Despite record revenue in the second quarter, Tennant Co. lost $2.6 million because of costs associated with a worldwide restructuring and an acquisition that greatly expands its markets overseas.
"Our performance during the 2017 second quarter primarily reflected near-term operational headwinds mainly stemming from our first-quarter 2017 restructuring," said President and Chief Executive Chris Killingstad in a statement on Wednesday.
The company also closed on its $350 million acquisition of the Italian IPC Group — its biggest purchase to date — resulting in charges related to closing the deal and starting to integrate the business.
"IPC boosts our presence and market share in Europe and more than doubles Tennant's current [European, Middle East and Africa] business, and we are pleased with IPC's contribution at this early stage," Killingstad said.
During the first quarter, the Golden Valley-based cleaning products and solutions company announced a global restructuring that included a 3 percent decrease in Tennant's global workforce.
Killingstad told analysts on the company's earnings conference call that the company is in a period of transition but that it has the right strategies for profitable growth.
"We have more work to do as we move through this transition period," Killingstad said. "We remain committed to our core strategies and reaching important milestones."
Those milestones include $1 billion in annual sales and 12 percent or better operating profit margins.
Sales of $270.8 million in the quarter — up 25 percent over the same period a year ago — put the company within reach of the sales goal. The first-quarter restructuring and IPC acquisition will help the company achieve its operating profit margin goals, officials said.
Shares of Tennant closed at $69.25 per share, down 8.7 percent on Wednesday. Year-to-date shares are now down 2.7 percent.
The company's second-quarter net loss was $2.6 million, or 15 cents per share. Special items in the quarter reduced total earnings at Tennant Co. by 75 cents per share.
Excluding the special charges, which also included a pension plan settlement, the company would have reported a net gain of $10.6 million, or 60 cents per share. That was still 19 cents per share less than the consensus on what analysts covering the company had expected, according to Thomson Reuters.
In the second quarter of last year, the company reported sales of $216.8 million and earned $15.3 million, or 85 cents per diluted share.
Looking toward the second half of the year, the company said it still expects to report annual revenue in the range of $960 million to $990 million. However, it lowered its full-year earnings guidance to a range of 85 cents to $1.05 per share from its previous guidance of $1.05 to $1.25 per share.
Patrick Kennedy • 612-673-7926
