Minneapolis, MN, October 8--Tennant Company said it is taking actions to permanently reduce costs as part of a continuing effort to improve profitability.
The actions include the elimination of a net 65 management and administrative positions company-wide on a base of approximately 2,500 employees.
The workforce reductions will result in a severance charge of approximately $1.9 million after tax, or $0.21 per diluted share, which the company is recognizing in its third quarter ended September 30, 2004. The workforce reductions are expected to produce net annualized savings totaling $2 million to $3 million pre-tax in 2005, increasing to $4 million to $5 million pre-tax in 2006 and beyond.
Taking into account the third quarter severance charge, Tennant now expects to report earnings per diluted share of $1.34 to $1.49 for the full year. Excluding the third quarter severance charge, this revised forecast of 2004 earnings per diluted share is within the lower half of the company's previous full year guidance of $1.55 to $1.85.
The company also said that earnings per diluted share for the 2004 third quarter, including the severance charge, are expected to range from $0.07 to $0.10. Excluding the severance charge, earnings per diluted share for the 2004 third quarter are expected to range from $0.28 to $0.31.
In the comparable 2003 period, the company reported net earnings of $3.3 million, or $0.36 per diluted share. Third quarter net earnings were dampened by soft volume early in the quarter, higher than expected steel and petroleum-related materials costs, and increased selling and administrative expenses, including higher marketing costs for products being launched in the second half of 2004 and Sarbanes-Oxley compliance costs.
"The actions we took during the third quarter reflect our previously stated commitment to complement revenue growth initiatives with concerted efforts to leverage our cost structure to improve our overall profitability," said Janet M. Dolan, Tennant Company's president and chief executive officer. "While sales volume is recovering, we are further reducing our overall cost structure to achieve our economic profit goals and fund our growth initiatives."
Tennant plans to report results for the 2004 third quarter on October 21,before the start of trading on the New York Stock Exchange.
