QUINCY, Ill., April 23 /PRNewswire-FirstCall/ --
Gardner Denver, Inc. (NYSE: GDI) announced that revenues for the three months
ended March 31, 2003 were $101.5 million, a 5% decrease compared with the
first quarter of the previous year. Diluted earnings per share (DEPS) in the
three-month period of 2003 were $0.22, compared to $0.29 in the previous year.
CEO's Comments Regarding Results
"Despite the weak industrial economy, we are improving operations and
investing for the future. Backlog for Compressed Air Products increased
approximately 12%, compared to the December 31, 2002 level, primarily due to
increased demand in wastewater treatment and additional penetration of the
European and Asian markets. The U.S. industrial economy remains very soft,
presenting the most difficult sales environment since the early 1980's.
However, our growing international presence has partially offset the decline
in domestic demand and, despite the limited opportunities for organic top line
growth, the Company continues to improve operations and cash flow. Material
and manufacturing cost reductions are on plan and I expect to see margin
expansion from these efforts when U.S. industrial demand improves and our
revenues increase accordingly. We are investing capital to reduce our costs
and improve our products. Through lean manufacturing techniques and supply
chain management, we are reducing lead-time and accelerating throughput. When
the industrial economy recovers in the U.S., the Company will be well-
positioned for revenue expansion and profitability improvements through
operating leverage," stated Ross J. Centanni, Chairman, President and CEO.
"We have recently seen some increased orders for drilling pumps,
particularly for international applications. As a result of these longer
lead-time orders, our backlog for Pump Products improved almost 98% compared
to December 31, 2002. Based on this improvement, we expect the Pump Products
segment to be profitable for the balance of the year, even though significant
improvement in the North American drilling pump market has not yet
materialized. Selling and administrative expenses for the three months ended
March 31, 2003 increased 4%, compared to the three-month period of 2002.
However, we are continuing to tightly control spending. Excluding the impact
of foreign currency exchange rate changes, selling and administrative expenses
decreased approximately 1% from the prior year period due to cost reduction
efforts, despite higher compensation and fringe benefit costs."
"I am pleased with the efforts made to further reduce receivables and days
sales outstanding, which were almost four days better than our previous low.
Additions to inventory resulted from positioning long lead-time items for
orders in backlog and increases related to iron casting supply disruptions. I
anticipate our inventory turnover will improve through the remainder of the
year and inventory reductions will be achieved by year-end as production is
balanced and new suppliers' performance improves. Cash flow from operations
totaled more than $5 million for the quarter, nearly 40% more than in the
first quarter of 2002 on lower net income. Our ability to generate such
strong cash flows, even in a period of weak economic demand, demonstrates the
underlying value of our Company. In the first quarter of 2003, we invested
almost $3 million in capital expenditures to reduce costs and develop new
products, compared to less than $2 million in the same period of 2002. We
also repaid almost $9 million of debt in the three-month period. At the end
of March, debt represented less than 33% of our capital structure, which
enhances our ability to pursue synergistic acquisitions and our other
strategies for growth."
Outlook
Looking forward, Mr. Centanni stated, "We have not seen significant
changes in the U.S. industrial market and believe that the future holds more
opportunities for growth than risks of further retrenchment. We are
maintaining tight expense controls in our operations and positioning the
Company for growth in Asia through the establishment of a packaging operation.
This packaging operation will also facilitate further reductions in material
costs as we access lower-cost Asian suppliers. We are improving our market
position in Europe through the addition and training of distribution and
development of cost-reduced products. We continue to monitor key industrial
economic indicators in the U.S., such as manufacturing capacity utilization
and industrial production, for improvement since demand for our compressed air
products has historically increased approximately six months after these
indicators improve. Although significant near term increases in orders for
compressed air products are not anticipated through the second quarter, we
believe Gardner Denver is positioned to respond quickly when orders begin to
increase."
"We expect improved demand for petroleum pumps and replacement parts if
North American rig counts continue to rise. Since we ended 2002 with minimal
levels of backlog, we are relying on order conversion in 2003 and striving for
lead-time reductions so that we can respond more quickly to increases in
demand. We increased backlog somewhat in the first quarter, based on a slight
increase in drilling pump orders, but future shipments will continue to be
reliant upon order conversion for the balance of the year. If natural gas
prices remain elevated, supported by an economic recovery, demand for well
servicing and drilling could return to higher levels, stimulating demand for
petroleum pumps in the second half of 2003."
"We continue to focus our efforts on improving operations and reducing
costs. We have been able to mitigate much of the supply disruption created
when a key provider of iron castings ceased production in the fourth quarter
of 2002. We have been able to reduce our material costs through our new
sources, but still incurred higher scrap and costs to expedite castings as new
suppliers were integrated into our manufacturing process. We believe that
DEPS for the first quarter of 2003 was reduced by approximately $0.02 to $0.03
per share due to this problem, although the exact impact is difficult to
estimate. We believe that the most significant aspects of this change are
completed, but expect to continue addressing lingering problems over the
balance of the year. Nevertheless, the Company continues to benefit from
lower material costs as we resolve these problems."
"Similar to most companies in the U.S. today, the Company's pension and
post retirement medical expenses are expected to be higher in 2003 than in
previous years, which is negatively impacting earnings. We are also incurring
volume reductions and unfavorable mix in our Pump Products segment as a result
of decreased drilling pump sales, which typically generate above-average
margins. However, we believe that material cost reductions and improvements
to operations will offset most of this deterioration. Further capital
investment, to reduce costs and develop new products, will also contribute to
margin improvements. We anticipate capital spending to be $14 to $16 million
for the year. We expect DEPS to be approximately $0.28 to $0.32 for the
second quarter of 2003 and, consistent with our previous guidance, $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, DEPS could exceed this outlook."
First Quarter Results
Revenues for the three-month period decreased $5.1 million (5%) to
$101.5 million, compared to the same period of 2002, due to a continuing
decline in the industrial economy in the U.S. and the reduction in drilling
pump backlog that generated revenues in 2002. Compressed Air Products
revenues decreased $1.3 million, or 1%, despite favorable changes in foreign
currency exchange rates. Excluding the favorable impact of changes in
exchange rates, revenues in this segment decreased $5.6 million (6%) as a
result of weakened demand related to the softer U.S. industrial economy. Pump
Products revenues for the three-month period decreased $3.8 million (21%),
compared to the same period of 2002. The depressed demand for petroleum pump
products resulted from previously low levels of rig count, which began
negatively impacting order rates in the second half of 2001. In 2002, Pump
Products revenues were primarily supported by drilling pump backlog carried
over from 2001 orders.
Net income was $3.5 million for the three-month period of 2003, compared
to $4.6 million in the same period of 2002. Favorable changes in exchange
rates increased net income by approximately $0.2 million. The 2003 results
reflect an effective tax rate of 32%, compared to 34% in the previous year, as
a result of greater benefits from U.S. export sales. We currently anticipate
this lower tax rate to be effective for the balance of the year. DEPS was
$0.22 for the first quarter of 2003, compared to $0.29 for the same period of
2002. This deterioration was primarily a result of the decline in drilling
pump revenues and the associated reduction in margin contribution and fixed
cost leverage, higher compensation and fringe benefit expenses and costs
associated with the disruption of castings from a key supplier. Foreign
currency transaction losses in 2003, compared to transaction gains in 2002,
also contributed to the deterioration in earnings. These reductions were
partially offset by the benefit of a lower tax rate and cost reduction
efforts, including acquisition integrations.
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, supply and outsourcing 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 benefits; (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 and international 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; (11) the continued successful implementation of cost
reduction efforts; (12) the continued ability to effectively manage and defend
litigation matters pending, or asserted in the future, against the Company;
(13) the successful implementation of the Company's strategic initiatives and
partnering relationships; (14) the acceptance of the Company's new product
offerings; and (15) the continued successful implementation and utilization of
the Company's electronic services. 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-month period ended
March 31, 2003 and 2002 follow.
Gardner Denver will broadcast, through a live webcast, its conference call
to discuss first quarter earnings on Thursday, April 24, 2003 at 11:00 a.m.
Eastern. 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 ( 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 visiting the Investor
Relations page on 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
March 31,
%
2003 2002 Change
Revenues $101,491 $106,609 (5)
Costs and Expenses:
Cost of sales 70,774 74,602 (5)
Depreciation and amortization 3,546 3,548 --
Selling and administrative 20,677 19,972 4
Interest expense 1,205 1,682 (28)
Other expense (income), net 113 (132) (186)
Income before income taxes 5,176 6,937 (25)
Provision for income taxes 1,656 2,359 (30)
Net income $3,520 $4,578 (23)
Basic earnings per share $0.22 $0.29 (24)
Diluted earnings per share $0.22 $0.29 (24)
Basic weighted average
number of shares outstanding 16,010 15,757
Diluted weighted average
number of shares outstanding 16,171 15,997
Shares outstanding as of 3/31 16,040 15,815
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended
March 31,
%
2003 2002 Change
Compressed Air Products
Revenues $87,186 $88,511 (1)
Operating earnings 6,576 7,340 (10)
% of Revenues 7.5% 8.3%
Orders 93,135 85,552 9
Backlog 65,449 56,189 16
Pump Products
Revenues 14,305 18,098 (21)
Operating (loss) earnings (82) 1,147 (107)
% of Revenues (0.6%) 6.3%
Orders 20,729 13,386 55
Backlog 13,141 15,828 (17)
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
3/31/03 12/31/02 Change
Cash and equivalents $21,065 $25,667 (18)
Receivables, net 67,858 74,490 (9)
Inventories, net 71,102 67,448 5
Current assets 169,006 177,775 (5)
Total assets 462,916 472,181 (2)
Short-term debt and
cur. maturities 7,500 7,500 --
Current liabilities 69,810 77,660 (10)
Long-term debt, ex.
cur. maturities 104,030 112,663 (8)
Total liabilities 233,072 249,258 (6)
Total stockholders' equity 229,844 222,923 3
SOURCE Gardner Denver, Inc.
 back to top
Related links:
http://www.gardnerdenver.com
Company News On-Call:
http://www.prnewswire.com/gh/cnoc/comp/303875.html
CONTACT:
Helen W. Cornell, Vice President, Strategic
Planning and Operations Support of Gardner Denver, Inc.,
+1-217-228-8209
|
