First Quarter Revenues Increase 55% and Total Segment Operating Earnings
Increase 83% Compared to the Previous Year
QUINCY, Ill., April 25 /PRNewswire-FirstCall/ -- Gardner Denver, Inc.
(NYSE: GDI) announced that revenues and net income for the three months ended
March 31, 2005 were $238.8 million and $10.3 million, respectively. These
results represent an 83% improvement in total segment operating earnings and
57% increase in net income on a 55% increase in revenues, as compared to the
first quarter of the previous year. These increases were primarily a result of
the September 2004 acquisition of Nash Elmo and continued improvement in
demand for pumps used in oil and natural gas well drilling and stimulation.
CEO's Comments Regarding Results
"Our year began with a very strong first quarter, both in terms of demand
and financial results. In fact, diluted earnings per share of $0.50 represents
a record first quarter for us. Organic revenue growth, excluding the Nash Elmo
acquisition and the effect of changes in foreign currency rates, exceeded 12%
for the first quarter, compared to the previous year. Orders grew faster than
shipments, resulting in increasing backlog across most product lines. Total
segment operating earnings as a percentage of revenues (operating margins)
increased to 7.6% for the three months ended March 31, 2005, compared to 6.4%
for the comparable period of 2004, a 120 basis point improvement. We continue
to see strong demand from many end markets served by our Fluid Transfer
Products segment, primarily due to elevated energy prices. These favorable
conditions have led to increased orders and shipments of pumps and related
aftermarket parts used in oil and natural gas exploration and well servicing
applications. Demand for blowers used in the transportation market segment,
for dry and liquid bulk conveyance, also remains strong. Additionally, we have
begun to see improving demand in end markets for many of our industrial
products, such as water jetting systems, compressors and some engineered
packages containing centrifugal blowers and liquid ring pumps," stated Ross
Centanni, Chairman, President and CEO.
"We believe the integration of the Syltone acquisition is substantially
complete. In March 2005, we divested another small, non-core operation that
was acquired with Syltone. We anticipate that there are opportunities to
generate synergistic benefits via facility and product rationalization, sales
channel leverage and material cost reductions through further integration of
Nash Elmo into the Gardner Denver business platform. These integration efforts
are on plan, with a primary focus on systems integration at present. We expect
to close the acquisition of Thomas Industries within the next two to four
months, subject to Thomas Industries' shareholder approval, regulatory
approvals in Europe and other customary conditions."
"Capital has been invested in integrating businesses onto our common
enterprise resource planning system, introducing new products to market, and
improving our operations. In the three months of 2005, we had capital
expenditures of approximately $5 million, and we expect total capital
expenditures for the year to be approximately $22 million to $24 million,
excluding Thomas Industries. Cash used in operating activities was $12.1
million in the first quarter of 2005, compared to cash provided of $3.5
million in the comparable period of 2004. This change is primarily a result of
higher operating working capital needs due to increased activity levels and
timing of payments, partially offset by higher net income. Days sales
outstanding, inventory turnover and debt to total capital improved slightly
during the period."
Outlook
Looking forward, Mr. Centanni stated, "Given the current economic
environment, as well as our existing backlog and recent order trends, we
expect diluted earnings per share (DEPS) to be approximately $0.55 to $0.65
for the second quarter of 2005 and $2.35 to $2.55 for the year (an increase
from our previous expectation of $2.15 to $2.40 DEPS), before any dilution
from the anticipated equity offering and excluding any potential impact from
the planned acquisition of Thomas Industries. This guidance now includes
approximately $0.44 to $0.48 DEPS in 2005 from our most recent acquisition,
Nash Elmo, approximately $0.06 DEPS better than our previously communicated
expectation. The remaining improvement in the Company's earnings guidance,
compared to previous expectations, is primarily due to increased demand for
drilling and well stimulation pumps and the delay of expensing stock options.
As allowed by a recent Securities and Exchange Commission announcement, the
Company plans to defer the adoption of the new accounting rule requiring the
expensing of stock options until January 1, 2006. The Company had previously
expected to be required to adopt this new accounting rule in 2005, which would
have resulted in a $0.03 to $0.05 reduction to DEPS in the second half of the
year."
First Quarter Results
Revenues increased $84.4 million (55%) to $238.8 million for the three
months ended March 31, 2005, compared to the same period of 2004. This
increase was primarily due to the Nash Elmo acquisition, which contributed
$62.4 million in revenues. Increased shipments of drilling and well
stimulation pumps, compressors and blowers, combined with changes in currency
exchange rates and price increases, also contributed to this improvement.
For the three months ended March 31, 2005, revenues for the Compressor and
Vacuum Products segment increased $69.7 million (57%) to $192.7 million,
compared to the same period of 2004. This increase was primarily due to the
acquisition of Nash Elmo. Higher volumes of compressor and blower shipments in
the U.S., Europe and China, changes in currency exchange rates and price
increases also contributed to this increase. Fluid Transfer Products segment
revenues increased $14.7 million (47%) to $46.1 million for the three months
ended March 31, 2005, compared to the same period of 2004. This increase was
primarily due to increased shipments of drilling and well stimulation pumps,
water jetting systems and related aftermarket parts, as well as price
increases.
Backlog for the businesses that existed prior to the acquisition of Nash
Elmo increased over 66% as of March 31, 2005, compared to March 31, 2004. The
Nash Elmo acquisition, which was completed in September of 2004, contributed
another $96.5 million to the increase in backlog compared to the previous
year. Orders for compressor and vacuum products for the three-month period of
2005 increased by $5.2 million for the businesses that existed prior to the
acquisition, representing growth of 4% compared to the previous year. Orders
for fluid transfer products increased more than $39.0 million (107%) in the
three-month period, compared to the previous year, driving a corresponding
167% increase in backlog for this segment, as a result of increased demand in
almost all major product lines.
Gross margin (defined as revenues less cost of sales) for the three months
ended March 31, 2005 increased $27.9 million (56%) to $77.8 million compared
to the same period of 2004, primarily due to the increase in revenues. Gross
margin as a percentage of revenues (gross margin percentage) increased to
32.6% in the three-month period of 2005 from 32.3% in the same period of 2004
due to the acquisition of Nash Elmo, which had a higher gross margin
percentage than the Company's previously existing businesses, and due to
increased volume in both segments. As volume increases, the Company realizes
benefits through the related positive impact of increased leverage of fixed
and semi-fixed costs over a higher revenue base. These positive factors were
partially offset by higher material costs due to surcharges on castings and
other components stemming from increases in scrap iron and other metal prices.
Depreciation and amortization for the three months ended March 31, 2005
increased $2.1 million (42%) to $7.3 million, compared to the same period of
2004, primarily due to the Nash Elmo acquisition.
Selling and administrative expenses increased $17.5 million (50%) in the
three-month period of 2005 to $52.4 million, compared to the same period of
2004, primarily due to the acquisition of Nash Elmo (approximately $15.5
million). Higher compensation and fringe benefit costs and changes in currency
exchange rates also contributed to this increase.
The Compressor and Vacuum Products segment generated operating earnings
(defined as revenues, less cost of sales, depreciation and amortization, and
selling and administrative expenses) as a percentage of revenues of 7.0% in
the three-month period ended March 31, 2005, an increase from 6.7% for the
same period of 2004. This increase was primarily attributable to the addition
of Nash Elmo and the positive impact of increased leverage of the segment's
costs over a higher revenue base, partially offset by higher material costs
and compensation and fringe benefit expense.
The Fluid Transfer Products segment generated operating earnings as a
percentage of revenues of 10.1% for the three-month period ended March 31,
2005, compared to 5.1% in the same period of 2004. This increase is primarily
due to the positive impact of increased leverage of the segment's costs over a
higher revenue base and favorable sales mix as a result of increased drilling
pump shipments. These factors were partially offset by higher material costs.
Interest expense increased $2.0 million (99%) to $4.0 million for the
three months ended March 31, 2005, compared to the same period of 2004, due to
higher average borrowings stemming from the Nash Elmo acquisition and higher
average rates. The average interest rate for the three-month period ended
March 31, 2005 was 5.1% compared to 4.4% in the comparable prior year period.
The provision for income taxes increased by $1.0 million to $4.4 million
for the three-month period of 2005, compared to the prior year period, as a
result of the higher pretax income, partially offset by a lower effective tax
rate. The Company's effective tax rate for the three months ended March 31,
2005 decreased to 30% compared to 34% in the prior year period, principally
due to a higher proportion of earnings derived from lower taxed non-U.S.
jurisdictions and other tax planning initiatives.
Net income for the three months ended March 31, 2005 increased
$3.7 million (57%) to $10.3 million ($0.50 DEPS), compared to $6.6 million
($0.39 DEPS) in same period of 2004. This increase was primarily attributable
to the acquisition of Nash Elmo, which contributed approximately $0.10 DEPS,
increased shipments as a result of improving demand in certain end markets and
a lower effective tax rate in 2005. In 2004, a non-recurring $1.2 million
foreign currency transaction gain, related to the appreciation of U.S. dollar
borrowings that were converted to British pounds prior to being used to
consummate the Syltone acquisition, was included in other income, net. This
transaction gain contributed approximately $0.05 to DEPS in the prior year.
The operational improvement in DEPS in 2005 was also partially offset by a
$0.08 effect from the stock offering completed in March 2004.
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, without
limitation, the statements made under the "CEO's Comments Regarding Results"
and "Outlook" sections. 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 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 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 complete the
Thomas Industries acquisition, including, without limitation, the ability to
satisfy various conditions, such as the receipt of governmental and third
party consents; (2) the ability of, and the speed with which, the Company is
able to integrate the Thomas Industries acquisition and realize anticipated
cost savings, synergies and revenue enhancements; (3) the risk that the
Company may incur significant cash integration costs to achieve any such cost
savings; (4) the risks associated with incurring substantial additional
indebtedness in completing the Thomas Industries acquisition, including
reduced liquidity for working capital and other purposes, increased
vulnerability to general economic conditions and floating interest rates, and
reduced financial and operating flexibility due to increased covenant and
other restrictions in the Company's credit facilities and indentures; (5) the
Company's exposure to economic downturns and market cyclicality, particularly
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, and domestic and/or worldwide industrial production and industrial
capacity utilization rates, which affect demand for the Company's compressor
and vacuum products; (6) the risks associated with intense competition in the
Company's markets, particularly the pricing of the Company's products; (7) 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; (8) the
Company's ability to continue to identify and complete other strategic
acquisitions and effectively integrate such acquisitions to achieve desired
financial benefits; (9) 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 and the
British pound); (10) the risks associated with pending asbestos and silicosis
personal injury lawsuits, as well as other potential product liability and
warranty claims due to the nature of the Company's products; (11) the risks
associated with environmental compliance costs and liabilities; (12) the
ability to attract and retain quality management personnel; (13) the ability
to avoid employee work stoppages and other labor difficulties; (14) the risks
associated with defending against potential intellectual property claims and
enforcing intellectual property rights; (15) market performance of pension
plan assets and changes in discount rates used for actuarial assumptions in
pension and other postretirement obligation and expense calculations; (16) the
risk of possible future charges if the Company determines that the value of
goodwill or other intangible assets has been impaired; and (17) changes in
laws and regulations, including accounting standards, tax requirements and
interpretations or guidance related to the American Jobs Creation Act of 2004.
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 periods ended
March 31, 2005 and 2004 follow.
Gardner Denver will broadcast its conference call to discuss first quarter
earnings on Monday, April 25, 2005 at 10:30 a.m. Eastern, 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 (http://www.gardnerdenver.com) or
on CCBN's website (http://www.fulldisclosure.com).
Gardner Denver, with 2004 revenues of $740 million ($896 million on a pro
forma basis including the acquisition of Nash Elmo, which was completed in
September 2004), 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
markets, 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
(http://www.gardnerdenver.com).
GARDNER DENVER, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts and percentages)
Three Months Ended
March 31, %
2005 2004 Change
Revenues $238,824 $154,428 55
Costs and expenses:
Cost of sales 161,014 104,511 54
Depreciation and amortization 7,282 5,133 42
Selling and administrative 52,424 34,903 50
Interest expense 4,033 2,022 99
Other expense (income), net (632) (2,076) (70)
Total costs and expenses 224,121 144,493 55
Income before income taxes 14,703 9,935 48
Provision for income taxes 4,411 3,378 31
Net income $10,292 $6,557 57
Basic earnings per share $0.51 $0.40 28
Diluted earnings per share $0.50 $0.39 28
Basic weighted average
Number of shares outstanding 20,044 16,352
Diluted weighted average
Number of shares outstanding 20,638 16,753
Shares outstanding as of 3/31 20,106 19,739
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
Three Months Ended
March 31, %
2005 2004 Change
Compressor & Vacuum Products
Revenues $192,726 $122,996 57
Operating earnings 13,432 8,274 62
% of Revenues 7.0% 6.7%
Orders 221,166 139,673 58
Backlog 195,576 77,932 151
Fluid Transfer Products
Revenues 46,098 31,432 47
Operating earnings 4,672 1,607 191
% of Revenues 10.1% 5.1%
Orders 75,398 36,364 107
Backlog 81,300 30,456 167
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
%
3/31/05 12/31/04 Change
Cash and equivalents $52,697 $64,601 (18)
Receivables, net 160,957 163,927 (2)
Inventories, net 134,357 138,386 (3)
Current assets 368,004 385,522 (5)
Total assets 1,008,348 1,028,609 (2)
Short-term debt and
cur. maturities 26,345 32,949 (20)
Accounts payable and
accrued liabilities 170,730 206,069 (17)
Current liabilities 197,075 239,018 (18)
Long-term debt, ex.
cur. maturities 290,866 280,256 4
Total liabilities 592,897 623,133 (5)
Total stockholders' equity 415,451 405,476 2
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, Finance and
CFO of Gardner Denver, +1-217-228-8209
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