TENNANT CO (0000097134) (Filer)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2026

OR

For the transition period from ___________ to __________

Commission File Number 1-16191

__________________________________________

TENNANT COMPANY

(Exact name of registrant as specified in its charter)

10400 Clean Street

Eden Prairie, Minnesota 55344

(Address of principal executive offices)

(Zip Code)

(763) 540-1200

(Registrant’s telephone number, including area code)

____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

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.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of October 30, 2026, there were 17,009,836 shares of common stock outstanding.

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TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements

TENNANT COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In millions, except shares and per share data)

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See accompanying notes to consolidated financial statements.

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TENNANT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In millions, except shares and per share data)

1.    Nature of Business

Tennant Company ("the Company", "we", "us", or "our") is a world leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. The Company is committed to creating and commercializing breakthrough, sustainable cleaning innovations to enhance its broad suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, and asset management solutions.

Our products are used in many types of environments, including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and more.

Customers include contract cleaners to whom organizations outsource facilities maintenance as well as businesses that perform facilities maintenance themselves. The Company reaches these customers through the industry's largest direct sales and service organization and through a strong and well-supported network of authorized distributors worldwide.

2.    Significant Accounting Policies

Basis of Presentation – The accompanying unaudited consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for interim reporting. In our opinion, the consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for the fair presentation of our financial position and results of operations.

These statements should be read in conjunction with the consolidated financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2025. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

There are no newly adopted accounting pronouncements during the three months ended September 30, 2026 that impacted the Company.

3.    Revenue

Disaggregation of Revenue

The following tables illustrate the disaggregation of revenue by geographic area, groups of similar products and services and sales channels:

Net sales by geographic area

Net sales are attributed to each geographic area based on the end-user country and are net of intercompany sales.

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Net sales by groups of similar products and services

Net sales by sales channel

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 using the most likely amount approach for estimating the amount of consideration to which the Company will be entitled. We forecast the most likely amount of the incentive to be paid 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 other current liabilities on our consolidated balance sheets.

The change in our sales incentive accrual balance was as follows:

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Deferred Revenue

Deferred revenue represents consideration received or billed in advance of satisfying performance obligations that are recognized over time.

Our deferred revenue balance primarily consists of (i) amounts related to Autonomous Robotic Machine ("AMR") arrangements that are recognized over time and (ii) prepaid service and maintenance contracts for our machines. Service and maintenance contracts generally provide routine maintenance, parts coverage, and support services and are recognized ratably over the contractual service period, which typically ranges from 12 months to 60 months.

Prior to March 1, 2026, certain AMR customer arrangements required an active autonomy subscription for customers to benefit from autonomous functionality. Amounts allocated to these subscription-based arrangements were recognized over the contractual subscription period and included in deferred revenue. Effective March 1, 2026, the Company amended its AMR arrangements such that customers receive full rights to the embedded autonomy software upon delivery of the machine along with ongoing connectivity services. Revenue associated with the embedded autonomy software is recognized at the time of sale. Revenue related to connectivity services (which include cloud connectivity, software updates, diagnostic, monitoring and support services) is recognized on a straight-line basis over the period the services are made available.

In arrangements that include multiple performance obligations, the transaction price is allocated to each performance obligation based on relative standalone selling prices.

The change in the deferred revenue balance was as follows:

As of September 30, 2026, $15.5 million and $14.1 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets. Of these amounts, we expect to recognize the following approximate amounts in net sales in the following periods:

As of December 31, 2025, $16.6 million and $15.8 million of deferred revenue was reported in other current liabilities and other liabilities, respectively, on our consolidated balance sheets.

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4.    Management Actions

Restructuring Actions

During the three and nine months ended September 30, 2026, we recognized restructuring activity as part of our ongoing global reorganization efforts. The following pre-tax restructuring charges were included in selling and administrative expense in the consolidated statements of income.

Our restructuring actions represent the execution of a multi-year enterprise strategy to drive increased productivity throughout our operations. The charges in 2026 and 2025 impacted all operating segments and were related to a global workforce realignment to support our key strategic initiatives.

A reconciliation of the beginning and ending net liability balances for severance-related costs is as follows:

5.    Acquisitions

Clean Machine

On February 2, 2026, we acquired 100% of our distributors, Clean Machine Falkenberg AB and Repax AB (collectively, "Clean Machine"), as we continue to expand our footprint in the EMEA region. The total purchase price was $7.7 million. The financial results for Clean Machine have been included in our consolidated financial statements since the acquisition date. The acquisition was not material to our consolidated financial statements.

R4Y

On September 1, 2025, we acquired 100% of our distributor, Reinigungstechnik 4 You GmbH ("R4Y"), as we continue to expand our footprint in the EMEA region. The total purchase price was $3.6 million. The financial results for R4Y have been included in our consolidated financial statements since the acquisition date. The acquisition was not material to our consolidated financial statements.

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6.    Inventories

Inventories are valued at the lower of cost or net realizable value and consisted of the following:

(a)Finished goods include machines, parts and consumables and component parts that are used in our products.

(b)The difference between replacement cost and the stated LIFO inventory value is not materially different from the reserve for the LIFO valuation method.

7.    Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2026 were as follows:

The balances of acquired intangible assets, excluding goodwill, were as follows:

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Amortization expense on intangible assets for the three and nine months ended September 30, 2026 was $3.1 million and $9.9 million, respectively. Amortization expense on intangible assets for the three and nine months ended September 30, 2025 was $3.4 million and $10.2 million, respectively.

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets for each of the five succeeding years and thereafter is as follows:

8.    Debt

On August 7, 2024, we and certain of our foreign subsidiaries entered into an Amended and Restated Credit Agreement (the "2024 Credit Agreement"), which amends and restates the Amended and Restated Credit Agreement, dated April 5, 2021, as amended on November 10, 2022. The 2024 Credit Agreement provides us and certain of our foreign subsidiaries access to a senior secured credit facility until August 7, 2029, consisting of a revolving facility in an amount up to $650.0 million, with an option to expand the revolving facility or obtain incremental term loans by up to $325.0 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.

The fee for undrawn committed funds under the revolving facility of the 2024 Credit Agreement ranges from an annual rate of 0.15% to 0.30%, depending on our leverage ratio. Borrowings denominated in U.S. dollars under the 2024 Credit Agreement bear interest at a rate per annum equal to (a) the greatest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the 2024 Credit Agreement) plus 0.50% and (iii) the Adjusted Term SOFR Rate (as defined in the 2024 Credit Agreement) for a one month period plus 1%; but in any case not less than 1%, plus an additional spread of 0.25% to 1%, depending on our leverage ratio, (b) the Adjusted Term SOFR Rate plus an additional spread of 1.25% to 2%, depending on our leverage ratio, or (c) the Adjusted Daily Simple RFR (as defined in the 2024 Credit Agreement) plus an additional spread of 1.25% to 2%, depending on our leverage ratio.

In connection with the 2024 Credit Agreement, we reaffirmed our security interest in favor of the lenders in substantially all its personal property and pledged the stock of certain of our domestic and foreign subsidiaries. The obligations under the 2024 Credit Agreement are also guaranteed by certain of the Company’s subsidiaries and those subsidiaries also provided a security interest in their similar personal property.

The 2024 Credit Agreement contains customary representations, warranties and covenants, including but not limited to covenants restricting the Company’s ability to incur indebtedness and liens and merge or consolidate with another entity. Further, the 2024 Credit Agreement contains 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 3.75 to 1.00, with certain alternative requirements for permitted acquisitions of at least $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 the greater of 10% of consolidated total assets and $100.0 million during any fiscal year.

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We were in compliance with the above financial covenants as of September 30, 2026.

Debt Outstanding

Debt outstanding consisted of the following:

(a)As of September 30, 2026, the Company was required to repay $0.4 million of finance lease liabilities over the next 12 months.

As of September 30, 2026, we had outstanding borrowings of $357.5 million under our revolving credit facility. We had letters of credit and bank guarantees outstanding in the amount of $3.1 million, leaving approximately $289.4 million of unused borrowing capacity on our revolving facility. Commitment fees on unused lines of credit for the nine months ended September 30, 2026 were $0.4 million. The overall weighted average cost of debt was approximately 5.3% and net of related cross-currency swap instruments and fixed rate interest rate swap instruments was approximately 4.5%. Further details regarding the cross-currency swap instrument and fixed rate interest rate swap instrument are discussed in Note 10.

9.    Warranty

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 sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. Warranty terms on machines generally range from one to four years. The majority of the liability for estimated warranty claims represents amounts to be paid out in the near term for qualified warranty issues.

The changes in warranty reserves were as follows:

10.    Derivatives

We report all derivative instruments as either assets or liabilities in our consolidated balance sheets at fair value. As a global organization, we are exposed to market risks, including fluctuations in foreign currency exchange rates and interest rates. To manage the volatility associated with these exposures, we enter into derivative instruments from time to time in accordance with our risk management policies.

We designate instruments as hedges on a transaction basis to support hedge accounting when the applicable criteria are met. The changes in fair value on these hedging instruments are intended to offset, in part or in whole, the corresponding changes in the fair value or cash flows of the underlying exposures being hedged.

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Gains and losses resulting from changes in fair value are accounted for based on the nature and use of the derivative and whether it is designated and qualifies for hedge accounting.

We assess hedge effectiveness at the inception of the hedging relationship and on an ongoing basis, both prospectively and retrospectively, in accordance with our policy. Any ineffective portion of a hedging instrument is recorded in the same line item of the consolidated statements of income as the item being hedged.

Our hedging policy also establishes maximum limits for each counterparty to reduce concentration of credit risk. We do not purchase, hold, or sell derivative financial instruments for trading purposes.

Cash Flow Hedges

The Company manages exposure to variability in cash flows related to its floating rate debt through the use of interest rate swaps. As of September 30, 2026, the Company had interest rate swaps with an aggregate notional amount of $120.0 million that effectively convert a portion of its variable rate debt to a fixed interest rate of 3.443%.

The interest rate swaps are designated as cash flow hedges under ASC 815. Changes in the fair value of the swaps, net of tax, are recorded in accumulated other comprehensive loss and are reclassified to interest expense, net, in the periods in which the hedged interest payments affect earnings. The swaps are scheduled to mature on October 1, 2029.

Fair Value Hedges

We have entered into Euro to U.S. dollar foreign exchange cross-currency swaps associated with an intercompany loan to 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.

On July 28, 2026, we amended and extended the two existing foreign exchange cross-currency swaps designated as fair value hedges. The amendments did not change the aggregate notional amount or the EUR-USD exchange rate of 1.0652. Due to changes in the economic terms, we discontinued previous hedge accounting relationships and prospectively redesignated the amended swaps in new fair value hedging relationships under ASC 815.

As of September 30, 2026 and December 31, 2025, these cross-currency swaps included €75.0 million of total notional value. As of September 30, 2026, the aggregated scheduled interest payments over the course of the loan and related swaps amounted to €15.8 million. These swaps are scheduled to mature in July 2030.

Net Investment Hedges

We have 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 its European subsidiaries. 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 subsidiaries 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.

On July 28, 2026, we amended and extended the two existing foreign exchange cross-currency swaps designated as net investment hedges. The amendments did not change the aggregate notional amount or the EUR-USD exchange rate of 1.0652. Due to changes in economic terms, we discontinued the previous hedge accounting relationships and prospectively redesignated the amended swaps in new net investment hedging relationships under ASC 815.

As of September 30, 2026 and December 31, 2025, the cross-currency swaps included €75.0 million of total notional value. These swaps are scheduled to mature in July 2029.

Foreign Currency Forward Contracts Not Designated as Hedges

We hedge our net recognized foreign currency denominated assets and liabilities with foreign currency forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in

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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 sheets with changes in the fair value recorded to net foreign currency transaction gain (loss) in our consolidated statements of 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 September 30, 2026 and December 31, 2025, the notional amounts of foreign currency forward contracts outstanding not designated as hedging instruments were $93.7 million and $92.9 million, respectively.

Balance Sheet Classification

Derivatives are classified as either current or non-current assets or liabilities based on their anticipated settlement dates.

The following table summarizes the location and respective fair values of the Company's derivative financial instruments on a gross basis:

The amount of the gains and losses on hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three and nine months ended September 30, 2026 were as follows. Gains and losses on hedging instruments are located within interest expense, net on our consolidated income statements.

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The amount of gains and losses on derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements during the three and nine months ended September 30, 2026 were as follows. Gains and losses on foreign currency forward contracts not designated as hedging instruments were reclassified into income as net foreign currency transaction gains or losses.

During the next twelve-month period, net gains expected to be reclassified into earnings are shown below:

Such gains will be reclassified at the time that the underlying hedged transactions are realized.

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11.    Fair Value Measurements

Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value due to their short-term nature.

On February 21, 2024, the Company acquired certain investment securities in Brain Corp, a privately held autonomous technology company located in San Diego, California. The investment securities include $12.1 million of redeemable convertible preferred stock, $12.2 million of non-redeemable convertible preferred stock, and $7.8 million of warrants. The redeemable convertible preferred stock is accounted for as an available-for-sale debt security. The non-redeemable convertible preferred stock and warrants are accounted for as equity securities. All securities were recorded at their allocated fair value at the acquisition date.

In December 2025, following achievement of a contractual milestone under the Company’s warrant agreement with Brain Corp, the Company concluded that it had obtained the ability to exercise significant influence over Brain Corp under ASC 323, Investments – Equity Method and Joint Ventures, and adopted the equity method of accounting for its equity securities investment (see Note 12 – Equity Method Investments).

The available-for-sale debt security is carried at fair value with changes in fair value recognized in accumulated other comprehensive loss. The Company estimates fair value using Level 3 inputs.

As of September 30, 2026 and December 31, 2025, the cost and market values of our debt and equity securities were as follows:

The aggregate unrealized gains and losses on available-for-sale debt securities, net of tax effects, are classified in accumulated other comprehensive loss within shareholders' equity.

Scheduled maturities of our debt securities were as follows:

Fair Value Measurements and Financial Statement Presentation

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

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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 September 30, 2026 was as follows:

Our population of assets and liabilities subject to fair value measurements at December 31, 2025 was as follows:

Our foreign currency forward contracts, cross-currency swaps and interest 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 derivative instruments are discussed in Note 10.

There were no transfers into or out of Level 3 investments in the periods ended September 30, 2026 and December 31, 2025.

The fair value and carrying value of total debt, including current portion, was $365.7 million and $358.7 million, respectively, as of September 30, 2026. The fair value and carrying value of total debt, including current portion, was $281.4 million and $273.6 million, respectively, as of December 31, 2025. The fair value was estimated

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using Level 3 inputs based on the borrowing rates currently available to us for bank loans with similar terms and remaining maturities.

12. Equity Method Investments

On February 21, 2024, the Company acquired certain investment securities of Brain Corp, as further described in Note 11 - Fair Value Measurements. The investment consists of $12.2 million of non-redeemable convertible preferred stock and $7.8 million of warrants to purchase common shares.

Prior to the vesting of all warrants on December 9, 2025, the Company accounted for the investment as an equity security under the measurement alternative. Upon vesting of the warrants, the Company's voting interest in Brain Corp increased to approximately 18% and its overall ownership interest increased to approximately 12%. Based on the voting interest, together with the board representation obtained in connection with the investment, the Company concluded that it has the ability to exercise significant influence over Brain Corp's operating and financial policies, but does not have controlling financial interest. Accordingly, beginning on December 9, 2025, the Company accounts for its investment in Brain Corp under the equity method of accounting.

Due to the timing and availability of Brain Corp's financial information, the Company recognizes its share of Brain Corp's earnings or losses on a three-month lag, based on the investee's most recently available financial statements. The Company recognized equity method losses of $0.1 million and $0.6 million for the three and nine months ended September 30, 2026, respectively, which are included in other expense, net in our consolidated statements of income.

As of September 30, 2026, the carrying amount of the Company's equity method investment in Brain Corp was $19.4 million and is included in Other Assets in the consolidated balance sheets.

13.    Commitments and Contingencies

In the ordinary course of business, we are subject to the effects of certain contractual stipulations, events, transactions, and laws and regulations that may, at times, require the recognition of liabilities, such as those related to self-insurance estimated liabilities and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. We establish estimated liabilities when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated.

Oxygenator Water Techs vs. Tennant Company

The Company is a defendant in an intellectual property litigation matter with Oxygenator Water Technologies, Inc. (OWT) in the United States District Court for the District of Minnesota. In November 2024, a jury returned a verdict against the Company, and in September 2025, the Court issued a post‑trial ruling enhancing damages. As of December 31, 2025 the Company has recorded a total accrued liability of approximately $20.5 million related to this matter.

In the three and nine months ended September 30, 2026, the Company recorded an incremental accrued expense and corresponding liability of $0.1 million and $0.5 million, respectively, based on updated estimates of interest costs.

The Company and OWT have appealed certain aspects of the Court’s decisions. To stay execution of the judgment pending appeal, the Company has obtained a supersedeas bond in the amount of $20.3 million. The bond was issued by a third‑party surety, and no cash collateral has been posted.

While the ultimate resolution of this matter is uncertain, management believes it has appropriately accrued for its current estimate of probable loss. The ruling does not restrict the Company’s ability to sell its products and is not expected to impact its long‑term business objectives.

Other Matters

Except as described above, there have been no material changes in the Company’s estimated liabilities for self-insurance, litigation, environmental matters, guarantees, or indemnities, or in the related events and circumstances.

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14.    Shareholders' Equity

Accumulated Other Comprehensive Loss

The changes in components of accumulated other comprehensive loss, net of tax, are as follows:

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $0.1 million.

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $0.5 million.

15.    Income Taxes

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 2020. The number of years which remain open for audit for U.S. state or foreign tax purposes varies by jurisdiction but generally ranges from three to five years. We are currently undergoing income tax examinations in various U.S. state and foreign jurisdictions. Although the outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. In addition to the liability of $5.6 million for unrecognized tax benefits as of September 30, 2026, there was approximately $1.0 million for accrued interest and penalties. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2026 was $5.1 million. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be revised and reflected as an adjustment of the income tax expense.

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16.    Share-Based Compensation

Our share-based compensation plans are described in Note 18 of our annual report on Form 10-K for the year ended December 31, 2025. During the three months ended September 30, 2026 and 2025, we recognized total share-based compensation expense of $1.5 million and $2.8 million, respectively. During the nine months ended September 30, 2026 and 2025, we recognized total share-based compensation expense of $5.1 million and $8.6 million, respectively. The total excess tax recognized for share-based compensation arrangements during the nine months ended September 30, 2026 and 2025 was a tax expense of $0.4 million and a tax benefit of $0.2 million, respectively.

17.    Income Attributable to Tennant Company Per Share

The computations of basic and diluted earnings per share were as follows:

Excluded from the dilutive securities presented above were options to purchase and shares to be paid out under share-based compensation plans totaling 130,584 and 44,322 shares of common stock for the three months ended September 30, 2026 and 2025, respectively. Excluded from the dilutive securities presented above were options to purchase and shares to be paid out under share-based compensation plans totaling 136,790 and 153,540 shares of common stock for the nine months ended September 30, 2026 and 2025, respectively. These instruments were excluded when their exercise prices exceeded the average market price of our common stock for the period, when the number of shares we can repurchase under the treasury stock method exceeded the weighted average shares outstanding, or during periods of net loss, as their inclusion would have been anti-dilutive.

18.    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 Company's chief operating decision maker ("CODM") is our chief executive officer. The CODM evaluates segment performance and makes resource allocation decisions using both net income and gross profit. Net income, which is also reported as consolidated net income on the consolidated statements of income, is regularly reviewed to assess segment performance. Additionally, the CODM uses gross profit to evaluate pricing and compare actual results to historical and forecasted data.

Significant expenses within net income include cost of sales, research and development, and selling and administrative expenses, which are each separately presented on the Company’s consolidated statements of income. Other segment items within net income include net foreign currency transaction gain (loss), interest expense, net, other (expense) income, net, and income tax expense.

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Item 2.    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 quarters ended September 30, 2026 and 2025. The MD&A should be read in conjunction with the Company's consolidated financial statements and notes included in Item 1 of this Quarterly 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 acquisitions and 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.

Overview

Tennant Company is a world leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. The Company is committed to creating and commercializing breakthrough, sustainable cleaning innovations to enhance its broad suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, and asset management solutions. Our products are used in many types of environments, including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and more. Customers include contract cleaners to whom organizations outsource facilities maintenance as well as businesses that perform facilities maintenance themselves. The Company reaches these customers through the industry's largest direct sales and service organization and through a strong and well-supported network of authorized distributors worldwide.

Macroeconomic Events

As a global company, we are exposed to risks and uncertainties arising from macroeconomic, geopolitical, and regulatory conditions, including inflationary pressures, interest rate volatility, foreign currency fluctuations, changes in global capital markets, supply chain conditions, and evolving international trade and tariff policies. These factors continue to influence our operating environment and may impact revenue growth, margins, liquidity, and the execution of our strategic initiatives.

During the third quarter of 2026, continued instability in the Middle East contributed to volatility in global energy markets, transportation routes, and supply chains. Although markets and supply chains continued to adapt, elevated energy, freight, and other input costs remained a source of pressure during the quarter.

Inflationary pressures remained elevated and varied by region and cost category, influenced in part by higher energy costs and ongoing trade-related uncertainty. In EMEA, economic conditions remained mixed, with demand and equipment volumes varying across markets and competitive pricing pressure continuing during the period. We also continued to experience higher input costs, including tariff-related material costs in the Americas. Foreign currency movements remained an additional source of uncertainty across the markets in which we operate.

We continue to take pricing, cost, and operational actions to mitigate these impacts and monitor changes in market conditions and input costs. While economic conditions have varied across regions and markets, persistent geopolitical, regulatory, and trade-related uncertainty, together with elevated costs, may continue to affect our business, financial condition, and results of operations.