 compared to 2016 due primarily to2022. The margin rate increase was the $7.2result of price realization and cost saving initiatives, which more than offset the multi-year impact of inflation.
Operating Expenses
Selling and Administrative Expense
Selling and Administrative expense ("S&A expense") was $352.6 million or approximately 70 basis points, fair value inventory step-up flow through related to our acquisition of the IPC Group and field service productivity challenges related to a high number of open service trucks of $5.1 million, or approximately 50 basis points. In addition, Gross Profit margin was unfavorably impacted by mix of sales by channel and region, primarily resulting from higher sales through the distribution in North America and lower gross margins from the IPC Group. The near-term unfavorable impacts from investments in manufacturing automation initiatives and high levels of raw material cost inflation also contributed to lower Gross Profit margin in 2017.
Gross Profit margin was 43.5% in 2016,2023, an increase of 50$46.3 million compared to 2022. As a percentage of net sales, S&A expense in 2023 increased 40 basis points to 28.4% from 28.0% in 2022. The S&A expense increase was driven by higher variable costs linked to improved operating performance as compared to 2015. Gross Profit margin in 2016 was favorably impacted by product mix (with relatively higher sales of industrial equipment and lower sales of commercial equipment), partially offset by manufacturing productivity challenges in North America.well as strategic investments aimed at fostering future growth.
Operating Expenses
Research and Development Expense – Tennant continues to invest in innovative product development with 3.2% of 2017 Net Sales spent on
Research and Development ("R&D"). expense was $36.6 million, or 2.9% of net sales, in 2023, nearly flat as a percentage of net sales compared to 2022.
We continueconduct research and development activities to invest in developing innovativedevelop new products and technologiesto 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 advancementmarketplace.
Total Other Expense, Net
Interest Expense, Net
Interest expense, net was $13.5 million in 2023, an increase of detergent-free products, fleet management and other sustainable technologies. There were 32 new products and product variants launched in 2017 including a new family of T500 commercial walk-behind scrubbers, the enhanced IRIS® Web Based Fleet Management System, the i-mop, the V3e compact dry canister vacuum, the T350 stand-on commercial scrubber and the A140 micro-scrubber. In 2017, our newly acquired IPC Group business also launched many new products and product variants across all product lines.
R&D Expense decreased $2.7$6.4 million or 7.8%, in 2017 as compared to 2016. As a percentage2022. The increase was the result of rising interest rates on our variable interest rate debt, partially offset by lower debt levels.
Our debt portfolio as of December 31, 2023 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.
19
Foreign Currency Transaction Gain/Loss
Net Sales, 2017 R&D Expense decreased 110 basis pointsforeign currency transaction gain was $0.3 million in 2023, compared to the prior year.a $1.2 million loss in 2022. The decrease in R&D spendingfavorable impact was primarily due to headcount reduction relatedweakening of the Chinese Renminbi relative to the first quarter 2017 restructuring action.
R&D Expense increased $2.3 million, or 7.2%, in 2016 asU.S. dollar on foreign U.S. dollar denominated receivables during 2023, compared to 2015. As a percentage of Net Sales, 2016 R&D Expense increased 30 basis points compared to the prior year. New products are a key driver of sales growth. There were 10 new products and product variants launched in 2016 including three models of emerging market floor machines, two models of the M17 battery-powered sweeper-scrubber, three large next-generation cleaning machines: the M20 and M30 integrated sweeper-scrubbers, and the T20 heavy-duty industrial rider scrubber, and two models of the commercial dryer/air mover.
Selling and Administrative Expense – Selling and Administrative Expense ("S&A Expense") increased by $97.2 million, or 39.1%, in 2017 compared to 2016. As a percentage of Net Sales, 2017 S&A Expense increased 370 basis points to 34.4% from 30.7% in 2016. S&A Expense was unfavorably impacted by $15.7 million, or 160 basis points, and $10.6 million, or 110 basis points, of amortization expense and acquisition costs, respectively, related to our acquisition of the IPC Group. In addition, S&A Expense was unfavorably impacted by $10.5 million, or 100 basis points, and $6.4 million, or 60 basis points, of restructuring charges taken in the 2017 first and fourth quarters and pension settlement charges, respectively. Excluding these costs, S&A Expense was 50 basis points lower in 2017 compared to 2016 due primarily to our continued balance of disciplined spending control with investments in key growth initiatives.
S&A Expense decreased by $4.1 million, or 1.6%, in 2016 compared to 2015. As a percentage of Net Sales, 2016 S&A Expense decreased 40 basis points to 30.7% from 31.1% in 2015 due to two restructuring charges totaling $3.7 million we recorded in 2015 to reduce our infrastructure costs that did not repeat in 2016. In addition, there was a net favorable impact to S&A Expense in 2016 as a result of disciplined spending control more than offsetting investments in key growth initiatives.
Profit from Operations
Operating Profit was $27.0 million, or 2.7% of Net Sales, in 2017, as compared to Operating Profit of$68.5 million, or 8.5% of Net Sales, in 2016. 2017 Operating Profit was $41.5 million lower than 2016 Operating Profit due primarily to $15.7 million of amortization expense related to IPC intangible assets, $10.6 million of acquisition costs and a $7.2 million fair value inventory step-up flow through, all related to our acquisition of the IPC Group. We also recorded $10.5 million of restructuring charges in 2017 to better align our global resources and expense structure. In addition, we recorded pension settlement charges of $6.4 million due to our termination of the U.S. Pension Plan in May 2017. These unfavorable impacts were partially offset by operating profit obtained from the IPC acquisition, reduced expenses resulting from our first quarter 2017 restructuring charge and tight management of controllable costs.
Operating Profit was $68.5 million in 2016, as compared to Operating Profit of $53.2 million in the prior year which included $11.2 million for the pre-tax non-cash Impairment of Long-Lived Assets as a result of the classification of our Green Machines assets as held for sale and also the $3.7 million pre-tax restructuring charges recorded in 2015. Operating Profit margin increased 190 basis points to 8.5% in 2016 from 6.6% in 2015. 2016 Operating Profit was also favorably impacted by higher Gross Profit despite the lower Net Sales in 2016 as compared to 2015. Due to the overall strengthening of the U.S. dollar relative to other currenciesthe Brazilian real on foreign denominated liabilities in 2016, foreign currency exchange reduced Operating Profit by approximately $1.2 million.2022.
Total Other Expense, Net
Interest Income – Interest Income was $2.4 million in 2017, an increase of $2.1 million from 2016. The increase between 2017 and 2016 was primarily due to interest income related to foreign currency swap activities.
Interest Income was $0.3 in 2016, an increase of $0.1 million from 2015. The increase between 2016 and 2015 was due to higher levels of cash deposits.
Interest Expense – Interest Expense was $25.4 million in 2017, as compared to $1.3 million in 2016. The higher Interest Expense in 2017 was primarily due to carrying a higher level of debt on our Consolidated Balance Sheets related to our acquisition activities as well as a $6.2 million charge to expense the debt issuance costs for loans which were refinanced or repaid, as further described in the Liquidity and Capital Resources section that follows.
There was no significant change in Interest Expense in 2016 as compared to 2015.

Net Foreign Currency Transaction Losses –Net Foreign Currency Transaction Losses were $3.4 million in 2017 as compared to $0.4 million in 2016. The unfavorable change in the impact from foreign currency transactions in 2017 was primarily due to fluctuations in foreign currency rates, specifically between the Euro and U.S. dollar, settlements of transactional hedging activity in the normal course of business and a $1.1 million mark-to-market adjustment of a foreign exchange call option, an instrument held in connection with our acquisition of the IPC Group on April 6, 2017.
Net Foreign Currency Transaction Losses were $0.4 million in 2016 as compared to $1.0 million in 2015. The favorable change in the impact from foreign currency transactions in 2016 was due to fluctuations in foreign currency rates and settlements of transactional hedging activity in the normal course of business.
Other Expense, Net – Other Expense, Net was $2.0 million in 2017 as compared to $0.7 million in 2016. The unfavorable change in Other Expense, Net was due primarily to the additional expense recorded as a result of the acquisition of the IPC Group.
There was no significant change in Other Expense, Net in 2016 as compared to 2015.
(Loss) Profit Before Income Taxes
Loss Before Income Taxes for 2017 was $1.3 million compared to Profit Before Income Taxes of $66.5 million for 2016 and $50.4 million in 2015.
The breakdown of (Loss) Profit Before Income Taxes between U.S. and foreign operations for each year ended December 31 was as follows:
 2017%2016%2015%
U.S. operations$7,465
(577.8)$54,018
81.2$51,189
101.5
Foreign operations(8,757)677.812,473
18.8(765)(1.5)
Total$(1,292)100.0$66,491
100.0$50,424
100.0
Profit Before Income Taxes from U.S. operations decreased by $46.6 million in2017 compared to 2016. The decrease resulted primarily from $10.6 million of acquisition costs related to our acquisition of the IPC Group, $6.4 million of pension settlement charges recorded in 2017 as a result of the termination of the U.S. Pension Plan in May 2017 and $4.9 million of restructuring charges recorded in 2017 to better align our global resources and expense structure. In addition, Interest Expense recorded in Profit Before Income Taxes from U.S. operations during 2017 was $23.4 higher compared to 2016 primarily due to carrying a higher level of debt on our Consolidated Balance Sheets related to our acquisition activities as well as a $6.2 million charge to expense the debt issuance costs for loans which were refinanced or repaid as part of our acquisition of the IPC Group.
(Loss) Profit Before Income Taxes from foreign operations decreased by $21.2 million in 2017compared to2016. The decrease resulted primarily from $15.7 million of amortization expense related to IPC intangible assets in 2017, a $7.2 million fair value inventory step-up flow through as a result of our acquisition of the IPC Group and $5.6 million of restructuring charges recorded in 2017 to better align our global resources and expense structure. These unfavorable impacts were partially offset by Profit Before Income Taxes obtained from the IPC acquisition.
Profit Before Income Taxes from foreign operations increased by $13.2 million in2016 compared to 2015. The increase resulted primarily from the $11.2 million non-cash Impairment of Long-Lived Assets included in 2015 as a result of our decision to hold the assets and liabilities of our Green Machines outdoor city cleaning line for sale that did not repeat in 2016. This impairment affected the results of operations in our EMEA region. In addition, 2015 Profit Before Income Taxes in our EMEA and APAC subsidiaries included an additional expense of $1.9 million and $0.7 million, respectively, as a result of two worldwide restructuring actions that did not repeat in 2016. Profit Before Income Taxes in our Latin America subsidiaries increased approximately $0.6 million in 2016 primarily due to sales increases. Profit Before Income Taxes in our APAC subsidiaries decreased by $1.3 million primarily due to lower sales resulting from economic slowdowns in the region and fewer large deals.
Income Taxes
OnThe effective tax rate for 2023 was 11.6% compared to 16.6% in 2022. The decrease in the effective tax rate was primarily driven by certain nonrecurring tax items. Both the 2023 and 2022 tax rates include benefits related to a reduction to a deferred tax liability on undistributed foreign earnings as those cumulative earnings were reduced by current year statutory book losses. These nonrecurring events had one-time impacts of (12.0%) in 2023 and (7.2%) in 2022.
In December 22, 2017,2021, the Organization for Economic Cooperation and Development (OECD), which is an international public policy setting organization comprised of member countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15% (the "Pillar Two rule"). The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning on or after January 1, 2024. To date, member states are in various stages of implementing the rules through local legislation, popularly referredand the OECD continues to asrefine the Tax Cutstechnical guidance. We are closely monitoring developments of the Pillar Two rule and Jobs Act (Tax Act) was enacted, resultingare currently evaluating the potential effect in significant changes from previous tax law, including, but not limitedeach of the countries we operate in.
In general, it is our practice and intention to requiring a one-time transition tax on certain unrepatriatedpermanently reinvest the earnings of our foreign subsidiaries and a reduction in the U.S. federal corporate income tax rate from 35% to 21%. The Tax Act also establishes new laws that will impact 2018.
ASC 740 requires a company to record the effects of a tax law change in the period of enactment, however shortly after the enactment of the Tax Act, the SEC staff issued SAB 118, which allows a company to record a provisional amount when it does not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the change in the law. The measurement period endsrepatriate earnings only when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.
Therefore,tax impact is zero or immaterial. No deferred taxes have been provided for withholding taxes or other taxes that would result in connection with its initial analysisrepatriation of the impact of the Tax Act, the Company’s overall tax expense for 2017 includes a provisional tax charge of $2.4 million, or $0.14per share, to reflect the estimated impacts of the Tax Act, including the transition tax on cash and cash equivalent balances related to accumulated earnings associated with our international operations, the write-down of net U.S. deferred tax assets at lower enacted corporate tax rates, and the effects of the implementation of the territorial tax system.
The overall effective income tax rate was (380.2)%, 29.9% and 36.4% in 2017, 2016 and 2015, respectively.
The tax expense for 2017 included a $3.7 million tax benefit associated with $18.8 million of acquisition and financing costs relatedforeign investments to the IPC Group acquisition, a $3.0 million tax benefit associated with a $10.5 million restructuring charge, a $2.4 million tax benefit associated with a $6.2 million pension settlement, a $2.0 million tax benefit associated with $7.2 million of expense related to inventory step-up amortization, a $2.0 million provisional tax expense related to the write-down of net U.S. deferred tax assets at the lower enacted tax rates and a $0.4 million provisional tax expense related to the transition tax on cash and cash equivalent balances related to accumulated earnings associated with our international operations as a result of Tax Legislation. These special items impacted the 2017 year-to-date overall effective tax rate by 412.9%.
Our effective tax rate fluctuates from year to year due to the global nature of our operations. Excluding the 2017 special items and the effect of the Tax Act, the tax rate increased from 29.9% in 2016 due primarily to the mix in full year taxable earnings by country. As a result of the Tax Act, we expect the income tax rate to be favorably impacted.
There were no special items that affected the tax rate in 2016.


The tax expense for 2015 included a $0.4 million tax benefit associated with an $11.2 million Impairment of Long-Lived Assets and a $0.6 million tax benefit associated with restructuring charges of $3.7 million. We are not able to recognize a tax benefit on the impairment charge until the assets are sold due to a tax valuation allowance. Excluding these items, the 2015 overall effective tax rate would have been 29.6%.
Net (Loss) Earnings and (Loss) Earnings Per Share
Net (Loss) Earnings for 2017 were $(6.2) million, or $(0.35) per diluted share, compared to $46.6 million, or $2.59 per diluted share, for 2016. Net (Loss) Earnings were impacted by:
Gross profit margin decline of 320 basis points compared to 2016.
A 370 basis point increase in S&A Expense as a percentage of Net Sales compared to 2016.
An unfavorable impact of $24.1 million from Interest Expense of $25.4 million in 2017 as compared to $1.3 million in 2016.
An unfavorable impact of $3.0 million from Net Foreign Currency Transaction Losses of $3.4 million in 2017 as compared to $0.4 million in 2016.
An increase in Net Sales of 24.1% in 2017 as compared to 2016.
Net Earnings for 2016 were $46.6 million, or $2.59 per diluted share, compared to $32.1 million, or $1.74 per diluted share, for 2015. Net Earnings were impacted by:
Gross profit margin strengthening of 50 basis points compared to 2015.
A 40 basis point decrease in S&A Expense as a percentage of Net Sales compared to 2015.
A pre-tax non-cash impact of $11.2 million in 2015 due to the Impairment of Long-Lived Assets as a result of the classification of our Green Machines assets as held for sale that did not repeat in 2016.
A favorable impact of $0.6 million from Net Foreign Currency Transaction Losses of $0.4 million in 2016 as compared to $1.0 million in 2015.
A decrease in Net Sales of 0.4% in 2016 as compared to 2015.
Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustments– For the years ended December 31, 2017 and 2016, we recorded a pre-tax foreign currency translation gain of $28.4 million and $0.1 million, respectively. For the year ended December 31, 2015, we recorded pre-tax foreign currency translation losses of $12.5 million in Other Comprehensive Income (Loss). These adjustments resulted from translating the financial statements of our non-U.S. dollar functional currency subsidiaries into our reporting currency, which is the U.S. dollar, as well as other adjustments permitted by ASC 830 –Foreign Currency Matters.
During 2017, we recorded pre-tax currency translation gains of $28.4 million. These adjustments were caused primarily by the appreciation of the Euro against the U.S. dollar. In 2017, the Euro appreciated against the U.S. dollar by approximately 14%.
During 2016, we recorded translation gains of $3.4 million relating to the Brazilian real, and translation losses of $1.3 million for the Euro, $1.0 million for the Chines renminbi, $0.9 million for the British pound and $0.1 million for various other currencies. These adjustments were caused by the appreciation of the U.S. dollar against these currencies of between 3% and 17%, and the strengthening of the Brazilian real of 22% in 2016.
During 2015, we recorded translation losses of $6.5 million relating to the Brazilian real, $5.3 million for the Euro, $0.6 million for the Chinese renminbi and $0.1 million for various other currencies. These adjustments were caused by the appreciation of the U.S. dollar against these currencies of between 5% and 32% in 2015.
Pension and Retiree Medical Benefits – For the years ended December 31, 2017 and 2016, we recorded pre-tax pension and postretirement liability adjustments consisting of gains of $5.9 million and losses of $2.2 million, respectively, in Other Comprehensive Income (Loss) as further disclosed in Note 13 to the Company's Consolidated Financial Statements. For the year endedDecember 31, 2015, we recorded a gain of $4.1 million in Other Comprehensive Income (Loss) for these items.
The summarized changes in Accumulated Other Comprehensive Loss for the three years ended December 31 were as follows:
 Pension and Postretirement Medical Benefits
 201720162015
Net actuarial loss (gain)$622
$2,357
$(2,940)
Amortization of prior service cost—
(41)(67)
Amortization of net actuarial loss(117)(68)(1,114)
Settlement Charge(6,373)—
—
Total recognized in other comprehensive (income) loss$(5,868)$2,248
$(4,121)
The $5.9 million gain in2017 was primarily due to a $6.4 million settlement charge related to the termination of the U.S. Pension Plan and a $0.1 million credit related to amortization of accumulated actuarial losses. These gains were partially offset by $0.6 million of net actuarial losses relating to an increase of $1.2 million in the pension benefit obligation in 2017 due to changes in demographic experience and other changes, a $0.6 million increase in the pension benefit obligation resulting from a 64 basis point decrease in the U.S. pension discount rate, a 19 basis point decrease in the non-U.S. discount rate and a 32 basis point decrease in the postretirement discount rates and $1.0 million decrease in the pension benefit obligation due to a higher than expected actual return on assets.
The $2.2 million loss in 2016 was primarily due to a $2.4 net actuarial loss relating to an increase of $3.2 million in the projected benefit obligation resulting from a 16 basis point decrease in the U.S. pension discount rate, a 95 basis point decrease in the non-U.S. discount rate and a 12 basis point decrease in the postretirement discount rate. There was an approximate $0.6 million decrease in the pension benefit obligation in 2016 relating to demographic experience and other changes, as well as a $0.2 million decrease due to a higher than expected actual return on assets. The net actuarial loss was partially offset by a $0.1 million credit relating to amortization of accumulated actuarial losses and prior service costs.
The $4.1 million gain in 2015 was primarily due to a $2.9 million net actuarial gain relating to a decrease of $2.4 million in the projected benefit obligation resulting from a 32 basis point increase in the U.S. Pension discount rate, a 21 basis point increase in the non-U.S. discount rate and a 31 basis point increase in the postretirement discount rate. There was an approximate $3.3 million decrease in the pension benefit obligation in 2015 relating to demographic experience and other changes, as well as a $3.0 million increase due to a lower than expected actual return of assets. The net actuarial gain was supplemented by a $1.2 million credit relating to amortization of accumulated losses and prior service costs.

Cash Flow Hedging – For the years ended December 31, 2017 and 2016, we recorded adjustments to pre-tax losses on cash flow hedge financial instruments of $7.7 million and $0.3 million, respectively, in Other Comprehensive Income (Loss) as further disclosed in Note 11 to the Company's Consolidated Financial Statements. For the year endedDecember 31, 2015, we recorded a gain of $0.2 million in Other Comprehensive Income (Loss) for these items.
The $7.7 million loss in2017 was primarily due to $26.2 million of losses recognized primarily as a result of our Euro to U.S. dollar foreign exchange cross currency swaps to mitigate our Euro exposure on our cash flows associated with an intercompany loan from a wholly-owned European subsidiary. The loss was partially offset by $18.5 of losses reclassified from Accumulated Other Comprehensive Loss to the Consolidated Statements of Earnings.
The $0.3 million pre-tax loss in 2016 and the pre-tax gain of$0.2 million in 2015 was driven by our cash flow exposure to the Canadian dollar resulting from changes in this currency relative to the U.S. dollar.
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 Cash Equivalentsrestricted cash totaled $58.4$117.1 million at December 31, 2017,2023, as compared to $58.0$77.4 million as of December 31, 2016. Cash and Cash Equivalents held by our foreign subsidiaries totaled $39.1 million as of December 31, 2017, as compared to $19.0 million as of December 31, 2016.2022. Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to subsidiaries as needed. Our current ratio was 1.82.1 as of December 31, 20172023 and 2.2 as of December 31, 2016, and our2022. Our primary working capital, was $186.6 million and $165.1 million, respectively.
Our Debt-to-Capital ratio was 56.0% as of December 31, 2017, compared with 11.5% as of December 31, 2016. Our capital structure waswhich is comprised of $376.8 million of Debtaccounts receivable, inventories and $296.5 million of Tennant Company Shareholders’ Equity as of December 31, 2017.
During 2017, we generated operating cash flows of $54.2 million and paid a total of $15.0 million in cash dividends. Total debt increased to $376.8accounts payable was $312.1 million as of December 31, 2017,2023 and $332.0 million as of December 31, 2022. Our debt-to-capital ratio was 25.8% as of December 31, 2023, compared to $36.2 million40.9% as of December 31, 2022.
On February 13, 2024, the Company's Board of Directors authorized a quarterly cash dividend of $0.28 per share payable on March 15, 2024, to shareholders of record at the endclose of 2016, due primarily to the acquisition of the IPC Group in April 2017.business on February 29, 2024.
Cash Flow Summary – Cash provided by (used in) our operating, investing and financing activities is summarized as follows (in thousands):
 2017 2016 2015
Operating Activities$54,174
 $57,878
 $45,232
Investing Activities:     
Purchases of Property, Plant and Equipment, Net of Disposals(17,926) (25,911) (24,444)
Proceeds from Principal Payments Received on Long-Term Note Receivable667
 —
 —
Issuance of Long-Term Note Receivable(1,500) (2,000) —
Acquisitions of Businesses, Net of Cash Acquired(354,073) (12,933) —
Purchase of Intangible Asset(2,500) —
 —
Proceeds from Sale of Business—
 285
 1,185
(Increase) Decrease in Restricted Cash(92) 116
 (322)
Financing Activities319,473
 (9,558) (61,405)
Effect of Exchange Rate Changes on Cash and Cash Equivalents2,142
 (1,144) (1,908)
Net Increase (Decrease) in Cash and Cash Equivalents$365
 $6,733
 $(41,662)
from Operating Activities – Cash provided by operating activities was $54.2 million in 2017, $57.9 million in 2016 and $45.2 million in 2015. In 2017,
Net cash provided by operating activities in 2023 was driven primarily by$188.4 million compared to net earnings, after adding back non-cash items, an increase in Other Current Liabilities of $14.6 million due to additional accruals recorded as a result of the IPC Group consolidation and the fourth quarter 2017 restructuring action and an increase in Accounts Payable of $10.8 million due to timing of payments. These cash inflows were partially offset by cash outflows resulting from an increase in Accounts Receivable of $14.4 million resulting from higher sales levels, the variety of payment terms offered and mix of business.
In 2016, cash provided by operating activities was driven primarily by net earnings, after adding back non-cash items, partially offset by anof $25.1 million in 2022. The increase in Accounts Receivable of $9.3 million resulting from higher sales levels, particularly in December 2016, the variety of payment terms offered and mix of business.
In 2015, cash provided bywas the result of strong operating activities was driven primary by net earnings, after adding back non-cash items, somewhat offset by a decrease in Accounts Payable of $10.5 million due to making earlier payments to utilize cash discounts and an increase in Inventories of $10.2 million to support the launches of many new products.
For 2017, we used operating profit and operating profit margin as key indicators of financial performance and the primary metrics for performance-based incentives.managed reductions in working capital investments.
Two metrics used by management to evaluate how effectively we utilize our net assets are “Accounts Receivable Days Sales Outstanding” (“DSO”) and “Days Inventory on Hand” (“DIOH”), on a first-in, first-out (“FIFO”) basis. The metrics are calculated on a rolling three month basis in order to more readily reflect changing trends in the business. These metrics for the quarters ended December 31 were as follows (in days):
 2017 2016
DSO63 59
DIOH96 89

DSO increased 4 days in 2017 as compared to 2016 primarily due to the acquisition of IPC, who generally offers longer payment terms than the average DSO of our business in 2016 prior to the acquisition, and mix of business. These drivers were partially offset by the trend of continued proactive management of our receivables by enforcing tighter credit limits and continuing to successfully collect past due balances.
DIOH increased 7 days in 2017 as compared to 2016 primarily due to a lower level of sales than anticipated that resulted in higher levels of inventory and maintaining a higher level of select inventory items to lower lead times, partially offset by progressCash Flow from inventory reduction initiatives.
Investing Activities –
Net cash used in investing activities in 2023 was $375.4$23.2 million compared to net cash used in investing activities of $24.5 million in 2017, $40.4 million2022. The decrease in 2016cash outflows was primarily driven by reduced property, plant and $23.6 million in 2015. In 2017, we used $354.1 million, netequipment investments as the Company continues to deploy cash flow toward operational capital needs.
20
In 2016, we used $25.9 million for net capital expenditures. Net capital expenditures included investments in information technology process improvement projects, tooling related to new product development, and manufacturing equipment. In addition, our acquisition of the Florock brand and the assets of Dofesa Barrdio Mecanizado, a long-time distributor based in Central Mexico, used $12.9 million, net of cash acquired. We also used $2.0 million as a result of a non-interest bearing cash advance to TCS EMEA GmbH, the master distributor of our products in Central Eastern Europe, Middle East and Africa.
In 2015, we used $24.4 million for net capital expenditures. Net capital expenditures included investments in information technology process improvement projects, tooling related to new product development, and manufacturing equipment. This cash outflow was partially offset by a cash inflow resultingCash Flow from proceeds from sale of our Green Machines outdoor city cleaning line, which provided $1.2 million.
Financing Activities – Net cash provided by financing activities was $319.5 million in 2017.
Net cash used in financing activities in 2023 was $9.6$122.6 million compared to net cash provided by financing activities of $8.1 million in 20162022. The increase in cash used was primarily driven by repayments of borrowings and $61.4 million in 2015. In 2017, proceedsshare repurchases.
Cash Requirements
The Company believes the liquidity available from the incurrencecombination of Long-Term Debt associated with the IPC acquisitionexpected cash generated by operating activities, existing cash and the issuance of Common Stock provided $440.0 millionavailable credit under existing credit facilities will be sufficient to meet its short-term and $6.9 million, respectively. Theselong-term cash inflows were partially offset by cash outflows resulting from $96.2 million of Long-Term Debt payments, $16.5 million related to payments of debt issuance costs and dividend payments of $15.0 million. Our annual cash dividend payout increased for the 46th consecutive year to $0.84 per share in 2017, an increase of $0.03 per share over 2016.
In 2016, dividend payments used $14.3 million, the purchases of our common stock per our authorized repurchase program used $12.8 million and the payment of Long-Term Debt used $3.5 million. These cash ouflows were partially offset by proceeds resulting from the incurrence of Long-Term Debt of $15.0 million, the issuance of Common Stock of $5.3 million and the excess tax benefit on stock plans of $0.7 million.
In 2015, the purchase of our common stock per our authorized repurchase program used $46.0 million, dividend payments used $14.5 million and the payment of Long-Term Debt used $3.4 million, partially offset by proceeds from the issuance of Common Stock of $1.7 million and the excess benefit on stock plans of $0.9 million.
On October 31, 2016, the Board of Directors authorized the repurchase of an additional 1,000,000 shares of our common stock. At December 31, 2017, there were 1,393,965 remaining shares authorized for repurchase.
There were no shares repurchased in 2017 in the open market, 246,474 shares repurchased in 2016 and 764,046 shares repurchased during 2015, at average repurchase prices of $51.78 during 2016 and $60.20 during 2015. Our 2017 Credit Agreement restricts the payment of dividends or repurchasing of stock if, after giving effect to such payments and assuming no default exists or would result from such payment, our leverage ratio is greater than 2.50 to 1, in such case limiting such payments to an amount ranging from $50.0 million to $75.0 million during any fiscal year based on our leverage ratio after giving effect to such payment. Our Senior Notes due 2025 also contain certain restrictions, which are generally less restrictive than those contained in the 2017 Credit Agreement.
Indebtedness – In order to finance the acquisition of the IPC Group, on April 4, 2017, the Company and certain of our foreign subsidiaries entered into a Credit Agreement (the “2017 Credit Agreement”) with JPMorgan, as administrative agent, Goldman Sachs Bank USA, as syndication agent, Wells Fargo, National Association, U.S. Bank National Association, and HSBC Bank USA, National Association, as co-documentation agents, and the lenders (including JPMorgan) from time to time party thereto.
On April 18, 2017, we issued and sold $300,000 in aggregate principal amount of our 5.625% Senior Notes due 2025 (the “Notes”), pursuant to an Indenture, dated as of April 18, 2017, among the company, the Guarantors (as defined therein), and Wells Fargo Bank, National Association, a national banking association, as trustee. The Notes are guaranteed by Tennant Coatings, Inc. and Tennant Sales and Service Company (collectively, the “Guarantors”), which are wholly owned subsidiaries of the company.
For further details regarding our indebtedness, see Note 9 to the Consolidated Financial Statements.

Contractual Obligations – Ourrequirements. Significant contractual obligations as of December 31, 2017, are summarized by period due in the following table (in thousands):
 Total Less Than 1 Year 1 - 3 Years 3 - 5 Years More Than 5 Years
Long-term debt(1)
$380,000
 $5,000
 $16,250
 $58,750
 $300,000
Interest payments on long-term
debt(1)
132,744
 19,587
 38,549
 36,217
 38,391
Capital leases3,279
 1,609
 1,540
 130
 —
Interest payments on capital leases300
 187
 111
 2
 —
Retirement benefit plans(2)
1,239
 1,239
 —
 —
 —
Deferred compensation arrangements(3)
6,257
 1,356
 1,894
 721
 2,286
Operating
leases(4)
36,931
 14,083
 15,261
 4,991
 2,596
Purchase obligations(5)
57,848
 57,848
 —
 —
 —
Other(6)
11,410
 11,410
 —
 —
 —
Total contractual obligations$630,008
 $112,319
 $73,605
 $100,811
 $343,273
(1)Long-term debt represents borrowings through our Senior Notes due 2025include principal and the 2017 Credit Agreement with JPMorgan. Interest on the Senior Notes will accrue at the rate of 5.625% per annum and will be payable semiannually in cash on each May 1 and November 1, commencing on November 1, 2017. Repayment of the principal amount of the Senior Notes is due upon expiration of the agreement in 2025. Interestinterest payments on our 2017 Credit Agreement with JPMorgan were calculated using the December 31, 2017 30-day LIBOR rate plus a spread.
(2)Our retirement benefit plans, as described in Note 13 to the Consolidated Financial Statements, require us to make contributions to the plans from time to time. Our plan obligations totaled $12.0 million as of December 31, 2017. Contributions to the various plans are dependent upon a number of factors including the market performance of plan assets, if any,long-term debt (Note 9) and future changes in interest rates, which impact the actuarial measurement of plan obligations. As a result, we have only included our 2018 expected contribution in the contractual obligations table.
(3)The unfunded deferred compensation arrangements covering certain current and retired management employees totaled $6.3 million as of December 31, 2017. Our estimated distributions in the contractual obligations table are based upon a number of assumptions including termination dates and participant distribution elections.
(4)Operatingoperating lease commitments consist primarily of office and warehouse facilities, vehicles and office equipment as discussed in Note 15 to the Consolidated Financial Statements.
(5)Purchase obligations include all known open purchase orders,(Note 15). We also have contractual purchase commitments and contractual obligations as of December 31, 2017.approximately $76 million for 2024.
(6)Other obligations include residual value guarantees as discussed in Note 15 to the Consolidated Financial Statements.
Total contractual obligations exclude our gross unrecognized tax benefits of $2.2 million and accrued interest and penalties of $0.5 million as of December 31, 2017. We expect to make cash outlays in the future related to uncertain tax positions. However, due to the uncertainty of the timing of future cash flows, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. For further information related to unrecognized tax benefits, see Note 16 to the Consolidated Financial Statements.
Newly Issued Accounting Guidance
Revenues from Contracts with CustomersSee Note 2 to the consolidated financial statements for information on new accounting pronouncements.
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU will replace all existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The ASU permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method).
In August 2015,October 2023, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative, which aims to clarify or improve disclosure and presentation requirements on a variety of topics and align the Effective Date, which defersrequirements in the effective date of the new revenue recognitionFASB accounting standard by one year from the original effective date specified in ASU No. 2014-09. The guidance now permits us to apply the new revenue recognition standard to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is our fiscal 2018.
We have completed the process of evaluating the effect of the adoption of this ASU on our financial statements and related disclosures. We adopted the new standard effective January 1, 2018, using the modified retrospective approach. We will expand our consolidated financial statement disclosures in order to comply with the ASU. The new standard requires a change in the presentation of our sales return reserve on the balance sheet, which we currently record net. The new standard also requires us to record a refund liabilitySecurities and a corresponding asset for our right to recover products from customers upon settling the refund liability to accountExchange Commission regulations. This guidance is effective for the transfer of products with a right of return. However, these changes willCompany no later than June 30, 2027. We do not expect the amendments in this update to have a material impact on our consolidated financial condition, results of operations or cash flows, other than additional disclosure requirements.statements.
Leases
In February 2016,November 2023, the FASB issued ASU No. 2016-02, Leases2023-07 Segment Reporting (Topic 842). This ASU changes current U.S. GAAP for lessees280): Improvements to recognize lease assetsReportable Segment Disclosures, which requires an entity to disclose significant segment expenses impacting profit and lease liabilities onloss that are regularly provided to the balance sheet for those leases classified aschief operating leases under previous U.S. GAAP. Under the new guidance, lessor accounting is largely unchanged.decision maker. The amendments in this ASU are effectiverequired to be adopted for annual periodsfiscal years beginning after December 15, 2018, including2023, and interim periods within that reporting period, whichfiscal years beginning after December 15, 2024. Early adoption is our fiscal 2019. Early application is permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The transition approach would not require any transition accounting for leases that expired before the earliest comparative period presented. A full retrospective transition approach is prohibited for both lessees and lessors. We will adopt this ASU beginning in 2019. We are currently evaluating the impact of this amended guidanceadoption on our consolidated financial statements and related disclosures.

Business Combinations
In January 2017,December 2023, the FASB issued ASU No. 2017-01, Business Combinations2023-09 Income Taxes (Topic 805)740): Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period,Improvements to Income Tax Disclosures, which is our fiscal 2018. We will applyintended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendments in this guidance to applicable transactions commencing in 2018.
Goodwill
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019, which is our fiscal 2020. Early adoption of the standard is permitted for any interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We early adopted this guidance to applicable goodwill impairment tests commencing with our annual goodwill impairment analysis in 2017 and it did not have a material impact on our Consolidated Financial Statements.
Compensation – Retirement Benefits
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost (credit) are required to be presented in the income statement separately from the service cost component in nonoperating expenses. In addition, the line items used in the income statement to present the other components of net benefit cost (credit) must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is our fiscal 2018. Companies are required to adopt the ASU retrospectively for the presentation of the service cost component and the other components of net periodic pension and postretirement benefit cost (credit) in the income statement. We adopted the new standard effective January 1, 2018.
We will comply with the requirements of this ASU by reporting the service cost component of net periodic pension and postretirement benefit cost (credit) in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. We will also present the other components of net periodic benefit cost (credit) separate from the service cost component in nonoperating expenses. Based on our analysis of this ASU, we have determined that the impact to our financial statements and related disclosures is immaterial as it relates to the presentation of the service cost component of net periodic pension and postretirement benefit costs. The other components of net periodic benefit cost (credit) will be recorded in Total Other Expense, Net on the Consolidated Statements of Operations. In 2017, we recorded $0.4 million of net periodic benefit credits as it relates to the other components of net periodic pension and postretirement benefit cost (credit) in Selling and Administrative Expense. We will begin presenting these costs in Total Other Expense, Net on a retrospective basis beginning with our fiscal 2018 quarterly and annual filings, along with the related disclosures.
Derivatives and Hedging
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which better aligns accounting rules with a company's risk management activities, better reflects the economic results of hedging in financial statements and simplifies hedge accounting treatment. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which2024. Early adoption is our fiscal 2019.permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. We are currently evaluating the impact that this standard is expected to haveof adoption on our consolidated financial statements and related disclosures.
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 Statementsconsolidated 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 Statementsconsolidated financial statements and the accompanying notes. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements.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.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.consolidated financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results.
Allowance for Doubtful Accounts – We record a reserve for accounts receivable that are potentially uncollectible. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances. In order to assess the collectability of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information becomes available. Our reserves are also based on amounts determined by using percentages applied to trade receivables. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. We are not able to predict changes in the financial condition of our customers and if circumstances related to these customers deteriorate, our estimates of the recoverability of accounts receivable could be materially affected and we may be required to record additional allowances. Alternatively, if more allowances are provided than are ultimately required, we may reverse a portion of such provisions in future periods based on the actual collection experience. Bad debt write-offs as a percentage of Net Sales were approximately 0.1% in 2017, 0.1% in 2016 and 0.2% in 2015. As of December 31, 2017, we had $3.2 million reserved against Accounts Receivable for doubtful accounts and sales returns.

Inventory Reserves – We value our inventory at the lower of the cost of inventory or net realizable value through the establishment of a reserve for excess, slow moving and obsolete inventory. In assessing the ultimate realization of inventories, we are required to make judgments as to future demand requirements compared with inventory levels. Reserve requirements are developed by comparing our inventory levels to our projected demand requirements based on historical demand, market conditions and technological and product life cycle changes. It is possible that an increase in our reserve may be required in the future if there are significant declines in demand for certain products. This reserve creates a new cost basis for these products and is considered permanent. As of December 31, 2017, we had $4.1 million reserved against Inventories.
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 Goodwillgoodwill on an annual basis and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its
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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 shouldmust recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit'sunit’s fair value. Subsequent reversal of goodwill impairment charges is not permitted.
We performed an analysis ofWhen 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. The qualitative test is used as an indicator to identify if there is potential goodwill impairment. If the qualitative test indicates there may be an impairment, we perform the quantitative test, is performed 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 year end orOctober 1 and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount, and use our judgmentamount.
In 2023, we elected to develop assumptions forperform the discounted cash flow modelqualitative test on all reporting units. Our test indicated that we use, if necessary. Management assumptions include forecasting revenues and margins, estimating capital expenditures, depreciation, amortization and discount rates.
If ourthere is no goodwill impairment testing resulted in one or moreany of our reporting units’ carrying amount exceeding its fair value, we would write downunits as of our reporting units’ carrying amount to its fair valueannual assessment date.
We had goodwill of $187.4 million and would record an impairment charge in our results of operations in the period such determination is made. Subsequent reversal of goodwill impairment charges is not permitted. We performed an analysis of 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 and, based upon our analysis, no qualitative indicators of impairment exist$182.0 million at December 31, 2017. We had Goodwill of $186.0 million as of December 31, 2017.2023 and 2022, respectively.
Warranty Reserves – We record a liability for warranty claims at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to net sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. Future claims experience could be materially different from prior results because of the introduction of new, more complex products, a change in our warranty policy in response to industry trends, competition or other external forces, or manufacturing changes that could impact product quality. In the event we determine that our current or future product repair and replacement costs exceed our estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. Warranty expense as a percentage of Net Sales was 1.2% in 2017, 1.5% in 2016 and 1.4% in 2015. As of December 31, 2017, we had $12.7 million reserved for future estimated warranty costs.
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 Statementsconsolidated statements of Operations.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.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 Statementsconsolidated statements of Operations.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 reserveallowance 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, 2017,2023, a valuation allowance of $9.7$3.2 million was recorded against foreign tax loss carryforwards, foreignand state tax credit carryforwards and state credit carryforwards.
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Cautionary Factors Relevant to Forward-Looking Information
This annual reportAnnual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, containcontains 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.
•Ability to effectively manage organizational changes.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.
Competition in our business.•Ability to effectively manage strategic plan or growth processes.
Fluctuations in the cost, quality or availability of raw materials and purchased components.
•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.
Ability to integrate acquisitions, including IPC.
Ability to generate sufficient cash to satisfy our debt obligations.
Geopolitical and economic uncertainty throughout the world.

Ability to successfully protect our information technology systems from cyber security risks.
Occurrence of a significant business interruption.
Ability to comply with laws and regulations.
Potential disruption of our business from actions of activist investors or others.
Relative strength of the U.S. dollar, which affects the cost of our materials and products purchased and sold internationally.
Unforeseen product liability claims or product quality issues.
Internal control over financial reporting risks resulting from our acquisition of IPC.
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."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 Securities and Exchange CommissionSEC and in other written statements on related subjects. It is not possible to anticipate or foresee all risk factors, and investors should not consider any list of such factors to be an exhaustive or complete list of all risks or uncertainties.
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ITEM 7A – Quantitative and Qualitative Disclosures About Market Risk
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.
Fluctuations in worldwide demand and other factors affect the price for lead, steel and related products. We do not maintain an inventory of raw or fabricated steel or batteries in excess of near-term production requirements. As a result, increases in the price of lead or steel can significantly increase the cost of our lead- and steel-based raw materials and component parts.
During 2017, we experienced inflation on our raw materials and other purchased component costs. 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 reductioncost-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 continue to be unfavorably impacted in 2018.
the future.
Interest Rate Risk – Our debt portfolio as of December 31, 2023, 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, 2023, the Company's financial liabilities subject to changes in interest rates are $110.0 million of our revolving credit facility borrowings and $90.0 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 $0.75 million in 2023.
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 Lossesforeign currency transaction losses on our Consolidated Statementsconsolidated statements of Operations.income.
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We also use foreign currency exchange rate derivatives to hedge our exposure to fluctuations in exchange rates for anticipated intercompany cash transactions between Tennantthe Company and its subsidiaries. During the second quarter of 2017,
On April 5, 2022, we entered into Euro to U.S. dollar foreign exchange cross currencycross-currency swaps for all of the anticipated cash flows associated with an intercompany loan from a wholly-ownedwholly owned European subsidiary. We enteredenter into these foreign exchange cross currencycross-currency swaps to hedge the foreign currency denominated cash flowsrisk associated with this intercompany loan, and accordingly, they are not speculative in nature. WeThese cross-currency swaps are designated as fair value hedges. As of December 31, 2023, these cross currencycross-currency swaps as cash flow hedges.included €75.0 million of total notional value. As of December 31, 2023, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to €7.5 million. The scheduled maturity and principal payment of the loan and related swapsinterest payments of €82.5 million are due in April 2022.2027. Based on the fair value hedges outstanding as of December 31, 2023, a 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $8.3 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, 2023, 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, 2023, a 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $8.3 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.

The average contracted rate and notional amounts of the foreign currency derivative instruments outstanding at December 31, 2017, presented in U.S. dollar equivalents are as follows (dollars in thousands, except average contracted rate):
 Notional AmountAverage Contracted RateMaximum Term (Months)
Derivatives designated as hedging instrument:   
Foreign currency option contracts:   
Canadian dollar$8,619
1.30112
Foreign currency forward contracts:   
Euro207,076
1.16851
Canadian dollar2,928
1.2643
Derivatives not designated as hedging instruments:   
Foreign currency forward contracts:   
Australian dollar$3,061
1.2876
Brazilian real4,862
3.3291
Canadian dollar6,612
1.2638
Euro38,068
0.83111
Mexican peso8,255
20.3128
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"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 financial performance and maximizing our return on investment.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.
25

ITEM 8 – Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and boardthe Board of directorsDirectors of Tennant Company
Tennant Company:
OpinionsOpinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheetssheet of Tennant Company and subsidiaries (the Company)"Company") as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations,income, comprehensive income, equity,cash flows, and cash flowsequity, for each of the three years in the three-year period ended December 31, 2017,2023, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as included in Item 15.A.2 (collectively, the consolidated financial statements)"financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the three-year period ended December 31, 2017,2023, in conformity with U.S.accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting principles. Alsofirm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill – EMEA Reporting Unit - Refer to Notes 1 and 8 of the consolidated financial statements

Critical Audit Matter Description

The Company performed a qualitative goodwill test on all reporting units. The tests indicated that there was no goodwill impairment as of the annual assessment date. The Company analyzed qualitative factors to determine whether it was more likely than not that the fair value of the reporting units was less than their carrying amounts as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.
26
Given the amount of goodwill within the EMEA reporting unit, the judgment used in the EMEA reporting unit’s qualitative assessment, and the difference between the most recent fair value estimate and the carrying amount of the EMEA reporting unit, auditing management’s conclusions related to the EMEA qualitative goodwill impairment assessment involved subjective judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s qualitative assessment of goodwill impairment for the EMEA reporting unit included the following, among others:

•We tested the effectiveness of controls over goodwill, including those over management’s judgments related to macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, and capital markets pricing.

•We evaluated the reasonableness of management’s qualitative assessment of factors affecting forecasted revenue and profit margins by comparing the forecasts to (1) historical results, (2) internal communications between management and the Board of Directors, and (3) information included in Company press releases.

•With the assistance of our fair value specialists, we evaluated the reasonableness of management’s qualitative assessment by performing the following: (1) evaluated GDP growth, inflation and other macroeconomic variables, as well as industry growth rates, (2) estimated industry discount rates, (3) analyzed growth, margin, and valuation multiple trends of guideline public companies, (4) compared recent fair value estimate and carrying amount, and (5) analyzed the trend of market capitalization of the entity and public peer companies.

•Assessed for potential indicators of impairment such as macroeconomic and industry conditions, financial performance, and events affecting the reporting unit such as a change in the carrying amount of its net assets or asset impairments at components of the reporting unit.

•We evaluated the financial results of the EMEA reporting unit compared to forecasts from the October 1, 2023 annual measurement date to December 31, 2023.


/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
February 22, 2024
We have served as the Company's auditor since 2019.


27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Tennant Company

Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Tennant Company and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the Committee of Sponsoring Organizationsstandards of the Treadway Commission.
ThePublic Company acquired IPC Group during 2017, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, IPC Group’s internal control over financial reporting associated with total assets of $509 million and total revenues of $174 million included inAccounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company as of and for the year ended December 31, 2017. Our audit of internal control over financial reporting2023, of the Company also excludedand our report dated February 22, 2024, expressed an evaluation of the internal control overunqualified opinion on those financial reporting of IPC Group.statements.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.opinion.

Definition and Limitations of Internal Control Overover Financial Reporting

A 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.

/s/ KPMGDeloitte & Touche LLP
We have served as the Company's auditor since 1954.
Minneapolis, Minnesota
February 27, 201822, 2024

28




Consolidated Statements of OperationsIncome
TENNANT COMPANY AND SUBSIDIARIES
(In thousands,millions, except shares and per share data)
Years ended December 312017 2016 2015
Net Sales$1,003,066
 $808,572
 $811,799
Cost of Sales598,645
 456,977
 462,739
Gross Profit404,421
 351,595
 349,060
Operating Expense: 
  
  
Research and Development Expense32,013
 34,738
 32,415
Selling and Administrative Expense345,364
 248,210
 252,270
Impairment of Long-Lived Assets—
 —
 11,199
Loss on Sale of Business—
 149
 —
Total Operating Expense377,377
 283,097
 295,884
Profit from Operations27,044
 68,498
 53,176
Other Income (Expense): 
  
  
Interest Income2,405
 330
 172
Interest Expense(25,394) (1,279) (1,313)
Net Foreign Currency Transaction Losses(3,387) (392) (954)
Other Expense, Net(1,960) (666) (657)
Total Other Expense, Net(28,336) (2,007) (2,752)
(Loss) Profit Before Income Taxes(1,292) 66,491
 50,424
Income Tax Expense4,913
 19,877
 18,336
Net (Loss) Earnings Including Noncontrolling Interest(6,205) 46,614
 32,088
Net Loss Attributable to Noncontrolling Interest(10) —
 —
Net (Loss) Earnings Attributable to Tennant Company$(6,195) $46,614
 $32,088
      
Net (Loss) Earnings Attributable to Tennant Company per Share: 
  
  
Basic$(0.35) $2.66
 $1.78
Diluted$(0.35) $2.59
 $1.74
      
Weighted Average Shares Outstanding:   
  
Basic17,695,390
 17,523,267
 18,015,151
Diluted17,695,390
 17,976,183
 18,493,447
      
Cash Dividends Declared per Common Share$0.84
 $0.81
 $0.80
Years ended December 31202320222021
Net sales$1,243.6 $1,092.2 $1,090.8 
Cost of sales715.8 671.3 652.8 
Gross profit527.8 420.9 438.0 
Selling and administrative expense352.6 306.3 321.9 
Research and development expense36.6 31.1 32.2 
Gain on sale of assets— (3.7)(9.8)
Operating income138.6 87.2 93.7 
Interest expense, net(13.5)(7.1)(7.3)
Net foreign currency transaction gain (loss)0.3 (1.2)(0.7)
Loss on extinguishment of debt— — (11.3)
Other (expense) income, net(1.6)0.6 (0.3)
Income before income taxes123.8 79.5 74.1 
Income tax expense14.3 13.2 9.2 
Net income$109.5 $66.3 $64.9 
Net income per share
Basic$5.92 $3.58 $3.51 
Diluted$5.83 $3.55 $3.44 
Weighted average shares outstanding:
Basic18,509,52318,494,35618,499,674
Diluted18,783,63318,697,25518,849,217
See accompanying Notesnotes to Consolidated Financial Statements.consolidated financial statements.

29
Consolidated Statements of Comprehensive Income
TENNANT COMPANY AND SUBSIDIARIES
(In thousands)millions)
Years ended December 312017 2016 2015
Net (Loss) Earnings Including Noncontrolling Interest$(6,205) $46,614
 $32,088
Other Comprehensive Income (Loss): 
  
  
Foreign currency translation adjustments28,356
 109
 (12,520)
Pension and retiree medical benefits5,868
 (2,248) 4,121
Cash flow hedge(7,731) (305) 164
Income Taxes:     
Foreign currency translation adjustments310
 32
 25
Pension and retiree medical benefits(2,087) 504
 (1,265)
Cash flow hedge2,884
 114
 (61)
Total Other Comprehensive Income (Loss), net of tax27,600
 (1,794) (9,536)
Total Comprehensive Income Including Noncontrolling Interest21,395
 44,820
 22,552
Comprehensive Loss Attributable to Noncontrolling Interest(10) —
 —
Comprehensive Income Attributable to Tennant Company$21,405
 $44,820
 $22,552
Years ended December 31202320222021
Net income$109.5 $66.3 $64.9 
Other comprehensive income (loss):
Foreign currency translation adjustments (net of related tax benefit (expense) of $0.8, $(1.2), and $0.4, respectively)8.3 (17.9)(16.9)
Pension and postretirement medical benefits (net of related tax benefit (expense) of $(0.3), $(1.6), and $0.3, respectively)1.0 4.8 (0.4)
Derivative financial instruments (net of tax (expense) benefit of $0.4, $(0.3), and $0.1, respectively)(1.4)0.8 (0.5)
Total other comprehensive income (loss), net of tax7.9 (12.3)(17.8)
Comprehensive income$117.4 $54.0 $47.1 
See accompanying Notesnotes to Consolidated Financial Statements.consolidated financial statements.

30
Consolidated Balance Sheets
TENNANT COMPANY AND SUBSIDIARIES
(In thousands,millions, except shares and per share data)
December 312017 2016
ASSETS   
Current Assets:   
Cash and Cash Equivalents$58,398
 $58,033
Restricted Cash653
 517
Receivables: 
  
Trade, less Allowances of $3,241 and $3,108, respectively203,280
 145,299
Other6,236
 3,835
Net Receivables209,516
 149,134
Inventories127,694
 78,622
Prepaid Expenses19,351
 9,204
Other Current Assets7,503
 2,412
Total Current Assets423,115
 297,922
Property, Plant and Equipment382,768
 298,500
Accumulated Depreciation(202,750) (186,403)
Property, Plant and Equipment, Net180,018
 112,097
Deferred Income Taxes11,134
 13,439
Goodwill186,044
 21,065
Intangible Assets, Net172,347
 6,460
Other Assets21,319
 19,054
Total Assets$993,977
 $470,037
LIABILITIES AND TOTAL EQUITY 
  
Current Liabilities: 
  
Current Portion of Long-Term Debt$30,883
 $3,459
Accounts Payable96,082
 47,408
Employee Compensation and Benefits37,257
 35,997
Income Taxes Payable2,838
 2,348
Other Current Liabilities69,447
 43,617
Total Current Liabilities236,507
 132,829
Long-Term Liabilities: 
  
Long-Term Debt345,956
 32,735
Employee-Related Benefits23,867
 21,134
Deferred Income Taxes53,225
 171
Other Liabilities35,948
 4,625
Total Long-Term Liabilities458,996
 58,665
Total Liabilities695,503
 191,494
Commitments and Contingencies (Note 15)

 

Equity: 
  
Common Stock, $0.375 par value per share, 60,000,000 shares authorized; 17,881,177 and 17,688,350 issued and outstanding, respectively6,705
 6,633
Additional Paid-In Capital15,089
 3,653
Retained Earnings297,032
 318,180
Accumulated Other Comprehensive Loss(22,323) (49,923)
Total Tennant Company Shareholders' Equity296,503
 278,543
Noncontrolling Interest1,971
 —
Total Equity298,474
 278,543
Total Liabilities and Total Equity$993,977
 $470,037
December 3120232022
ASSETS
Cash, cash equivalents, and restricted cash$117.1 $77.4 
Receivables, less allowances of $7.2 and $6.1, respectively247.6 251.5 
Inventories175.9 206.6 
Prepaid and other current assets28.5 39.8 
Total current assets569.1 575.3 
Property, plant and equipment, less accumulated depreciation of $304.0 and $279.3, respectively187.7 179.9 
Operating lease assets41.7 31.8 
Goodwill187.4 182.0 
Intangible assets, net63.1 76.4 
Other assets64.4 39.7 
Total assets$1,113.4 $1,085.1 
LIABILITIES AND TOTAL EQUITY
Current portion of long-term debt$6.4 $5.2 
Accounts payable111.4 126.1 
Employee compensation and benefits67.3 44.0 
Other current liabilities88.6 86.3 
Total current liabilities273.7 261.6 
Long-term debt194.2 295.1 
Long-term operating lease liabilities27.4 17.1 
Employee-related benefits13.3 13.2 
Deferred income taxes5.0 11.5 
Other liabilities21.5 14.5 
Total long-term liabilities261.4 351.4 
Total liabilities535.1 613.0 
Commitments and contingencies (Note 16)
Common stock, $0.375 par value per share, 60,000,000 shares authorized; 18,631,384 and 18,521,485 issued and outstanding, respectively7.0 7.0 
Additional paid-in capital64.9 56.0 
Retained earnings547.4 458.0 
Accumulated other comprehensive loss(42.3)(50.2)
Total Tennant Company shareholders' equity577.0 470.8 
Noncontrolling interest1.3 1.3 
Total equity578.3 472.1 
Total liabilities and total equity$1,113.4 $1,085.1 
See accompanying Notesnotes to Consolidated Financial Statements.consolidated financial statements.

31
Consolidated Statements of Cash Flows
TENNANT COMPANY AND SUBSIDIARIES
(In thousands)millions)
Years ended December 31202320222021
OPERATING ACTIVITIES
Net income$109.5 $66.3 $64.9 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense36.4 32.8 33.1 
Amortization expense14.7 15.9 20.0 
Deferred income tax benefit(26.9)(15.6)(15.0)
Share-based compensation expense11.6 7.8 9.5 
Bad debt and returns expense3.4 2.3 1.5 
Gain on sale of assets— (3.7)(9.8)
Debt extinguishment cost— — 11.3 
Other, net1.3 1.0 2.3 
Changes in operating assets and liabilities:
Receivables4.1 (46.3)(20.3)
Inventories14.3 (68.3)(56.0)
Accounts payable(15.3)7.7 19.1 
Employee compensation and benefits22.3 (14.8)8.3 
Other assets and liabilities13.0 (10.2)0.5 
Net cash provided by (used in) operating activities188.4 (25.1)69.4 
INVESTING ACTIVITIES
Purchases of property, plant and equipment(22.8)(25.0)(19.4)
Investment in leased assets(1.2)(4.3)(3.7)
Cash received from leased assets0.8 0.6 — 
Proceeds from sale of assets, net of cash divested— 4.1 24.7 
Other, net— 0.1 (0.1)
Net cash (used in) provided by investing activities(23.2)(24.5)1.7 
FINANCING ACTIVITIES
Proceeds from borrowings20.0 52.0 315.8 
Repayments of borrowings(120.0)(19.1)(362.0)
Debt extinguishment payment— — (8.4)
Contingent consideration payments— — (2.5)
Change in finance lease obligations0.2 — 0.1 
Proceeds (repurchases) from exercise of stock options, net of employee tax withholdings obligations19.0 (0.9)5.0 
Dividends paid(20.1)(18.9)(17.5)
Repurchases of common stock(21.7)(5.0)(15.0)
Net cash (used in) provided by financing activities(122.6)8.1 (84.5)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2.9)(4.7)(4.0)
Net increase (decrease) in cash, cash equivalents and restricted cash39.7 (46.2)(17.4)
Cash, cash equivalents and restricted cash at beginning of year77.4 123.6 141.0 
Cash, cash equivalents and restricted cash at end of year$117.1 $77.4 $123.6 

Years ended December 312017 2016 2015
OPERATING ACTIVITIES     
Net (Loss) Earnings Including Noncontrolling Interest$(6,205) $46,614
 $32,088
Adjustments to Reconcile Net (Loss) Earnings to Net Cash Provided by Operating Activities: 
  
  
Depreciation26,199
 17,891
 16,550
Amortization of Intangible Assets17,054
 409
 1,481
Amortization of Debt Issuance Costs1,779
 —
 —
Debt Issuance Cost Charges Related to Short-Term Financing6,200
 —
 —
Fair Value Step-Up Adjustment to Acquired Inventory7,245
 —
 —
Impairment of Long-Lived Assets—
 —
 11,199
Deferred Income Taxes(6,095) (1,172) (1,129)
Share-Based Compensation Expense5,891
 3,875
 8,222
Allowance for Doubtful Accounts and Returns1,602
 468
 1,089
Loss on Sale of Business—
 149
 —
Other, Net364
 (345) (100)
Changes in Operating Assets and Liabilities, Net of Assets Acquired: 
  
  
Receivables, Net(14,381) (9,278) 4,547
Inventories(2,898) 23
 (10,190)
Accounts Payable10,849
 (3,904) (10,455)
Employee Compensation and Benefits(7,780) 124
 716
Other Current Liabilities14,560
 (185) (402)
Income Taxes285
 5,427
 (4,283)
Other Assets and Liabilities(495) (2,218) (4,101)
Net Cash Provided by Operating Activities54,174
 57,878
 45,232
INVESTING ACTIVITIES 
  
  
Purchases of Property, Plant and Equipment(20,437) (26,526) (24,780)
Proceeds from Disposals of Property, Plant and Equipment2,511
 615
 336
Proceeds from Principal Payments Received on Long-Term Note Receivable667
 —
 —
Issuance of Long-Term Note Receivable(1,500) (2,000) —
Acquisitions of Businesses, Net of Cash Acquired(354,073) (12,933) —
Purchase of Intangible Asset(2,500) —
 —
Proceeds from Sale of Business—
 285
 1,185
(Increase) Decrease in Restricted Cash(92) 116
 (322)
Net Cash Used in Investing Activities(375,424) (40,443) (23,581)
FINANCING ACTIVITIES 
  
  
Proceeds from Short-Term Debt303,000
 —
 —
Repayments of Short-Term Debt(303,000) —
 —
Proceeds from Issuance of Long-Term Debt440,000
 15,000
 —
Payments of Long-Term Debt(96,248) (3,460) (3,445)
Payments of Debt Issuance Costs(16,482) —
 —
Change in Capital Lease Obligations311
 —
 —
Purchases of Common Stock—
 (12,762) (45,998)
Proceeds from Issuances of Common Stock6,875
 5,271
 1,677
Excess Tax Benefit on Stock Plans—
 686
 859
Purchase of Noncontrolling Owner Interest(30) —
 —
Dividends Paid(14,953) (14,293) (14,498)
Net Cash Provided by (Used in) Financing Activities319,473
 (9,558) (61,405)
Effect of Exchange Rate Changes on Cash and Cash Equivalents2,142
 (1,144) (1,908)
NET INCREASE IN CASH AND CASH EQUIVALENTS365
 6,733
 (41,662)
Cash and Cash Equivalents at Beginning of Year58,033
 51,300
 92,962
CASH AND CASH EQUIVALENTS AT END OF YEAR$58,398
 $58,033
 $51,300


SUPPLEMENTAL CASH FLOW INFORMATION     
Cash Paid During the Year for:     
Income Taxes$13,542
 $14,172
 $23,421
Interest$14,228
 $1,135
 $1,167
Supplemental Non-Cash Investing and Financing Activities:     
Long-Term Note Receivable from Sale of Business$—
 $5,489
 $—
Capital Expenditures in Accounts Payable$2,167
 $2,045
 $1,830
SUPPLEMENTAL CASH FLOW INFORMATION
Years ended December 31202320222021
Cash paid for income taxes$39.5 $34.1 $19.5 
Cash paid for interest$17.1 $7.6 $11.7 
Supplemental non-cash investing and financing activities:
Capital expenditures in accounts payable$3.5 $4.1 $3.7 
See accompanying Notesnotes to Consolidated Financial Statements.consolidated financial statements.

32

Consolidated Statements of Equity
TENNANT COMPANY AND SUBSIDIARIES
(In thousands, except shares and per share data)
 Tennant Company Shareholders  
 Common SharesCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTennant Company Shareholders' EquityNoncontrolling InterestTotal Equity
Balance, December 31, 201418,415,047
$6,906
$26,247
$286,091
$(38,593)$280,651
$—
$280,651
Net Earnings—
—
—
32,088
—
32,088
—
32,088
Other Comprehensive Loss—
—
—
—
(9,536)(9,536)—
(9,536)
Issue Stock for Directors, Employee Benefit and Stock Plans, net of related tax withholdings of 23,160 shares93,380
35
384
—
—
419
—
419
Share-Based Compensation—
—
8,222
—
—
8,222
—
8,222
Dividends paid $0.80 per Common Share—
—
—
(14,498)—
(14,498)—
(14,498)
Tax Benefit on Stock Plans—
—
859
—
—
859
—
859
Purchases of Common Stock(764,046)(287)(35,712)(9,999)—
(45,998)—
(45,998)
Balance, December 31, 201517,744,381
$6,654
$—
$293,682
$(48,129)$252,207
$—
$252,207
Net Earnings—
—
—
46,614
—
46,614
—
46,614
Other Comprehensive Loss—
—
—
—
(1,794)(1,794)—
(1,794)
Issue Stock for Directors, Employee Benefit and Stock Plans, net of related tax withholdings of 23,113 shares190,443
71
3,939
—
—
4,010
—
4,010
Share-Based Compensation—
—
3,875
—
—
3,875
—
3,875
Dividends paid $0.81 per Common Share—
—
—
(14,293)—
(14,293)—
(14,293)
Tax Benefit on Stock Plans—
—
686
—
—
686
—
686
Purchases of Common Stock(246,474)(92)(4,847)(7,823)—
(12,762)—
(12,762)
Balance, December 31, 201617,688,350
$6,633
$3,653
$318,180
$(49,923)$278,543
$—
$278,543
Net Loss—
—
—
(6,195)—
(6,195)(10)(6,205)
Other Comprehensive Income—
—
—
—
27,600
27,600
—
27,600
Issue Stock for Directors, Employee Benefit and Stock Plans, net of related tax withholdings of 16,990 shares192,827
72
5,545
—
—
5,617
—
5,617
Share-Based Compensation—
—
5,891
—
—
5,891
—
5,891
Dividends paid $0.84 per Common Share—
—
—
(14,953)—
(14,953)—
(14,953)
Recognition of Noncontrolling Interests—
—
—
—
—
—
2,028
2,028
Purchase of Noncontrolling Shareholder Interest—
—
—
—
—
—
(30)(30)
Other—
—
—
—
—
—
(17)(17)
Balance, December 31, 201717,881,177
$6,705
$15,089
$297,032
$(22,323)$296,503
$1,971
$298,474
(In millions, except shares and per share data)Common SharesCommon StockAdditional Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Tennant
Company
Shareholders'
Equity		Noncontrolling
Interest		Total Equity
Balance, December 31, 202018,503,805$6.9 $54.7 $363.3 $(20.1)$404.8 $1.3 $406.1 
Net income—— — 64.9 — 64.9 — 64.9 
Other comprehensive loss—— — — (17.8)(17.8)— (17.8)
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 35,061 shares228,2930.1 4.9 — — 5.0 — 5.0 
Share-based compensation—— 9.5 — — 9.5 — 9.5 
Dividends paid $0.94 per common share—— — (17.5)— (17.5)— (17.5)
Repurchases of common stock(196,982)— (15.0)— — (15.0)— (15.0)
Other—— — (0.1)— (0.1)— (0.1)
Balance, December 31, 202118,535,116$7.0 $54.1 $410.6 $(37.9)$433.8 $1.3 $435.1 
Net income—— — 66.3 — 66.3 — 66.3 
Other comprehensive loss—— — — (12.3)(12.3)— (12.3)
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 27,653 shares66,125— (0.9)— — (0.9)— (0.9)
Share-based compensation—— 7.8 — — 7.8 — 7.8 
Dividends paid $1.015 per common share—— — (18.9)— (18.9)— (18.9)
Repurchases of common stock(79,756)— (5.0)— — (5.0)— (5.0)
Balance, December 31, 202218,521,485$7.0 $56.0 $458.0 $(50.2)$470.8 $1.3 $472.1 
Net income—— — 109.5 — 109.5 — 109.5 
Other comprehensive income—— — — 7.9 7.9 — 7.9 
Issue stock for directors, employee benefit and stock plans, net of related tax withholdings of 23,622 shares400,819— 19.0 — — 19.0 — 19.0 
Share-based compensation—— 11.6 — — 11.6 — 11.6 
Dividends paid $1.075 per common share—— — (20.1)— (20.1)— (20.1)
Repurchases of common stock(290,920)— (21.7)— — (21.7)— (21.7)
Balance, December 31, 202318,631,384$7.0 $64.9 $547.4 $(42.3)$577.0 $1.3 $578.3 
See accompanying Notesnotes to Consolidated Financial Statements.


consolidated financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)


1.Summary of Significant Accounting Policies
1.    Operations and Summary of Significant Accounting Policies
Nature of Operations – Tennant Company ("the Company", "we", "us", or "our") is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, significantly reduce environmental impact and help create a cleaner, safer, healthier world. Tennant offersThe Company is committed to creating and commercializing breakthrough, sustainable cleaning innovations to enhance its broad suite of products, including floor maintenance and solutions consisting of mechanized cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings, and business solutions such as financing, rental and leasing programs, and machine-to-machine asset management solutions. Tennant
Our products are used in many types of environments, including: Retailincluding retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets, 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.
In April 2017, the Company completed its acquisition of the IPC Group business. IPC manufactures a complete range of commercial cleaning products including mechanized cleaning equipment, wet & dry vacuum cleaners, cleaning tools & carts and high pressure washers. These products are sold into similar vertical market applications as those listed above, but also into office cleaning and hospitality vertical markets through a global direct sales and service organization and network of distributors. IPC markets products and services under the following valued brands: IPC, Gansow, Vaclensa, Portotecnica, Soteco and private-label brands.
Consolidation – The Consolidated Financial Statementsconsolidated financial statements include the accounts of Tennantthe Company and its subsidiaries. All intercompany transactions and balances have been eliminated. In these Notes to the Consolidated Financial Statements, Tennant Company is referred to as “Tennant,” “we,” “us,” or “our.”
Translation of Non-U.S. Currency – Foreign currency-denominated assets and liabilities have been translated to U.S. dollars at year-end exchange rates, while income and expense items are translated at average exchange rates prevailing during the year. Gains or losses resulting from translation are included as a separate component of Accumulated Other Comprehensive Loss.accumulated other comprehensive loss. The balance of cumulative foreign currency translation adjustments recorded within Accumulated Other Comprehensive Lossaccumulated other comprehensive loss as of December 31, 2017, 20162023, 2022 and 20152021 was a net loss of $15,778, $44,444$45.6 million, $53.9 million and $44,585,$36.0 million, respectively. The majority of translation adjustments are not adjusted for income taxes as substantially all translation adjustments relate to permanent investments in non-U.S. subsidiaries. Net Foreign Currency Transaction Lossesforeign currency transaction losses are included in Other Income (Expense).income before income taxes on the consolidated statements of income.
Use of Estimates – In preparing theThe preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("(“U.S. GAAP"GAAP”), management must requires us to make decisionsestimates and assumptions that impactaffect the amounts reported amounts of assets, liabilities, revenues, expensesin these consolidated financial statements and the related disclosures, includingaccompanying notes, disclosures of contingent assets and liabilities. Such decisions includeliabilities at the selectiondate of the appropriate accounting principles to be appliedfinancial statements and the assumptions on which to base accounting estimates.reported amounts of revenues and expenses during the reporting period. Estimates are used in determining, among other items, sales promotions and incentives accruals, inventory valuation, warranty reserves, allowance for doubtful accounts, pension and postretirement accruals, useful lives for intangible assets, and future cash flows associated with impairment testing for Goodwillgoodwill and other long-lived assets. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. A number of these factors include, among others, economic conditions, credit markets, foreign currency, commodity cost volatility and consumer spending and confidence, all of which have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual amountsActual results could differ significantly from those estimated at the time the consolidated financial statements are prepared. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.our estimates.
Cash and Cash Equivalents – We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.
Restricted Cash – We have a total of $653$0.2 million as of December 31, 20172023 and 2022 that serves as collateral backing certain bank guarantees and is therefore restricted. This money is invested in time deposits. Restricted cash is recorded in cash, cash equivalents and restricted cash on the consolidated balance sheets.
Receivables – Credit is granted to our customers in the normal course of business. Receivables are recorded at original carrying value less reserves for estimated uncollectible accounts and sales returns. To assess the collectability of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information becomes available.
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Our reserves are also based on amounts determined by using percentages applied to trade receivables. These percentages are determinedreceivables, using a loss rate method. We considered the following in determining the expected loss rate: (1) historical loss rate, (2) macroeconomic factors, and (3) creditworthiness of customers. The historical loss rate is calculated by taking the yearly write-off expense, net of collections, as a varietypercentage of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience.the annual average balance of trade receivables for each of the past three years. An account is considered past-due or delinquent when it has not been paid within the contractual terms. Uncollectible accounts are written off against the reserves when it is deemed that a customer account is uncollectible.
Inventories – Inventories are valued at the lower of cost or net realizable value. Cost is determined on a first-in, first-out (“FIFO”) basis except for Inventoriesinventories in North America, which are determined on a last-in, first-out (“LIFO”) basis.
Property, Plant and Equipment – Property, plant and equipment is carried at cost. Additions and improvements that extend the lives of the assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. We generally depreciate buildings and improvements by the straight-line method over a life of 30 years. Other property, plant and equipment are generally depreciated using the straight-line method based on lives of 3 years to 15 years.

Leases – We assess whether an arrangement is a lease at inception.
32
TableOperating leases with an initial term of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares12 months or less are expensed as incurred as short-term lease cost. We have elected the practical expedient to not separate lease and per share data)

Equity Method Investment – Investmentsnon-lease components for all asset classes. Operating lease assets and operating lease liabilities are calculated based on the present value of the future lease payments over the lease term at the lease commencement date. When future lease payments are based on an index or rate, operating lease assets and operating lease liabilities are calculated using the prevailing index or rate at the lease commencement date. As the implicit rate is not readily determinable, we use our incremental borrowing rate based on the information available at the lease start date in determining the present value of future payments. Information used in determining the incremental borrowing rates for the Company's leases includes: (1) the market yield on the Company's traded bond, adjusted for the presence of collateral and the difference in terms of the bond and the leases, (2) consideration of the currency in which each lease was denominated, and (3) the lease term. The operating lease asset is increased by any lease payments made at or before the lease start date, increased by initial direct costs incurred, and reduced by lease incentives. The lease term includes options to renew or terminate the lease when it is reasonably certain that we havewill exercise that option. The exercise of lease renewal options is at our sole discretion. The useful life of lease assets and leasehold improvements are limited by the abilitylease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain leases also include options to exercise significant influence, but dopurchase the leased asset. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Certain leases contain variable lease payments for items such as index-based changes in rent, fuel and common area maintenance, which we expense as incurred as variable lease cost.
Finance leases are not control, are accounted for under the equity method of accounting and are included in Other Assets on the Consolidated Balance Sheets. Under this method of accounting,material to our share of the net earnings or losses of the investee are presented as a component of Other Expense, Net on the Consolidated Statements of Operations. The detail regarding our equity method investment in i-team North America B.V., a joint venture that operates as the distributor of the i-mop in North America, are further described in Note 3.consolidated financial statements.
Goodwill – Goodwill represents the excess of cost over the fair value of net assets of businesses acquired.acquired and is allocated to our reporting units at the time of the acquisition. We analyze Goodwillgoodwill on an annual basis as of year endOctober 1 and when an event occurs or circumstances change that may reduce the fair value of one of our reporting units below its carrying amount. A goodwill impairment occurs ifWe have the carrying amountoption of a reporting unit exceeds its fair value. In assessing the recoverability of Goodwill, we use an analysis offirst analyzing qualitative factors to determine whether it is more likely than not that the fair value of aany reporting unit is less than its carrying amount as a basis for determining whether it is necessaryamount. However, we may elect to perform a quantitative goodwill impairment test in lieu of the quantitativequalitative test.
In 2023, we performed a qualitative goodwill test on all reporting units. Our tests indicated that there was no goodwill impairment test.in any of our reporting units as of our annual assessment date.
Intangible Assets – Intangible Assetsassets consist of definite lived customer lists, trade names and technology. Generally, intangible assets classified as trade names are amortized on a straight-line basis and intangible assets classified as customer lists or technology are amortized using an accelerated method of amortization.
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Impairment of Long-livedLong-Lived Assets and Assets Held for Sale – We periodically review our intangible and long-lived assets for impairment and assess whether events or circumstances indicate that the carrying amount of the assets may not be recoverable. We generally deem an asset group to be impaired if an estimate of undiscounted future operating cash flows is less than its carrying amount. If impaired, an impairment loss is recognized based on the excess of the carrying amount of the individual asset group over its fair value.
Assets held for sale are measured at the lower of their carrying value or fair value less costs to sell. Upon retirement or disposition, the asset cost and related accumulated depreciation or amortization are removed from the accounts and a gain or loss is recognized based on the difference between the fair value of proceeds received and carrying value of the assets held for sale. In fiscal 2015, we adopted a plan to sell assets and liabilities of our Green Machines™ outdoor city cleaning line as a result of determining that the product line does not sufficiently complement our core business. The long-lived assets involved were tested for recoverability in 2015; accordingly, a pre-tax impairment loss of $11,199 was recognized, which represents the amount by which the carrying values of the assets exceeded their fair value less costs to sell. The impairment charge is included in the caption "Impairment of Long-Lived Assets" in the accompanying Consolidated Statements of Operations.
Purchase of Common Stock – We repurchase our Common Stockcommon stock under 2016 and 2015 repurchase programsprogram authorized by our Board of Directors. These programs allowThis program allows us to repurchase up to an aggregate of 1,393,965821,413 shares of our Common Stock.common stock. Upon repurchase, the par value is charged to Common Stockcommon stock and the remaining purchase price is charged to Additional Paid-in Capital.additional paid-in capital. If the amount of the remaining purchase price causes the Additional Paid-in Capitaladditional paid-in capital account to be in a debitnegative position, this amount is then reclassified to Retained Earnings.retained earnings. Common Stockstock repurchased is included in shares authorized but is not included in shares outstanding.
Warranty – We record a liability for estimated warranty claims at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. In the event we determine that our current or future product repair and replacement costs exceed our estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. Warranty terms on machines range from one to four years. However, the majority of our claims are paid out within the first six to nine months following a sale. The majority of the liability for estimated warranty claims represents amounts to be paid out in the near term for qualified warranty issues, with immaterial amounts reserved to be paid out for older equipment warranty issues.
Debt Issuance Costs – We record all applicable debt issuanceWarranty costs related to a recognized debt liability in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt liability, if not a line-of-credit arrangement. All debt issuance costs related to line-of-credit arrangements are recorded as parta component of Other Assetsselling and administrative expense in the Consolidated Balance Sheets and subsequently amortized over the termconsolidated statements of the line-of-credit arrangement. We amortize our debt issuance costs using the effective interest method over the term of the debt instrument or line-of-credit arrangement. Amortization of these costs is included as part of Interest Expense in the Consolidated Statements of Operations.income.
Environmental – We record a liability for environmental clean-up on an undiscounted basis when a loss is probable and can be reasonably estimated.
Pension and Profit Sharing Plans – Substantially all U.S. employees are covered by various retirement benefit plans, including postretirement medical plans and defined contribution savings plans. Pension plan costsRetirement benefits for eligible employees in foreign locations are accrued based on actuarial estimates with the required pension cost funded annually, as needed. No new participants have entered theprincipally through defined benefit pension plan since 2000. For further details regarding our pension and profit sharing plans, see Note 13.annuity or government programs.
Postretirement Benefits – We accrue and recognize the cost of retiree health benefits over the employees’ period of service based on actuarial estimates. Benefits are only available for U.S. employees hired before January 1, 1999.
Derivative Financial Instruments – In countries outside the U.S., we transact business in U.S. dollarsThe Company uses cross-currency swaps, interest rate swaps and in various other currencies. We hedge our net recognized foreign currency denominated assetsexchange forward and liabilitiesoption contracts to manage risks generally associated with foreign exchange forward contracts to reduce the risk that the value of these assetsrate and liabilities will be adversely affected by changes in exchange rates. We may also use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in foreign currency exchange rates. We enter into these foreign exchange contracts to hedge a portion of our forecasted currency denominated revenue in the normal course of business, and accordingly, they are not speculative in nature.

33
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

interest rate volatility. We account for our foreign currency hedging instruments as either assets or liabilities on the consolidated balance sheetsheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. Gains and losses from foreign exchange forward contractsfor all instruments that do not qualify for hedge certain balance sheet positionsaccounting are recorded each period to Net Foreign Currency Transaction Lossesnet foreign currency transaction loss in our Consolidated Statementsconsolidated statements of Operations. Foreign exchange option contracts or forward contracts hedging forecasted foreign currency revenueincome. Changes in the fair value of designated hedges are designated as cash flow hedges under accounting for derivative instruments and hedging activities, with gains and losses recorded each period to Accumulated Other Comprehensive Lossreported in our Consolidated Balance Sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain oraccumulated other comprehensive loss on the cash flow hedge to Net Sales. In the eventconsolidated balance sheet until a related transaction occurs. If the underlying forecastedhedged transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from Accumulated Other Comprehensive Lossceases to Net Foreign Currency Transaction Losses in our Consolidated Statements of Operations at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, theexist, all changes in fair value from period to periodof the related derivatives that have not been settled are recorded in Net Foreign Currency Transaction Lossesour consolidated statements of income.
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in our Consolidated Statements of Operations. See Note 11 for additional information regarding our hedging activities.millions, except shares and per share data)
Revenue Recognition – Revenue is recognized when control transfers under the terms of the contract with our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize revenue when persuasive evidencedo not account for shipping and handling as a distinct performance obligation as we generally perform shipping and handling activities after we transfer control of an arrangement exists, title and risk of ownership have passedgoods to the customer. We have elected to account for shipping and handling costs associated with outbound freight after control of goods has transferred to a customer as a fulfillment cost. Incidental items that are immaterial in the sales pricecontext of the contract are not recognized as a separate performance obligation. We do not have any significantly extended payment terms as payment is fixed or determinablegenerally received within one year of the point of sale.
In general, we transfer control and collectability is reasonably assured. Generally, these criteria are metrecognize a sale at the point in time the product is shipped. Provisions for estimated returns, rebateswhen products are shipped from our manufacturing facilities both direct to consumers and discounts are provided for at the time the related revenue is recognized. Freight revenue billed to customers is included in Net Sales and the related shipping expense is included in Cost of Sales.distributors. Service revenue is recognized in the period the service is performed or ratably over the period of the related service contract.
Customers may obtain financing through third-party leasing companies to assist in their acquisition of our equipment products. Certain lease transactions classified as operating leases contain retained ownership provisions or guarantees, which results in recognition of revenue over the lease term. As a result, we defer the sale of these transactions and record the sales proceeds as collateralized borrowings or deferred revenue. The underlying equipment relating to operating leases is depreciated on a straight-line basis, not to exceed the equipment’s estimated useful life.
Revenues from contracts with multiple element arrangements are recognized as each element is earned. We offer service contracts in conjunction with equipment sales in addition to selling equipment and service contracts separately. Sales proceeds Consideration related to service contracts areis deferred if the proceeds are received in advance of the servicesatisfaction of the performance obligations and recognized ratably over the contract period.period as the performance obligation is met. We use an output method to measure progress toward completion for certain prepaid service contracts, as this method appropriately depicts performance toward satisfaction of the performance obligations.
For contracts with multiple performance obligations (i.e., a product and service component), we allocate the transaction price to the performance obligations in proportion to their stand-alone selling prices. We use an observable price to determine the stand-alone selling price for separate performance obligations. When allocating on a relative stand-alone selling price basis, any discounts contained within the contract are allocated proportionately to all of the performance obligations in the contract.
We generally expense the incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs relate primarily to sales commissions and are recorded in selling and administrative expense in the consolidated statements of income.
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. In May 2014,addition, we do not adjust the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU will replace all existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. This guidance requires an entity to recognize thepromised amount of revenue to which it expects to be entitledconsideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer ofa promised goodsgood or servicesservice to customers. This guidance provides a five-step analysis of transactions to determinecustomer and when and how revenue is recognized. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. We adopted the new standard effective January 1, 2018. The adoption of this ASU did not have a material impact on our financial condition, results of operationscustomer pays for that good or cash flows, other than additional disclosure requirements.service will be one year or less.
Share-basedShare-Based Compensation – We account for employee share-based compensation awards on a fair value basis. The estimated grant date fair value of each option award is recognized in income on a straight-line basis over the requisite service period (generally the vesting period). The estimated fair value of each option award is calculated using the Black-Scholes option-pricing model. From time to time, we have elected to modify the terms of the original grant. These modified grants are accounted for as a new award and measured using the fair value method, resulting in the inclusion of additional compensation expense in our consolidated statements of income.
Restricted share awards and units are recorded as compensation cost over the requisite service periods based method. Our share-basedon the market value on the date of grant. To determine the amount of compensation planscost to be recognized in each period for these awards and for option awards, we account for forfeitures as they occur.
Performance share awards (PSUs) are more fully described in Note 17stock awards where the ultimate number of shares issued will be contingent on the Company’s performance against certain performance goals. The Compensation Committee has the ability to adjust performance goals or modify the manner of measuring or evaluating a performance goal using its discretion. The fair value of each PSU is based on the market value on the date of grant. We recognize expense related to the estimated vesting of our PSUs granted. The estimated vesting of the Consolidated Financial Statements.PSUs is based on the probability of achieving certain performance metrics over the specified performance period. To determine the amount of compensation cost to be recognized in each period, we estimate forfeitures.
Research and Development – Research and development costs are expensed as incurred.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Advertising Costs –We advertise products, technologies and solutions to customers and prospective customers through a variety of marketing campaign and promotional efforts. These efforts include tradeshows, online advertising, e-mail marketing, mailings, sponsorships and telemarketing. Advertising costs are expensed as incurred. In 2017, 20162023, 2022 and 20152021, such activities amounted to $8,228, $7,269$4.6 million, $4.0 million and $7,418,$4.6 million, respectively.
Income Taxes – Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the book and tax bases of existing assets and liabilities. A valuation allowance is provided when, in management’s judgment, it is more likely than not that some portion or all of the deferred tax asset will not be realized. We have established contingentuncertain tax liabilitiesposition accruals using management’s best judgment. We follow guidance provided by Accounting Standards Codification ("ASC") 740, Income Taxes, regarding uncertainty in income taxes, to record these contingent tax liabilities (refer to Note 16 of the Consolidated Financial Statements for additional information). We adjust these liabilitiesaccruals as facts and circumstances change. Interest Expenseexpense is recognized in the first period the interest would begin accruing. Penalties are recognized in the period we claim or expect to claim the position in our tax return. Interest and penaltiespenalty expenses are classified as an income tax expense.
Sales Tax –Sales taxes collected from customers and remitted to governmental authorities are presented on a net basis.
Earnings perPer Share – Basic (loss) earnings per share is computed by dividing Net (Loss) Earnings Attributablenet earnings attributable to Tennant Company by the Weighted Average Shares Outstandingweighted average shares outstanding during the period. Diluted earnings per share assumes conversion of potentially dilutive stock options, performance shares, restricted shares and restricted stock units. These conversions are not included in our computation of diluted earnings per share if we have a net loss attributable to Tennantthe Company in a reporting period asor if the instrument's effects are anti-dilutive.
New Accounting Pronouncements –In accordance with ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, we present excess tax benefits along with other income tax cash flows on the Consolidated Statements of Cash Flows as an operating activity rather than, as previously required, a financing activity. For further details regarding the implementation of this ASU and the impact on our financial statements, see Note 2.

34
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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

2.    Newly Adopted Accounting Pronouncements
2.Newly Adopted Accounting Pronouncements
On March 30, 2016,Income Taxes
In January 2021, we adopted Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the FASB issued ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting for Income Taxes, which amends Accounting Standards Codification ("ASC") Topic 718, Compensation–Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transaction, includingincome taxes by removing certain exceptions to the income tax consequences, classificationgeneral principles in Topic 740. The impact of awardsthis amended guidance on our consolidated financial statements and related disclosures was immaterial.
Defined Benefit Plans
In December 2022, we adopted ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, which updates disclosure requirements for defined benefit pension and other postretirement plans. Adoption of this ASU did not have a material impact on our consolidated financial statements.
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04,Reference Rate Reform (Topic 848). This ASU provides optional expedients to applying generally accepted accounting principles to certain contract modifications, hedging relationships, and other transactions affected by the reference rate reform, which affects the London Inter-bank Offered Rate ("LIBOR"), if certain criteria are met. The amendments were effective March 12, 2020 through December 31, 2022. There has been no material impact to our financial condition, results of operations, or cash flows from reference rate reform as either equity or liabilities and classificationof December 31, 2022. See Note 9 for information on the Consolidated Statementsreplacement of Cash Flows. UnderLIBOR with the new standard, all excess tax benefitsSecured Overnight Financing Rate ("SOFR") in our Credit Agreements (defined below) on November 17, 2022.
3.    Revenue
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products and tax deficienciesservices. Generally, these criteria are met at the time the product is shipped.
We also enter into contracts that can include combinations of products and services, which are generally capable of being distinct and are accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
Disaggregation of Revenue
The following tables illustrate the disaggregation of revenue by geographic area, groups of similar products and services and sales channels for the years ended December 31:
Net sales by geographic area
202320222021
Americas$840.3 $705.9 $658.3 
Europe, Middle East and Africa (EMEA)314.4 301.6 331.9 
Asia Pacific (APAC)88.9 84.7 100.6 
Total$1,243.6 $1,092.2 $1,090.8 
Net sales are attributed to each geographic area based on the end user country and are net of intercompany sales.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Net sales by groups of similar products and services
202320222021
Equipment$776.4 $664.0 $679.9 
Parts and consumables279.5 263.1 249.3 
Specialty surface coatings(a)
— — 1.5 
Service and other187.7 165.1 160.1 
Total$1,243.6 $1,092.2 $1,090.8 
(a)On February 1, 2021, we sold our Coatings business. Further details regarding the sale are discussed in Note 5.
Net sales by sales channel
202320222021
Sales direct to consumer$854.4 $712.6 $692.4 
Sales to distributors389.2 379.6 398.4 
Total$1,243.6 $1,092.2 $1,090.8 
Contract Liabilities
Sales Returns
The right of return may exist explicitly or implicitly with our customers. When the right of return exists, we adjust the transaction price for the estimated effect of returns. We estimate the expected returns using the expected value method by assessing historical sales levels and the timing and magnitude of historical sales return levels as a percent of sales and projecting this experience into the future.
Sales Incentives
Our sales contracts may contain various customer incentives, such as volume-based rebates or other promotions. We reduce the transaction price for certain customer programs and incentive offerings that represent variable consideration. Sales incentives given to our customers are recorded as a component ofusing the provisionmost likely amount approach for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the company present excess tax benefits along with other income tax cash flows on the Consolidated Statements of Cash Flows as an operating activity rather than, as previously required, a financing activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016.
We have adopted ASU 2016-09 effective January 1, 2017 on a prospective basis where permitted by the new standard. As a result of this adoption:
In 2017, we recognized discrete tax benefits of $1,168 in the Income Tax Expense line item of our Consolidated Statements of Operations related to excess tax benefits upon vesting or settlement in that period.
We elected to adopt the cash flow presentation of the excess tax benefits prospectively where the tax benefits are classified along with other income tax cash flows as operating cash flows in 2017. Our 2016 and 2015 excess tax benefits are recognized as financing cash flows. However, other income tax cash flows are classified as operating cash flows.
We have elected to account for forfeitures as they occur, rather than electing to estimate the number of share-based awards expected to vest to determineestimating the amount of compensation costconsideration to which the Company will be entitled. We forecast the most likely amount of the incentive to be recognizedpaid at the time of sale, update this forecast quarterly, and adjust the transaction price accordingly to reflect the new amount of incentives expected to be earned by the customer. A majority of our customer incentives are settled within one year. We record our accruals for volume-based rebates and other promotions in each period. other current liabilities on our consolidated balance sheets.
The difference of such change is immaterial.in our sales incentive accrual balance for the years ended December 31, 2023 and 2022 was as follows:
20232022
Beginning balance$20.0 $19.9 
Additions to sales incentive accrual29.5 22.5 
Contract payments(28.5)(21.8)
Foreign currency fluctuations0.2 (0.6)
Ending balance$21.2 $20.0 
3.Investment in Joint Venture
On February 13, 2017,Deferred Revenue
We sell separately priced prepaid contracts to our customers where we receive payment at the company, through a Dutch subsidiary, and i-team Global, a Future Cleaning Technologies, B.V. company headquartered in The Netherlands, announced the January 1, 2017 formation of i-team North America B.V., a joint venture that will operate as the distributorinception of the i-mopcontract and defer recognition of the consideration received because we have to satisfy future performance
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in North America. We beganmillions, except shares and per share data)
obligations. Our deferred revenue balance is primarily attributed to prepaid maintenance contracts on our machines ranging from 12 months to 60 months. In circumstances where prepaid contracts are sold simultaneously with machines, we use an observable price to determine stand-alone selling and servicing the i-mopprice for separate performance obligations.
The change in the second quarterdeferred revenue balance for the years ended December 31, 2023and 2022 was as follows:
20232022
Beginning balance$9.3 $11.2 
Increase in deferred revenue representing our obligation to satisfy future performance obligations21.7 24.2 
Decrease in deferred revenue for amounts recognized in net sales for satisfied performance obligations(20.8)(25.5)
Foreign currency fluctuations0.1 (0.6)
Ending balance$10.3 $9.3 
As of 2017. We own a 50% ownership interestDecember 31, 2023, $7.9 million and $2.4 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets. Of this, we expect to recognize the following approximate amounts in net sales in the joint venture, which is accounted for under the equity method of accounting, with our proportionate share of income or loss presented as a component of Other Expense, Net on the Consolidated Statements of Operations. In 2017, this amount is immaterial.following periods:
2024$7.9 
20251.2 
20260.7 
20270.3 
20280.1 
Thereafter0.1 
Total$10.3 
As of December 31, 2017, the carrying value2022, $6.6 million and $2.7 million of the company's investmentdeferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets.
4.    Management Actions
Restructuring Actions
In 2023 and 2022, we incurred restructuring expenses as part of our ongoing global reorganization efforts. The following pre-tax restructuring charges were included in the joint venture was $75. In March 2017, we issued a $1,500 loan toconsolidated statements of income:
20232022
Severance-related costs - Selling and administrative expense$1.9 $2.2 
Severance-related costs - Cost of sales0.7 — 
Other costs - Selling and administrative expense(a)
0.3 1.6 
Other costs - Cost of sales(a)
— 0.3 
Total pre-tax restructuring costs$2.9 $4.1 
(a)Includes facility exit costs associated with facility moves.
The charges in 2023 impacted the joint venture and, as a result, recorded a long-term note receivable in Other Assets on the Consolidated Balance Sheets.
4.Management Actions
During the first quarter of 2017, we implemented a restructuring action to better align our global resources and expense structure with a lower growth global economic environment. The pre-tax charge of $8,018, including other associated costs of $961, consisted primarily of severance and was included within Selling and Administrative Expense in the Consolidated Statements of Operations. The charge impacted our Americas, Europe, Middle East and Africa ("EMEA")(EMEA) and Asia Pacific ("APAC")(APAC) operating segments. We believe the anticipated savings will offset the pre-tax chargeThe charges in approximately one year from the date of the action. We do not expect additional costs will be incurred related to this restructuring action.
During the fourth quarter of 2017, we implemented a restructuring action primarily driven by integration actions related to our acquisition of IP Cleaning S.p.A and its subsidiaries ("IPC Group"). See Note 5 for further details regarding our acquisition of the IPC Group. The restructuring action consisted primarily of severance and includes reductions in overall staffing to streamline and right-size the organization to support anticipated business requirements. The pre-tax charge of $2,501 was included within Selling and Administrative Expense in the Consolidated Statements of Operations. The charge2022 impacted our Americas, EMEA and APACall operating segments. We believeOur restructuring actions represent the anticipated savings will offset the pre-tax charge
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in approximately one year from the datemillions, except shares and per share data)
continued execution of the action. We do not expect additional costs will be incurred relateda multi-year enterprise strategy to this restructuring action.drive increased productivity throughout our operations.
A reconciliation to the ending liability balance of severance and related costs as of December 31, 20172023 is as follows:
20232022
Beginning balance$1.7 $4.9 
New charges3.2 2.2 
Cash payments(1.9)(2.9)
Foreign currency adjustments— (0.5)
Adjustment to accrual(0.6)(2.0)
Ending balance$2.4 $1.7 
5.    Acquisitions and Divestitures
 Severance and Related Costs
2017 restructuring actions$9,558
Cash payments(6,312)
Foreign currency adjustments190
December 31, 2017 Balance$3,436
Sale of Building
5.Acquisitions
IP Cleaning S.p.A.During the second quarter of 2022, we sold a building located in Golden Valley, Minnesota. The resulting pre-tax gain was $3.7 million and is reflected within gain on sale of assets in the consolidated statements of income. Proceeds from sale of assets were $4.1 million.
On April 6, 2017,Sale of Coatings Business
During the first quarter of 2021, we acquired 100 percentsold the Coatings business. The resulting pre-tax gain was $9.8 million and is reflected within gain on sale of business in the outstanding capital stockconsolidated statements of IP Cleaning S.p.A. and its subsidiaries ("IPC Group") for a purchase priceincome. Proceeds from sale of $353,769,business, net of cash acquireddivested, were $24.7 million.
Acquisition of $8,804. The primary seller was Ambienta SGR S.p.A.Gaomei
On January 4, 2019, a European private equity fund. IPC Group, based in Italy, is a designer and manufacturer of innovative professional cleaning equipment, cleaning tools and supplies. The acquisition strengthens our presence and market share in Europe and will allow us to better leverage our EMEA cost structure. We funded we completed the acquisition of IPC Group, along withHefei Gaomei Cleaning Machines Co., Ltd. and Anhui Rongen Environmental Protection Technology Co., Ltd. (collectively "Gaomei"), privately held designers and manufacturers of commercial cleaning solutions based in China. The financial results for Gaomei have been included in the consolidated financial results since the date of closing. The total purchase price included $22.4 million of payments and related fees, including refinancing of existing debt, with funds raised through borrowings under a senior secured credit facilityadjustments paid in an aggregate principal amount of $420,000. Further details regarding our acquisition financing arrangements are discussed2019 and contingent consideration payments totaling $2.5 million paid in Note 9.

2021.
35
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

6.    Inventories
The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:
ASSETS 
Receivables$39,984
Inventories46,442
Other Current Assets5,314
Assets Held for Sale2,247
Property, Plant and Equipment63,890
Intangible Assets Subject to Amortization: 
Trade Name26,753
Customer Lists123,061
Technology9,631
Other Assets8,261
Total Identifiable Assets Acquired325,583
LIABILITIES 
Accounts Payable32,227
Accrued Expenses15,611
Deferred Income Taxes60,433
Other Liabilities9,360
Total Identifiable Liabilities Assumed117,631
Net Identifiable Assets Acquired207,952
Noncontrolling Interest(2,028)
Goodwill147,845
Total Estimated Purchase Price, net of Cash Acquired$353,769
The acquired assets, liabilities and operating results have been included in our Consolidated Financial Statements from the date of acquisition. During 2017, we included net sales of $174,444 and a net loss of $14,483 from IPC Group in our Consolidated Statements of Operations. The net loss includes a fair value adjustment, net of tax, of $5,237 to the acquired inventory of IPC Group. In addition, costs of $10,408, net of tax, associated with the acquisition of the IPC Group were expensed as incurred in the 2017 Consolidated Statement of Operations. The preliminary gross amount of the accounts receivable acquired is $44,654, of which $4,670 is expected to be uncollectible.
The fair value measurements were final at December 31, 2017, with the exception of the fair value of accounts receivable, inventory excess and obsolescence reserves, intangible assets subject to amortization, goodwill, warranty, income tax payable and deferred income taxes. We expect the fair value measurement process to be completed no later than one year from the acquisition date.
Goodwill was calculated as the difference between the acquisition date fair value of the total purchase price consideration and the fair value of the net identifiable assets acquired, and represents the future economic benefits that we expect to achieve as a result of the acquisition. This resulted in an estimated purchase price in excess of the fair value of identifiable net assets acquired.
The estimated purchase price also included the fair value of other assets that were not identifiable and not separately recognizable under accounting rules (e.g., assembled workforce) or these assets were of immaterial value. In addition, there is a going concern element that represents our ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process. Based on preliminary fair value measurement of the assets acquired and liabilities assumed, we allocated $147,845 to goodwill for the expected synergies from combining IPC Group with our existing business. None of the goodwill is expected to be deductible for income tax purposes. The assignment of goodwill to reporting units is not complete, pending finalization of the valuation measurements.
The fair value of acquired identifiable intangible assets was primarily determined using discounted expected cash flows. The fair value of acquired identifiable tangible assets was primarily determined using the cost or market approach. The valuations were based on the information that was available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by us. There are inherent uncertainties and management judgment required in these determinations. The fair value measurements of the assets acquired and liabilities assumed were based on valuations involving significant unobservable inputs, or Level 3 in the fair value hierarchy.
The preliminary fair value of the acquired intangible assets is $159,445. The expected lives of the acquired amortizable intangible assets are approximately 15 years for customer lists, 10 years for trade names and 10 years for technology. Trade names are being amortized on a straight-line basis while the customer lists and technology are being amortized on an accelerated basis. We recorded amortization expense of $15,746 in Selling and Administrative Expense on our Consolidated Statements of Operations for these acquired intangible assets in 2017.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

The following unaudited pro forma financial information presents the combined results of operations of Tennant Company as if the acquisition of IPC Group had occurred as of January 1, 2016:
Years ended December 312017 2016
Net Sales   
Pro forma$1,057,127
 $1,013,710
As reported1,003,066
 808,572
    
Net Earnings (Loss) Attributable to Tennant Company   
Pro forma$12,288
 $30,412
As reported(6,195) 46,614
    
Net Earnings (Loss) Attributable to Tennant Company per Diluted Share   
Pro forma$0.68
 $1.69
As reported(0.35) 2.59
The unaudited pro forma financial information is presented for informational purposes only. It is not necessarily indicative of what our consolidated results of operations actually would have been had the acquisition occurred at the beginning of each year, nor does it attempt to project the future results of operations of the combined company.
The unaudited pro forma financial information above gives effect to the following:
Incremental depreciation expense related to the estimated fair value of the property, plant and equipment from the preliminary purchase price allocation.
Exclusion of the purchase accounting impact of the $7,245 inventory step-up reported in 2017 Cost of Sales on our Consolidated Statements of Operations related to the sale of acquired inventory.
Incremental interest expense related to additional debt used to finance the acquisition.
Exclusion of non-recurring acquisition-related transaction and financing costs.
Pro forma adjustments tax affected based on the jurisdiction where the costs were incurred.
Other Acquisitions
On July 28, 2016, pursuant to an asset purchase agreement and real estate purchase agreement with Crawford Laboratories, Inc. and affiliates thereof ("Sellers"), we acquired selected assets and liabilities of the Seller's commercial floor coatings business, including the Florock® Polymer Flooring brand ("Florock"). Florock manufactures commercial floor coatings systems in Chicago, IL. The purchase price was $11,843, including working capital and other adjustments, and is comprised of $10,965 paid at closing, with the remaining $878 paid in two installments. We paid the first installment of $575 in 2016. The remaining amount was paid during the 2017 first quarter.
On September 1, 2016, we acquired selected assets and liabilities of Dofesa Barrido Mecanizado ("Dofesa") which was our largest distributor in Mexico. The operations are based in Aguascalientes, Mexico, and their addition allows us to expand our sales and service network in an important market. The purchase price was $4,650 less assumed liabilities of $3,448, subject to customary working capital adjustments. The net purchase price of $1,202 and a value added tax of $191 were paid at closing.
The acquisitions have been accounted for as business combinations and the results of their operations have been included in the Consolidated Financial Statements since their respective dates of acquisition. The impact of the incremental revenue and earnings recorded as a result of the acquisitions are not material to our Consolidated Financial Statements. The purchase price allocations for both the Florock and Dofesa acquisitions are complete.

37
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

The components of the final purchase price of the Florock and Dofesa acquisitions, as described above, have been allocated as follows:
Current Assets$5,949
Property, Plant and Equipment, net4,112
Identified Intangible Assets6,055
Goodwill1,739
Other Assets7
Total Assets Acquired17,862
Current Liabilities4,764
Other Liabilities53
Total Liabilities Assumed4,817
Net Assets Acquired$13,045
6.Inventories
Inventories as of December 31 consisted of the following:
20232022
Inventories carried at LIFO:
Finished goods(a)
$74.7 $85.0 
Raw materials and work-in-process38.5 46.4 
Excess of FIFO over LIFO cost(b)
(47.7)(49.7)
Total LIFO inventories$65.5 $81.7 
Inventories carried at FIFO:
Finished goods(a)
$52.8 $68.9 
Raw materials and work-in-process57.6 56.0 
Total FIFO inventories$110.4 $124.9 
Total inventories$175.9 $206.6 
 2017 2016
Inventories carried at LIFO:   
Finished goods$43,439
 $39,142
Raw materials, production parts and work-in-process23,694
 23,980
LIFO reserve(28,429) (28,190)
Total LIFO inventories$38,704
 $34,932
    
Inventories carried at FIFO:   
Finished goods$54,161
 $31,044
Raw materials, production parts and work-in-process34,829
 12,646
Total FIFO inventories$88,990
 $43,690
Total inventories$127,694
 $78,622
(a)Finished goods include machines, parts and consumables and component parts that are used in our products.
(b)The LIFO reserve approximates the difference between LIFO carryingreplacement cost and FIFO.the stated LIFO inventory value is not materially different from the reserve for the LIFO valuation method.
7.Property, Plant and Equipment
7.    Property, Plant and Equipment
Property, plant and equipment and related Accumulated Depreciation,accumulated depreciation, including equipment under capitalfinance leases, as of December 31,consisted of the following:
20232022
Property, plant and equipment:
Land$21.0 $22.0 
Buildings and improvements137.6 149.0 
Machinery and manufacturing equipment209.5 171.1 
Office equipment116.0 107.7 
Construction in progress7.6 9.4 
Total property, plant and equipment491.7 459.2 
Less: accumulated depreciation(304.0)(279.3)
Property, plant and equipment, net$187.7 $179.9 
 2017 2016
Property, Plant and Equipment:   
Land$18,152
 $6,328
Buildings and improvements96,230
 58,577
Machinery and manufacturing equipment151,645
 116,221
Office equipment107,312
 89,838
Work in progress9,429
 27,536
Total Property, Plant and Equipment382,768
 298,500
Less: Accumulated Depreciation(202,750) (186,403)
Property, Plant and Equipment, Net$180,018
 $112,097
Depreciation expense was $26,199$36.4 million, $32.8 million and $33.1 million in 2017, $17,891 in 20162023, 2022 and $16,550 in 2015.

2021, respectively.
38
43
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

8.    Goodwill and Intangible Assets
8.Goodwill and Intangible Assets
For purposes of performing our goodwill impairment analysis, we have identified our reporting units as North America, Latin America, Coatings, EMEA and APAC. AsIn 2021, the Coatings reporting unit was sold and is no longer considered a reporting unit.

We have the option of December 31, 2017, 2016 and 2015, we performed an analysis offirst analyzing qualitative factors to determine whether it is more likely than not that the fair value of aany reporting unit is less than its carrying amount asamount.We may elect to perform a basis for determining whether it is necessaryquantitative goodwill impairment test in lieu of the qualitative test, and in 2023 we performed the qualitative goodwill test on all reporting units. In 2022, we elected to perform the quantitative goodwill impairment test.test on all reporting units. Based on our analysis, of qualitative factors, we determined that itthere was not necessary to perform the quantitativeno impairment of goodwill impairment test for anyas of our reporting units.December 31, 2023 and 2022.
The changes in the carrying amount of Goodwillgoodwill are as follows:
Goodwill
Accumulated
Impairment
Losses
Total
Balance as of December 31, 2023$220.7 $(33.3)$187.4 
Foreign currency fluctuations1.9 3.5 5.4 
Balance as of December 31, 2022$218.8 $(36.8)$182.0 
Foreign currency fluctuations(15.1)4.0 (11.1)
Balance as of December 31, 2021$233.9 $(40.8)$193.1 
 Goodwill 
Accumulated
Impairment
Losses
 Total
Balance as of December 31, 2015$60,447
 $(43,644) $16,803
Additions3,787
 —
 3,787
Foreign currency fluctuations(5,837) 6,312
 475
Balance as of December 31, 2016$58,397
 $(37,332) $21,065
Additions147,845
 —
 147,845
Purchase accounting adjustments(1,865) —
 (1,865)
Foreign currency fluctuations22,847
 (3,848) 18,999
Balance as of December 31, 2017$227,224
 $(41,180) $186,044
The balances of acquired Intangible Assets,intangible assets, excluding Goodwill, as of December 31,goodwill, are as follows:
Customer Lists 
Trade
Names
 Technology Total
Balance as of December 31, 2017       
Customer
Lists		Customer
Lists
Trade
Names
TechnologyTotal
Balance as of December 31, 2023
Original cost
Original cost
Original cost$149,355
 $31,968
 $14,589
 $195,912
Accumulated amortization(17,870) (2,436) (3,259) (23,565)
Carrying amount$131,485
 $29,532
 $11,330
 $172,347
Weighted-average original life (in years)15
 10
 11
  
       
Balance as of December 31, 2016 
  
  
  
Balance as of December 31, 2022
Balance as of December 31, 2022
Balance as of December 31, 2022
Original cost
Original cost
Original cost$8,016
 $2,000
 $5,136
 $15,152
Accumulated amortization(5,948) —
 (2,744) (8,692)
Carrying amount$2,068
 $2,000
 $2,392
 $6,460
Weighted-average original life (in years)15
 15
 13
  
The additions to Goodwill during 2017 were based onIn 2021, we divested identified intangible assets, excluding goodwill, with a carrying value of $0.9 million and $1.4 million in the preliminary purchase price allocationcategories of our acquisitioncustomer lists and trade names, respectively, as a result of the IPC Group, as described furthersale of the Coatings business discussed in Note 5.
As partAmortization expense of our acquisition of the IPC Group, we acquired customer lists, trade names and technology for a fair value measurement of $159,445. Further details regarding the preliminary purchase price allocation of our acquisition of the IPC Group are described further in Note 5.
As part of the formation of the i-team North America B.V. joint venture, we purchased the distribution rights to sell the i-mop in North America for $2,500. The distribution rights were recorded in intangible assets net as a customer list on the Consolidated Balance Sheets as of December 31, 2017. The i-mop distribution rights have a useful life of five years. Further details regarding the joint venture are discussed in Note 3.
Amortization expense on Intangible Assets was $17,054, $409$14.7 million, $15.9 million and $1,481$20.0 million for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively.

39
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

Estimated aggregate amortization expense based on the current carrying amount of amortizable Intangible Assetsintangible assets for each of the five succeeding years is as follows:
2024$13.4 
202512.0 
202610.7 
20277.3 
20285.6 
Thereafter14.1 
Total$63.1 
9.    Debt
2018$22,345
201921,691
202020,198
202118,561
202216,367
Thereafter73,185
Total$172,347
9.Debt
Credit Facility Borrowings
2017 2021Credit Agreement
In order to finance the acquisition of the IPC Group, onOn April 4, 2017, the Company5, 2021, we and certain of our foreign subsidiaries entered into aan Amended and Restated Credit Agreement (the “2017“2021 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, Goldman Sachs Bank USA, as syndication agent, Wells Fargo, National Association, U.S. Bank National Association, and HSBC Bank USA, National Association, as co-documentation agents, and the lenders (including JPMorgan) from time to time party thereto.agent. The 20172021 Credit Agreement provides the companyus and certain of our foreign subsidiaries access to a senior secured credit facility until April 4, 2022,3, 2026, consisting of a multi-tranche term loan facility in an amount up to $400,000$100.0 million and a revolving facility in an amount up to $200,000$450.0 million with an option to expand the revolvingcredit facility by $150,000,up to $275.0 million, with the consent of the lenders willing to provide additional borrowings in the form of increases to their revolving facility commitment or funding of incremental term loans. Borrowings may be denominated in U.S. dollars or certain other currencies.
In connection with the 2017 Credit Agreement, the company granted the lenders a security interest in substantially all its personal property, and pledged the stock of its domestic subsidiaries and 65% of the stock of its first tier foreign subsidiaries. The obligations under the 2017 Credit Agreement are also guaranteed by certain of the Company’s first tier domestic subsidiaries and those subsidiaries also provided a security interest in their similar personal property.
The fee for committed funds under the revolving facility of the 20172021 Credit Agreement ranges from an annual rate of 0.175%0.15% to 0.35%0.30%, depending on the company’sour leverage ratio. Borrowings
On November 10, 2022, Tennant Company further amended the 2021 Credit Agreement (the "Amendment") to update the benchmark provisions to replace LIBOR with Term SOFR (as defined in the Amendment) as the reference rate for purposes of calculating interest under the 2021 Credit Agreement. Pursuant to the Amendment, borrowings denominated in U.S. dollars under the 2017 Credit Agreement bear interest at a rate per annum equal to (a) the Term SOFR Rate (as defined in the Amendment) plus a credit spread adjustment of 0.10% per annum, but in any case, not less than 0%, plus an additional spread of 1.10% to 1.70%, depending on the Company’s leverage ratio, or (b) the Alternate Base Rate (as defined in the Amendment), which is the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) the adjusted LIBOR rateTerm SOFR Rate for a one month period, but in any case, not less than 0%1.0%, plus, in any such case, 1.00%1.0%, plus an additional spread of 0.075%0.10% to 0.90% for revolving loans and 0.25% to 1.25% for term loans,0.70%, depending on the company’sCompany’s leverage ratio. All other material terms included in the 2021 Credit Agreement remain unchanged as a result of the Amendment.
In connection with the 2021 Credit Agreement, we reaffirmed our security interest in favor of the lenders in substantially all our personal property and pledged the stock of our domestic subsidiaries and 65% of the stock of our first-tier foreign subsidiaries. The obligations under the 2021 Credit Agreement are also guaranteed by certain of our first-tier domestic subsidiaries, and those subsidiaries also provided a security interest in their similar personal property.
Our 2021 Credit Agreement restricts the payment of dividends or repurchasing of stock requiring that, after giving effect to such payments, no default exists or would result from such payment. Additionally, cash dividends are restricted to $7.5 million per quarter, and approved levels of other restricted payments range from $60.0 million to unlimited based on our net leverage ratio or (b) the LIBOR Rate, as adjusted for statutory reserve requirements for eurocurrency liabilities, but(not taking into account any acquisition holiday) after giving effect to such payment.
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in any case, not less than 0%, plus an additional spread of 1.075% to 1.90% for revolving loansmillions, except shares and 1.25% to 2.25% for term loans, depending on the company’s leverage ratio.per share data)
The 20172021 Credit Agreement contains customary representations, warranties and covenants, including but not limited to covenants restricting the company’sour ability to incur indebtedness and liens and merge or consolidate with another entity. The 2017Further, the 2021 Credit Agreement also contains financial covenants, requiring us to maintain the following covenants:
•a covenant requiring us to maintain an indebtedness to EBITDA ratio, determined as of the end of each of our fiscal quarters, of no greater than 3.50 to 1.00, with certain alternative requirements for permitted acquisitions greater than $50.0 million;
•a covenant requiring us to maintain an EBITDA to interest expense ratio for a period of four consecutive fiscal quarters as of the end of each quarter of no less than 3.00 to 1; and
•a covenant restricting us from paying dividends or repurchasing stock if, after giving effect to such payments and assuming no default exists or would result from such payment, our leverage ratio is greater than 2.50 to 1, in such case limiting such payments to $60.0 million during any fiscal year.
Redemption of consolidated total indebtedness to consolidated earnings before income, taxes, depreciation and amortization, subject to certain adjustments ("Adjusted EBITDA")Senior Notes
In the second quarter of not greater than 4.25 to 1, as well as requiring us to maintain a ratio of consolidated Adjusted EBITDA to consolidated interest expense of no less than 3.50 to 1 for2021, the year ended December 31, 2017. The 2017 Credit Agreement also contains a financial covenant requiring us to maintain a senior secured net indebtedness to Adjusted EBITDA ratio of not greater than 3.50 to 1. These financial covenants may restrict our ability to pay dividends and purchase outstanding shares of our common stock. We were in compliance with our financial covenants at December 31, 2017.
We will be required to repay the senior credit agreement with 25% to 50% of our excess cash flow from the preceding fiscal year, as defined in the agreement, unless our net leverage ratio for such preceding fiscal year is less than or equal to 3.00 to 1, which will be first measured using our fiscal year ended December 31, 2018.
Upon entry into the 2017 Credit Agreement, the company repaid $45,000 in outstanding borrowings under our Prior Credit Agreement (as defined below) and terminated the Prior Credit Agreement.
Prior Credit Agreement
On June 30, 2015, we entered into an Amended and Restated Credit Agreement (the "Prior Credit Agreement") that amended and restated the Credit Agreement dated May 5, 2011 between us and JP Morgan Chase Bank, N.A. ("JPMorgan"), as administrative agent and collateral agent, U.S. Bank National Association, as syndication agent, Wells Fargo Bank, National Association, and RBS Citizens, N.A., as co-documentation agents, and the Lenders (including JPMorgan) from time to time party thereto, as amended by Amendment No. 1 dated April 25, 2013.
At December 31, 2016, there were $25,000 in outstanding borrowings under this facility with a weighted average interest rate of 1.64%. Upon entry into the 2017 Credit Agreement, we repaid any outstanding borrowings under the Prior Credit Agreement and terminated the Prior Credit Agreement.
Prudential Shelf Agreement
On July 29, 2009, we entered into a Private Shelf Agreement, as amended (the “Shelf Agreement”) with Prudential Investment Management, Inc. (“Prudential”) and Prudential affiliates from time to time party thereto. The Shelf Agreement provided us and our subsidiaries access to an uncommitted, senior secured, maximum aggregateCompany redeemed $300.0 million principal amount outstanding of $80,000 of debt capital.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

As of December 31, 2016, there were $11,143 in outstanding borrowings under this facility, consisting of the $4,000 Series A notes issued in March 2011 with a fixed interest rate of 4.00% and a term of seven years, with remaining serial maturities from 2017 to 2018, and the $7,143 Series B notes issued in June 2011 with a fixed interest rate of 4.10% and a term of 10 years, with remaining serial maturities from 2017 to 2021. Upon entry into the 2017 Credit Agreement, we repaid any outstanding borrowings under the Shelf Agreement and terminated the Shelf Agreement.
HSBC Bank (China) Company Limited, Shanghai Branch
On June 20, 2012, we entered into a banking facility with the HSBC Bank (China) Company Limited, Shanghai Branch in the amount of $5,000. As of December 31, 2017, there were no outstanding borrowings on this facility.
Senior Unsecured Notes
On April 18, 2017, we issued and sold $300,000 in aggregate principal amount of ourits 5.625% Senior Notes due 2025 (the “Notes”("Senior Notes"), pursuant to an Indenture, dated as of April 18, 2017, among. We used the company,proceeds from the Guarantors (as defined therein), and Wells Fargo Bank, National Association, a national banking association, as trustee. The Notes are guaranteed by Tennant Coatings, Inc. and Tennant Sales and Service Company (collectively, the “Guarantors”), which are wholly owned subsidiaries of the company. Separate financial information of the Guarantors is presented in Note 22.
The Notes will mature on May 1, 2025. Interest on the Notes will accrue at the rate of 5.625% per annum and will be payable semiannually in cash on each May 1 and November 1, commencing on November 1, 2017.
The Notes and the guarantees constitute senior unsecured obligations of the company and the Guarantors, respectively.  The Notes and the guarantees, respectively, are: (a) equal in right of payment with all of the company’s and the Guarantors’ senior debt, without giving effect to collateral arrangements; (b) senior in right of payment to all of the company’s and the Guarantors’ future subordinated debt, if any; (c) effectively subordinated in right of payment to all of the company’s and the Guarantors’ debt and obligations that are secured, including borrowings under the company’s senior secured credit facilities for so long as2021 Credit Agreement to retire our Senior Notes and pay the senior secured credit facilities are secured, to the extent of the value of the assets securing such liens; and (d) structurally subordinated in right of payment to all liabilities (including trade payables) of the company’s and the Guarantors’ subsidiaries that do not guarantee the Notes. The Notes also contain customary representations, warranties and covenants, and are less restrictive than those contained$8.4 million call premium due upon redemption in the 2017 Credit Agreement.second quarter of 2021. In addition, we wrote off $2.9 million of unamortized debt issuance costs in the second quarter of 2021.
We used the net proceeds from this offering to refinance a $300,000 term loan under our 2017 Credit Agreement that we borrowed as part of the financing for the acquisition of the IPC Group and to pay related fees and expenses.
The Indenture governing the Notes contains covenants that limit, among other things, our ability and the ability of our restricted subsidiary to incur additional indebtedness (including guarantees thereof); incur or create liens on assets securing indebtedness; make certain restricted payments; make certain investments; dispose of certain assets; allow to exist certain restrictions on the ability of the our restricted subsidiaries to pay dividends or make other payments to us; engage in certain transactions with affiliates; and consolidate or merge with or into other companies. If we experience certain kinds of changes of control, we may be required to repurchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. If we makes certain asset sales and do not use the net proceeds for specified purposes, we may be required to offer to repurchase the Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.
Registration Rights Agreement
In connection with the issuance and sale of the Notes, the company entered into a Registration Rights Agreement, dated April 18, 2017, among the company, the Guarantors and Goldman, Sachs & Co. and J.P. Morgan Securities LLC (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the company agreed (1) to use its commercially reasonable efforts to consummate an exchange offer to exchange the Notes for new registered notes (the “Exchange Notes”), with terms substantially identical in all material respects with the Notes (except that the Exchange Notes will not contain terms with respect to additional interest, registration rights or transfer restrictions) and (2) if required, to have a shelf registration statement declared effective with respect to resales of the Notes. If the company fails to satisfy certain obligations under the Registration Rights Agreement within 360 days, it will be required to pay additional interest to the holders of the Notes under certain circumstances.
On January 22, 2018, we commenced the exchange offer required by the Registration Rights Agreement. The exchange offer closed on February 23, 2018. We will not incur any additional indebtedness as a result of the exchange offer. As a result, we will not be required to pay additional interest on the Notes.
Capital Lease Obligations
Capital lease obligations outstanding are primarily related to sale-leaseback transactions with third-party leasing companies whereby we sell our manufactured equipment to the leasing company and lease it back. The equipment covered by these leases is rented to our customers over the lease term.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)


Debt outstanding atas of December 31 consisted of the following:
20232022
Credit facility borrowings:
Revolving credit facility borrowings$110.0 $205.0 
Term loan facility borrowings90.0 95.0 
Finance lease liabilities0.6 0.3 
Total debt200.6 300.3 
Less: current portion of long-term debt(a)
(6.4)(5.2)
Long-term debt$194.2 $295.1 
 2017 2016
Long-Term Debt: 
  
Senior Unsecured Notes$300,000
 $—
Credit Facility Borrowings80,000
 36,143
Capital Lease Obligations3,279
 51
Total Long-Term Debt383,279
 36,194
Less: Unamortized Debt Issuance Costs(6,440) —
Less: Current Maturities of Credit Facility Borrowings, Net of Debt Issuance Costs(1)
(29,413) (3,459)
Less: Current Maturities of Capital Lease Obligations(1)
(1,470) —
Long-term portion$345,956
 $32,735
(1)
(a)		Current maturitiesAs of long-term debt include $30,000 of current maturities, less $587 of unamortized debt issuance costs, under our 2017 Credit Agreement (defined below)December 31, 2023, the Company is required to repay $6.3 million in outstanding credit facility borrowings and $1,470$0.1 million of current maturities of capitalfinance lease obligations.liabilities over the next 12 months.
As of December 31, 2017,2023, we had outstanding borrowings under our Senior Unsecured Notes of $300,000. We had outstanding borrowings under our 2017 Credit Agreement, totaling $60,000$90.0 million and $110.0 million under our term loan facility and $20,000 under our revolving facility, leaving $180,000 of unused borrowing capacity on our revolving facility. Although we are only required to make a minimum principal payment of $5,000 during 2018, we have both the intent and the ability to pay an additional $25,000 during 2018. As such, we have classified $30,000 as current maturities of long-term debt. In addition, werespectively. We had stand alone letters of credit and bank guarantees outstanding in the amount of $4,670,$3.2 million, leaving approximately $175,330$336.8 million of unused borrowing capacity on our revolving facility. Commitment fees on unused lines of credit for the year ended December 31, 20172023 were $570.$0.5 million. The overall weighted average cost of debt is approximately 5.1%6.5% and net of a related cross-currency swap instrument is approximately 4.2%5.0%. Further details regarding the cross-currency swap instrument are discussed in Note 11.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The aggregate maturities of our outstanding debt, including capital lease obligationsexcluding unamortized debt issuance costs, as of December 31, 2017,2023, are as follows:
2024$6.4 
20259.2 
2026185.0 
2027— 
2028— 
Thereafter— 
Total aggregate maturities$200.6 
2018$6,609
20197,868
20209,921
202112,006
202246,875
Thereafter300,000
Total aggregate maturities$383,279
10.Other Current Liabilities
10.    Other Current Liabilities
Other current liabilities as of December 31 consisted of the following:
20232022
Other current liabilities:
Taxes$11.3 $11.1 
Warranty reserve7.4 7.8 
Deferred revenue7.9 6.6 
Customer sales incentives21.3 20.0 
Freight3.9 6.4 
Restructuring2.4 1.7 
Operating leases14.4 15.0 
Miscellaneous accrued expenses20.0 17.7 
Total other current liabilities$88.6 $86.3 
11.    Derivatives
 2017 2016
Other Current Liabilities:   
Taxes, other than income taxes$14,760
 $7,122
Warranty12,676
 10,960
Deferred revenue5,815
 2,366
Rebates13,466
 11,102
Freight3,208
 4,274
Restructuring4,267
 394
Miscellaneous accrued expenses10,779
 4,385
Other4,476
 3,014
Total Other Current Liabilities$69,447
 $43,617

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

The changes in warranty reserves for the three years ended December 31 were as follows:
 2017 2016 2015
Beginning balance$10,960
 $10,093
 $9,686
Product warranty provision12,124
 12,413
 11,719
Acquired warranty obligations1,208
 42
 —
Foreign currency274
 82
 (207)
Claims paid(11,890) (11,670) (11,105)
Ending balance$12,676
 $10,960
 $10,093
11.Derivatives
Hedge Accounting and Hedging Programs
In 2015, we expanded our foreign currency hedging programs to include foreign exchange purchased options and forward contracts to hedge our foreign currency denominated revenue. We recognize all derivative instruments as either assets or liabilities in our Consolidated Balance Sheetsconsolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge. We evaluate hedge effectiveness on our hedges that are designated and qualify for hedge accounting at the inception of the hedge prospectively, as well as retrospectively, and record any ineffective portion of the hedging instruments in Net Foreign Currency Transaction Lossesnet foreign currency transaction loss on our Consolidated Statementsconsolidated statements of Operations.income. The time value of purchased contracts is recorded in Net Foreign Currency Transaction Lossesnet foreign currency transaction loss in our Consolidated Statementsconsolidated statements of Operations.income. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in net foreign currency transaction losses in our consolidated statements of income.
Our hedging policy establishes maximum limits for each counterparty to mitigate any concentration of risk.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Balance Sheet Hedging
Hedges of Foreign Currency Assets and Liabilities
We hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value as either assets or liabilities on the Consolidated Balance Sheetsconsolidated balance sheets with changes in the fair value recorded to Net Foreign Currency Transaction Lossesnet foreign currency transaction gain in our Consolidated Statementsconsolidated statements of Operations.income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. At December 31, 20172023 and December 31, 2016,2022, the notional amounts of foreign currency forward exchange contracts outstanding not designated as hedging instruments were $60,858$73.0 million and $42,866,$83.7 million, respectively.
During the first quarter of 2017, in connection with our acquisition of IPC Group, we entered into a foreign currency option contract not designated as a hedging instrument for a notional amount of €180,000. The option contract has since expired and there were no outstanding foreign currency option contracts not designated as hedging instruments as of December 31, 2017 and December 31, 2016.
Cash Flow HedgingHedges
Hedges of Forecasted Foreign Currency Transactions
In countries outside the U.S., we transact business in U.S. dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to one year. We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business, and accordingly, they are not speculative in nature. The notional amount of outstanding foreign currency forward contracts designated as cash flow hedges were $2,928 and $2,127 as of December 31, 2017 and December 31, 2016, respectively. The notional amount of outstanding foreign currency option contracts designated as cash flow hedges was $8,619 and $8,522 as of December 31, 2017 and December 31, 2016, respectively.
Foreign Currency Derivatives
We use foreign currency exchange rate derivatives to hedge our exposure to fluctuations in exchange rates for anticipated intercompany cash transactions between Tennant Company and its subsidiaries. During the second quarter of 2017, we entered into Euro to U.S. dollar foreign exchange cross currency swaps for all of the anticipated cash flows associated with an intercompany loan from a wholly-owned European subsidiary. We enteredenter into these foreign exchange cross currencycross-currency swaps to hedge the foreign currency denominated cash flows associated with this intercompany loan, and accordingly, they are not speculative in nature. WeThese cross-currency swaps are designated these cross currency swaps as cash flow hedges. The hedgedloan and related swaps matured in April 2022.
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. The Company entered into an aggregate $120.0 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%. These interest rate swaps are designated as cash flowsflow hedges. These swaps are scheduled to mature on December 1, 2026.
Fair Value Hedges
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, 20172023, these cross-currency swaps included €181,200€75.0 million of total notional value. As of December 31, 2017,2023, the aggregateaggregated scheduled interest payments over the course of the loan and related swaps amounted to €31,200.€7.5 million. The scheduled maturity and principal payment of the loan and related swapsinterest payments of €150,000€82.5 million are due in April 2022. There were no cross2027.
Net Investment Hedges
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 cash flow hedges asnet investment hedges. As of December 31, 2016.

2023, the cross-currency swaps included €75.0 million of total notional values. These swaps are scheduled to mature in April 2027.
43
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the fair value of these cash flow hedges in Accumulated Other Comprehensive Loss in our Consolidated Balance Sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to Net Sales. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from Accumulated Other Comprehensive Loss to Net Foreign Currency Transaction Losses in our Consolidated Statements of Operations at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in Net Foreign Currency Transaction Losses in our Consolidated Statements of Operations.
The fair value of derivative instruments on our Consolidated Balance Sheetsconsolidated balance sheets as of December 31 consisted of the following:
Derivative AssetsDerivative Liabilities
Balance Sheet LocationDecember 31, 2023December 31, 2022Balance Sheet LocationDecember 31, 2023December 31, 2022
Derivatives designated as cash flow hedges:
Interest rate swapsOther current assets0.8 0.8 Other current liabilities— 
Interest rate swapsOther assets— — Other liabilities1.9 1.8 
Derivatives designated as fair value hedges:
Cross-currency swapsOther current assets1.3 1.4 Other current liabilities— 
Cross-currency swapsOther assets— 0.8 Other liabilities3.3 — 
Derivatives designated as net investment hedges:
Cross-currency swapsOther current assets1.2 1.2 Other current liabilities— 
Cross-currency swapsOther assets— 0.5 Other liabilities3.4 — 
Derivatives not designated as hedging instruments:
Foreign currency forward contracts(a)
Other current assets— 0.1 Other current liabilities1.6 0.3 
  2017 2016
  Fair Value Asset Derivatives Fair Value Liability Derivatives Fair Value Asset Derivatives Fair Value Liability Derivatives
Derivatives designated as hedging instruments:        
Foreign currency option contracts(1)
 $86
 $—
 $184
 $—
Foreign currency forward contracts(1)
 7,218
 34,961
 —
 13
Derivatives not designated as hedging instruments:        
Foreign currency forward contracts(1)
 $442
 $425
 $12
 $162
(a)Contracts that mature within the next 12 months are included in other current assets and other current liabilities for asset derivatives and liabilities derivatives, respectively, on our consolidated balance sheets. Contracts with maturities greater than 12 months are included in other assets and other liabilities for asset derivatives and liability derivatives, respectively, in our consolidated balance sheets. Amounts included in our consolidated balance sheets are recorded net where a right of offset exists with the same derivative counterparty.
(1)
Contracts that mature within the next 12 months are included in Other Current Assets and Other Current Liabilities for asset derivatives and liabilities derivatives, respectively, on our Consolidated Balance Sheets. Contracts with maturities greater than 12 months are included in Other Assets and Other Liabilities for asset derivatives and liability derivatives, respectively, in our Consolidated Balance Sheets. Amounts included in our Consolidated Balance Sheets are recorded net where a right of offset exists with the same derivative counterparty.
As of December 31, 2017,2023, we anticipate reclassifying approximately $1,865$3.0 million of gains from Accumulated Other Comprehensive Lossaccumulated other comprehensive loss to net earningsnet income during the next twelve12 months.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The following tables include the amounts in the consolidated statements of income in which the effects of derivative instruments are recorded and the effects of derivative instruments activity on these line items for the years ended December 31, 2023 and December 31, 2022:
20232022
TotalAmount of Gain (Loss) on Cash Flow
Hedge Activity		TotalAmount of Gain (Loss) on Cash Flow
Hedge Activity
Derivatives designated as cash flow hedges:
Net sales$1,243.6 $— $1,092.2 $— 
Interest expense, net(13.5)0.9 (7.1)0.7 
Net foreign currency transaction loss0.3 — (1.2)4.7 
Derivatives designated as fair value hedges:
Interest expense, net(13.5)1.1 (7.1)0.9 
Net foreign currency transaction loss (gain)0.3 (1.9)(1.2)2.0 
Derivatives designated as net investment hedges:
Interest expense, net(13.5)1.0 (7.1)0.7 
The effect of foreign currency derivative instruments designated as cash flow hedges and foreign currency derivative instruments not designated as hedges in our Consolidated Statementsconsolidated statements of Earningsincome for the three years ended December 31 were as follows:
202320222021
Derivatives designated as cash flow hedges:
Net gain (loss) recognized in other comprehensive (loss) income, net of tax(a)
$0.6 $3.1 $10.8 
Net loss reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net sales— — (0.3)
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest income2.0 0.5 1.9 
Net gain (loss) reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to net foreign currency transaction losses— 3.69.7 
Derivatives designated as fair value hedges:
Net gain recognized in other comprehensive loss, net of tax— 2.7 — 
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net— 0.9 — 
Derivatives designated as net investment hedges:
Net gain recognized in other comprehensive loss, net of tax2.0 4.2 — 
Net gain reclassified from accumulated other comprehensive loss into income, net of tax, effective portion to interest expense, net1.0 0.7 — 
Derivatives not designated as hedging instruments:
Net gain (loss) recognized in income(b)
$1.7 $1.0 $2.5 
(a)Net change in the fair value of the effective portion classified in other comprehensive (loss) income.
(b)Classified in net foreign currency transaction losses.
50
  2017 2016 2015
  Foreign Currency Option Contracts Foreign Currency Forward Contracts Foreign Currency Option Contracts Foreign Currency Forward Contracts Foreign Currency Option ContractsForeign Currency Forward Contracts
Derivatives in cash flow hedging relationships:           
Net (loss) gain recognized in Other Comprehensive Income (Loss), net of tax(1)
 $(193) $(16,226) $(259) $(73) $31
$77
Net (loss) gain reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Net Sales (178) (37) (148) 7
 —
5
Net gain reclassified from Accumulated Other Comprehensive Loss in earnings, net of tax, effective portion to Interest Income —
 1,198
 —
 —
 —
—
Net loss reclassified from Accumulated Other Comprehensive Loss into earnings, net of tax, effective portion to Net Foreign Currency Transaction Losses —
 (12,555) —
 —
 —
—
Net (loss) gain recognized in earnings(2)
 (13) 10
 (11) 2
 6
(2)
Derivatives not designated as hedging instruments:           
Net (loss) gain recognized in earnings(3)
 $—
 $(6,161) $—
 $(890) $—
$4,047
(1)
Net change in the fair value of the effective portion classified in Other Comprehensive Income (Loss).
(2)
Ineffective portion and amount excluded from effectiveness testing classified in Net Foreign Currency Transaction Losses.
(3)
Classified in Net Foreign Currency Transaction Losses.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

12.    Fair Value Measurements
12.Fair Value Measurements
Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Our population of assets and liabilities subject to fair value measurements at as of December 31, 2017 is2023 were as follows:
Fair ValueLevel 1Level 2Level 3
Assets:
Cross-currency swaps$2.5 $— $2.5 $— 
Interest rate swaps0.8 — 0.8 — 
Total assets3.3 — 3.3 — 
Liabilities:
Foreign currency forward exchange contracts1.6 — 1.6 — 
Cross-currency swaps6.7 — 6.7 — 
Interest rate swaps1.9 — 1.9 — 
Total liabilities$10.2 $— $10.2 $— 
 
Fair
Value
 Level 1 Level 2 Level 3
Assets:       
Foreign currency forward exchange contracts$7,660
 $—
 $7,660
 $—
Foreign currency option contracts86
 —
 86
 —
Total Assets$7,746
 $—
 $7,746
 $—
Liabilities: 
  
  
  
Foreign currency forward exchange contracts$35,386
 $—
 $35,386
 $—
Total Liabilities$35,386
 $—
 $35,386
 $—
Our population of assets and liabilities subject to fair value measurements as of December 31, 2022 were as follows:
Fair ValueLevel 1Level 2Level 3
Assets:
Foreign currency forward exchange contracts$0.1 $— $0.1 $— 
Cross-currency swaps3.9 — 3.9 — 
Interest rate swaps0.8 — 0.8 — 
Total assets4.8 — 4.8 — 
Liabilities:
Foreign currency forward exchange contracts0.3 — 0.3 — 
Interest rate swaps1.8 — 1.8 $— 
Total liabilities$2.1 $— $2.1 $— 
Our foreign currency forward exchange contracts, cross-currency swaps and option contractsinterest rate swaps are valued using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount. Further details regarding our foreign currency forward exchange and option contracts are discussed in Note 11.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Contingent consideration is valued using a probability-weighted analysis of projected gross profit and integration milestones. Contingent consideration payments totaling $2.5 million were paid in 2021.
The carrying amounts reported in the Consolidated Balance Sheetsconsolidated balance sheets for Cashcash and Cash Equivalents, Restricted Cash, Receivables, Other Current Assets, Accounts Payablecash equivalents, restricted cash, receivables, other current assets, accounts payable and Other Current Liabilitiesother current liabilities approximate fair value due to their short-term nature.
The fair marketvalue and carrying value of our Long-Term Debt approximates costtotal debt, including current portion, was $198.2 million and $200.6 million, respectively, as of December 31, 2023. The fair value was calculated based on the borrowing rates currently available to us for bank loans with similar terms and remaining maturities.
From time to time, we measure certain assets at fair value onmaturities, which is a non-recurring basis, including evaluation of long-lived assets, goodwill and other intangible assets, as part of a business acquisition. These assets are measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Fair value valuations are based on the information available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by us. There are inherent uncertainties and management judgment required in these determinations. The fair value measurements of assets acquired and liabilities assumed as part of a business acquisition are based on valuations involving significant unobservable inputs, or Level 3,2 in the fair value hierarchy.
These assets are also subject to periodic impairment testing by comparing the respective carrying value of each asset to the estimated fair value of the reporting unit or asset group in which they reside. In the event we determine these assets to be impaired, we would recognize an impairment loss equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. These periodic impairment tests utilize company-specific assumptions involving significant unobservable inputs, or Level 3, in the fair value hierarchy.
13.    Retirement Benefit Plans
13.Retirement Benefit Plans
Substantially all U.S. employees are covered by various retirement benefit plans, including postretirement medicaldefined contribution savings plans and defined contribution savingspostretirement medical plans. Retirement benefits for eligible employees in foreign locations are funded principally through defined benefit plans, annuity or government programs. The total cost of benefits for our plans was $13,253, $12,108$16.6 million, $11.6 million and $12,428$14.8 million in 2017, 20162023, 2022 and 2015,2021, respectively.
We had a qualified, funded defined benefit retirement plan (the “U.S. Pension Plan”) covering certain current and retired employees in the U.S. Pension Plan benefits are based on the years of service and compensation during the highest five consecutive years of service in the final ten years of employment. No new participants have entered the plan since 2000. During 2015, the plan was amended to freeze benefits for all participants effective January 31, 2017. On February 15, 2017, the Board of Directors approved the termination of the U.S. Pension Plan, effective May 15, 2017. Participants who elected an immediate lump sum distribution were paid out in December 2017. Assets for participants who elected or are currently receiving annuity payments and those who have elected to defer their benefits were transferred to the annuity company, Pacific Life, in December 2017. In December 2017, excessExcess assets of $6,305 were transferred from the Tennant Company Pension Trust to the Tennant Company Retirement Savings Plan to deliver future discretionary benefits to plan participants. During 2022, all remaining excess assets were utilized, and none remained outstanding as of December 31, 2022.
We have a U.S. postretirement medical benefit plan (the “U.S. Retiree Plan”) to provide certain healthcare benefits for U.S. employees hired before January 1, 1999. Eligibility for those benefits is based upon a combination of years of service with us and age upon retirement.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Our defined contribution savings plan (“401(k)” plan”) covers substantially all U.S. employees. Under this plan, we match up to 3% of the employee’s annual compensation in cash to be invested per their election. We also make a profit sharing contribution to the 401(k) plan for employees with more than one year of service in accordance with our Profit Sharing Plan. This contribution is based upon our financial performance and can be funded in the form of Tennant stock, cash or a combination of both. Expenses for the 401(k) plan were $4,404, $8,359$10.5 million, $6.0 million and $8,098$8.7 million during 2017, 20162023, 2022 and 2015,2021, respectively.
We have a U.S. nonqualified supplemental benefit plan (the “U.S. Nonqualified Plan”) to provide additional retirement benefits for certain employees whose benefits under our 401(k) plan or U.S. Pension Plan are limited by either the Employee Retirement Income Security Act or the Internal Revenue Code.
We also have defined benefit pension plans in the United Kingdom, Germany, France and GermanyItaly (the “U.K. Pension Plan” and, the “German Pension Plan”Plan,” "French Pension Plan" and the "Italian Pension Plan"). The U.K. Pension Plan, French Pension Plan, German Pension Plan and GermanItalian Pension Plan cover certain current and retired employees and bothall plans are closed to new participants. In December 2018, the U.K. Pension Plan was amended to close all future accrual of benefits to existing active members, resulting in a curtailment gain of $0.1 million relating to past service benefits. The Italian Plan is an employee termination indemnity mandated by Italian law to all employees employed prior to 2008. Benefits are paid out when employees covered under the plan are terminated for any reason. Due to changes in Italian law, such termination indemnities are no longer available to new participants. Prior year Non-U.S. Pension Benefits disclosures have been updated to include the Italian Pension Plan.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
We expect to contribute approximately $140less than $0.1 million to our U.S. Nonqualified Plan $771and $0.6 million to our U.S. Retiree Plan $292in 2024. We expect contributions to our U.K. Pension Plan, and $36 to our German Pension Plan, in 2018. There were no contributions made to the U.S.French Pension Plan during 2017.and Italian Pension Plans to be $0.2 million in 2024.
Weighted-average asset allocations by asset category of the U.K. Pension Plan and the Tennant Company Retirement Savings Planas of December 31, 2023 are as follows:
Quoted Prices in Active Markets for
Identical Assets		Significant Observable InputsSignificant Unobservable Inputs
Asset categoryFair Value(Level 1)(Level 2)(Level 3)
Investment account held by pension plan(a)
$12.7 $— $— $12.7 
Total$12.7 $— $— $12.7 
(a)This category is comprised of December 31, 2017 are as follows:investments in insurance contracts.
Asset CategoryFair Value 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Cash and Cash Equivalents$6,305
 $6,305
 $—
 $—
Investment Account held by Pension Plan(1)
11,163
 —
 —
 11,163
Total$17,468
 $6,305
 $—
 $11,163
(1)
This category is comprised of investments in insurance contracts.
Weighted-average asset allocations by asset category of the U.S. and U.K. Pension PlansPlan as of December 31, 20162022 are as follows:
Quoted Prices in Active Markets for
Identical Assets		Significant Observable InputsSignificant Unobservable Inputs
Asset categoryFair Value(Level 1)(Level 2)(Level 3)
Investment account held by pension plan(a)
$11.3 — — $11.3 
Total$11.3 $— $— $11.3 
Asset CategoryFair Value 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Cash and Cash Equivalents$663
 $663
 $—
 $—
Mutual Funds: 
  
  
  
U.S. Large-Cap9,803
 9,803
 —
 —
U.S. Small-Cap2,584
 2,584
 —
 —
International Equities2,244
 2,244
 —
 —
Fixed-Income Domestic4,564
 4,564
 —
 —
Collective Investment Funds26,531
 —
 26,531
 —
Investment Account held by Pension Plan(1)
9,562
 —
 —
 9,562
Total$55,951
 $19,858
 $26,531
 $9,562
(a)This category is comprised of investments in insurance contracts.
(1)
This category is comprised of investments in insurance contracts.
Estimates of the fair value of U.S. and U.Kthe U.K. Pension Plan and the Tennant Company Retirement Savings Plan assets are based on the framework established in the accounting guidance for fair value measurements. A brief description of the three levels can be found in Note 12. Equity Securities and Mutual Funds traded in active markets are classified as Level 1. Collective Investment Funds are measured at fair value using quoted market prices. They are classified as Level 2 as they trade in a non-active market for which asset prices are readily available. The Investment Account held by the U.K. Pension Plan invests in insurance contracts for purposes of funding the U.K. Pension Plan and is classified as Level 3. The fair value of the Investment Account is the cash surrender values as determined by the provider which are the amounts the plan would receive if the contracts were cashed out at year end.year-end. The underlying assets held by these contracts are primarily invested in assets traded in active markets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

A reconciliation of the beginning and ending balances of the Level 3 investments of our U.K. Pension Plan during the years ended areDecember 31 is as follows:
2017 2016
202320232022
Fair value at beginning of year$9,562
 $10,691
Purchases, sales, issuances and settlements, net(535) 7
Net gain1,190
 674
Net (loss) gain
Foreign currency946
 (1,810)
Fair value at end of year$11,163
 $9,562
The primary objective of our U.S. and U.K. Pension PlansPlan is to meet retirement income commitments to plan participants at a reasonable cost to us and to maintain a sound actuarially funded status. This objective is accomplished through growth of capital and safety of funds invested. The pension plans' assetsAssets are invested in securities to
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
achieve growth of capital over inflation through appreciation and accumulation and reinvestment of dividend and interest income. Investments are diversified to control risk. The target allocation for the U.S. Pension Plan was 70% debt securities and 30% equity. Equity securities within the U.S. Pension Plan did not include any direct investments in Tennant Company Common Stock. The U.K. Pension Plan is invested in insurance contracts with underlying investments primarily in equity and fixed income securities. Our German Pension Plan is unfunded, which is customary in that country.
Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:
U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
2017 2016 2017 2016 2017 2016
U.S. Nonqualified PlanU.S. Nonqualified PlanNon-U.S.
Pension Benefits		Postretirement
Medical Benefits
2023202320222023202220232022
Discount rate3.28% 3.92% 2.45% 2.64% 3.26% 3.58%Discount rate5.07 %5.37 %4.26 %1.05 %5.06 %5.37 %
Rate of compensation increase—% 3.00% 3.50% 3.50% —
 —
Rate of compensation increase— %— %3.00 %2.25 %— %— %
Weighted-average assumptions used to determine net periodic benefit costs as of December 31 are as follows:
U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
2017 2016 2015 2017 2016 2015 2017 2016 2015
U.S. Nonqualified PlanU.S. Nonqualified PlanNon-U.S.
Pension Benefits		Postretirement
Medical Benefits
2023202320222021202320222021202320222021
Discount rate3.92% 4.08% 3.76% 2.64% 3.59% 3.38% 3.58% 3.70% 3.39%Discount rate5.37 %2.54 %2.06 %4.68 %1.55 %1.05 %5.37 %2.53 %2.07 %
Expected long-term rate of return on plan assets5.10% 5.20% 5.20% 3.90% 4.60% 4.40% —
 —
 —
Expected long-term rate of return on plan assets— %— %— %6.10 %3.20 %2.70 %— %— %— %
Rate of compensation increase—% 3.00% 3.00% 3.50% 3.50% 3.50% —
 —
 —
Rate of compensation increase— %— %— %2.25 %1.50 %— %— %— %— %
The discount rate is used to discount future benefit obligations back to today’s dollars. Our discount rates were determined based on high-quality fixed income investments. The resulting discount rates are consistent with the duration of plan liabilities. The CitigroupMercer Above Median Spot RateMean Yield Curve for high-quality corporate bonds is used in determining the discount rate for the U.S. Nonqualified Plan in 2023. The Mercer Yield Curve is used in determining the discount rate for the Non-U.S. Plans in 2023. Before 2019, the FTSE (formerly known as Citigroup) Above Median Spot rates for high-quality corporate bonds were used in determining the discount rate for the U.S. Plans. Before 2021, the iBoxx € Corporates AA 7-10 and iBoxx € Corporates AA 10+ Benchmark was used to determine the discount rate for the Italian Pension Plan. The expected return on assets assumption on the investment portfolios for the pension plans is based on the long-term expected returns for the investment mix of assets currently in the portfolio. Management uses historic return trends of the asset portfolio combined with recent market conditions to estimate the future rate of return.
The accumulated benefit obligations as of December 31 for all defined benefit plans are as follows:
20232022
U.S. Nonqualified Plan$0.9 $0.9 
U.K. Pension Plan6.2 6.5 
German Pension Plan1.0 0.7 
French Pension Plan0.4 0.5 
Italian Pension Plan2.5 2.4 
54
 2017 2016
U.S. Pension Plans$1,414
 $40,961
U.K. Pension Plan11,131
 10,265
German Pension Plan1,013
 871
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Information for our plans with an accumulated benefit obligation in excess of plan assets as of December 31 is as follows:
20232022
Accumulated benefit obligation$4.8 $4.5 
Fair value of plan assets— — 
 2017 2016
Accumulated benefit obligation$2,427
 $12,597
Fair value of plan assets—
 9,562
As of December 31, 2017,2023 and 2022, the U.S. Nonqualified, the German Pension, the French Pension and the GermanItalian Pension Plans had an accumulated benefit obligation in excess of plan assets. As of December 31, 2016, the U.S. Nonqualified, the U.K. Pension and the German Pension Plans had an accumulated benefit obligation in excess of plan assets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Information for our plans with a projected benefit obligation in excess of plan assets as of December 31 is as follows:
2017 2016
202320232022
Projected benefit obligation$2,427
 $12,794
Fair value of plan assets—
 9,562
As of December 31, 2017, the U.S. Nonqualified2023 and the German Pension Plans had a projected benefit obligation in excess of plan assets. As of December 31, 2016,2022, the U.S. Nonqualified, the UKGerman Pension, the French Pension and the GermanItalian Pension Plans had a projected benefit obligation in excess of plan assets.
Assumed healthcare cost trend rates as of December 31 are as follows:
 2017 2016
Healthcare cost trend rate assumption for the next year6.56% 6.56%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)5.00% 5.00%
Year that the rate reaches the ultimate trend rate2032
 2031
Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans. To illustrate, a one-percentage-point change in assumed healthcare cost trends would have the following effects:
20232022
Healthcare cost trend rate assumption for the next year Pre-658.00 %5.30 %
Healthcare cost trend rate assumption for the next year Post-658.80 %5.80 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)4.00 %4.00 %
Year that the rate reaches the ultimate trend rate20472045
55
 
1-Percentage-
Point
Decrease
 
1-Percentage-
Point
Increase
Effect on total of service and interest cost components$(31) $35
Effect on postretirement benefit obligation$(724) $820

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

Summaries related to changes in benefit obligations and plan assets and to the funded status of our defined benefit and postretirement medical benefit plans are as follows:
U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
2017 2016 2017 2016 2017 2016
U.S. Nonqualified PlanU.S. Nonqualified PlanNon-U.S.
Pension Benefits		Postretirement
Medical Benefits
2023202320222023202220232022
Change in benefit obligation:           
Benefit obligation at beginning of year$40,961
 $41,774
 $11,136
 $10,883
 $10,540
 $11,144
Benefit obligation at beginning of year
Benefit obligation at beginning of year
Plan combinations
Service cost—
 354
 132
 103
 60
 76
Interest cost1,538
 1,659
 298
 358
 363
 396
Plan participants' contributions—
 —
 14
 14
 —
 —
Actuarial loss (gain)1,811
 690
 327
 1,939
 (524) 6
Actuarial (gain) loss
Foreign exchange—
 —
 1,097
 (1,852) —
 —
Settlement
Benefits paid(1,950) (3,516) (860) (309) (835) (1,082)
Settlement(40,946) —
 —
 —
 —
 —
Benefit obligation at end of year$1,414
 $40,961
 $12,144
 $11,136
 $9,604
 $10,540
Change in fair value of plan assets and net accrued liabilities:
Fair value of plan assets at beginning of year$46,389
 $47,201
 $9,562
 $10,691
 $—
 $—
Fair value of plan assets at beginning of year
Fair value of plan assets at beginning of year
Actual return on plan assets2,536
 2,457
 1,189
 673
 —
 —
Employer contributions276
 247
 313
 303
 835
 1,082
Plan participants' contributions—
 —
 14
 14
 —
 —
Excess assets transferred to Defined Contribution Plan(6,305) —
 —
 —
 —
 —
Foreign exchange—
 —
 945
 (1,810) —
 —
Settlement
Benefits paid(1,950) (3,516) (860) (309) (835) (1,082)
Settlement(40,946) —
 —
 —
 —
 —
Fair value of plan assets at end of year—
 46,389
 11,163
 9,562
 —
 —
Funded status at end of year$(1,414) $5,428
 $(981) $(1,574) $(9,604) $(10,540)
Amounts recognized in the Consolidated Balance Sheets consist of:
Noncurrent Other Assets$—
 $7,087
 $—
 $—
 $—
 $—
Current Liabilities(140) (239) (36) (30) (771) (828)
Long-Term Liabilities(1,274) (1,420) (945) (1,544) (8,833) (9,712)
Net accrued asset (liability)$(1,414) $5,428
 $(981) $(1,574) $(9,604) $(10,540)
Amounts recognized in Accumulated Other Comprehensive Loss consist of:
Net actuarial loss(915) (5,720) (1,245) (1,802) (41) (566)
Accumulated Other Comprehensive Loss$(915) $(5,720) $(1,245) $(1,802) $(41) $(566)
Amounts recognized in the consolidated balance sheets consist of:
Noncurrent other assets
Noncurrent other assets
Noncurrent other assets
Current liabilities
Long-term liabilities
Net accrued liability
Amounts recognized in accumulated other comprehensive loss consist of:
Prior service cost
Prior service cost
Prior service cost
Net actuarial (loss) gain
Accumulated other comprehensive (loss) income
49
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

The components of the net periodic benefit cost (credit) cost for the three years ended December 31 were as follows:
 U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
 2017 2016 2015 2017 2016 2015 2017 2016 2015
Service cost$—
 $354
 $480
 $132
 $103
 $153
 $60
 $76
 $96
Interest cost1,538
 1,659
 1,711
 298
 358
 396
 363
 396
 393
Expected return on plan assets(2,336) (2,400) (2,613) (379) (452) (433) —
 —
 —
Amortization of net actuarial loss43
 41
 835
 74
 27
 54
 —
 —
 —
Amortization of prior service cost—
 41
 42
 —
 —
 —
 —
 —
 —
Foreign currency—
 —
 —
 (1) 97
 (35) —
 —
 —
Net periodic benefit (credit) cost(755) (305) 455
 124
 133
 135
 423
 472
 489
Curtailment charge—
 —
 25
 —
 —
 —
 —
 —
 —
Settlement charge6,373
 —
 225
 —
 —
 —
 —
 —
 —
Net benefit cost (credit)$5,618
 $(305) $705
 $124
 $133
 $135
 $423
 $472
 $489
U.S. Nonqualified PlanNon-U.S.
Pension Benefits		Postretirement
Medical Benefits
202320222021202320222021202320222021
Service cost$— $— $— $0.1 $0.3 $— $— $— $0.1 
Interest cost— — 0.1 0.5 0.2 0.2 0.3 0.2 0.1 
Expected return on plan assets— — — (0.7)(0.4)(0.4)— — — 
Amortization of net actuarial loss0.1 0.1 — (0.1)— 0.1 (0.2)— — 
Net periodic benefit cost (credit)$0.1 $0.1 $0.1 $(0.2)$0.1 $(0.1)$0.1 $0.2 $0.2 
The changes in Accumulated Other Comprehensive Lossaccumulated other comprehensive loss for the three years ended December 31 were as follows:
 U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
 2017 2016 2015 2017 2016 2015 2017 2016 2015
Net actuarial loss (gain)$1,611
 $633
 $195
 $(465) $1,718
 $(1,517) $(524) $6
 $(1,618)
Amortization of prior service cost—
 (41) (67) —
 —
 —
 —
 —
 —
Amortization of net actuarial loss(43) (41) (1,060) (74) (27) (54) —
 —
 —
Settlement Charge(6,373) —
 —
 —
 —
 —
 —
 —
 —
Total recognized in other comprehensive (income) loss$(4,805) $551
 $(932) $(539) $1,691
 $(1,571) $(524) $6
 $(1,618)
Total recognized in net benefit cost (credit) and other comprehensive (income) loss$813
 $246
 $(227) $(415) $1,824
 $(1,436) $(101) $478
 $(1,129)
U.S. Nonqualified PlanNon-U.S.
Pension Benefits		Postretirement
Medical Benefits
202320222021202320222021202320222021
Prior service cost$— $— $— $— $— $— $— $— $— 
Net actuarial (gain) loss0.1 (0.1)— (0.9)(5.0)0.2 (0.7)(1.1)0.6 
Amortization of net actuarial (loss) gain(0.1)(0.1)— 0.1 — (0.1)0.2 — — 
Total recognized in other comprehensive (income) loss$— $(0.2)$— $(0.8)$(5.0)$0.1 $(0.5)$(1.1)$0.6 
Total recognized in net benefit (credit) cost and other comprehensive (income) loss$0.1 $(0.1)$0.1 $(1.0)$(4.9)$— $(0.4)$(0.9)$0.8 
The following benefit payments, which reflect expected future service, are expected to be paid for our U.S. and Non-U.S. plans:paid:
U.S.
Nonqualified Plan		Non-U.S.
Pension Benefits		Postretirement
Medical Benefits
2024$0.1 $0.6 $0.6 
20250.1 0.6 0.5 
20260.1 0.6 0.5 
20270.1 0.6 0.5 
20280.1 0.6 0.5 
2028 to 20310.3 3.7 2.0 
Total$0.8 $6.7 $4.6 
57
 U.S. Pension Benefits 
Non-U.S.
Pension Benefits
 
Postretirement
Medical Benefits
2018$140
 $247
 $771
2019133
 254
 803
2020132
 261
 849
2021124
 269
 751
2022117
 278
 741
2023 to 2027493
 1,538
 3,509
Total$1,139
 $2,847
 $7,424
The following amounts are included in Accumulated Other Comprehensive Loss as of December 31, 2017 and are expected to be recognized as components of net periodic benefit cost during 2018:
 
Pension
Benefits
 
Postretirement
Medical
Benefits
Net actuarial loss$78
 $—

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands,Tables in millions, except shares and per share data)

14.    Shareholders' Equity
14.Shareholders' Equity
Authorized Shares
We are authorized to issue an aggregate of 60,000,000 shares, all of which are designated as Common Stock having a par value of $0.375$0.375 per share. The Board of Directors is authorized to establish one or more series of preferred stock, setting forth the designation of each such series, and fixing the relative rights and preferences of each such series.
Accumulated Other Comprehensive Loss
Components of Accumulated Other Comprehensive Loss, net of tax, within the Consolidated Balance Sheets and Statements of Shareholders' Equity as of December 31 are as follows:
 2017 2016 2015
Foreign currency translation adjustments$(15,778) $(44,444) $(44,585)
Pension and retiree medical benefits(1,610) (5,391) (3,647)
Cash flow hedge(4,935) (88) 103
Total Accumulated Other Comprehensive Loss$(22,323) $(49,923) $(48,129)
The changes in components of Accumulated Other Comprehensive Loss,accumulated other comprehensive loss, net of tax, are as follows:
 Foreign Currency Translation Adjustments Pension and Postretirement Benefits Cash Flow Hedge Total
December 31, 2016$(44,444) $(5,391) $(88) $(49,923)
Other comprehensive income (loss) before reclassifications28,666
 (300) (16,419) 11,947
Amounts reclassified from Accumulated Other Comprehensive Loss—
 4,081
 11,572
 15,653
Net current period other comprehensive income (loss)28,666
 3,781
 (4,847) 27,600
December 31, 2017$(15,778) $(1,610) $(4,935) $(22,323)
Foreign Currency Translation
Adjustments		Pension and Postretirement
Medical Benefits		Derivative Financial InstrumentsTotal
December 31, 2021$(36.0)$(2.1)$0.2 $(37.9)
Other comprehensive (loss) income before reclassifications(17.2)4.8 5.8 (6.6)
Amounts reclassified from accumulated other comprehensive loss(0.7)— (5.0)(5.7)
Net current period other comprehensive (loss) income(17.9)4.8 0.8 (12.3)
December 31, 2022$(53.9)$2.7 $1.0 $(50.2)
Other comprehensive (loss) income before reclassifications9.3 1.0 0.6 10.9 
Amounts reclassified from accumulated other comprehensive loss(1.0)— (2.0)(3.0)
Net current period other comprehensive (loss) income8.3 1.0 (1.4)7.9 
December 31, 2023$(45.6)$3.7 $(0.4)$(42.3)
Accumulated Other Comprehensive Lossother comprehensive loss associated with pension and postretirement benefits and cash flow hedges areis included in Notes 13 and 11, respectively.
Repurchase of Common Stock
15.Commitments and Contingencies
On October 31, 2016, the Board of Directors authorized the repurchase of 1,000,000 shares of our common stock. During the year ended December 31, 2023, the Company paid $21.7 million to repurchase 290,920 shares of its common stock at an average price of $74.57 per share. As of December 31, 2023, 821,413 shares were available to be repurchased. The Company paid $5.0 million to repurchase 79,756 share repurchases during the year ended December 31, 2022.
15.    Leases
We lease office and warehouse facilities, vehicles and office equipment under the operating lease agreements, which include both monthly and longer-term arrangements. Leases with initial terms of one year or more expire at various dates through 2025 and generally provide for extension options. Rent expense under the leasing agreements (exclusive of real estate taxes, insurance and other expenses payable under the leases) amounted to $21,566, $18,640 and $17,804 in 2017, 2016 and 2015, respectively.
The minimum rentals for aggregate lease commitments as of December 31, 2017, were as follows:
2018$14,083
20199,540
20205,721
20212,995
20221,996
Thereafter2,596
Total$36,931
Certain operating leases for vehicles contain residual value guarantee provisions, which would become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. TheAs of December 31, 2023, of those leases that contain residual value guarantees, the aggregate residual value at lease expiration of those leases is $14,052,was $14.6 million, of which we have guaranteed $11,409. As$8.1 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The lease assets and liabilities as of December 31 2017, we have recorded a liabilityare as follows:
LeasesClassification20232022
Assets
Operating lease assetsOperating lease assets$41.7 $31.8 
Finance lease assets
Property, plant and equipment(a)
0.6 0.2 
Total leased assets$42.3 $32.0 
Liabilities
Current:
OperatingOther current liabilities$14.4 $15.0 
FinanceCurrent portion of long-term debt0.1 — 
Noncurrent:
OperatingLong-term operating lease liabilities27.4 17.1 
FinanceLong-term debt0.5 0.1 
Total lease liabilities$42.4 $32.2 
(a)Finance lease assets are recorded net of accumulated amortization of $0.1 million and less than $0.1 million as of December 31, 2023 and December 31, 2022, respectively.
The lease cost for the estimated end-of-term lossthree years ended December 31 was as follows:
Lease Cost202320222021
Operating lease cost(a)
$28.9 $26.2 $26.6 
Finance lease cost(b)
0.1 0.1 0.1 
Total lease cost$29.0 $26.3 $26.7 
(a)Includes short-term lease costs of $5.9 million and $4.8 million and variable lease costs of $4.2 million and $3.3 million for the years ended December 31, 2023 and December 31, 2022, respectively.
(b)Includes amortization of leased assets and interest on lease liabilities.
The maturity of lease liabilities as of December 31, 2023 was as follows:
Maturity of Lease LiabilitiesOperating LeasesFinance LeasesTotal
2024$16.0 $0.2 $16.2 
202511.6 0.2 11.8 
20268.2 0.1 8.3 
20274.6 0.1 4.7 
20283.3 0.1 3.4 
Thereafter3.0 — 3.0 
Total lease payments$46.7 $0.7 $47.4 
Less: Interest(4.9)(0.1)(5.0)
Present value of lease liabilities$41.8 $0.6 $42.4 
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
The lease term and discount rate as of December 31 were as follows:
Lease Term and Discount Rate20232022
Weighted-average remaining lease term (years):
Operating leases3.82.9
Finance leases4.74.1
Weighted-average discount rate:
Operating leases6.0%3.9%
Finance leases6.0%2.5%
Other information related to this residual value guarantee of $509cash paid related to lease liabilities and lease assets obtained for certain vehicles within our fleet. Our fleet also contains vehicles we estimate will settle at a gain. Gains on these vehicles will be recognized at the end of the lease term.years ended December 31 was as follows:
Other Information20232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$18.9 $18.2 
Financing cash flows from finance leases0.1 0.1 
Lease assets obtained in exchange for new finance lease liabilities0.7 0.3 
Lease assets obtained in exchange for new operating lease liabilities18.8 11.4 
16.    Commitments and Contingencies
In the ordinary course of business, we may become liable with respect to pending and threatened litigation, tax, environmental and other matters. While the ultimate results of current claims, investigations and lawsuits involving us are unknown at this time, we do not expect that these matters will have a material adverse effect on our consolidated financial position or results of operations. Legal costs associated with such matters are expensed as incurred.

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(In thousands, except shares and per share data)

16.17.    Income Taxes
Tax Reform
Legislation popularly known as The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017, resulting in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low-taxed income. These changes are effective beginning in 2018. The 2017 Tax Act also includes a one-time transition tax on certain unrepatriated earnings from foreign subsidiaries.
ASC 740 requires a company to record the effects of a tax law change in the period of enactment, however, shortly after the enactment of the Tax Act, the SEC staff issued SAB 118, which allows a company to record a provisional amount when it does not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. We have made a reasonable estimate of the impact of the Tax Act and recorded discrete items in our 2017 provisional income tax expense of $2,355 which reflects an estimated reduction in our deferred income tax liabilities of $1,993 as a result of the maximum federal rate decrease to 21% from 35% and an estimated tax charge of $362 for the effects of one-time transition tax on cash and cash equivalent balances related to accumulated earnings associated with our international operations. We are continuing to gather additional information related to these estimates in order to more precisely compute the remeasurement of deferred taxes and the impact of the transition tax.
Income from continuing operationsbefore income taxes for the three years ended December 31 was as follows:
202320222021
U.S. operations$94.2 $58.9 $47.5 
Foreign operations29.6 20.6 26.6 
Total$123.8 $79.5 $74.1 
60
 2017 2016 2015
U.S. operations$7,465
 $54,018
 $51,189
Foreign operations(8,757) 12,473
 (765)
Total$(1,292) $66,491
 $50,424
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
Income tax expense (benefit) for the three years ended December 31 was as follows:
202320222021
Current:
Federal$28.7 $17.1 $11.1 
Foreign8.5 7.9 11.2 
State4.0 3.8 1.9 
Total current$41.2 $28.8 $24.2 
Deferred:
Federal$(8.7)$(6.3)$0.6 
Foreign(17.3)(8.5)(15.5)
State(0.9)(0.8)(0.1)
Total deferred$(26.9)$(15.6)$(15.0)
Total:
Federal$20.0 $10.8 $11.7 
Foreign(8.8)(0.6)(4.3)
State3.1 3.0 1.8 
Total income tax expense$14.3 $13.2 $9.2 
 2017 2016 2015
Current:     
Federal$2,590
 $15,962
 $15,117
Foreign8,701
 3,035
 3,992
State812
 1,859
 1,685
 $12,103
 $20,856
 $20,794
Deferred: 
  
  
Federal$1,640
 $(472) $(481)
Foreign(8,699) (434) (1,888)
State(131) (73) (89)
 $(7,190) $(979) $(2,458)
Total: 
  
  
Federal$4,230
 $15,490
 $14,636
Foreign2
 2,601
 2,104
State681
 1,786
 1,596
Total Income Tax Expense$4,913
 $19,877
 $18,336
U.S. income taxes have been provided on approximately $11,636 of undistributed earnings of non-U.S. subsidiaries as a result of the transition tax required by the Tax Act. 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 and that position has not changed following incurring the transition tax under the Tax Act. Noimmaterial. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $102.5 million of undistributed earnings from foreign investmentssubsidiaries to the United States.States as those earnings continue to be permanently reinvested.

52
TableIn December 2021, the Organization for Economic Cooperation and Development (OECD), which is an international public policy setting organization comprised of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except sharesmember countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15% (the "Pillar Two rule"). The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning on or after January 1, 2024. To date member states are in various stages of implementing the rules through local legislation and per share data)

Tax loss carryforwards and expiration periods by international operation as of December 31, 2017 were as follows:
 Amount Carryforward Period
Netherlands$23,733
 9 years
Germany12,068
 Unlimited
Sweden1,586
 Unlimited
Norway655
 Unlimited
Spain4,555
 Unlimited
Total$42,597
  
Becausethe OECD continues to refine technical guidance. We are closely monitoring developments of the uncertainty regarding realizationPillar Two rule and are currently evaluating the potential effect in each of the Netherlands and Sweden tax loss carryforwards, valuation allowances were established.
countries we operate in. We do not expect this rule to have Netherlands foreign tax credit carryforwards of $1,575. Because of the uncertainty regarding utilization of the Netherlands foreign tax credit carryforward, a valuation allowance was established.
A valuation allowance for the remaining deferred tax assets is not required since it is more likely than not that they will be realized through carryback to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income.material impact on our consolidated financial statements.
Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31 as follows:
2017 2016 2015
2023202320222021
Tax at statutory rate35.0 % 35.0 % 35.0 %Tax at statutory rate21.0 %21.0 %21.0 %
(Decreases) increases in the tax rate from:   
  
Increases (decreases) in the tax rate from:
State and local taxes, net of federal benefit
State and local taxes, net of federal benefit
State and local taxes, net of federal benefit(21.1) 1.7
 2.2
Effect of foreign operations(70.8) (5.5) (5.1)
Transaction costs(226.3) —
 —
Effect of 2018 deferred rate change(154.3) —
 —
Transition Tax(28.0) —
 —
Impairment of Long-Lived Assets—
 —
 7.0
Effect of changes in valuation allowances(126.5) 1.9
 1.5
Domestic production activities deduction28.3
 (2.2) (2.7)
Excess tax benefits on share-based compensation
Share-based payments90.4
 —
 —
Research & Development credit82.9
 (1.3) (1.7)
Research and development credit
Other, net10.2
 0.3
 0.2
Effective income tax rate(380.2)% 29.9 % 36.4 %Effective income tax rate11.6 %16.6 %12.5 %
53
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(In thousands,Tables in millions, except shares and per share data)

The effect of foreign operations line item includes (12.0%) and (7.2%) benefits for 2023 and 2022, respectively, associated with reductions to deferred tax liabilities on undistributed foreign earnings as those cumulative earnings were reduced by current year statutory book losses.
Deferred tax assets and liabilities were comprised of the following as of December 31:
20232022
Deferred tax assets:
Inventory$3.8 $4.1 
Compensation and employee benefits13.2 11.4 
Warranty reserves2.4 2.3 
Allowance for doubtful accounts and deferred revenue2.7 2.3 
Operating lease liabilities9.0 5.9 
Tax loss carryforwards6.9 8.0 
Tax credit carryforwards3.7 3.6 
Capitalized research and development costs12.3 6.6 
Goodwill and intangible assets4.5 — 
Other1.2 (0.9)
Gross deferred tax assets$59.7 $43.3 
Less: valuation allowance(3.2)(3.3)
Total net deferred tax assets$56.5 $40.0 
Deferred tax liabilities:
Operating lease assets$9.5 $6.1 
Fixed assets9.5 11.2 
Goodwill and intangible assets— 13.8 
Total deferred tax liabilities$19.0 $31.1 
Net deferred tax assets$37.5 $8.9 
 2017 2016
Deferred Tax Assets:   
Inventories, principally due to changes in inventory reserves$4,757
 $332
Employee wages and benefits, principally due to accruals for financial reporting purposes11,031
 14,723
Warranty reserves accrued for financial reporting purposes2,578
 3,617
Receivables, principally due to allowance for doubtful accounts and tax accounting method for equipment rentals2,138
 1,413
Tax loss carryforwards11,383
 7,821
Tax credit carryforwards1,575
 1,228
Other3,630
 2,126
Gross Deferred Tax Assets$37,092
 $31,260
Less: valuation allowance(9,691) (6,865)
Total Net Deferred Tax Assets$27,401
 $24,395
Deferred Tax Liabilities: 
  
Property, Plant and Equipment, principally due to differences in depreciation and related gains9,042
 6,947
Goodwill and Intangible Assets60,450
 4,180
Total Deferred Tax Liabilities$69,492
 $11,127
Net Deferred Tax (Liabilities) Assets$(42,091) $13,268
Tax credit carryforwards consist of $3.0 million of U.S. federal and state tax credits and $1.3 million of Netherlands tax credits. We have non-U.S. cumulative tax losses of $26.0 million in various countries ($6.9 million tax effected). Cumulative losses can be used to offset the income tax liabilities on future income in these countries. Of these losses, $26.0 million have unlimited carryforward periods. Less than $0.1 million of these losses have a limited carryforward period.
The valuation allowance atas of December 31, 20172023 principally applies to the Netherlands tax loss and tax credit carryforwards that,in the Netherlands and certain U.S. states which, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. As of December 31, 2023, we believe it is more likely than not that the remainder of our deferred tax assets are realizable. We recorded a net valuation allowance release in 2023 of $0.1 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. The net decrease in the valuation allowance was primarily driven by a change in judgment regarding the expected utilization of tax credit carryovers in the U.S. and the Netherlands.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
20232022
Beginning balance$4.2 $4.7 
(Decreases) as a result of tax positions taken during a prior period— (0.1)
Increases as a result of tax positions taken during the current year1.2 0.8 
Decreases relating to settlement with tax authorities(0.2)— 
Decreases as a result of a lapse of the applicable statute of limitations(1.1)(1.0)
Decreases as a result of foreign currency fluctuations— (0.2)
Ending balance$4.1 $4.2 
 2017 2016
Balance at January 1,$2,477
 $2,326
Increases as a result of tax positions taken during the current year329
 545
Increase related to prior period tax positions of acquired entities236
 —
Decreases relating to settlement with tax authorities(68) (6)
Reductions as a result of a lapse of the applicable statute of limitations(770) (523)
Increases as a result of foreign currency fluctuations28
 135
Balance at December 31,$2,232
 $2,477
Included in the balance of unrecognized tax benefits at as of December 31, 20172023 and 20162022 are potential benefits of $1,992$3.7 million and $2,114,$3.9 million, respectively, that if recognized, would affect the effective tax rate from continuing operations.rate.
We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition to the liability of $2,232$4.1 million and $2,477$4.2 million for unrecognized tax benefits as of December 31, 20172023 and 2016,2022, there was approximately $482$0.5 million and $490,$0.6 million, respectively, for accrued interest and penalties. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are generally no longer subject to U.S. federal tax examinations for taxable years before 2014 and, with limited exceptions,2018. The number of years which remain open for audit for U.S. state andor foreign income tax examinations for taxable years before 2013.
We are currently under examinationpurposes varies by the Internal Revenue Service for the 2015 tax year. Although the outcome of this matter cannot currently be determined, we believe adequate provision has been made for any potential unfavorable financial statement impact.jurisdiction but generally ranges from 3-5 years. We are currently undergoing income tax examinations in various state and foreign jurisdictions covering 2014 to 2016.jurisdictions. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.
We do not anticipate that total unrecognized tax benefits will change significantly within the next 12 months.

18.    Share-Based Compensation
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(In thousands, except shares and per share data)

17.Share-Based Compensation
We have fourfive plans under which we have awarded share-based compensation grants: The 1997 Non-Employee Directors Option Plan ("1997 Plan"), which provided for stock option grants to our non-employee Directors, the 2007 Stock Incentive Plan (“2007 Plan”), the Amended and Restated 2010 Stock Incentive Plan, as Amended (“2010 Plan”) and, the 2017 Stock Incentive Plan ("2017 Plan"), which were adopted as a continuing step toward aggregating our equity compensation programs to reduce and the complexity of our equity compensation programs.
The 20102020 Stock Incentive Plan originally approved by our shareholders on April 28, 2010 and amended and restated by our shareholders on April 25, 2012, terminated our rights to grant awards under the 2007 Plan; however, any awards granted under the 2007 or 2010 Plans that do not result in the issuance of shares of Common Stock may again be used for an award under the 2010 Plan. The 2010 Plan was amended and restated by our shareholders on April 24, 2013, increasing the number of shares available under the amended 2010 Plan from 1,500,000 shares to 2,600,000 shares.
The 2017 Plan approved by our shareholders on April 26, 2017 terminated our rights to grant awards under previous plans; however, any awards granted under previous plans that do not result in the issuance of shares of Common Stock may again be used for an award under the 2017 Plan. There were 1,200,000 shares made available under the approved 2017 Plan.("2020 Plan").
As of December 31, 2017,2023, there were 742,8731,111,646 shares reserved for issuance under the 2007 Plan, the 2010 Plan and the 20102017 Plan for outstanding compensation awards. There were 1,155,110975,475 shares available for issuance under the 20172020 Plan for current and future equity awards as of December 31, 2017.2023. The Compensation Committee of the Board of Directors determines the number of shares awarded and the grant date, subject to the terms of our equity award policy.
We recognized total Share-Based Compensation Expenseshare-based compensation expense of $5,891, $3,875$11.6 million, $7.8 million and $8,222,$9.5 million, respectively, during the years ended 2017, 20162023, 2022 and 2015.2021. The total excess tax benefit recognized for share-based compensation arrangements during the years ended 2017, 20162023, 2022 and 20152021 was $1,168, $686$0.1 million, $0.3 million and $859,$0.7 million, respectively.
Stock Option Awards
We determined the fair value of our stock option awards using the Black-Scholes valuation model that uses the assumptions noted in the table below. The expected lifeterm selected for stock options granted during the year represents the period of time that the stock options are expected to be outstanding based on historical data of stock option holder exercise and termination behavior of similar grants. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury rate over the expected life at the time of grant. Expected volatilities are based upon historical volatility of our stock over a period equal to the expected
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
life of each stock option grant. Dividend yield is estimated over the expected life based on our dividend policy and historical dividends paid. To determine the amount of compensation cost to be recognized in each period, we account for forfeitures as they occur.
The following table illustrates the valuation assumptions used for the 2017, 20162023, 2022 and 20152021 grants:
202320222021
Expected volatility35 %34 %34 - 35%
Weighted-average expected volatility35 %34 %35 %
Expected dividend yield1.6 %1.2 %1.3 - 1.4%
Weighted-average expected dividend yield1.6 %1.2 %1.4 %
Expected term, in years555
Risk-free interest rate4.2 - 4.2%1.9 - 1.9%0.8 - 0.9%
 2017 2016 2015
Expected volatility25 - 26% 29 - 32% 32 - 36%
Weighted-average expected volatility26% 32% 36%
Expected dividend yield1.2 - 1.3% 1.3 - 1.5% 1.1 - 1.2%
Weighted-average expected dividend yield1.3% 1.3% 1.2%
Expected term, in years5 5 5
Risk-free interest rate1.7 - 2.0% 1.1 - 1.4% 1.4 - 1.6%
New stock option awards granted vest one-third each year over a three year period and have a ten year contractual term. Compensation expense equal to the grant date fair value is recognized for these awards on a straight-line basis over the awardsawards' vesting period. Stock options granted to employees are subject to accelerated expensing if the option holder meets the retirementsretirement definition set forth in the 2010 Plan.
In addition to stock options, we also occasionally grant cash-settled stock appreciation rights (“SARs”) to employees in certain foreign locations. There were no outstanding SARs as of December 31,2020, 2017 and no SARs were granted during 2017, 2016 or 2015.2010 Plans.
The following table summarizes the activity during the year ended December 31, 20172023 for stock option awards:
SharesWeighted-Average Exercise
Price
Outstanding at beginning of year931,843$66.97 
Granted60,49272.88 
Exercised(338,787)61.17 
Forfeited(10,667)75.76 
Expired(450)71.70 
Outstanding at end of year642,431$70.43 
Exercisable at end of year534,335$69.33 
 Shares Weighted-Average Exercise Price
Outstanding at beginning of year1,113,382
 $42.34
Granted224,985
 72.85
Exercised(159,792) 44.04
Forfeited(42,586) 63.98
Expired(381) 65.12
Outstanding at end of year1,135,608
 $47.47
Exercisable at end of year766,583
 $39.15

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 20162023, 2022 and 20152021 was $16.39, $13.61$24.21, $23.45 and $20.08,$22.01, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 20162023, 2022 and 20152021 was $4,450, $3,408$5.9 million, $0.4 million and $1,702,$3.9 million, respectively. The aggregate intrinsic value of options outstanding and exercisable at December 31, 20172023 was $28,711$14.3 million and $25,702,$12.5 million, respectively. The weighted-average remaining contractual life for options outstanding and exercisable as of December 31, 2017,2023 was 5.65.1 years and 4.24.3 years, respectively. As of December 31, 2017,2023, there was unrecognized compensation cost for nonvested options of $2,064,$1.5 million, which is expected to be recognized over a weighted-average period of 1.41.3 years.
Restricted Share Awards
Restricted share awards for employees generally have a three year vesting period from the effective date of the grant. Restricted share awards to non-employee directors vest upon a change of control or upon termination of service as a director occurring at least six months after grant date of the award so long as termination is for one of the following reasons: death; disability; retirement in accordance with Tennant policy (e.g., age, term limits, etc.); resignation at request of Board (other than for gross misconduct); resignation following at least six months’ advance notice; failure to be renominated (unless due to unwillingness to serve) or reelected by shareholders; or removal by shareholders. We use the closing share price the day before the grant date to
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
determine the fair value of our restricted share awards. Expenses onfor these awards are recognized over the vesting period.
The following table summarizes the activity during the year ended December 31, 20172023 for nonvested restricted share awards:
Shares Weighted-Average Grant Date Fair Value
SharesSharesWeighted-Average Grant Date Fair
Value
Nonvested at beginning of year117,234
 $47.62
Granted20,284
 73.06
Vested(32,990) 44.36
Forfeited(4,739) 63.43
Nonvested at end of year99,789
 $53.11
The total fair value of restricted shares vested during the years ended December 31, 2017, 20162023, 2022 and 20152021 was $1,463, $1,970$0.4 million, $1.7 million and $1,054,$1.2 million, respectively. As of December 31, 2017,2023, there was $1,585$1.5 million of total unrecognized compensation cost related to nonvested restricted shares which is expected to be recognized over a weighted-average period of 1.81.7 years.
Performance Share Awards
We grant performance share awards to key employees as a part of our long-term management compensation program. These awards are earned based upon achievement of certain financial performance targets over a three year period. The number of shares of common stock a participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of the financial performance targets. We use the closing share price the day before the grant date to determine the fair value of our performance share awards. Expenses on these awards are recognized over a three year performance period. Performance shares are granted in restricted stock units. They are payable in stock and vest solely upon achievement of certain financial performance targets during this three year period.
The following table summarizes the activity during the year ended December 31, 20172023 for nonvested performance share awards:
SharesWeighted-Average Grant Date Fair
Value
Nonvested at beginning of year134,763$78.29 
Granted67,39673.12 
Vested(32,130)77.27 
Forfeited(16,881)76.45 
Nonvested at end of year153,148$76.44 
 Shares Weighted-Average Grant Date Fair Value
Nonvested at beginning of year129,096
 $59.30
Granted45,792
 72.84
Vested(20,060) 61.80
Forfeited(31,804) 62.55
Nonvested at end of year123,024
 $63.09
The total fair value ofDuring the year ended December 31, 2022, 43,198 performance shares vested. There were 43,621 performance shares vested during the year ended December 31, 2017, 2016 and 2015 was $1,240, $1,703 and $1,713, respectively.2021. As of December 31, 2017,2023, we expect to recognize $1,400$7.8 million of total compensation costs over a weighted-average period of 2.01.8 years.
Restricted Stock Units
We grant restricted stock units to employees and non-employee directors, which generally vest within three years from the date of the grant. Vested restricted stock units are paid out in stock. We use the closing share
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
price the day before the grant date to determine the fair value of our restricted stock units. Expenses on these awards are recognized on a straight linestraight-line basis over the vesting period of the award.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

The following table summarizes the activity during the year ended December 31, 20172023 for nonvested restricted stock units:
Shares Weighted-Average Grant Date Fair Value
SharesSharesWeighted-Average Grant Date Fair
Value
Nonvested at beginning of year31,038
 $60.47
Granted30,750
 68.92
Vested(14,638) 65.74
Forfeited(4,025) 60.82
Nonvested at end of year43,125
 $64.67
The total fair value of shares vested during the years ended December 31, 20172023, 2022 and 20162021 was $962$3.0 million, $0.5 million and $907,$3.2 million, respectively. As of December 31, 2017,2023, there was $1,743$3.8 million of total unrecognized compensation cost related to nonvested shares which is expected to be recognized over a weighted-average period of 1.31.5 years.
Share-Based Liabilities
As of December 31, 20172023 and 2016,2022, we had $175$0.4 million and $155$0.3 million in total share-based liabilities recorded on our Consolidated Balance Sheets,consolidated balance sheets, respectively. During the years ended December 31, 2017, 2016 and 2015, we paid out $45, $62 and $53 related to share-based liability awards, respectively.
18.(Loss) Earnings Attributable to Tennant Company Per Share
The computations of Basic and Diluted (Loss) Earnings19.    Income Attributable to Tennant Company Per Share
The computations of basic and diluted earnings attributable to Tennant Company per Shareshare for the years ended December 31 were as follows:
202320222021
Numerator:
Net income$109.5 $66.3 $64.9 
Denominator:
Basic - weighted average shares outstanding18,509,52318,494,35618,499,674
Effect of dilutive securities274,110202,899349,543
Diluted - weighted average shares outstanding18,783,63318,697,25518,849,217
Basic earnings per share$5.92 $3.58 $3.51 
Diluted earnings per share$5.83 $3.55 $3.44 
 2017 2016 2015
Numerator:     
Net (Loss) Earnings Attributable to Tennant Company$(6,195) $46,614
 $32,088
Denominator: 
  
  
Basic - Weighted Average Shares Outstanding17,695,390
 17,523,267
 18,015,151
Effect of dilutive securities—
 452,916
 478,296
Diluted - Weighted Average Shares Outstanding17,695,390
 17,976,183
 18,493,447
Basic (Loss) Earnings per Share$(0.35) $2.66
 $1.78
Diluted (Loss) Earnings per Share$(0.35) $2.59
 $1.74
Excluded from the dilutive securities shown above were options to purchase and shares to be paid out under share-based compensation plans of 711,212, 356,598249,690, 649,054 and 222,092171,273 shares of common stock during 2017, 20162023, 2022 and 2015,2021, respectively. These exclusions were made if the exercise prices of these options are greater than the average market price of our common stock for the period, if the number of shares we can repurchase under the treasury stock method exceeds the weighted shares outstanding in the options or if we have a net loss, as thethese effects are anti-dilutive.
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19.Segment Reporting
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except shares and per share data)
20.    Segment Reporting
We are organized into four operating segments: North America; Latin America; Europe, Middle East, Africa; and Asia Pacific. We combine our North America and Latin America operating segments into the "Americas" for reporting net sales by geographic area. In accordance with the objective and basic principles of the applicable accounting guidance, we aggregate our operating segments into one reportable segment that consists of the design, manufacture and sale of products used primarily in the maintenance of nonresidential surfaces.
The following table presents Net Salesnet sales by geographic area for the three years ended December 31:
202320222021
Net Sales:
United States$726.8 $618.8 $566.4 
Other Americas113.5 87.1 91.9 
Americas840.3 705.9 658.3 
Europe, Middle East, Africa314.4 301.6 331.9 
Asia Pacific88.9 84.7 100.6 
Total$1,243.6 $1,092.2 $1,090.8 
 2017 2016 2015
Net Sales:     
Americas$640,274
 $607,026
 $591,405
Europe, Middle East, Africa273,738
 129,046
 139,834
Asia Pacific89,054
 72,500
 80,560
Total$1,003,066
 $808,572
 $811,799

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(In thousands, except shares and per share data)

The following table presents long-lived assets by geographic area as of December 31:
 2017 2016 2015
Long-lived assets:     
Americas$132,659
 $134,737
 $110,842
Europe, Middle East, Africa422,338
 19,606
 11,100
Asia Pacific4,731
 4,334
 4,658
Total$559,728
 $158,677
 $126,600
Accounting policies of the operations in the various operating segments are the same as those described in Note 1. Net Salessales are attributed to each operating segment based on the end user country and are net of intercompany sales. Information regarding sales to customers geographically located inApart from the United States is providedshown in Item 1, Business – Segment and Geographic Area Financial Information.the table above, there were no individual foreign locations which had net sales which represented more than 10% of our consolidated net sales. No single customer represents more than 10% of our consolidated Net Sales.net sales.
The following table presents long-lived assets by geographic area as of December 31:
202320222021
Long-lived assets:
United States$104.2 $105.9 $106.6 
Other Americas31.9 26.4 18.8 
Americas136.1 132.3 125.4 
Italy218.0 223.5 280.4 
Other Europe, Middle East, Africa75.6 69.6 36.2 
Europe, Middle East, Africa293.6 293.1 316.6 
Asia Pacific30.4 32.1 35.8 
Total$460.1 $457.5 $477.8 
Long-lived assets consist of Property, Plantproperty, plant and Equipment, Goodwill, Intangible Assetsequipment, goodwill, intangible assets and certain other assets. Long-lived assets locatedApart from the United States and Italy shown in Italy totaled $393,917 as of the year ended December 31, 2017 as a result of our acquisition of IPC Group. We did not have long-lived assets located in Italy for 2016 and 2015. Theretable above, there are no other individual foreign locations which have long-lived assets which represent more than 10% of our consolidated long-lived assets.
The following table presents revenues for groups of similar products and services for the years ended December 31:
21.    Subsequent Events
 2017 2016 2015
Net Sales:     
Equipment$636,875
 $491,075
 $499,634
Parts and consumables202,452
 173,632
 175,697
Service and other132,332
 114,719
 112,622
Specialty surface coatings31,407
 29,146
 23,846
Total$1,003,066
 $808,572
 $811,799
20.Consolidated Quarterly Data (Unaudited)
 2017
 Q1 Q2 Q3 Q4
Net Sales$191,059
 $270,791
 $261,921
 $279,295
Gross Profit79,736
 104,554
 104,604
 115,527
Net (Loss) Earnings Attributable to Tennant Company(3,957) (2,591) 3,559
 (3,206)
Basic (Loss) Earnings Attributable to Tennant Company per Share$(0.22) $(0.15) $0.20
 $(0.18)
Diluted (Loss) Earnings Attributable to Tennant Company per Share$(0.22) $(0.15) $0.20
 $(0.18)
 2016
 Q1 Q2 Q3 Q4
Net Sales$179,864
 $216,828
 $200,134
 $211,746
Gross Profit77,502
 95,289
 85,295
 93,509
Net Earnings Attributable to Tennant Company4,439
 15,328
 11,477
 15,370
Basic Earnings Attributable to Tennant Company per Share$0.25
 $0.88
 $0.66
 $0.88
Diluted Earnings Attributable to Tennant Company per Share$0.25
 $0.85
 $0.64
 $0.85
The summation of quarterly data may not equate to the calculation for the full fiscal year as quarterly calculations are performed on a discrete basis.
Regular quarterly dividends aggregated to $0.84 per share in 2017, or $0.21 per share per quarter, and $0.81 per share in 2016, or $0.20 per share for the first three quarters of 2016 and $0.21 per share for the last quarter of 2016.
21.Related Party Transactions
During the first quarter of 2008,On February 21, 2024, we acquired Sociedade Alfa Ltda. and entered into lease agreementsan agreement to acquire a non-controlling preferred equity share investment in Brain Corp., a privately held autonomous technology company in San Diego, California. The investment will drive the development and adoption of the next generation of robotic and AI technologies. The purchase of the investment was completed on February 21, 2024 for certain properties owned by or partially owned by$32.1 million. The Company is currently evaluating the former ownersaccounting treatment and financial statement impact of this entity. Some of these individuals are current employees of Tennant. Lease payments made under these lease agreements are not material to our financial position or results of operations.

the investment.
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(In thousands, except shares and per share data)

22.Separate Financial Information of Guarantor Subsidiaries
The following condensed consolidating guarantor financial information is presented to comply with the requirements of Rule 3-10 of Regulation S-X.
On April 18, 2017, we issued and sold $300,000 in aggregate principal amount of our 5.625% Senior Notes due 2025 (the “Notes”), pursuant to an Indenture, dated as of April 18, 2017, among the company, the Guarantors (as defined below), and Wells Fargo Bank, National Association, a national banking association, as trustee. The Notes are unconditionally and jointly and severally guaranteed by Tennant Coatings, Inc. and Tennant Sales and Service Company (collectively, the “Guarantors”), which are wholly owned subsidiaries of the company. 
The Notes and the guarantees constitute senior unsecured obligations of the company and the Guarantors, respectively. The Notes and the guarantees, respectively, are: (a) equal in right of payment with all of the company’s and the Guarantors’ senior debt, without giving effect to collateral arrangements; (b) senior in right of payment to all of the company’s and the Guarantors’ future subordinated debt, if any; (c) effectively subordinated in right of payment to all of the company’s and the Guarantors’ debt and obligations that are secured, including borrowings under the company’s senior secured credit facilities for so long as the senior secured credit facilities are secured, to the extent of the value of the assets securing such liens; and (d) structurally subordinated in right of payment to all liabilities (including trade payables) of the company’s and the Guarantors’ subsidiaries that do not guarantee the Notes.
The following condensed consolidated financial information presents the Condensed Consolidated Statements of Earnings, Comprehensive Income and Cash Flows for each of the years in the three-year period ended December 31, 2017, and the related Condensed Consolidated Balance Sheets as of December 31, 2017 and 2016, of Tennant Company ("Parent"), the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and elimination entries necessary to consolidated the Parent with the Guarantor and Non-Guarantor Subsidiaries. The following condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the company and notes thereto of which this note is an integral part.
Condensed Consolidated Statement of Earnings
For the year ended December 31, 2017
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Sales$454,703
 $594,405
 $471,559
 $(517,601) $1,003,066
Cost of Sales311,897
 488,972
 317,151
 (519,375) 598,645
Gross Profit142,806
 105,433
 154,408
 1,774
 404,421
Operating Expense: 
  
  
    
Research and Development Expense27,219
 315
 4,479
 —
 32,013
Selling and Administrative Expense116,388
 78,516
 150,460
 —
 345,364
Total Operating Expense143,607
 78,831
 154,939
 —
 377,377
(Loss) Profit from Operations(801) 26,602
 (531) 1,774
 27,044
Other Income (Expense): 
  
  
    
Equity in Earnings of Affiliates12,754
 2,004
 28,855
 (43,613) —
Interest Expense, Net(22,659) —
 (299) (31) (22,989)
Intercompany Interest Income (Expense)12,519
 (5,776) (6,743) —
 —
Net Foreign Currency Transaction Gains (Losses)857
 —
 (4,244) —
 (3,387)
Other (Expense) Income, Net(3,962) (736) 2,841
 (103) (1,960)
Total Other (Expense) Income, Net(491) (4,508) 20,410
 (43,747) (28,336)
(Loss) Profit Before Income Taxes(1,292) 22,094
 19,879
 (41,973) (1,292)
Income Tax Expense (Benefit)4,913
 8,070
 (98) (7,972) 4,913
Net (Loss) Earnings Including Noncontrolling Interest(6,205) 14,024
 19,977
 (34,001) (6,205)
Net Loss Attributable to Noncontrolling Interest(10) —
 (10) 10
 (10)
Net (Loss) Earnings Attributable to Tennant Company$(6,195) $14,024
 $19,987
 $(34,011) $(6,195)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Statement of Earnings
For the year ended December 31, 2016
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Sales$455,375
 $587,815
 $290,349
 $(524,967) $808,572
Cost of Sales299,459
 483,075
 199,336
 (524,893) 456,977
Gross Profit155,916
 104,740
 91,013
 (74) 351,595
Operating Expense: 
  
  
    
Research and Development Expense32,378
 429
 1,931
 —
 34,738
Selling and Administrative Expense95,189
 74,643
 78,378
 —
—
248,210
(Gain) Loss on Sale of Business(82) —
 231
 —
 149
Total Operating Expense127,485
 75,072
 80,540
 —
 283,097
Profit from Operations28,431
 29,668
 10,473
 (74) 68,498
Other Income (Expense): 
  
  
    
Equity in Earnings of Affiliates34,068
 2,192
 —
 (36,260) —
Interest (Expense) Income, Net(1,204) —
 255
 —
 (949)
Intercompany Interest Income (Expense)7,157
 (5,570) (1,587) —
 —
Net Foreign Currency Transaction Gains (Losses)648
 (652) (388) —
 (392)
Other (Expense) Income, Net(2,609) (573) 2,516
 —
 (666)
Total Other Income (Expense), Net38,060
 (4,603) 796
 (36,260) (2,007)
Profit Before Income Taxes66,491
 25,065
 11,269
 (36,334) 66,491
Income Tax Expense19,877
 9,443
 2,427
 (11,870) 19,877
Net Earnings$46,614
 $15,622
 $8,842
 $(24,464) $46,614
Condensed Consolidated Statement of Earnings
For the year ended December 31, 2015
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Sales$480,418
 $586,154
 $306,506
 $(561,279) $811,799
Cost of Sales320,620
 489,203
 213,085
 (560,169) 462,739
Gross Profit159,798
 96,951
 93,421
 (1,110) 349,060
Operating Expense: 
  
  
    
Research and Development Expense29,888
 389
 2,138
 —
 32,415
Selling and Administrative Expense97,301
 72,954
 82,015
 —
 252,270
Impairment of Long-Lived Assets—
 —
 11,199
 —
 11,199
Total Operating Expense127,189
 73,343
 95,352
 —
 295,884
Profit (Loss) from Operations32,609
 23,608
 (1,931) (1,110) 53,176
Other Income (Expense): 
  
  
    
Equity in Earnings of Affiliates14,766
 2,122
 —
 (16,888) —
Interest (Expense) Income, Net(1,221) —
 80
 —
 (1,141)
Intercompany Interest Income (Expense)7,368
 (5,400) (1,968) —
 —
Net Foreign Currency Transaction Gains (Losses)535
 (777) (712) —
 (954)
Other (Expense) Income, Net(3,633) (422) 3,398
 —
 (657)
Total Other Income (Expense), Net17,815
 (4,477) 798
 (16,888) (2,752)
Profit (Loss) Before Income Taxes50,424
 19,131
 (1,133) (17,998) 50,424
Income Tax Expense18,336
 4,619
 1,630
 (6,249) 18,336
Net Earnings (Loss)$32,088
 $14,512
 $(2,763) $(11,749) $32,088

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Statement of Comprehensive Income
For the year ended December 31, 2017
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Earnings$(6,205) $14,024
 $19,977
 $(34,001) $(6,205)
Other Comprehensive Income (Loss):         
Foreign currency translation adjustments28,356
 1,215
 2,960
 (4,175) 28,356
Pension and retiree medical benefits5,868
 —
 538
 (538) 5,868
Cash flow hedge(7,731) —
 —
 —
 (7,731)
Income Taxes:         
Foreign currency translation adjustments310
 —
 310
 (310) 310
Pension and retiree medical benefits(2,087) —
 (99) 99
 (2,087)
Cash flow hedge2,884
 —
 —
 —
 2,884
Total Other Comprehensive (Loss) Income, net of tax27,600
 1,215
 3,709
 (4,924) 27,600
Total Comprehensive Income Including Noncontrolling Interest21,395
 15,239
 23,686
 (38,925) 21,395
Comprehensive Loss Attributable to Noncontrolling Interest(10) —
 (10) 10
 (10)
Comprehensive Income Attributable to Tennant Company$21,405
 $15,239
 $23,696
 $(38,935) $21,405
Condensed Consolidated Statement of Comprehensive Income
For the year ended December 31, 2016
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Earnings$46,614
 $15,622
 $8,842
 $(24,464) $46,614
Other Comprehensive Income (Loss):         
Foreign currency translation adjustments109
 270
 3,534
 (3,804) 109
Pension and retiree medical benefits(2,248) —
 (1,691) 1,691
 (2,248)
Cash flow hedge(305) —
 —
 —
 (305)
Income Taxes:         
Foreign currency translation adjustments32
 —
 32
 (32) 32
Pension and retiree medical benefits504
 —
 296
 (296) 504
Cash flow hedge114
 —
 —
 —
 114
Total Other Comprehensive (Loss) Income, net of tax(1,794) 270
 2,171
 (2,441) (1,794)
Comprehensive Income$44,820
 $15,892
 $11,013
 $(26,905) $44,820
Condensed Consolidated Statement of Comprehensive Income
For the year ended December 31, 2015
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
Net Earnings$32,088
 $14,512
 $(2,763) $(11,749) $32,088
Other Comprehensive (Loss) Income:         
Foreign currency translation adjustments(12,520) (1,082) (12,903) 13,985
 (12,520)
Pension and retiree medical benefits4,121
 —
 1,571
 (1,571) 4,121
Cash flow hedge164
 —
 —
 —
 164
Income Taxes:         
Foreign currency translation adjustments25
 —
 25
 (25) 25
Pension and retiree medical benefits(1,265) —
 (314) 314
 (1,265)
Cash flow hedge(61) —
 —
 —
 (61)
Total Other Comprehensive Loss, net of tax(9,536) (1,082) (11,621) 12,703
 (9,536)
Comprehensive Income (Loss)$22,552
 $13,430
 $(14,384) $954
 $22,552

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(In thousands, except shares and per share data)

Condensed Consolidated Balance Sheet
As of December 31, 2017
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
ASSETS         
Current Assets:         
Cash and Cash Equivalents$18,469
 $507
 $39,422
 $—
 $58,398
Restricted Cash—
 —
 653
 —
 653
Net Receivables683
 88,629
 120,204
 —
 209,516
Intercompany Receivables53,444
 133,778
 —
 (187,222) —
Inventories29,450
 12,695
 94,542
 (8,993) 127,694
Prepaid Expenses8,774
 1,172
 9,405
 —
 19,351
Other Current Assets4,030
 —
 3,473
 —
 7,503
Total Current Assets114,850
 236,781
 267,699
 (196,215) 423,115
Property, Plant and Equipment225,064
 12,155
 145,549
 —
 382,768
Accumulated Depreciation(146,320) (6,333) (50,097) —
 (202,750)
Property, Plant and Equipment, Net78,744
 5,822
 95,452
 —
 180,018
Deferred Income Taxes1,308
 2,669
 7,157
 —
 11,134
Investment in Affiliates392,486
 11,273
 20,811
 (424,570) —
Intercompany Loans304,822
 —
 4,983
 (309,805) —
Goodwill12,869
 1,739
 171,436
 —
 186,044
Intangible Assets, Net2,105
 2,898
 167,344
 —
 172,347
Other Assets10,363
 —
 10,956
 —
 21,319
Total Assets$917,547
 $261,182
 $745,838
 $(930,590) $993,977
LIABILITIES AND TOTAL EQUITY 
  
      
Current Liabilities: 
  
      
Current Portion of Long-Term Debt$29,413
 $—
 $1,470
 $—
 $30,883
Accounts Payable39,927
 3,018
 53,137
 —
 96,082
Intercompany Payables133,778
 1,963
 51,481
 (187,222) —
Employee Compensation and Benefits8,311
 10,355
 18,591
 —
 37,257
Income Taxes Payable366
 —
 2,472
 —
 2,838
Other Current Liabilities20,183
 15,760
 33,504
 —
 69,447
Total Current Liabilities231,978
 31,096
 160,655
 (187,222) 236,507
Long-Term Liabilities: 
  
      
Long-Term Debt344,147
 —
 1,809
 —
 345,956
Intercompany Loans—
 128,000
 181,805
 (309,805) —
Employee-Related Benefits11,160
 3,992
 8,715
 —
 23,867
Deferred Income Taxes—
 —
 53,225
 —
 53,225
Other Liabilities31,788
 2,483
 1,677
 —
 35,948
Total Long-Term Liabilities387,095
 134,475
 247,231
 (309,805) 458,996
Total Liabilities619,073
 165,571
 407,886
 (497,027) 695,503
Equity: 
  
      
Common Stock6,705
 —
 11,131
 (11,131) 6,705
Additional Paid-In Capital15,089
 72,483
 384,460
 (456,943) 15,089
Retained Earnings297,032
 23,797
 (21,219)��(2,578) 297,032
Accumulated Other Comprehensive Loss(22,323) (669) (38,391) 39,060
 (22,323)
Total Tennant Company Shareholders’ Equity296,503
 95,611
 335,981
 (431,592) 296,503
Noncontrolling Interest1,971
 —
 1,971
 (1,971) 1,971
Total Equity298,474
 95,611
 337,952
 (433,563) 298,474
Total Liabilities and Total Equity$917,547
 $261,182
 $745,838
 $(930,590) $993,977

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Balance Sheet
As of December 31, 2016
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
ASSETS         
Current Assets:         
Cash and Cash Equivalents$38,484
 $226
 $19,323
 $—
 $58,033
Restricted Cash—
 —
 517
 —
 517
Net Receivables209
 85,219
 63,706
 —
 149,134
Intercompany Receivables50,437
 123,289
 2,251
 (175,977) —
Inventories26,422
 12,821
 49,829
 (10,450) 78,622
Prepaid Expenses4,120
 1,151
 3,933
 —
 9,204
Other Current Assets2,402
 —
 10
 —
 2,412
Total Current Assets122,074
 222,706
 139,569
 (186,427) 297,922
Property, Plant and Equipment225,651
 12,996
 59,853
 —
 298,500
Accumulated Depreciation(144,281) (6,175) (35,947) —
 (186,403)
Property, Plant and Equipment, Net81,370
 6,821
 23,906
 —
 112,097
Deferred Income Taxes3,048
 3,281
 7,110
 —
 13,439
Investment in Affiliates157,004
 9,021
 —
 (166,025) —
Intercompany Loans130,000
 —
 —
 (130,000) —
Goodwill12,869
 1,439
 6,757
 —
 21,065
Intangible Assets, Net—
 3,200
 3,260
 —
 6,460
Other Assets10,189
 27
 8,838
 —
 19,054
Total Assets$516,554
 $246,495
 $189,440
 $(482,452) $470,037
LIABILITIES AND SHAREHOLDERS' EQUITY 
  
      
Current Liabilities: 
  
      
Current Portion of Long-Term Debt$3,429
 $—
 $30
 $—
 $3,459
Accounts Payable30,867
 2,599
 13,942
 —
 47,408
Intercompany Payables125,540
 1,249
 49,188
 (175,977) —
Employee Compensation and Benefits12,025
 15,261
 8,711
 —
 35,997
Income Taxes Payable1,410
 —
 938
 —
 2,348
Other Current Liabilities15,329
 13,348
 14,940
 —
 43,617
Total Current Liabilities188,600
 32,457
 87,749
 (175,977) 132,829
Long-Term Liabilities: 
  
      
Long-Term Debt32,714
 —
 21
 —
 32,735
Intercompany Loans—
 128,000
 2,000
 (130,000) —
Employee-Related Benefits14,291
 3,704
 3,139
 —
 21,134
Deferred Income Taxes—
 —
 171
 —
 171
Other Liabilities2,406
 1,295
 924
 —
 4,625
Total Long-Term Liabilities49,411
 132,999
 6,255
 (130,000) 58,665
Total Liabilities238,011
 165,456
 94,004
 (305,977) 191,494
Shareholders' Equity: 
  
      
Common Stock6,633
 —
 11,131
 (11,131) 6,633
Additional Paid-In Capital3,653
 72,483
 158,592
 (231,075) 3,653
Retained Earnings318,180
 9,771
 (32,187) 22,416
 318,180
Accumulated Other Comprehensive Loss(49,923) (1,215) (42,100) 43,315
 (49,923)
Total Shareholders’ Equity278,543
 81,039
 95,436
 (176,475) 278,543
Total Liabilities and Shareholders’ Equity$516,554
 $246,495
 $189,440
 $(482,452) $470,037

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Statement of Cash Flows
For the year ended December 31, 2017
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
OPERATING ACTIVITIES         
Net Cash Provided by Operating Activities$26,992
 $280
 $27,711
 $(809) $54,174
INVESTING ACTIVITIES         
Purchases of Property, Plant and Equipment(9,558) —
 (10,879) —
 (20,437)
Proceeds from Disposals of Property, Plant and Equipment23
 1
 2,487
 —
 2,511
Proceeds from Principal Payments Received on Long-Term Note Receivable—
 —
 667
 —
 667
Issuance of Long-Term Note Receivable—
 —
 (1,500) —
 (1,500)
Acquisition of Businesses, Net of Cash Acquired(304) —
 (353,769) —
 (354,073)
Purchase of Intangible Asset(2,500) —
 —
 —
 (2,500)
Change in Investments in Subsidiaries(199,028) —
 —
 199,028
 —
Loan (Payments) Borrowings from Subsidiaries(159,780) —
 (4,983) 164,763
 —
Increase in Restricted Cash—
 —
 (92) —
 (92)
Net Cash (Used in) Provided by Investing Activities(371,147) 1
 (368,069) 363,791
 (375,424)
FINANCING ACTIVITIES         
Proceeds from Short-Term Debt303,000
 —
 —
 —
 303,000
Repayments of Short-Term Debt(303,000) —
 —
 —
 (303,000)
Loan Borrowings (Payments) from Parent4,983
 —
 159,780
 (164,763) —
Change in Subsidiary Equity—
 —
 199,028
 (199,028) —
Proceeds from Issuance of Long-Term Debt440,000
 —
 —
 —
 440,000
Payments of Long-Term Debt(96,142) —
 (106) —
 (96,248)
Payments of Debt Issuance Costs(16,482) —
 —
 —
 (16,482)
Change in Capital Lease Obligations—
 —
 311
 —
 311
Proceeds from Issuances of Common Stock6,875
 —
 —
 —
 6,875
Purchase of Noncontrolling Owner Interest—
 —
 (30) —
 (30)
Dividends Paid(14,953) —
 (809) 809
 (14,953)
Net Cash Provided by Financing Activities324,281
 —
 358,174
 (362,982) 319,473
Effect of Exchange Rate Changes on Cash and Cash Equivalents(141) —
 2,283
 —
 2,142
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(20,015) 281
 20,099
 —
 365
Cash and Cash Equivalents at Beginning of Year38,484
 226
 19,323
 —
 58,033
CASH AND CASH EQUIVALENTS AT END OF YEAR$18,469
 $507
 $39,422
 $—
 $58,398

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Statement of Cash Flows
For the year ended December 31, 2016
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
OPERATING ACTIVITIES         
Net Cash Provided by Operating Activities$44,147
 $239
 $14,090
 $(598) $57,878
INVESTING ACTIVITIES        

Purchases of Property, Plant and Equipment(21,507) (13) (5,006) —
 (26,526)
Proceeds from Disposals of Property, Plant and Equipment377
 —
 238
 —
 615
Acquisition of Businesses, Net of Cash Acquired—
 (11,539) (1,394) —
 (12,933)
Issuance of Long-Term Note Receivable—
 —
 (2,000) —
 (2,000)
Proceeds from Sale of Business—
 —
 285
 —
 285
Change in Investments in Subsidiaries(19,594) —
 —
 19,594
 —
Loan Borrowings (Payments) from Subsidiaries8,690
 —
 —
 (8,690) —
Decrease in Restricted Cash—
 —
 116
 —
 116
Net Cash Used in Investing Activities(32,034) (11,552) (7,761) 10,904
 (40,443)
FINANCING ACTIVITIES         
Loan Borrowings (Payments) from Parent—
 7,969
 (16,659) 8,690
 —
Change in Subsidiary Equity—
 3,570
 16,024
 (19,594) —
Payments of Long-Term Debt(3,429) —
 (31) —
 (3,460)
Proceeds from Issuance of Long-Term Debt15,000
 —
 —
 —
 15,000
Purchases of Common Stock(12,762) —
 —
 —
 (12,762)
Proceeds from Issuances of Common Stock5,271
 —
 —
 —
 5,271
Excess Tax Benefit on Stock Plans686
 —
 —
 —
 686
Dividends Paid(14,293) —
 (598) 598
 (14,293)
Net Cash (Used in) Provided by Financing Activities(9,527) 11,539
 (1,264) (10,306) (9,558)
Effect of Exchange Rate Changes on Cash and Cash Equivalents64
 —
 (1,208) —
 (1,144)
NET INCREASE IN CASH AND CASH EQUIVALENTS2,650
 226
 3,857
 —
 6,733
Cash and Cash Equivalents at Beginning of Year35,834
 —
 15,466
 —
 51,300
CASH AND CASH EQUIVALENTS AT END OF YEAR$38,484
 $226
 $19,323
 $—
 $58,033

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

Condensed Consolidated Statement of Cash Flows
For the year ended December 31, 2015
(in thousands)Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Tennant Company
OPERATING ACTIVITIES         
Net Cash Provided by Operating Activities$40,764
 $—
 $4,928
 $(460) $45,232
INVESTING ACTIVITIES         
Purchases of Property, Plant and Equipment(19,149) —
 (5,631) —
 (24,780)
Proceeds from Disposals of Property, Plant and Equipment32
 —
 304
 —
 336
Loan Borrowings (Payments) from Subsidiaries268
 —
 —
 (268) —
Proceeds from Sale of Business—
 —
 1,185
 —
 1,185
Increase in Restricted Cash—
 —
 (322) —
 (322)
Net Cash Used in Investing Activities(18,849) —
 (4,464) (268) (23,581)
FINANCING ACTIVITIES         
Loan (Payments) Borrowings from Parent—
 —
 (268) 268
 —
Payments of Long-Term Debt(3,435) —
 (10) —
 (3,445)
Purchases of Common Stock(45,998) —
 —
 —
 (45,998)
Proceeds from Issuances of Common Stock1,677
 —
 —
 —
 1,677
Excess Tax Benefit on Stock Plans859
 —
 —
 —
 859
Dividends Paid(14,498) —
 (460) 460
 (14,498)
Net Cash Used in Financing Activities(61,395) —
 (738) 728
 (61,405)
Effect of Exchange Rate Changes on Cash and Cash Equivalents79
 —
 (1,987) —
 (1,908)
NET DECREASE IN CASH AND CASH EQUIVALENTS(39,401) —
 (2,261) —
 (41,662)
Cash and Cash Equivalents at Beginning of Year75,235
 —
 17,727
 —
 92,962
CASH AND CASH EQUIVALENTS AT END OF YEAR$35,834
 $—
 $15,466
 $—
 $51,300
23.Subsequent Event
On January 22, 2018, we commenced the exchange offer required by the Registration Rights Agreement referred to in Note 9. The exchange offer closed on February 23, 2018. We will not incur any additional indebtedness as a result of the exchange offer. As a result, we will not be required to pay additional interest on the Notes.


ITEM 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A – Controls and Procedures
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and PrincipalChief 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, 2017.2023. Based on that evaluation, our Chief Executive Officer and PrincipalChief Financial Officer and Principal Accounting Officer concluded that, as of December 31, 2017,2023, 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 PrincipalChief 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.
(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 PrincipalChief 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
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Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, our Chief Executive Officer and PrincipalChief Financial Officer and Principal Accounting Officer concluded that our internal control over financial reporting was effective as of December 31, 2017.2023.
Tennant Company acquired 100 percent of the outstanding capital stock of IP Cleaning S.p.A. and its subsidiaries ("IPC Group") in April 2017, which was accounted for as a business combination, and management excluded from its assessment of the effectiveness of Tennant Company's internal control over financial reporting as of December 31, 2017 the IPC Group's internal control over financial reporting associated with total assets of $509 million and total revenues of $174 million included in the consolidated financial statements of Tennant Company and subsidiaries as of and for the year ended December 31, 2017. This exclusion is in accordance with the SEC's guidance, which permits companies to omit an acquired business's internal control over financial reporting from management's assessment for up to one year after the date of the acquisition.
KPMG,Deloitte & Touche LLP, anour independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of December 31, 20172023 and has issued a report which is included in Item 8 of this Annual Report on Form 10-K.
Remediation of Material Weaknesses Disclosed in Fiscal Year 2016 Annual Report on Form 10-K
As previously disclosed in Item 9A of Part II of our Annual Report on Form 10-K for fiscal year 2016, management determined that our internal control over financial reporting was not effective as of December 31, 2016 due to material weaknesses over control activities with respect to effective general information technology controls over the accounting for revenue related to equipment maintenance and repair service, management review controls over the accounting for certain inventory adjustments, incentive accruals and performance share awards and controls over the determination of technological feasibility and the capitalization of software development costs. Furthermore, the Company did not have a sufficient number of trained resources with assigned responsibility and accountability over the design and operation of internal controls nor did the Company have an effective risk assessment process that identified and assessed necessary changes in significant accounting policies and practices that were responsible to changes in business operations and new product arrangements.
To remediate the material weaknesses in our internal control over financial reporting described in Item 9A of Part II of our Annual Report on Form 10-K for Fiscal year 2016, we:
Sponsored ongoing training related to the COSO 2013 Framework best practices for personnel that are accountable for internal control over financial reporting.
Enhanced management review controls over the accounting for certain inventory adjustments, incentive accruals and performance share awards.
Performed a complete review of our accounting for revenue related to equipment maintenance and repair service to ensure the adequacy of the design and implementation of automated and manual controls.

Designed and implemented controls over the determination of technological feasibility and the capitalization of software development costs.
Management has determined that the remediation actions discussed above were effectively designed and demonstrated to be operating effectively for a sufficient period of time to enable us to conclude that the material weaknesses regarding internal control activities have been remediated as of December 31, 2017.
Changes in Internal Control Over Financial Reporting
Other than the action described under Remediation of Material Weaknesses Disclosed in Fiscal Year 2016 Annual Report on Form 10-K, thereThere were no othersignificant changes in the Company's internal control over financial reporting during the quarter ended December 31, 20172023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B – Other Information
On November 20, 2023, Donal L. Mulligan, Board of Directors, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 2,358 shares of the Company’s common stock until April 30, 2025.
ITEM 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
ITEM 10 – Directors, Executive Officers and Corporate Governance
Information required under this item with respect to directors is contained in the sectionssection entitled “Board of Directors Information” and “Section 16(a) Beneficial Ownership Reporting Compliance”Directors” as part of our 20182024 Proxy Statement and is incorporated herein by reference. See also Item 1, Information About Our Executive Officers of the Registrant in Part I hereof.
Business Ethics GuideCode of Conduct
We have adopted the Tennant Company Business Ethics Guide, as amended by the BoardCode of Directors in December 2011,Conduct, which applies to all of our employees, directors, consultants, agents and anyone else acting on our behalf. The Business Ethics GuideCode of Conduct includes particular provisions applicable to our senior financial management, which includes our Chief Executive Officer, Chief Financial Officer, ControllerChief Accounting Officer and other employees performing similar functions. A copy of our Business Ethics GuideCode of Conduct is available on the Investor Relations website at investors.tennantco.com. We intend to post on our website any amendment to, or waiver from, a provision of our Business Ethics GuideCode of Conduct that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, ControllerChief Accounting Officer and other persons performing similar functions promptly following the date of such amendment or waiver. In addition, we have also posted copies of our Corporate Governance Principles and the Charters for our Audit, Compensation, Governance and Executive Committees on our website.
ITEM 11 – Executive Compensation
Information required under this item is contained in the sections entitled “Director Compensation” andCompensation," “Executive Compensation Information” and "Pay Ratio" as part of our 20182024 Proxy Statement and is incorporated herein by reference.
ITEM 12 – Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information required under this item is contained in the sectionsections entitled “Security Ownership of Certain Beneficial Owners and Management” and "Equity Compensation Plan Information" as part of our 20182024 Proxy Statement and is incorporated herein by reference. The section entitled "Equity Compensation Plan Information" can be found within Item 5 of this form 10-K.

ITEM 13 – Certain Relationships and Related Transactions, and Director Independence
Information required under this item is contained in the sections entitled “Director Independence” and “Related Person“Related-Person Transaction Approval Policy” as part of our 20182024 Proxy Statement and is incorporated herein by reference.
ITEM 14 – Principal Accountant Fees and Services
Information required under this item is contained in the section entitled “Fees Paid to Independent Registered Public Accounting Firm” as part of our 20182024 Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15 – Exhibits and Financial Statement Schedules
A.
A.The following documents are filed as a part of this report:
1.Financial Statements
Consolidated Financial Statements filed as part of this report are containedreport:
1.Financial Statements
Consolidated financial statements and related notes, together with the reports of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 34), appear in Part II Item 88. Financial Statements and Supplementary Data of this annual report on Form 10-K.
2.Financial Statement Schedule
2.Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
(In millions)202320222021
Allowance for doubtful accounts:
Balance at beginning of year$6.1 $5.3 $4.6 
Charged to costs and expenses4.4 1.9 1.5 
Reclassification— — — 
Charged to other accounts(a)
— 0.1 0.3 
Deductions(b)
(3.3)(1.2)(1.1)
Balance at end of year$7.2 $6.1 $5.3 
Sales returns reserve:
Balance at beginning of year$1.4 $1.0 $1.0 
Charged to costs and expenses2.0 0.9 0.1 
Deductions(b)
(1.5)(0.5)(0.1)
Balance at end of year$1.9 $1.4 $1.0 
Allowance for excess and obsolete inventories:
Balance at beginning of year$14.2 $14.3 $13.6 
Charged to costs and expenses8.9 0.5 1.7 
Charged to other accounts(a)
0.1 0.2 (0.3)
Deductions(c)
(6.0)(0.8)(0.7)
Balance at end of year$17.2 $14.2 $14.3 
Valuation allowance for deferred tax assets:
Balance at beginning of year$3.3 $4.8 $7.5 
Charged to costs and expenses(0.3)(1.4)(2.6)
Charged to other accounts(a)
0.2 (0.1)(0.1)
Balance at end of year$3.2 $3.3 $4.8 
Warranty reserve:
Balance at beginning of year$10.9 $10.4 $11.1 
Charged to costs and expenses12.2 9.9 8.5 
Charged to other accounts(a)
(0.1)(0.1)(0.2)
Deductions(d)
(11.8)(9.3)(9.0)
Balance at end of year$11.2 $10.9 $10.4 

(a)Primarily includes impact from foreign currency fluctuations.
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(In thousands)2017 2016 2015
Allowance for Doubtful Accounts and Returns:     
Balance at beginning of year$3,108
 $3,615
 $3,936
Charged to costs and expenses1,602
 561
 1,087
Reclassification(1)
(526) —
 172
Charged to other accounts(2)
111
 (19) (159)
Deductions(3)
(1,054) (1,049) (1,421)
Balance at end of year$3,241
 $3,108
 $3,615
Inventory Reserves: 
  
  
Balance at beginning of year$3,644
 $3,540
 $3,272
Charged to costs and expenses1,698
 1,455
 1,728
Charged to other accounts(2)
183
 (50) (160)
Deductions(4)
(1,418) (1,301) (1,300)
Balance at end of year$4,107
 $3,644
 $3,540
Valuation Allowance for Deferred Tax Assets: 
  
  
Balance at beginning of year$6,865
 $5,884
 $5,699
Charged to costs and expenses1,634
 1,295
 734
Charged to other accounts(2)
1,192
 (314) (549)
Balance at end of year$9,691
 $6,865
 $5,884
(b)Includes accounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.
(1)
(c)Includes inventory identified as excess, slow moving or obsolete and charged against reserves.
(d)Includes warranty claims charged against reserves.
Includes amount reclassified from Allowance for Doubtful Accounts to Other Receivables to properly classify a customer's open receivables balance.
(2)
Primarily includes impact from foreign currency fluctuations.
(3)
Includes accounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.
(4)
Includes inventory identified as excess, slow moving or obsolete and charged against reserves.
All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statementsconsolidated financial statements or notes thereto.

3.3.    Exhibits
Item #DescriptionDescriptionMethod of Filing
2.13.1Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed February 28, 2017.
3i
Restated Articles of Incorporation
Incorporated by reference to Exhibit 3i to the Company’s Form 10-Q for the quarter ended June 30, 2006.
3ii3.2Incorporated by reference to Exhibit 3iii3.2 to the Company’s Current Report on Form 8-K dated December 14, 2010.January 13, 2023.
4.13.3Incorporated by reference to Exhibit 3iii to the Company's Form 10-Q for the quarter ended March 31, 2018.
4.1Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed April 24, 2017.10-K for the year ended December 31, 2022.
4.210.1Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed April 24, 2017.
10.1
Tennant Company Executive Nonqualified Deferred Compensation Plan, as restated effective January 1, 2009, as amended*
Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2012.
10.2Incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 2011.
10.3
Filed herewith electronically.

10.4Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2004.
10.5Incorporated by reference to Appendix A to the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders filed on March 15, 2006.
10.6Incorporated by reference to Appendix A to the Company’s Proxy Statement for the 2007 Annual Meeting of Shareholders filed on March 15, 2007.
10.7
Incorporated by reference to Exhibit 10.17 to the Company's Form 10-K for the year ended December 31, 2007.

10.8
Tennant Company 2014 Short-Term Incentive Plan*
Incorporated by reference to Appendix B to the Company's Proxy Statement for the 2013 Annual Meeting of Shareholders filed on March 11, 2013.
10.9
Amended and Restated 2010 Stock Incentive Plan, as Amended*
Incorporated by reference to Appendix A to the Company's Proxy Statement for the 2013 Annual Meeting of Shareholders filed on March 11, 2013.
10.1010.8Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 5, 2017.
10.11
2017 Stock Incentive PlanPlan*
Incorporated by reference to Appendix A on the Company's Proxy Statement for the 2017 Annual Meeting of Shareholders filed March 15, 2017.

10.1210.9Incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.1310.10Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.1410.11Incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.1510.12Incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q for the quarter ended June 30, 2017.
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10.13Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 2018.
2110.14Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 20, 2018.
10.15Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 10, 2018.
10.16Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.17Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.18Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.19Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.20Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.21Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.22Incorporated by reference to Exhibit 10.9 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.23Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2021.
10.24Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.25Incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.26Incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.27Incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.28Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 7, 2021.
10.29Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended June 30, 2021.
10.30Incorporated by reference to Exhibit 10.01 to the Company's Current Report on Form 8-K filed on November 17, 2022.
21Filed herewith electronically.
23.1Filed herewith electronically.
24.1Powers of AttorneyIncluded on signature page.
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31.1Filed herewith electronically.
31.2Filed herewith electronically.

32.1
32.1Filed herewith electronically.
32.2Filed herewith electronically.
10197Filed herewith electronically.
101The following financial information from Tennant Company’s annual report on Form 10-K for the period ended December 31, 2017,2023, filed with the SEC on February 27, 2018,22, 2024, formatted in Inline Extensible Business Reporting Language (XBRL)(iXBRL): (i) the Consolidated Statements of OperationsIncome for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, (iii) the Consolidated Balance Sheets as of December 31, 20172023 and 2016,2022, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, (v) the Consolidated Statements of Equity for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, and (vi) Notes to the Consolidated Financial Statements.Filed herewith electronically.
104Inline Extensible Business Reporting language (iXBRL) for the cover page of this Annual Report on Form 10-K, included in Exhibit 101Filed herewith electronically.
*Management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on Form 10-K.

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ITEM 16 – Form 10-K Summary
None.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TENNANT COMPANY
By/s/ David W. Huml
TENNANT COMPANYDavid W. Huml
By/s/ H. Chris Killingstad
H. Chris Killingstad
President, CEO and
Board of Directors
DateDateFebruary 27, 201822, 2024
Each of the undersigned hereby appoints H. Chris KillingstadDavid W. Huml and Jeffrey L. Cotter,Kristin A. Erickson, and each of them (with full power to act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, any and all amendments and exhibits to this annual report on Form 10-K and any and all applications, instruments, and other documents to be filed with the Securities and Exchange Commission pertaining to this annual report on Form 10-K or any amendments thereto, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By/s/ David W. HumlBy/s/ Timothy R. Morse
David W. HumlTimothy R. Morse
ByPresident, CEO and Board of DirectorsBoard of Directors
DateFebruary 22, 2024DateFebruary 22, 2024
By/s/ H. Chris KillingstadFay WestByBy/s/ Donal L. Mulligan
Fay WestH. Chris KillingstadDonal L. Mulligan
Chief Financial Officer and Principal Accounting OfficerPresident, CEO andBoard of Directors
DateFebruary 22, 2024Board of DirectorsDateDateFebruary 27, 201822, 2024
DateFebruary 27, 2018
By
By/s/ Thomas PaulsonAzita ArvaniByBy/s/ Steven A. Sonnenberg
Azita ArvaniThomas PaulsonSteven A. Sonnenberg
Senior Vice President and Chief Financial OfficerBoard of Directors
(Principal Financial and Accounting Officer)DateFebruary 27, 2018
DateFebruary 27, 2018
By/s/ Azita ArvaniBy/s/ David S. Wichmann
Azita ArvaniDavid S. Wichmann
Board of Directors
DateFebruary 22, 2024DateFebruary 22, 2024
By/s/ Andrew P. HiderBy/s/ Maria C. Green
Andrew P. HiderMaria C. Green
Board of Directors
DateFebruary 27, 2018DateFebruary 27, 2018
By/s/ William F. AustenBy/s/ David Windley
William F. AustenDavid Windley
Board of DirectorsBoard of Directors
DateFebruary 22, 2024DateFebruary 27, 2018DateFebruary 27, 201822, 2024
By/s/ Carol S. EicherBy/s/ David Windley
Carol S. EicherDavid Windley
Board of DirectorsBoard of Directors
DateFebruary 22, 2024DateFebruary 27, 201822, 2024

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HIDDEN IXBRL

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