GARDNER DENVER INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - GARDNER DENVER INC	d245982d8k.htm

Exhibit 99.1

LOGO

PRESS RELEASE

FOR IMMEDIATE RELEASE


October 20, 2011		Contact: Michael M. Larsen
		Vice President and CFO
		Tel. (610) 249-2002

GARDNER DENVER ANNOUNCES RECORD RESULTS

—

Record revenues of $614.7 million in the third quarter of 2011, up 25% over the same period of 2010.

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Record Diluted Earnings per Share (“DEPS”) were $1.42 for the third quarter, an increase of 61% compared to $0.88 in the third quarter of 2010.

—

Completed $126 million stock buyback in third quarter of 2011.

WAYNE, Pa. (October 20, 2011) – Gardner Denver, Inc. (NYSE: GDI) today announced third quarter results that established quarterly records for revenues, operating income, net income and DEPS.

Gardner Denver’s third quarter 2011 revenues of $614.7 million were up 25% over the $493.4 million reported in the third quarter of 2010. Operating income for the third quarter of 2011 was $106.6 million, a 57% increase from $68.0 million recorded in the same period of 2010. Operating margin improved 350 basis points to 17.3% in the third quarter of 2011. Net income in the third quarter of 2011 increased 58% to $73.6 million, or $1.42 per diluted share, from the third quarter 2010 level of $46.6 million, or $0.88 per diluted share. On a non-GAAP basis, excluding profit improvement costs and other items from DEPS as reflected on the reconciliation schedule below, third quarter adjusted 2011 DEPS (“Adjusted DEPS”) were $1.48, a 68% increase over third quarter 2010. ⁽¹⁾

In the third quarter of 2011, Gardner Denver repurchased 1.77 million shares of Gardner Denver stock at a total purchase price of $126 million. The buy-back was financed through a combination of cash on hand and the Company’s existing credit facility. The repurchase increased DEPS by $0.02 in the third quarter of 2011.

CEO’s Comments

“I am very pleased with the strong financial performance of the Company in the third quarter as our team’s execution led to yet another quarter of record revenue and earnings,” said Barry L. Pennypacker, Gardner Denver’s President and Chief Executive Officer. “We continue to make progress on margin expansion, supported by the principles of the Gardner Denver Way, as evidenced by the Industrial Products Group achieving a 12.1% operating margin and delivering on its tenth consecutive quarter of sequential margin improvement. Cash flow was excellent, with operating cash flow totaling $97 million for the quarter,” continued Mr. Pennypacker. “Our strong balance sheet and cash

generation enabled us to opportunistically repurchase shares of Gardner Denver and pursue selective acquisitions such as the agreement to acquire Robuschi S.p.A. (“Robuschi”), announced on October 11, 2011. In addition, we invested $17 million in capital expenditures in the third quarter of 2011, with a sustained focus on operational improvements and increased capacity to meet growing customer demand.”

Outlook

“While the global economy faces an uncertain future, we remain cautiously optimistic. Our backlog and order rates remain at healthy levels and we expect our businesses to grow in the fourth quarter of 2011, despite tougher comparisons to 2010. Our diverse portfolio of global businesses, supported by existing backlog, and proven operational capabilities will enable us to perform well,” commented Mr. Pennypacker.

“We anticipate fourth quarter 2011 DEPS to be approximately $1.42 to $1.47, and our full-year 2011 DEPS to be in the range of $5.24 to $5.29. These projections include profit improvement costs and other items totaling $0.03 per diluted share for the fourth quarter and $0.20 per diluted share for the full-year 2011. Fourth quarter 2011 Adjusted DEPS are expected to be in a range of $1.45 to $1.50. Full-year 2011 Adjusted DEPS are expected to be in a range of $5.44 to $5.49, an increase of 60% to 62% over Adjusted DEPS levels for 2010. The Robuschi acquisition is not expected to have a material impact on DEPS in the fourth quarter.”

Engineered Products Group (EPG)

EPG orders and revenues increased 7% and 38%, respectively, for the three months ended September 30, 2011, compared to the same period of 2010, reflecting strong demand for drilling and well servicing pumps, aftermarket products and related services, and growth in emerging markets. Operating margin⁽²⁾ for EPG increased 360 basis points to 23.1% as compared to 19.5% in the third quarter of 2010. The improvement in operating income for this segment was primarily attributable to incremental profit on revenue growth, favorable product mix and cost reductions.

Industrial Products Group (IPG)

Orders and revenues for IPG increased 21% and 14%, respectively, in the third quarter, compared to the same period of 2010, reflecting on-going improvement in demand for OEM products, custom engineered packages in Asia Pacific, and aftermarket parts and services. Operating margin⁽²⁾ for IPG increased 270 basis points to 12.1% as compared to 9.4% in the third quarter of 2010. The improvement in operating income for this segment was primarily attributable to incremental profit on revenue growth and cost reductions.

Gardner Denver Consolidated Results

Adjusted Operating Income, which excludes the net impact of expenses incurred for profit improvement initiatives and other items ($4.9 million), for the three-month period ended September 30, 2011 was $111.5 million, compared to

$68.1 million in the prior year period.⁽¹⁾ Adjusted Operating Income as a percentage of revenues improved 430 basis points to 18.1% from 13.8% in the third quarter of 2010.⁽¹⁾

Forward-Looking Information

This press release contains forward-looking statements that involve risks and uncertainties. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “could,” “should,” “anticipate,” “expect,” “believe,” “will,” “project,” “lead,” or the negative thereof or variations thereon or similar terminology. The actual future performance of the Company could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: changing economic conditions; pricing of the Company’s products and other competitive market pressures; the costs and availability of raw materials; fluctuations in foreign currency exchange rates and energy prices; risks associated with the Company’s current and future litigation; and the other risks detailed from time to time in the Company’s SEC filings, including but not limited to, its Annual Report on Form 10-K for the fiscal year ending December 31, 2010, and its subsequent quarterly reports on Form 10-Q for the 2011 fiscal year. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. 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.

Gardner Denver will broadcast a conference call to discuss results for the third quarter of 2011 on Friday, October 21, 2011 at 9:30 a.m. EDT 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 Center on the Gardner Denver website at www.GardnerDenver.com or through Thomson StreetEvents at www.earnings.com.

Corporate Profile

Gardner Denver, Inc., with 2010 revenues of approximately $1.9 billion, is a leading worldwide manufacturer of highly engineered products, including compressors, liquid ring pumps and blowers for various industrial, medical, environmental, transportation and process applications, pumps used in the petroleum and industrial market segments and other fluid transfer equipment, such as loading arms and dry break couplers, serving chemical, petroleum and food industries. Gardner Denver’s news releases are available by visiting the Investors section on the Company’s website (www.GardnerDenver.com).

(1) Adjusted Operating Income, on a consolidated and segment basis, and Adjusted DEPS are both financial measures that are not in accordance with GAAP. For reconciliation to the comparable GAAP number for reported historic periods please see “Reconciliation of Operating Income and DEPS to Adjusted Operating Income and Adjusted DEPS” at the end of this press release. Gardner Denver believes the non-GAAP financial measures of Adjusted Operating Income and Adjusted DEPS provide

important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. Gardner Denver believes excluding the specified items from operating income and DEPS provides a more meaningful comparison to the corresponding reported periods and internal budgets and forecasts, assists investors in performing analysis that is consistent with financial models developed by investors and research analysts, provides management with a more relevant measurement of operating performance and is more useful in assessing management performance.

(2) 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” at the end of this press release.

GARDNER DENVER, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts and percentages)

(Unaudited)


		Three Months Ended September 30,								Nine Months Ended September 30,
		2011			2010		% Change			2011			2010		% Change

Revenues	$		614,682	$		493,449		25	$		1,757,228	$		1,365,132		29
Cost of sales			409,197			333,127		23			1,157,019			919,403		26

Gross profit			205,485			160,322		28			600,209			445,729		35
Selling and administrative expenses			94,179			91,070		3			295,209			270,509		9
Other operating expense, net			4,726			1,253		277			12,425			3,170		292

Operating income			106,580			67,999		57			292,575			172,050		70
Interest expense			2,898			5,651		(49)			12,179			17,829		(32)
Other income, net			(138)			(1,110)		(88)			(821)			(1,747)		(53)

Income before income taxes			103,820			63,458		64			281,217			155,968		80
Provision for income taxes			29,543			16,610		78			79,345			38,943		104

Net income			74,277			46,848		59			201,872			117,025		73
Less: Net income attributable to noncontrolling interests			694			273		154			1,690			1,158		46

Net income attributable to Gardner Denver	$		73,583	$		46,575		58	$		200,182	$		115,867		73


Earnings per share attributable to Gardner Denver common stockholders:
Basic earnings per share	$		1.43	$		0.89		61	$		3.85	$		2.22		73

Diluted earnings per share	$		1.42	$		0.88		61	$		3.82	$		2.20		74


Cash dividends declared per common share	$		0.05	$		0.05		-	$		0.15	$		0.15		-


Basic weighted average number of shares outstanding			51,601			52,352					52,028			52,271


Diluted weighted average number of shares outstanding			51,968			52,749					52,428			52,683


Shares outstanding as of September 30			50,577			52,456

GARDNER DENVER, INC.

CONDENSED BALANCE SHEET ITEMS

(in thousands, except percentages)

(Unaudited)


		9/30/2011			6/30/2011		% Change			12/31/2010

Cash and cash equivalents	$		143,944	$		121,347		19	$		157,029

Accounts receivable, net			459,090			445,812		3			369,860

Inventories, net			282,794			299,470		(6)			241,485

Total current assets			956,590			932,401		3			828,537

Total assets			2,131,036			2,185,553		(2)			2,027,098

Short-term borrowings and current maturities of long-term debt			38,540			38,010		1			37,228

Accounts payable and accrued liabilities			423,736			410,185		3			322,372

Total current liabilities			462,276			448,195		3			359,600

Long-term debt, less current maturities			218,597			148,308		47			250,682

Total liabilities			892,839			819,966		9			837,425

Total stockholders’ equity	$		1,238,197	$		1,365,587		(9)	$		1,189,673

GARDNER DENVER, INC.

BUSINESS SEGMENT RESULTS

(in thousands, except percentages)

(Unaudited)


		Three Months Ended September 30,								Nine Months Ended September 30,
		2011			2010		% Change			2011			2010		% Change
Industrial Products Group
Revenues	$		320,171	$		280,633		14	$		934,227	$		795,677		17
Operating income			38,607			26,476		46			103,734			66,186		57
% of revenues			12.1%			9.4%					11.1%			8.3%
Orders			327,226			270,777		21			974,424			830,481		17
Backlog			248,557			216,980		15			248,557			216,980		15

Engineered Products Group
Revenues			294,511			212,816		38			823,001			569,455		45
Operating income			67,973			41,523		64			188,841			105,864		78
% of revenues			23.1%			19.5%					22.9%			18.6%
Orders			300,549			279,879		7			902,228			705,764		28
Backlog			420,824			341,707		23			420,824			341,707		23

Reconciliation of Segment Results to Consolidated Results

Industrial Products Group operating income	$		38,607	$		26,476			$		103,734	$		66,186
Engineered Products Group operating income			67,973			41,523					188,841			105,864

Consolidated operating income			106,580			67,999					292,575			172,050
% of revenues			17.3%			13.8%					16.6%			12.6%
Interest expense			2,898			5,651					12,179			17,829
Other income, net			(138)			(1,110)					(821)			(1,747)

Income before income taxes	$		103,820	$		63,458			$		281,217	$		155,968

% of revenues			16.9%			12.9%					16.0%			11.4%

The Company 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 September 30,					Nine Months Ended September 30,
		$ Millions		% Change			$ Millions		% Change
Industrial Products Group
2010 Revenues			280.6					795.7
Effect of currency exchange rates			16.3		6			44.8		6
Organic growth			23.3		8			93.7		11

2011 Revenues			320.2		14			934.2		17

2010 Orders			270.8					830.5
Effect of currency exchange rates			17.4		6			46.0		5
Organic growth			39.0		15			97.9		12

2011 Orders			327.2		21			974.4		17

Backlog as of 9/30/10			217.0
Effect of currency exchange rates			(2.2)		(1)
Organic growth			33.8		16

Backlog as of 9/30/11			248.6		15

Engineered Products Group
2010 Revenues			212.8					569.5
Incremental effect of acquisitions			-		-			8.5		1
Effect of currency exchange rates			9.4		4			23.6		4
Organic growth			72.3		34			221.4		40

2011 Revenues			294.5		38			823.0		45

2010 Orders			279.9					705.8
Incremental effect of acquisitions			-		-			7.6		1
Effect of currency exchange rates			8.6		3			21.6		3
Organic growth			12.0		4			167.2		24

2011 Orders			300.5		7			902.2		28

Backlog as of 9/30/10			341.7
Incremental effect of acquisitions			-		-
Effect of currency exchange rates			(2.0)		(1)
Organic growth			81.1		24

Backlog as of 9/30/11			420.8		23

Consolidated
2010 Revenues			493.4					1,365.1
Incremental effect of acquisitions			-		-			8.5		1
Effect of currency exchange rates			25.7		5			68.4		5
Organic growth			95.6		20			315.2		23

2011 Revenues			614.7		25			1,757.2		29

2010 Orders			550.7					1,536.3
Incremental effect of acquisitions			-		-			7.6		1
Effect of currency exchange rates			26.0		5			67.6		4
Organic growth			51.0		9			265.1		17

2011 Orders			627.7		14			1,876.6		22

Backlog as of 9/30/10			558.7
Incremental effect of acquisitions			-		-
Effect of currency exchange rates			(4.2)		(1)
Organic growth			114.9		21

Backlog as of 9/30/11			669.4		20

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 the non-GAAP financial measures of Adjusted Operating Income and Adjusted DEPS provide important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. Gardner Denver believes excluding the specified items from operating income and DEPS provides management a more meaningful comparison to the corresponding reported periods and internal budgets and forecasts, assists investors in performing analysis that is consistent with financial models developed by investors and research analysts, provides management with a more relevant measurement of operating performance, and is more useful in assessing management performance.


		Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
		Industrial Products Group			Engineered Products Group			Consolidated			Industrial Products Group			Engineered Products Group			Consolidated

Operating income	$		38,607	$		67,973	$		106,580	$		103,734	$		188,841	$		292,575
% of revenues			12.1%			23.1%			17.3%			11.1%			22.9%			16.6%
Adjustments to operating income:
Profit improvement initiatives ⁽³⁾			1,690			935			2,625			5,261			1,327			6,588
Other, net ⁽⁴⁾			1,538			713			2,251			3,514			1,657			5,171

Total adjustments to operating income			3,228			1,648			4,876			8,775			2,984			11,759
Adjusted Operating Income	$		41,835	$		69,621	$		111,456	$		112,509	$		191,825	$		304,334
% of revenues, as adjusted			13.1%			23.6%			18.1%			12.0%			23.3%			17.3%

		Three Months Ended September 30, 2010									Nine Months Ended September 30, 2010
		Industrial Products Group			Engineered Products Group			Consolidated			Industrial Products Group			Engineered Products Group			Consolidated

Operating income	$		26,476	$		41,523	$		67,999	$		66,186	$		105,864	$		172,050
% of revenues			9.4%			19.5%			13.8%			8.3%			18.6%			12.6%
Adjustments to operating income:
Profit improvement initiatives ⁽³⁾			(398)			34			(364)			3,562			(1,230)			2,332
Other, net ⁽⁴⁾			170			284			454			149			445			594

Total adjustments to operating income			(228)			318			90			3,711			(785)			2,926
Adjusted Operating Income	$		26,248	$		41,841	$		68,089	$		69,897	$		105,079	$		174,976
% of revenues, as adjusted			9.4%			19.7%			13.8%			8.8%			18.5%			12.8%

		Three Months Ended September 30,									Nine Months Ended September 30,
		2011			2010			% Change			2011			2010			% Change

Diluted earnings per share	$		1.42	$		0.88			61	$		3.82	$		2.20			74
Adjustments to diluted earnings per share:
Profit improvement initiatives ⁽³⁾			0.03			(0.01)						0.09			0.03
Other, net ⁽⁴⁾			0.03			0.01						0.07			0.01

Total adjustments to diluted earnings per share			0.06			-						0.16			0.04
Adjusted Diluted Earnings Per Share	$		1.48	$		0.88			68	$		3.98	$		2.24			78

⁽³⁾	Charges in both years reflect costs, including employee termination benefits, to streamline operations and reduce overhead costs.

⁽⁴⁾	Charges in 2011 include costs associated with certain severance payments, the closure of a manufacturing facility, acquisition due diligence and corporate relocation.

Charges in 2010 include certain retirement expenses and acquisition due diligence and integration costs, partially offset by the gain on the sale of a foundry.

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