QUINCY, Ill., July 20 /PRNewswire-FirstCall/ -- Gardner Denver, Inc.
(NYSE: GDI) announced that revenues and net income for the three months ended
June 30, 2005 were $250.3 million and $14.7 million, respectively. These
results represent a 77% improvement in net income and 55% increase in
revenues, compared to the second quarter of the previous year. Compared to the
first quarter of 2005, revenues increased approximately 5% and net income
increased approximately 42%. These improved results were primarily a result
of the Nash Elmo acquisition, continued expansion in demand for pumps used in
oil and natural gas well drilling and stimulation and incremental other
income.
CEO's Comments Regarding Results
"The second quarter was an outstanding period for us, reflecting both
improved organic growth and the positive impact of our recent acquisitions.
Diluted earnings per share (DEPS) of $0.61 represent a record second quarter,
and are 22% higher than the results of the first quarter, which was also a
record. Organic revenue growth, excluding the Nash Elmo and Bottarini
acquisitions and the effect of changes in foreign currency rates, exceeded 12%
for the second quarter, compared to the three-month period of the previous
year. Compared to the first quarter of 2005, revenues increased almost 5%.
Total segment operating earnings (defined as revenues, less cost of sales,
depreciation and amortization, and selling and administrative expenses) as a
percentage of revenues (operating margin) increased to 9.4% for the three
months ended June 30, 2005, compared to 8.7% for the comparable period of 2004
and 7.6% in the first quarter of 2005," stated Ross Centanni, Chairman,
President and CEO.
"We experienced double-digit increases in demand for compressor and vacuum
products used in North America, compared to the previous year. Orders for
compressor products and related aftermarket parts in North America grew more
than 20% compared to the previous year and more than 16% compared to the first
quarter of 2005, as a result of a recovering industrial manufacturing
environment and demand for compressors used in natural gas gathering. Demand
for compressors and blowers used in transportation applications in North
America remains strong. Demand for oil and natural gas well drilling pumps
and replacement parts increased substantially, due to elevated energy prices
and continued increases in North American rig counts. Over the last twelve
months, we have booked more orders for drilling pumps than in any comparable
period since the 1980's. We were able to convert many of the orders received
in the second quarter into shipments, but backlog in both business segments
still increased. Therefore, we anticipate that second half shipments will
exceed that of the first.
"We continue to actively pursue opportunities to reduce costs in our
business. We recently announced the planned closures of a distribution center
in the United States and Thomas Industries' (Thomas) corporate office, and
will consolidate these activities into our existing operations. These efforts
should enable us to lower costs and reduce our investment in inventory and
fixed assets. We also restructured some of our sales organizations in Canada
and Europe and closed an under-performing packaging operation in Brazil.
Expenses associated with these efforts totaled $0.6 million in the second
quarter and are expected to be approximately $2 million in the second half of
2005. These efforts, and the previously announced disposition of non-core
Syltone operations, are expected to increase income before income taxes by
approximately $5 million annually and should be realized beginning in 2006.
We anticipate that there are additional opportunities to generate synergistic
benefits via facility and product rationalization, sales channel leverage and
material cost reductions through further integration of Nash Elmo, Bottarini
and Thomas into the Gardner Denver business platform. We recently completed
the first installation of SAP at a Nash Elmo operation and have begun to
further refine our integration plans for Thomas since completing the
acquisition on July 1. The Thomas operations that existed prior to its
acquisition of Rietschle are now managed as the Thomas Products Division by
Jim Kregel, who has been appointed the Vice President and General Manager of
this new division. Mr. Kregel formerly served as Vice President, Worldwide
Compressors and Pumps at Thomas. The Rietschle operations of Thomas are being
integrated into our existing Blower Division."
Outlook
Looking forward, Mr. Centanni stated, "The rate of improvement in demand
for drilling pumps and our compressor and vacuum products in North America has
exceeded our previous expectations. The consensus opinion is that the current
environment for our petroleum products is expected to extend for the longest
period in over twenty years. Based on the current economic environment, as
well as our existing backlog and recent order trends, we expect DEPS to be
approximately $0.46 to $0.56 for the third quarter of 2005 and $2.20 to $2.40
for the year (an increase from our previous expectation of $2.00 to $2.16
DEPS, including the acquisition of Thomas and the impact of the related
financings). The guidance for the year includes net income of approximately
$10 million to $11 million from the acquisition of Nash Elmo. The Thomas
acquisition and related financings are expected to dilute DEPS for the third
quarter and full year. The net effect of the transactions is expected to
reduce DEPS approximately $0.16 to $0.22 for the third quarter and $0.31 to
$0.41 for the year. This reflects a more favorable outlook on the Thomas
results offset by incremental dilution on the increased earnings expectations
of our base business. We currently expect this acquisition to be accretive to
DEPS in 2006."
Second Quarter Results
Revenues increased $89.0 million (55%) to $250.3 million for the three
months ended June 30, 2005, compared to the same period of 2004. This
increase was primarily due to the acquisitions of Nash Elmo and Bottarini,
which contributed $66.9 million. Increased shipments of drilling and well
stimulation pumps, compressors and blowers, price increases and favorable
changes in currency exchange rates also contributed to the improved revenues.
For the three months ended June 30, 2005, revenues for the Compressor and
Vacuum Products segment increased $74.9 million (59%) to $200.9 million,
compared to the same period of 2004, primarily due to the acquisitions of Nash
Elmo and Bottarini. Higher volumes of compressor and blower shipments in the
U.S., Europe and China, price increases and changes in currency exchange rates
also contributed to this increase. Fluid Transfer Products segment revenues
increased $14.1 million (40%) to $49.4 million for the three months ended June
30, 2005, compared to the same period of 2004. This improvement was primarily
due to increased volume of drilling and well stimulation pumps, water jetting
systems and related aftermarket parts, price increases and changes in currency
exchange rates.
Backlog for the compressor and vacuum businesses that existed prior to the
acquisition of Nash Elmo and Bottarini increased over 29% as of June 30, 2005,
compared to June 30, 2004. The Nash Elmo and Bottarini acquisitions,
completed in September 2004 and June 2005, respectively, contributed another
$95.7 million to the increase in backlog compared to the previous year.
Orders for compressor and vacuum products for the three-month period ended
June 30, 2005 increased by $13.4 million for the businesses that existed prior
to the acquisitions, representing growth of 10% compared to the previous year.
Orders for fluid transfer products increased more than $22.7 million (55%) in
the three-month period of 2005, compared to the previous year, driving a
corresponding 159% increase in backlog for this segment, as a result of
increased demand in most major product lines.
Gross margin (defined as revenues less cost of sales) for the three months
ended June 30, 2005 increased $29.8 million (57%) to $82.4 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
32.9% in the three-month period of 2005 from 32.6% in the same period of 2004
primarily 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 and price increases in both segments. 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.
Acquisitions (Nash Elmo and Bottarini) increased depreciation and
amortization by $2.5 million and selling and administrative expenses by $15.7
million for the three months ended June 30, 2005, compared to the same period
of 2004. Higher compensation and fringe benefit costs, changes in currency
exchange rates and expenses associated with a new compressor packaging
facility in China also contributed to the increase in selling and
administrative expenses.
The Compressor and Vacuum Products segment generated operating margin of
8.3% in the three-month period ended June 30, 2005, slightly less than the
operating margin of the three-month period of the previous year and an
increase from 7.0% for the three months ended March 31, 2005. Improved
results from Nash Elmo operations contributed to much of the sequential
improvement in operating margin.
The Fluid Transfer Products segment generated operating margin of 13.8%
for the three-month period ended June 30, 2005, compared to 9.5% in the same
period of 2004 and 10.1% in the first quarter of 2005. This improvement was
primarily due to the positive impact of increased leverage of the segment's
fixed and semi-fixed costs over a higher revenue base, improved productivity
and the favorable mix associated with a higher proportion of drilling pump
shipments.
Acquisition related financing and higher interest rates resulted in $3.8
million of additional interest expense for the three months ended June 30,
2005, compared to the same period of 2004. The weighted average interest rate
for the three-month period ended June 30, 2005 was 6.8%, compared to 5.2% in
the comparable prior year period. Accrued interest on a private placement of
$125 million aggregate principal amount of 8% Senior Subordinated Notes due
2013, issued in May 2005 to partially finance the Thomas acquisition, was
included in this expense. Approximately $0.7 million of interest income
earned on the investment of these proceeds, prior to their use to complete the
Thomas acquisition, was included in other income, net. Proceeds from
litigation related settlements ($1.6 million) received in the second quarter
of 2005 also increased other income, net.
Income before income taxes increased $8.4 million (67%) to $20.9 million
for the three months ended June 30, 2005, compared to the same period of 2004.
This increase was primarily due to the Nash Elmo acquisition, which
contributed approximately $5 million, and the increase in other income.
Increased volume and pricing in the Fluid Transfer segment and the related
positive impact of increased leverage of fixed and semi-fixed costs over a
higher revenue base also contributed to the increase. These positive factors
were partially offset by higher interest expense.
The Company's effective tax rate for the three and six months ended June
30, 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. The provision for
income taxes increased by $2.0 million to $6.3 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.
Net income for the three months ended June 30, 2005 increased $6.4 million
(77%) to $14.7 million ($0.61 DEPS), compared to $8.3 million ($0.41 DEPS) in
the same period of 2004. This improvement resulted primarily from the benefit
of the Nash Elmo acquisition (approximately $4 million), increased revenues
and the related cost leverage, litigation related settlements and the lower
effective tax rate. DEPS for the three-month period were reduced by $0.11 as
a result of the public offering of 5,658,000 shares of Gardner Denver's common
stock and the Senior Subordinated Notes issued to finance the Thomas
acquisition. These acquisition related financings were completed in early May
2005.
Six Month Results
Revenues for the first half of 2005 increased $173.4 million (55%) to
$489.2 million, compared to the same period of 2004. This increase was due to
the acquisition of Nash Elmo ($128.0 million) and increased shipments of
drilling and well stimulation pumps, replacement parts, compressors and
blowers. Price increases and favorable changes in currency exchange rates also
contributed to this improvement.
Net income for the six months ended June 30, 2005 increased $10.2 million
(68%) to $25.0 million ($1.11 DEPS), compared to $14.8 million ($0.80 DEPS) in
same period of 2004. This increase was primarily attributable to the Nash Elmo
acquisition (approximately $6 million), higher revenues and the related cost
leverage, the litigation related settlements received in the second quarter
and the lower effective tax rate. 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 2004. Conversely,
DEPS for the six months ended June 30, 2005 included the incremental dilutive
effects of the March 2004 stock offering ($0.10) and the May 2005 financing
transactions completed in advance of the Thomas acquisition ($0.11).
In the first six months of 2005, the Company invested approximately $11
million in capital expenditures, and expects total capital expenditures for
the year to be approximately $35 million to $40 million, including capital
investments for the recently acquired operations of Thomas. Capital has been
invested in integrating businesses onto a common enterprise resource planning
system, introducing new products to market and improving operations. Net cash
provided by operating activities was approximately $19 million in the first
half of 2005, compared to approximately $5 million in the comparable period of
2004. This increase was primarily due to higher net income and depreciation
and amortization levels. Improvements in days sales outstanding and inventory
turnover also contributed to the increase.
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 effectively
integrate the Thomas Industries, Nash Elmo and Bottarini acquisitions and
realize anticipated cost savings, synergies and revenue enhancements; (2) the
risk that the Company may incur significant cash integration costs to achieve
any such cost savings; (3) the risks associated with incurring substantial
additional indebtedness to complete 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; (4) the
Company's exposure to economic downturns and market cycles, 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; (5) the risks associated with intense competition in the
Company's markets, particularly the pricing of the Company's products; (6) 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; (7) the
Company's ability to continue to identify and complete other strategic
acquisitions and effectively integrate such acquisitions to achieve desired
financial benefits; (8) 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); (9) 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; (10) the risks
associated with environmental compliance costs and liabilities; (11) the
ability to attract and retain quality management personnel; (12) the ability
to avoid employee work stoppages and other labor difficulties; (13) the risks
associated with defending against potential intellectual property claims and
enforcing intellectual property rights; (14) market performance of pension
plan assets and changes in discount rates used for actuarial assumptions in
pension and other postretirement obligation and expense calculations; (15) the
risk of possible future charges if the Company determines that the value of
goodwill or other intangible assets has been impaired; and (16) 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 and six-month periods
ended June 30, 2005 and 2004 follow.
Gardner Denver will broadcast a conference call to discuss second quarter
earnings on Wednesday, July 20, 2005 at 4:00 p.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 (http://www.gardnerdenver.com) or
through Thomson StreetEvents at http://www.earnings.com.
Gardner Denver, with 2004 revenues of $740 million ($1,306 million on a
pro forma basis including the acquisitions of Nash Elmo and Thomas Industries,
which were completed in September 2004 and July 2005, respectively), 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)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
% %
2005 2004 Change 2005 2004 Change
Revenues $250,346 $161,297 55 $489,170 $315,725 55
Costs and Expenses:
Cost of sales 167,900 108,650 55 328,914 213,161 54
Depreciation and
amortization 7,199 5,016 44 14,481 10,149 43
Selling and
administrative 51,739 33,667 54 104,163 68,570 52
Interest expense 5,251 1,436 266 9,284 3,458 168
Other income, net (2,690) (12) NM (3,322) (2,088) 59
Total costs and
expenses 229,399 148,757 54 453,520 293,250 55
Income before income
taxes 20,947 12,540 67 35,650 22,475 59
Provision for income
taxes 6,284 4,264 47 10,695 7,642 40
Net income $14,663 $8,276 77 $24,955 $14,833 68
Basic earnings per
share $0.62 $0.42 48 $1.14 $0.82 39
Diluted earnings per
share $0.61 $0.41 49 $1.11 $0.80 39
Basic weighted average
number of shares
outstanding 23,681 19,763 21,872 18,058
Diluted weighted average
number of shares
outstanding 24,222 20,141 22,433 18,447
Shares outstanding
as of 6/30 25,799 19,784
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
% %
2005 2004 Change 2005 2004 Change
Compressor and
Vacuum Products
Revenues $200,944 $126,026 59 $393,670 $249,022 58
Operating earnings 16,691 10,629 57 30,122 18,903 59
% of Revenues 8.3% 8.4% 7.7% 7.6%
Orders 209,508 129,617 62 430,672 269,290 60
Backlog 201,015 81,514 147 201,015 81,514 147
Fluid Transfer Products
Revenues 49,402 35,271 40 95,500 66,704 43
Operating earnings 6,817 3,335 104 11,489 4,942 132
% of Revenues 13.8% 9.5% 12.0% 7.4%
Orders 64,151 41,438 55 139,549 77,802 79
Backlog 94,819 36,655 159 94,819 36,655 159
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
6/30/05 3/31/05 Change 12/31/04
Cash and equivalents $246,335 $52,697 367 $$64,601
Receivables, net 162,466 160,957 1 163,927
Inventories, net 137,939 134,357 3 138,386
Current assets 564,709 368,004 53 385,522
Total assets 1,203,113 1,008,348 19 1,028,609
Short-term debt and
cur. maturities 22,758 26,345 (14) 32,949
Accounts payable and
accrued liabilities 182,121 170,730 7 206,069
Current liabilities 204,879 197,075 4 239,018
Long-term debt, ex.
cur. maturities 274,028 290,866 (6) 280,256
Total liabilities 584,118 592,897 (1) 623,133
Total stockholders'
equity 618,995 415,451 49 405,476
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, Inc., +1-217-228-8209
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