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Graco, Tennant announce layoffs
The number of purchase orders for the Minnesota firms' manufactured products is falling short of expectations.
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Graco Inc. and Tennant Co. announced 150 and 240 respective job cuts Wednesday, becoming the latest in a long line of Minnesota stalwarts to shrink because of the troubled economy.
Graco, the Minneapolis-based spray and fluid-equipment maker, said it will cut 6 percent of its workforce because incoming orders had dropped 15 to 20 percent in the fourth quarter.
"As a result, we must take this difficult step of reducing our workforce and adjusting our cost structure," said CEO Patrick McHale. "We regret the impact on our employees."
The company expects the layoffs to ultimately save it $9 million a year. Graco will take a $5 million pretax charge to cover severance and early retirement costs and expects $4 million in impairment charges as declining business results are reflected in the company's intangible assets.
Graco's stock closed at $22.29, down 52 cents a share, on Wednesday.
Tennant, which makes street sweepers and large floor cleaning machines, expects sales to drop 15 to 20 percent in the fourth quarter so it will offset the shortfall by cutting 8 percent of its staff by the first quarter.
"Demand for our equipment is weaker than projected and we do not see a quick recovery," said Tennant CEO Chris Killingstad.
Tennant expects the job cuts to save $20 million a year. It will also take a $20 million charge, mostly in the fourth quarter, to cover severance costs and restructuring expenses. The company is terminating contractors, reducing production work schedules, and halting raises and its stock repurchase plan. It also trimmed its previous equipment-purchase estimate from about $25 million to $22 million.
Killingstad now expects 2008 fourth-quarter sales of $140 million to $155 million and a net loss for the quarter of 98 cents to $1.08 per share, which includes 88 cents a share in restructuring charges.
For full year 2008, Tennant expects sales of $688 to $703 million and earnings of 40 to 50 cents per share. Tennant's stock closed Wednesday at $24.72, up 19 cents a share.
Dee DePass • 612-673-7725
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