QUINCY, Ill., Feb. 5 /PRNewswire-FirstCall/ -- Gardner Denver, Inc.
(NYSE: GDI), a leading manufacturer of compressors and blowers for industrial
applications and pumps for the petroleum and industrial markets, announced
that revenues for the year ended December 31, 2002 were $418.2 million, a
slight decrease compared with the results of the previous year. Diluted
earnings per share (DEPS) in the twelve month period of 2002 were $1.22,
13% less than the previous year. Revenues for the three months ended
December 31, 2002 were $103.9 million, 6% less than the results of the fourth
quarter of 2001. DEPS in the fourth quarter of 2002 were $0.29, a
12% decrease compared with the fourth quarter of 2001.
CEO's Comments Regarding Results
"Despite the difficult sales environment in which we are operating, the
Company continues to significantly improve operations and cash flow. We have
taken advantage of this period of slow demand to focus internally and prepare
our operations for a future recovery. We have successfully completed the
integration of the Belliss & Morcom and Hoffman acquisitions, made in the
third quarter of 2001. These acquisitions enabled us to report increased
revenues and operating earnings for the Compressed Air segment for the year,
despite a retrenchment in industrial demand. Our cost reduction efforts are
continuing on plan and I would expect to see additional benefits from these
efforts when U.S. industrial demand improves and our revenues increase
accordingly. We are investing capital to reduce our costs, implementing lean
manufacturing techniques to reduce leadtime and accelerate throughput, and
expanding our quality systems to improve customer satisfaction. The Company
is well-positioned for profitability improvements when the sales environment
strengthens," stated Ross J. Centanni, Chairman, President and CEO.
"The industrial economy has remained very soft. The recovery generally
expected for 2002 did not materialize and demand for the Company's
petroleum-related products is off dramatically from a year ago. In response,
we continue to tightly control spending. Excluding the effect of changes in
foreign exchange rates, selling and administrative expenses in the fourth
quarter of 2002 decreased approximately 4% compared to the previous year,
despite increased medical and post retirement expenses."
"We were very successful in generating strong cash flow in 2002. Cash
flow from operations totaled almost $53 million for the year, 19% more than
2001 on lower net income. We reduced working capital significantly during the
fourth quarter. Our days sales outstanding decreased to less than 65 days,
the lowest level in our history, in the face of a weak economy. We reinvested
some of this cash in our operations through capital expenditures in an effort
to reduce costs and develop new products. In 2002, we invested $13.6 million
in capital to improve our operations, compared to $11.5 million in 2001. We
also repaid a substantial amount of debt during 2002. In the fourth quarter
of 2002, we repaid almost $11 million of debt and more than $47 million for
the year. By December, debt represented only about 35% of our capital
structure. We believe we are well positioned to pursue synergistic
acquisitions and our other strategies for growth. The ability of our
businesses to generate such strong cash flows demonstrates the strength of our
business model, even in a period of weak economic demand."
Outlook
Looking forward, Mr. Centanni stated, "We believe that the U.S. industrial
market and demand for our compressed air products reached their low in 2002
and that the future holds more opportunities for growth than risks of further
reductions in demand for industrial products. Key economic indicators, such
as U.S. manufacturing capacity utilization and industrial production, are
being monitored for signs of recovery. Typically, demand for our compressed
air products improves approximately six months after these indicators of
industrial activity increase. We have improved our position in Europe through
adding new distribution and strengthening existing channel partners. Although
significant near term improvements in orders for compressed air products are
not anticipated, we believe Gardner Denver is positioned to respond quickly
when a modest improvement in demand does occur, which we expect in the second
half of 2003."
"If rig counts continue to increase, eventual improvement in demand for
petroleum pumps and replacement parts is expected. During 2002, pump products
revenues were driven by backlog consumption. Given the relatively low level
of backlog at year-end, in 2003 we will be relying more on order conversion,
at least through the second quarter. We are working with our supply chain to
reduce leadtimes so that we can respond more quickly to any increase in
demand. If natural gas prices remain elevated, supported by an economic
recovery and a weather-related depletion of inventories, demand for well
servicing and drilling could return to higher levels, stimulating demand for
petroleum pumps in 2003."
"I am pleased with the operational improvements and the cost reductions we
are achieving. As a result of detailed contingency plans and coordinated
efforts across the Company, we were able to mitigate a supply disruption when
a key provider of iron castings ceased production in the fourth quarter of
2002. The incremental costs associated with expediting new castings were
partially offset by lower material costs and, therefore, did not negatively
affect our operations as severely as previously expected. Nevertheless, we
expect that these changes will continue to impact us through the first quarter
of 2003 as new suppliers are integrated into our manufacturing process.
Although the precise financial impact is difficult to estimate, we believe
that the financial results of the fourth quarter of 2002 were reduced by
approximately $0.01 to $0.03 per share due to this problem and the negative
impact in the first quarter of 2003 will be approximately $0.02 to $0.04 per
share. The most significant aspects of this change should be completed by the
first quarter of 2003 and the Company should then continue to benefit from
lower material costs."
"Similar to most companies in the U.S. today, the Company will face rising
post retirement pension and medical expenses in 2003, which will negatively
impact the Company's earnings. We anticipate that increases in these expenses
will reduce DEPS approximately $0.15-$0.18 in 2003, as compared to 2002.
However, we also expect material cost reductions and improvements to
operations will offset most of this increase. Therefore, we expect DEPS for
2003 to be approximately $0.19 to $0.24 for the first quarter and $1.10 to
$1.30 for the year, assuming that a modest recovery in the industrial economy
occurs in the second half of the year. Given the fixed cost leverage
associated with our business and our improved cost structure, if revenues
improve more substantially, financial results next year could exceed this
outlook."
Fourth Quarter Results
Revenues for the three-month period decreased $7.0 million (6%) to
$103.9 million, compared to the same period of 2001, due to a reduction in
demand for petroleum pumps. Compressed Air Products revenues increased
$2.0 million (2%) compared to the fourth quarter of 2001, primarily due to
favorable foreign exchange rate changes. Pump Products revenues for the
three-month period of 2002 were $9.0 million (34%) less than the same period
of 2001. This decrease in revenues reflects lower demand for petroleum pumps
related to reduced rig counts, which began negatively impacting this business
segment's order rate in the second half of 2001.
Net income was $4.7 million for the three-month period of 2002, compared
to $5.2 million in same period of 2001. Fourth quarter results reflect a
cumulative adjustment to lower the Company's effective tax rate to 32% for the
year as a result of greater benefits from U.S. export sales and increased
earnings generated by international subsidiaries with lower effective tax
rates. Diluted earnings per share decreased 12% to $0.29 for the fourth
quarter of 2002, compared to $0.33 for the same period of 2001, primarily as a
result of the decline in pump products revenues and the associated reduction
in fixed cost leverage, additional medical expenses and costs associated with
the disruption of castings from a key supplier. These reductions were
partially offset by the benefit of the tax rate adjustment.
Full Year Results
For the year, total revenues, including $54.1 million in incremental
revenues from acquisitions completed in the third quarter of 2001, decreased
slightly to $418.2 million compared to 2001. Compressed Air Products
revenues, including the benefit of acquisitions and favorable exchange rate
changes, increased $42.0 million (14%). Excluding revenues from acquisitions
and foreign exchange rate changes, revenues from this business segment
decreased $16.6 million (5%) compared to the previous year. This volume
decline was a result of the protracted period of weak economic conditions in
the U.S. and European industrial markets, which led to lower demand for
compressors and blowers. Pump Products revenues for the year decreased
$43.6 million (39%), compared to 2001, as a result of reduced demand for
petroleum pumps related to lower rig counts.
Net income was $19.6 million for twelve-month period of 2002, compared to
$22.0 million in 2001. Diluted earnings per share decreased 13% to $1.22 for
2002, compared to $1.40 for the previous year, due to the lower revenue volume
and related de-leverage of operations, higher medical and post retirement
benefit expenses and costs associated with the disruption of castings from a
key supplier.
Cautionary Statement Regarding Forward-Looking Statements
All of the statements in this release, other than historical facts, are
forward-looking statements made in reliance upon the safe harbor of the
Private Securities Litigation Reform Act of 1995, including the statements
under the "CEO's Comments Regarding Results" and "Outlook" section. As a
general matter, forward-looking statements are those focused upon anticipated
events or trends and expectations and beliefs relating to matters that are not
historical in nature. Such forward-looking statements are subject to
uncertainties and factors relating to Gardner Denver's operations and business
environment, all of which are difficult to predict and many of which are
beyond the control of the Company. These uncertainties and factors could
cause actual results to differ materially from those matters expressed in or
implied by such forward-looking statements. The following uncertainties and
factors, among others, could affect future performance and cause actual
results to differ materially from those expressed in or implied by
forward-looking statements: (1) the ability to maintain and to enter into key
purchasing and supply relationships; (2) the ability to effectively manage the
transition of iron casting supply to alternate sources due to the LaGrange
Foundry closure and the skill, commitment and availability of such alternate
sources; (3) the ability to identify, negotiate and complete future
acquisitions; (4) the speed with which the Company is able to integrate
acquisitions and realize the related financial benefit; (5) the domestic
and/or worldwide level of oil and natural gas prices and oil and gas drilling
and production, which affect demand for the Company's petroleum products; (6)
changes in domestic and/or worldwide industrial production and industrial
capacity utilization rates, which affect demand for the Company's compressed
air products; (7) pricing of Gardner Denver products; (8) the degree to which
the Company is able to penetrate niche markets; (9) the ability to attract and
retain quality management personnel; (10) market performance of pension plan
assets and changes in discount rates used for actuarial assumptions in pension
and other post-employment obligation and expense calculations; and (11) the
continued successful implementation of cost reduction efforts. The Company
does not undertake, and hereby disclaims, any duty to update these
forward-looking statements, even though its situation and circumstances may
change in the future.
Comparisons of the financial results for the three and twelve-month
periods ended December 31, 2002 and 2001 follow.
Gardner Denver will broadcast, through a live webcast, its conference call
to discuss fourth quarter earnings on Thursday, February 6, 2003 at 10:30 a.m.
Eastern. This free webcast will be available in listen-only mode and can be
accessed, for up to thirty days following the call, through the Investor
Relations page on the Gardner Denver website ( http://www.gardnerdenver.com ) or on
CCBN's website ( http://www.companyboardroom.com ).
Gardner Denver, with 2002 revenues of $418 million, is a leading
manufacturer of reciprocating, rotary and vane compressors and blowers for
various industrial applications and pumps used in the petroleum and industrial
markets. Gardner Denver's news releases are available by facsimile
(800-758-5804, extension 303875) or by visiting the Company's website
( http://www.gardnerdenver.com ).
GARDNER DENVER, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts and percentages)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
% %
2002 2001 Change 2002 2001 Change
Revenues $103,904 $110,894 (6) $418,158 $419,770 --
Costs and
Expenses:
Cost of sales 73,479 76,944 (5) 289,631 294,249 (2)
Depreciation
and
amortization 3,280 4,843 (32) 14,139 17,567 (20)
Selling and
administrative 19,223 19,397 (1) 79,400 69,678 14
Interest
expense 1,387 1,858 (25) 6,365 6,796 (6)
Other expense
(income), net 331 (173) (291) (204) (3,203) (94)
Income before
income taxes 6,204 8,025 (23) 28,827 34,683 (17)
Provision for
income taxes 1,533 2,796 (45) 9,225 12,659 (27)
Net income $4,671 $5,229 (11) $19,602 $22,024 (11)
Basic earnings
per share $0.29 $0.33 (12) $1.24 $1.42 (13)
Diluted earnings
per share $0.29 $0.33 (12) $1.22 $1.40 (13)
Basic weighted
average number
of shares
outstanding 15,917 15,632 15,854 15,553
Diluted weighted
average number
of shares
outstanding 16,032 15,880 16,042 15,783
Shares
outstanding
as of 12/31 15,942 15,691
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
% %
2002 2001 Change 2002 2001 Change
Compressed Air
Products
Revenues $86,789 $84,791 2 $350,036 $308,028 14
Operating
earnings 6,280 5,864 (A) 7 29,795 22,176 (A) 34
% of Revenues 7.2% 6.9% 8.5% 7.2%
Orders 87,976 76,938 14 347,902 296,019 18
Backlog 58,695 58,681 -- 58,695 58,681 --
Pump Products
Revenues 17,115 26,103 (34) 68,122 111,742 (39)
Operating
earnings 1,642 3,846 (A) (57) 5,193 16,100 (A) (68)
% of Revenues 9.6% 14.7% 7.6% 14.4%
Orders 13,395 17,773 (25) 54,117 117,419 (54)
Backlog 6,649 20,483 (68) 6,649 20,483 (68)
(A) As a result of adopting SFAS 142, periodic goodwill amortization
ceased effective January 1, 2002. Operating earnings for the
quarter-ended December 31, 2001, excluding goodwill amortization
expense, would have been $6,769 (8.0% of revenues) and $4,036 (15.5%
of revenues) for the Compressed Air Products and Pump Products
segments, respectively. Operating earnings for year ended December
31, 2001, excluding goodwill amortization expense, would have been
$25,796 (8.4% of revenues) and $16,860 (15.1% of revenues) for the
Compressed Air Products and Pump Products segments, respectively.
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
12/31/02 09/30/02 Change 12/31/01
Cash and equivalents $25,667 $16,185 59 $29,980
Receivables, net 75,151 78,362 (4) 85,538
Inventories, net 67,448 73,607 (8) 76,650
Current assets 178,436 178,672 -- 201,135
Total assets 475,389 464,832 2 488,688
Short-term debt and
cur. maturities 7,500 7,500 -- 7,375
Current liabilities 78,321 73,451 7 84,577
Long-term debt,
ex. cur. maturities 112,663 123,297 (9) 160,230
Total liabilities 256,449 242,265 6 289,960
Total stockholders'
equity 218,940 222,567 (2) 198,728
SOURCE Gardner Denver, Inc.
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Related links:
http://www.gardnerdenver.com
Company News On-Call:
http://www.prnewswire.com/comp/303875.html
CONTACT:
Helen W. Cornell, Vice President, Strategic
Planning and Operations Support of Gardner Denver, Inc.,
+1-217-228-8209
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