QUINCY, IL -- 10/22/08 --
Gardner Denver, Inc. (NYSE: GDI)
Third Quarter Highlights:
-- Adjusted Diluted Earnings Per Share were $0.88 for the third quarter
of 2008, which excludes expenses for profit improvement initiatives,
non-recurring expenses, mark-to-market currency adjustments, and
incremental taxes associated with cash repatriation totaling $0.23.
DEPS, as reported under accounting principles generally accepted in
the U.S. ("GAAP"), were $0.65.
-- Cash provided by operating activities exceeded $87 million, a new
record level for a three-month period.
-- Lean implementation continues to drive inventory reductions,
increasing inventory turnover to 5.6 times and generating in excess
of $14 million of cash for the quarter.
-- The Company repurchased 1.5 million shares of Gardner Denver stock,
completing the outstanding authorization under its share repurchase
program.
Gardner Denver, Inc. (NYSE: GDI) announced that revenues and net income for
the three months ended September 30, 2008 were $480.3 million and $34.6
million, respectively. For the nine-month period of 2008, revenues and net
income were $1.5 billion and $135.1 million, respectively. Operating
income for the three and nine-month periods ending September 30, 2008 was
$55.5 million and $205.0 million, respectively. Diluted earnings per share
("DEPS") for the three months ended September 30, 2008 were $0.65 and $2.52
for the nine-month period of 2008. The three and nine-month periods ended
September 30, 2008 included expenses for profit improvement initiatives,
non-recurring expenses, mark-to-market currency adjustments, and
incremental taxes associated with cash repatriation totaling $0.23 DEPS and
$0.28 DEPS, respectively.
Operating income, as adjusted to exclude the impact of expenses for profit
improvement initiatives, non-recurring expenses, and mark-to-market
currency adjustments ("Adjusted Operating Income") for the three and
nine-month periods ended September 30, 2008 was $70.1 million and $223.6
million, respectively. DEPS, as adjusted for the impact of profit
improvement initiatives, non-recurring expenses, mark-to-market currency
adjustments, and incremental taxes associated with cash repatriation
("Adjusted DEPS") for the three and nine-month periods ended September 30,
2008 were $0.88 and $2.80, respectively. Adjusted Operating Income, on a
consolidated and segment basis, and Adjusted DEPS are both non-GAAP
financial measures. See "Reconciliation of Operating Income and DEPS to
Adjusted Operating Income and Adjusted DEPS" at the end of this press
release. Gardner Denver believes excluding these expenses and adjustments
from operating income and DEPS provides a more meaningful comparison to the
corresponding reported period and assists investors in performing financial
analysis that is consistent with financial models developed by research
analysts.
The Company's provision for income taxes in the third quarter of 2008
increased to 33.2 percent, compared to 12.3 percent in the same period of
the previous year. The third quarter of 2008 effective tax rate was
impacted by higher than anticipated cash repatriation costs ($2.7 million
or $0.05 DEPS). In the third quarter of 2007, the Company's provision for
income taxes decreased by $10.5 million as a result of the recognition of
non-recurring, non-cash reductions to net deferred tax liabilities, which
increased DEPS in that period by $0.19.
Acquisition of CompAir
On October 20, 2008, Gardner Denver announced that it had completed its
acquisition of all of the outstanding shares of CompAir Holdings Limited
("CompAir"), a leading global manufacturer of compressed air and gas
solutions, for a total transaction value, net of cash acquired, of
approximately £200.6 million ($347.9 million). As a result of certain
non-recurring and non-cash adjustments required under accounting principles
generally accepted in the U.S. (primarily the adjustment of inventory to
fair value, which is estimated to be $3.0 million) and incremental
depreciation, amortization, and interest expense, the addition of CompAir
is expected to reduce Gardner Denver's fourth quarter 2008 DEPS by $0.06 to
$0.10. In 2009, CompAir is currently expected to be accretive to DEPS by
$0.10 to $0.15. These expectations are based on current market conditions
and include incremental interest expense on the acquisition related debt
financing and reflect a 30 percent effective tax rate on the combined
businesses in 2009.
CEO's Comments Regarding Results
"I am very pleased with the performance of the Gardner Denver team in the
third quarter of 2008, and the operational improvements we have begun to
achieve," said Barry L. Pennypacker, Gardner Denver's President and Chief
Executive Officer. "Despite the challenging and uncertain economic
environment, our core businesses continue to perform well and I am
optimistic about the future of the Company. Many milestones were reached
during the quarter, including the announcement of the CompAir transaction,
one of the largest and most strategic acquisitions in the Company's
history. In addition, we negotiated and closed new $650 million
multicurrency senior secured loan facilities, which were oversubscribed
despite an incredibly difficult credit environment.
"While the Gardner Denver team is progressing on our externally-focused
objectives, we are also executing on our planned operational improvements,"
said Mr. Pennypacker. "The Company's lean transformation continues to
build momentum, with most of our plants throughout the world implementing
programs to improve operational efficiencies. An implementation of lean
programs typically results in near-term pressure on gross profit and
operating margins as production levels, lead times, and inventory are
reduced. However, in the long-term, lean initiatives are expected to
provide greater benefits through lead-time reduction and operating margin
improvements. Typically, the immediate benefit of lean efforts is realized
in incremental cash provided by operating activities as inventory
decreases. In the third quarter, Gardner Denver's inventory turnover
improved to 5.6 times, the highest recorded amount in the Company's
history, and inventory reductions contributed approximately $14 million to
the Company's record cash provided by operating activities in the third
quarter of 2008, which exceeded $87 million. For the nine-month period of
2008, cash provided from operating activities exceeded $204 million,
compared to $127 million in the same period of 2007. I am very proud of
the efforts of our employees throughout the world and look forward to
achieving our next milestones.
"I am also very excited about the opportunities that will be created by the
integration of CompAir with Gardner Denver's existing compressor operations
throughout the world. The combined businesses will significantly enhance
our channels of distribution to serve the global market. Our integration
team has already begun to implement their plans, with the goal of blending
the complementary product lines and geographic reach of CompAir and Gardner
Denver in order to take advantage of future growth opportunities for our
products, services, and employees."
Commenting on the worldwide demand environment, Mr. Pennypacker continued,
"It is challenging to project industrial product demand on a global basis
in the current economic environment. At present, demand remains strong in
end market segments in Asia and Eastern Europe, while growth has stalled in
North America and slowed considerably in the last few weeks of September in
Western Europe. Our shorter lead-time products that are more susceptible
to swings in the economy, such as those that serve light industry and Class
8 trucks, are experiencing challenging demand environments, whereas demand
for products for medical applications and longer lead-time products for
process applications, such as energy and environmental, have remained
resilient. Worldwide economic difficulties and the financial crisis,
however, have clouded our visibility into many of our key end market
segments and we remain cautious in our outlook for 2009.
"For the three months ended September 30, 2008, compared to the same period
of 2007, revenues increased 5 percent, reflecting the favorable impact of
foreign currency exchange rates and moderate growth in Europe and Asia,
offset by lower shipments of petroleum pumps," said Mr. Pennypacker.
"Gross profit as a percentage of revenues ('gross margin') declined in the
third quarter of 2008, when compared to the third quarter of 2007,
primarily as a result of decreased shipments of petroleum pumps and the
pursuit of lean initiatives. Operating income as a percentage of revenues
declined year-over-year as a result of the lower gross margin and $14.7
million of expenses relating to profit improvement initiatives,
non-recurring expenses, and mark-to-market currency adjustments.
"Our Compressor and Vacuum Products segment revenues grew by 7 percent in
the third quarter of 2008, when compared to the same period of 2007, due to
favorable changes in foreign currency exchange rates and strong shipments
in Europe and Asia. Orders increased 1 percent in the three months ended
September 30, 2008, when compared with the same period of 2007, reflecting
favorable changes in foreign currency exchange rates and good demand for
original equipment manufacturer ('OEM') applications on a global basis,
which was almost entirely offset by lower demand for low-pressure and
vacuum applications in Europe. The third quarter of 2007 also included a
significant order for an engineered package to be used in a mining
application that did not recur in 2008.
"Adjusted Operating Income for the Compressor and Vacuum Products segment
in the third quarter of 2008 was $48.9 million and segment Adjusted
Operating Income as a percentage of revenues was 12.7 percent," said Mr.
Pennypacker. "Segment operating income(1), as reported under GAAP, for the
Compressor and Vacuum Products segment for the three months ended September
30, 2008 was $35.2 million and segment operating income as a percentage of
revenues (segment operating margin(1)) declined to 9.1 percent, compared to
11.6 percent in the same quarter of last year. The decline in segment
operating margin was the result of costs associated with profit improvement
initiatives, non-recurring expenses, and mark-to-market currency
adjustments, which reduced segment operating income by $13.7 million and
segment operating margin by 3.6 percentage points. See the reconciliation
of operating income to Adjusted Operating Income for this segment at the
end of this press release.
"Fluid Transfer Products segment revenues declined 3 percent in the third
quarter of 2008, compared with the third quarter of 2007, primarily due to
decreased shipments of petroleum pumps, partially offset by higher loading
arm volume and the favorable impact of foreign currency exchange rates,"
said Mr. Pennypacker. "Orders grew 32 percent in the third quarter,
compared with the same period of 2007, reflecting strong demand for
petroleum pumps.
"Adjusted Operating Income for the Fluid Transfer Products segment for the
third quarter of 2008 was $21.2 million and segment Adjusted Operating
Income as a percentage of revenues was 22.5 percent. Segment operating
income(1), as reported under GAAP, for the Fluid Transfer Products segment
for the three months ended September 30, 2008 was $20.2 million and segment
operating margin(1) was 21.5 percent, compared to 26.0 percent in the same
period of the prior year. The decline in segment operating margin was
expected and primarily reflects the unfavorable mix of decreased petroleum
pump shipments, since these products generate operating margin in excess of
the Fluid Transfer Products segment average. Segment operating margin was
also impacted by costs associated with profit improvement initiatives and
non-recurring expenses, which reduced segment operating income by $1.0
million and segment operating margin by 1.0 percentage point. See the
reconciliation of operating income to Adjusted Operating Income for this
segment at the end of this press release.
Mr. Pennypacker continued, "During the third quarter of 2008, the Company
completed the acquisition of the remaining 1.5 million shares of the total
2.7 million shares authorized under the Company's share repurchase program.
The total cost for these purchases was $56.3 million. Although the Company
was actively repurchasing shares and accumulating cash in preparation for
completion of the CompAir transaction, debt to total capital was 18.8
percent as of September 30, 2008. Upon the completion of the CompAir
acquisition on October 20, 2008, the Company's debt to total capital
increased to approximately 33 percent.
Outlook
"The Company expects orders for its compressor and vacuum products to slow
in the fourth quarter of 2008, driven by declining demand in the United
States and Europe, partially offset by continued growth in Asia. We expect
to see stable demand through the end of the year for OEM, marine,
locomotive, and process applications. Demand is expected to continue to
decline for our lower horsepower and general industrial products. We
anticipate revenue growth to slow in the fourth quarter of 2008 as a result
of this order outlook, partially offset by a reduction in backlog as
operational improvements are achieved," said Mr. Pennypacker.
"Demand surged in the third quarter for our petroleum pumps and our
production capacity for most of these products is sold out into the first
quarter of 2009. To date, demand for new rigs has not appeared to slow,
given the need for upgrades to improve efficiencies. In addition, in the
third quarter we experienced improved demand for well servicing pumps, as
excess capacity is absorbed in North America. However, recent volatility
in oil and natural gas prices has caused dramatic shifts in the capital
expenditure expectations of certain oil and gas exploration and production
companies, which may result in a lower average rig count in North America
in 2009.
"Based on our current economic outlook, existing backlog and expected
operational improvements, we are revising our full-year 2008 DEPS outlook
range to $3.29 to $3.35, with fourth quarter DEPS expected to be $0.77 to
$0.83. The effective tax rate assumed in the DEPS guidance for 2008 is 29
percent. The outlook range for the fourth quarter of 2008 includes DEPS of
$0.93 to $0.99 before (1) the incremental effect of the CompAir acquisition
and related financings, which are expected to reduce DEPS by $0.06 to
$0.10; (2) mark-to-market currency adjustments related to the CompAir
acquisition and the associated financing that reduce DEPS by $0.02; and (3)
anticipated additional costs associated with profit improvement initiatives
(primarily consisting of severance expense) incurred in order to streamline
operations, reduce overhead costs, and rationalize the Company's
manufacturing footprint ($0.06 DEPS).
"The financial results in the fourth quarter of 2007 included an
approximately $8.4 million ($0.16 DEPS) reduction to the Company's tax
provision, primarily due to foreign tax credits. The financial results for
the full-year 2007 included $19.5 million of non-recurring reductions in
the tax provision, which benefited DEPS by $0.36 for the year.
"The Company invested $28.9 million in capital expenditures during the
nine-month period of 2008, compared to $32.2 million in the same period of
2007. Depreciation and amortization expense was $44.7 million for the nine
months ended September 30, 2008, compared to $42.8 million in the
nine-month period of 2007. For the full-year 2008, capital spending is
expected to be approximately $40 million to $45 million."
Third Quarter Results
Revenues increased $23.1 million (5 percent) to $480.3 million for the
three months ended September 30, 2008, compared to the same period of 2007.
Compressor and Vacuum Products segment revenues increased 7 percent for the
three-month period of 2008, compared to the previous year, driven by
favorable changes in foreign currency exchange rates and organic growth in
most product lines. Fluid Transfer Products segment revenues decreased 3
percent for the three months ended September 30, 2008, compared to the same
period of 2007, primarily resulting from decreased petroleum pump volume,
partially offset by incremental sales of all other product lines and
favorable changes in foreign currency exchange rates (see "Selected
Financial Data Schedule").
Gross profit increased $1.2 million (1 percent) to $150.4 million for the
three months ended September 30, 2008, compared to the same period of 2007,
as a result of the higher revenue. Gross profit as a percentage of
revenues declined to 31.3 percent in the three-month period of 2008, from
32.6 percent in the same period of 2007, due primarily to product mix,
partially offset by operational improvements and leveraging fixed and
semi-fixed costs over additional sales volume.
As a percentage of revenues, selling and administrative expenses improved
to 16.7 percent for the three-month period ended September 30, 2008,
compared to 17.6 percent for the same period of 2007, as a result of cost
control initiatives and leveraging revenue growth. Selling and
administrative expenses were flat in the three-month period ended September
30, 2008, as compared to the same period of 2007, at $80.3 million, despite
an unfavorable impact of changes in foreign currency exchange rates of
approximately $2.9 million, as a result of the cost reductions.
Other operating expenses, net increased $13.2 million in the three months
ended September 30, 2008, as compared to the same period of 2007, to $14.6
million, primarily as a result of $12.6 million of costs associated with
profit improvement initiatives, non-recurring expenses, and mark-to-market
currency adjustments.
The provision for income taxes for the three months ended September 30,
2008 increased $9.7 million to $17.2 million, compared to the same period
of 2007, primarily due to approximately $10.5 million of non-recurring,
non-cash reductions to net deferred tax liabilities that were recognized in
the third quarter of 2007 and an increase in the provision for income taxes
in the third quarter of 2008 of $2.7 million, which was primarily related
to cash repatriation activities.
Net income for the three months ended September 30, 2008 decreased $19.0
million (35 percent) to $34.6 million, compared to $53.7 million in same
period of 2007, due primarily to costs associated with profit improvement
initiatives, non-recurring expenses, and mark-to-market currency
adjustments incurred in the third quarter of 2008 and the increase in the
effective tax rate discussed previously.
Nine Month Results
Revenues for the nine-month period of 2008 increased $135.6 million (10
percent) to $1.5 billion, compared to $1.4 billion in the same period of
2007. This increase resulted from favorable changes in foreign currency
exchange rates and organic growth.
Gross profit increased $27.6 million (6 percent) to $479.6 million in the
nine months ended September 30, 2008, compared to 2007, primarily as a
result of higher revenue. Gross profit as a percentage of revenues
decreased to 32.1 percent in the first nine months of 2008, compared with
33.3 percent in 2007, due primarily to product mix, partially offset by
operational improvements and leveraging fixed and semi-fixed costs over
additional sales volume (see "Selected Financial Data Schedule").
As a percentage of revenues, selling and administrative expenses improved
to 17.2 percent for the nine-month period of 2008, from 17.9 percent in the
comparable period of 2007, as a result of cost control initiatives and
leveraging revenue growth. Selling and administrative expenses increased
$14.5 million for the nine-month period ended September 30, 2008 to $257.3
million, primarily due to unfavorable changes in foreign currency exchange
rates ($13.7 million) and other selling and administrative expense
increases, which were mostly offset by cost reductions realized through
integration initiatives.
Other operating expenses, net increased $14.1 million in the nine months
ended September 30, 2008, as compared to the same period of 2007, to $17.3
million, primarily as a result of costs associated with profit improvement
initiatives, non-recurring expenses, and mark-to-market currency
adjustments.
The provision for income taxes for the nine months ended September 30, 2008
was $56.3 million, $9.5 million higher than the same period of 2007. The
effective tax rate for the nine-month period of 2007 (25 percent) was lower
than in the same period of 2008 (29 percent), primarily due to the
previously mentioned net deferred tax liability adjustment recorded in 2007
and an increase in the provision for income taxes in the third quarter of
2008 related to cash repatriation activities.
As a result of the costs associated with profit improvement initiatives,
non-recurring expenses and mark-to-market currency adjustments in 2008 and
the increase in the effective tax rate discussed previously, net income
decreased $6.2 million (4 percent) to $135.1 million for the nine months
ended September 30, 2008, compared to $141.2 million for the same period of
2007.
Cautionary Statement Regarding Forward-Looking Statements
All of the statements in this release, other than historical facts, are
forward-looking statements, including, without limitation, the statements
made under the "Acquisition of CompAir," "CEO's Comments Regarding
Results," "Outlook," "Third Quarter Results," and "Nine Month Results"
sections. As a general matter, forward-looking statements are those
focused upon anticipated events or trends, expectations, and beliefs
relating to matters that are not historical in nature. The words
"anticipate," "preliminary," "expect," "believe," "intend," "plan to,"
"will," "foresee," "project," "forecast," and similar expressions identify
forward-looking statements. The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for these forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that
forward-looking statements are subject to known and unknown risks,
uncertainties, and other factors relating to the Company's operations and
business environment, all of which are difficult to predict and many of
which are beyond the control of the Company. These known and unknown
risks, uncertainties, and other factors could cause actual results to
differ materially from those matters expressed in, anticipated by, or
implied by such forward-looking statements.
These risks, uncertainties, and factors include, but are not limited to:
(1) the Company's exposure to economic downturns and market cycles,
particularly the level of oil and natural gas prices and oil and natural
gas drilling and production, which affect demand for the Company's
petroleum products, and industrial production and manufacturing capacity
utilization rates, which affect demand for the Company's compressor and
vacuum products; (2) the risks associated with intense competition in the
Company's market segments, particularly the pricing of the Company's
products; (3) the risks of large or rapid increases in raw material costs
or substantial decreases in their availability, and the Company's
dependence on particular suppliers, particularly iron casting and other
metal suppliers; (4) the risks that the integration of the CompAir
acquisition disrupts the plans and operations of the Company, CompAir, or
both and the potential difficulties of employee retention as a result of
the acquisition; (5) the risks that the Company will not realize the
expected financial and other benefits from the acquisition of CompAir; (6)
the ability to continue to identify and complete other strategic
acquisitions and effectively integrate such acquired companies to achieve
desired financial benefits; (7) economic, political, and other risks
associated with the Company's international sales and operations, including
changes in currency exchange rates (primarily between the U.S. dollar, the
euro, the British pound, and the Chinese yuan); (8) the ability to attract
and retain quality executive management and other key personnel; (9) the
risks associated with potential product liability and warranty claims due
to the nature of the Company's products; (10) the risk of regulatory
noncompliance; (11) the risks associated with environmental compliance
costs and liabilities; (12) the risks associated with pending asbestos and
silicosis personal injury lawsuits; (13) the risk of possible future
charges if the Company determines that the value of goodwill and other
intangible assets, representing a significant portion of its total assets,
is impaired; (14) the risk that communication or information systems
failure may disrupt our business and result in financial loss and liability
to our customers; (15) the risks associated with enforcing the Company's
intellectual property rights and defending against potential intellectual
property claims; and (16) the ability to avoid employee work stoppages and
other labor difficulties. The foregoing factors should not be construed as
exhaustive and should be read together with important information regarding
risks, uncertainties, and factors that may affect the Company's future
performance set forth in the Company's Annual Report on Form 10-K for the
fiscal year ending December 31, 2007 and other public reports filed with
the Securities and Exchange Commission.
These statements reflect the current views and assumptions of management
with respect to future events. The Company does not undertake, and hereby
disclaims, any duty to update these forward-looking statements, although
its situation and circumstances may change in the future. The inclusion of
any statement in this release does not constitute admission by the Company
or any other person that the events or circumstances described in such
statement are material.
Comparisons of the financial results for the three and nine-month periods
ended September 30, 2008 and 2007 follow.
Gardner Denver will broadcast a conference call to discuss results for the
third quarter of 2008 and completion of the Company's acquisition of
CompAir Holdings Limited on Thursday, October 23, 2008 at 9:30 a.m. Eastern
Time through a live webcast. This free webcast will be available in
listen-only mode and can be accessed, for up to ninety days following the
call, through the Investor Relations page on the Gardner Denver website at
www.GardnerDenver.com or through Thomson StreetEvents at www.earnings.com.
Gardner Denver, Inc., with 2007 revenues of $1.9 billion, is a leading
worldwide manufacturer of reciprocating, rotary and vane compressors,
liquid ring pumps and blowers for various industrial and transportation
applications, pumps used in the petroleum and industrial market segments,
and other fluid transfer equipment serving chemical, petroleum, and food
industries. Gardner Denver's news releases are available by visiting the
Investor Relations page on the Company's website (www.GardnerDenver.com).
(1) Segment operating income (defined as income before interest expense,
other income, net, and income taxes), and segment operating margin (defined
as segment operating income divided by segment revenues) are indicative of
short-term operational performance and ongoing profitability. For a
reconciliation of segment operating income to consolidated operating income
and consolidated income before income taxes, see "Business Segment
Results."
GARDNER DENVER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts and percentages)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
% %
2008 2007 Change 2008 2007 Change
--------- --------- ----- ---------- ---------- -----
Revenues $ 480,310 $ 457,230 5 $1,494,092 $1,358,517 10
Cost of sales 329,925 308,050 7 1,014,505 906,578 12
--------- --------- ---------- ----------
Gross profit 150,385 149,180 1 479,587 451,939 6
Selling and
administrative
expenses 80,343 80,700 - 257,330 242,812 6
Other operating
expense,
net (2) 14,586 1,395 NM 17,258 3,153 NM
--------- --------- ---------- ----------
Operating income 55,456 67,085 (17) 204,999 205,974 -
Interest expense 3,829 6,566 (42) 14,470 20,161 (28)
Other income,
net (237) (657) (64) (814) (2,163) (62)
--------- --------- ---------- ----------
Income before
income taxes 51,864 61,176 (15) 191,343 187,976 2
Provision for
income taxes 17,226 7,524 129 56,280 46,737 20
--------- --------- ---------- ----------
Net income $ 34,638 $ 53,652 (35) $ 135,063 $ 141,239 (4)
========= ========= ========== ==========
Basic earnings
per share $ 0.65 $ 1.00 (35) $ 2.55 $ 2.66 (4)
========= ========= ========== ==========
Diluted
earnings per
share $ 0.65 $ 0.99 (34) $ 2.52 $ 2.62 (4)
========= ========= ========== ==========
Basic weighted
average number
of shares
outstanding 53,080 53,472 52,915 53,124
========= ========= ========== ==========
Diluted weighted
average number
of shares
outstanding 53,608 54,236 53,571 53,998
========= ========= ========== ==========
Shares outstanding
as of
September 30 51,725 53,501
========= =========
(2) Current and prior year results reflect the reclassification from
"Selling and administrative expenses" of certain operating income and
expense items, including realized and unrealized foreign currency
exchange gains and losses, certain employee termination and retirement
benefits, certain non-recurring items and other operating expenses
and income.
GARDNER DENVER, INC.
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
9/30/2008 6/30/2008 Change 12/31/2007
----------- ----------- ------ -----------
Cash and equivalents $ 179,115 $ 127,134 41 $ 92,922
Accounts receivable, net 302,429 329,003 (8) 308,748
Inventories, net 233,807 262,586 (11) 256,446
Total current assets 756,652 769,929 (2) 701,528
Total assets 1,925,454 2,009,099 (4) 1,905,607
Short-term borrowings and
current maturities of
long-term debt 31,741 30,642 4 25,737
Accounts payable and accrued
liabilities 309,911 295,070 5 286,465
Total current liabilities 341,652 325,712 5 312,202
Long-term debt, less current
maturities 243,208 219,980 11 263,987
Total liabilities 739,208 716,747 3 745,894
Total stockholders' equity $ 1,186,246 $ 1,292,352 (8) $ 1,159,713
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------------
% %
2008 2007 Change 2008 2007 Change
--------- --------- ----- ----------- ----------- -----
Compressor and
Vacuum
Products
Revenues $ 386,011 $ 359,990 7 $ 1,189,215 $ 1,053,241 13
Operating
income 35,217 41,770 (16) 132,458 121,299 9
% of revenues 9.1% 11.6% 11.1% 11.5%
Orders 381,304 376,365 1 1,206,806 1,101,934 10
Backlog 435,325 420,703 3 435,325 420,703 3
Fluid Transfer
Products
Revenues 94,299 97,240 (3) 304,877 305,276 -
Operating
income 20,239 25,315 (20) 72,541 84,675 (14)
% of revenues 21.5% 26.0% 23.8% 27.7%
Orders 131,733 99,529 32 330,357 299,186 10
Backlog 155,425 184,648 (16) 155,425 184,648 (16)
Reconciliation of
Segment Results
to Consolidated
Results
Compressor and
Vacuum Products
operating
income $ 35,217 $ 41,770 $ 132,458 $ 121,299
Fluid Transfer
Products
operating
income 20,239 25,315 72,541 84,675
--------- --------- ----------- -----------
Consolidated
operating
income 55,456 67,085 204,999 205,974
% of revenues 11.5% 14.7% 13.7% 15.2%
Interest
expense 3,829 6,566 14,470 20,161
Other income,
net (237) (657) (814) (2,163)
--------- --------- ----------- -----------
Income before
income taxes $ 51,864 $ 61,176 $ 191,343 $ 187,976
========= ========= =========== ===========
% of revenues 10.8% 13.4% 12.8% 13.8%
========= ========= =========== ===========
The Company has determined its reportable segments in accordance with SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" and evaluates the performance of its reportable segments based
on operating income, which is defined as income before interest expense,
other income, net, and income taxes. Reportable segment operating income
and segment operating margin (defined as segment operating income divided
by segment revenues) are indicative of short-term operating performance and
ongoing profitability. Management closely monitors the operating income
and operating margin of each business segment to evaluate past performance
and identify actions required to improve profitability.
GARDNER DENVER, INC.
SELECTED FINANCIAL DATA SCHEDULE
(in millions, except percentages)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
% %
$ Millions Change $ Millions Change
--------- ------- --------- -------
Compressor and Vacuum Products
2007 Revenues 360.0 1,053.2
Effect of currency exchange rates 14.4 4 65.3 6
Organic growth 11.6 3 70.7 7
--------- ------- --------- -------
2008 Revenues 386.0 7 1,189.2 13
2007 Orders 376.4 1,101.9
Effect of currency exchange rates 13.0 3 65.5 6
Organic growth (8.1) (2) 39.4 4
--------- ------- --------- -------
2008 Orders 381.3 1 1,206.8 10
Backlog as of 09/30/07 420.7
Effect of currency exchange rates (9.4) (2)
Organic growth 24.0 5
--------- -------
Backlog as of 09/30/08 435.3 3
Fluid Transfer Products
2007 Revenues 97.2 305.3
Effect of currency exchange rates 1.5 2 10.4 3
Organic growth (4.4) (5) (10.8) (3)
--------- ------- --------- -------
2008 Revenues 94.3 (3) 304.9 -
2007 Orders 99.5 299.2
Effect of currency exchange rates 1.2 1 9.4 3
Organic growth 31.0 31 21.8 7
--------- ------- --------- -------
2008 Orders 131.7 32 330.4 10
Backlog as of 09/30/07 184.6
Effect of currency exchange rates (0.9) (1)
Organic growth (28.3) (15)
--------- -------
Backlog as of 09/30/08 155.4 (16)
Consolidated Revenues
2007 457.2 1,358.5
Effect of currency exchange rates 15.9 3 75.7 6
Organic growth 7.2 2 59.9 4
--------- ------- --------- -------
2008 480.3 5 1,494.1 10
GARDNER DENVER, INC.
RECONCILIATION OF OPERATING INCOME AND DEPS TO
ADJUSTED OPERATING INCOME AND ADJUSTED DEPS
(in thousands, except per share amounts and percentages)
(Unaudited)
While Gardner Denver, Inc. reports financial results in accordance with
accounting principles generally accepted in the U.S. ("GAAP"), this press
release includes non-GAAP measures. These non-GAAP measures are not in
accordance with, nor are they a substitute for, GAAP measures. Gardner
Denver, Inc. believes these non-GAAP measures provide a more meaningful
comparison to the corresponding reported period and assist investors in
performing financial analysis that is consistent with financial models
developed by research analysts. Investors should consider non-GAAP
measures in addition to, not as a substitute for, or superior to, the
comparable GAAP measures.
Three Months Ended Nine Months Ended
September 30, 2008 September 30, 2008
------------------------ ----------------------------
Compressor Compressor
and Fluid and Fluid
Vacuum Transfer Consol- Vacuum Transfer Consol-
Products Products idated Products Products idated
------- ------- ------- -------- ------- --------
Operating income $35,217 $20,239 $55,456 $132,458 $72,541 $204,999
% of revenues 9.1% 21.5% 11.5% 11.1% 23.8% 13.7%
Adjustments to
operating income:
Profit improvement
Initiatives (3) 1,713 206 1,919 1,713 206 1,919
Non-recurring
expenses (4) 3,176 794 3,970 6,332 1,573 7,905
Mark-to-market
currency
adjustments (5) 8,766 - 8,766 8,766 - 8,766
------- ------- ------- -------- ------- --------
Total adjustments
to operating
income 13,655 1,000 14,655 16,811 1,779 18,590
Adjusted Operating
Income $48,872 $21,239 $70,111 $149,269 $74,320 $223,589
% of revenues, as
adjusted 12.7% 22.5% 14.6% 12.6% 24.4% 15.0%
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------------
% %
2008 2007 Change 2008 2007 Change
-------- ------- ------- --------- ------- --------
Diluted earnings
per share $ 0.65 $ 0.99 (34) $ 2.52 $ 2.62 (4)
Adjustments to
diluted earnings
per share:
Profit improvement
Initiatives (3) 0.02 - 0.02 -
Non-recurring
Expenses (4) 0.05 - 0.10 -
Mark-to-market
currency
adjustments (5) 0.11 - 0.11 -
Incremental cost
of cash
repatriation (6) 0.05 - 0.05 -
Non-cash
reductions to
net deferred
taxes (7) - (0.19) - (0.19)
-------- ------- --------- -------
Total adjustments
to diluted
earnings per share 0.23 (0.19) 0.28 (0.19)
Adjusted Diluted
Earnings Per Share $ 0.88 $ 0.80 10 $ 2.80 $ 2.43 15
(3) Costs, consisting primarily of employee termination benefits, to
streamline operations, reduce overhead costs, and rationalize the
Company's manufacturing footprint.
(4) Non-recurring expenses in the three months ended September 30, 2008
consisted primarily of the write-off of expenses associated with an
unconsummated acquisition. The Company incurred a $3.9 million
pretax charge for non-recurring retirement expenses in the three
months ended June 30, 2008.
(5) Mark-to-market adjustments for cash transactions and forward currency
contracts on the British pound sterling ("GBP") entered into to limit
the impact of changes in the US dollar ("USD") to GBP exchange rate
on the amount of USD-denominated borrowing capacity that will remain
available on the Company's new revolving credit facility following
the completion of the CompAir Holdings Limited transaction.
(6) Primarily due to incremental taxes associated with cash repatriation
($2.7 million).
(7) The provision for income taxes decreased by $10.5 million in the three
months ended September 30, 2007 as a result of the recognition of
non-recurring, non-cash reductions to net deferred tax liabilities.
Contact:
Christian E. Rothe
Director, Strategic Planning and Development
(217) 228-8224
