QUINCY, Ill., July 23 /PRNewswire-FirstCall/ -- Gardner Denver, Inc.
(NYSE: GDI) announced that revenues for the three months ended June 30, 2003
were $109.4 million, a 4% increase compared with the second quarter of the
previous year and an 8% increase compared to the three months ending March 31,
2003. Diluted earnings per share (DEPS) in the three-month period of 2003
were $0.33, compared to $0.34 in the previous year, and 50% better than DEPS
of $0.22 in the first quarter of 2003.
CEO's Comments Regarding Results
"I am pleased with the Company's accomplishments, despite this protracted
period of weak industrial demand. I believe the Company is well-positioned for
revenue expansion and profitability improvements through operating leverage
when the U.S. industrial economy recovers. We are actively developing new,
more efficient products to better penetrate the markets we serve. We are
reducing our manufacturing costs through process improvements and capital
investments and developing the abilities of our supply and distribution
partners to enhance our operating results. The U.S. industrial economy has
not improved significantly, presenting the most challenging volume and pricing
environment since the early 1980's. However, our penetration of international
markets has partially offset weak domestic demand and we continue to improve
operations, our balance sheet and cash flow. I am pleased with the material
and manufacturing cost reductions and lead time improvements we are achieving
and expect to see further margin expansion from these when the U.S. industrial
economy improves and we leverage these benefits through incremental revenue
volume," stated Ross J. Centanni, Chairman, President and CEO.
"We remain focused on controlling spending, improving our operations and
reducing costs. Selling and administrative expenses for the second quarter of
2003 increased 2% compared to the same period of the previous year, primarily
due to unfavorable foreign currency exchange rates. Excluding the impact of
foreign currency exchange rate changes, selling and administrative expenses
decreased approximately 3% from the prior year period due to cost reductions,
including acquisition integration, despite higher sales commissions and fringe
benefit costs."
"I am pleased to report that we are continuing to improve our balance
sheet. Our receivables remain in excellent condition and we are beginning to
see some improvement in inventory turnover, despite the positioning of some
drilling pump inventory for early third quarter shipments and to enable us to
respond more quickly to future increases in demand. I anticipate that
inventory turnover will continue to improve through the remainder of the year
and that inventory reductions will also result. We will expand the use of
Lean Manufacturing techniques, implement further manufacturing process
improvements, re-balance our domestic supply chain as a result of re-sourcing
castings and work with new suppliers to improve their responsiveness to our
requirements. Cash flow from operations totaled almost $9 million for the
first half, which enabled us to repay more than $9 million in debt and
continue investing capital to improve our operations. The inherent ability to
continue generating strong cash flows in a period of weak economic demand is a
key strength for our Company. In the first half of 2003, we invested almost
$6 million in capital expenditures to reduce costs and develop new products,
compared to slightly less than $5 million in the same period of 2002. For the
year, we expect to invest $14-$16 million to improve our operations. At the
end of June, debt represented less than 32% of our capital structure (debt
plus equity), the lowest level in our history as an independent company, which
better positions us to pursue our strategies for growth, including synergistic
acquisitions."
Outlook
Looking forward, Mr. Centanni stated, "The growth in the U.S. industrial
market remains relatively stagnant, but we believe that the outlook for the
balance of the year is more positive than negative. We are positioning the
Company for growth in Asia through the establishment of a Chinese packaging
operation in the fall of 2004, which will also facilitate further material
cost reductions as we access lower-cost suppliers. We are strengthening our
distribution channels in the U.S. and Europe through further training and
development. Although significant near term increases in orders for compressed
air products are not anticipated through the third 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. In the second quarter, we consumed
some of the backlog added earlier in the year and, therefore, future shipments
will continue to be reliant upon order conversion for the balance of the year.
We are striving for lead-time reductions and have begun to position drilling
pump inventory so that we can respond more quickly to increases in demand. 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 believe that the more significant aspects of re-sourcing our castings
are behind us. The financial results of the second quarter of 2003 included a
depreciation charge to write-off pattern modification fees from casting
suppliers no longer servicing the Company. We expect to continue to respond to
on-going supply issues over the balance of the year as we modify and
re-balance our casting supply chain. Nevertheless, the Company continues to
benefit from lower material costs and reduced concentration in our supply
relationships as we resolve these issues. To date, the Company has been able
to avoid significant supply disruptions while managing these changes."
"The Company's postretirement expenses have not increased as significantly
as originally anticipated due to lower staffing levels and less dramatic
increases in medical costs. However, similar to many other companies in the
U.S., these expenses are expected to be higher in 2003 than in previous years.
We now expect the DEPS deterioration as a result of increased fringe benefits
to be approximately $0.08 to $0.10 compared to 2002, rather than previous
expectations of an unfavorable impact of $0.15 to $0.18 per share. We expect
that material cost reductions, process improvements to operations and further
capital investment will offset most of the volume reductions and unfavorable
mix in our Pump Products segment. This unfavorable mix is a result of
decreased drilling pump sales, which typically generate above-average margins.
The Company currently expects DEPS to be approximately $0.30 to $0.34 for the
third quarter of 2003. Within the range of our previous guidance, DEPS is
expected to be approximately $1.17 to $1.27 for the year, assuming that a
modest recovery in demand for compressed air products occurs in the fourth
quarter. Given the fixed-cost leverage associated with our business, our
improved cost structure and more readily available drilling pump inventory, if
revenues improve more substantially or incremental orders for drilling pumps
are received, DEPS could exceed this outlook."
Second Quarter Results
Revenues for the three-month period increased $4.5 million (4%) to
$109.4 million, compared to the same period of 2002, due to favorable changes
in foreign currency exchange rates and increased shipments of petroleum pump
parts. Compared to the same period of 2002, Compressed Air Products revenues
increased $3.2 million (4%) as a result of favorable changes in foreign
currency exchange rates. Excluding the favorable impact of changes in foreign
currency exchange rates, revenues in this segment would have decreased
$1.4 million (2%) due to softer U.S. and European industrial economies.
However, revenues for this segment increased $5.3 million (6%) compared to the
first quarter of 2003, which was the third consecutive quarter for revenue
growth in this business segment despite no significant improvement in general
industrial economic conditions. Pump Products revenues for the three-month
period increased $1.3 million (9%) compared to the same period of 2002,
primarily as a result of increased international shipments of petroleum pump
parts from backlog.
Net income was $5.3 million for the three-month period of 2003, compared
to $5.5 million in the same period of 2002 and $3.5 million in the previous
quarter of 2003. Favorable changes in exchange rates increased net income by
approximately $0.3 million in the second quarter of 2003, compared to the
previous year. The 2003 results reflect an effective tax rate of 32%,
compared to 34% in the previous year, as a result of benefits from higher U.S.
export sales. We currently anticipate this lower tax rate to be effective for
the balance of the year. DEPS was $0.33 for the second quarter of 2003,
compared to $0.34 for the same period of 2002. Higher commissions and fringe
benefit expenses and costs associated with the disruption within our casting
supply chain have been substantially offset by cost reductions, including
acquisition integration, favorable changes in exchange rates and the benefit
of a lower tax rate. Compared to the three months ending March 31, 2003, DEPS
increased 50% due to increased revenue, a slight improvement in gross margin
as a percentage of revenues, lower fringe benefit costs and a slight gain on
the sale of an idle manufacturing facility in Syracuse, New York.
Six Month Results
Revenues for the first half of 2003 decreased slightly to $210.9 million
compared to the same period of 2002, despite favorable changes in foreign
currency exchange rates. Compressed Air Products revenues increased
$1.9 million (1%) due to favorable changes in foreign currency exchange rates.
Excluding the favorable impact of changes in foreign currency exchange rates,
revenues in this segment decreased $7.1 million (4%) for the six-month period
compared to the previous year, due to softer industrial economic conditions in
the U.S. and Europe. Pump Products revenues for the six-month period
decreased $2.5 million (7%) compared to the same period of 2002. The
depressed demand for petroleum pumps resulted from previously low levels of
rig count, which began negatively impacting order rates in the second half of
2001. In 2002, Pump Products segment revenues were primarily supported by
drilling pump backlog carried over from 2001 orders.
Net income for the six-month period of 2003 was $8.9 million ($0.55 DEPS),
compared to $10.1 million ($0.63 DEPS) for the same period of 2002. Favorable
changes in exchange rates increased net income by approximately $0.5 million
in the first half of 2003, compared to the previous year.
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" 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 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
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 and six-month periods
ended June 30, 2003 and 2002 follow.
Gardner Denver will broadcast, through a live webcast, its conference call
to discuss second quarter earnings on Thursday, July 24, 2003 at 9:30 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 Six Months Ended
June 30, June 30,
% %
2003 2002 Change 2003 2002 Change
Revenues $ 109,388 $ 104,854 4 $ 210,879 $ 211,463 --
Costs and Expenses:
Cost of sales 76,151 71,289 7 146,925 145,891 1
Depreciation and
amortization 3,767 3,593 5 7,313 7,141 2
Selling and
administrative 20,681 20,308 2 41,358 40,280 3
Interest expense 1,136 1,730 (34) 2,341 3,412 (31)
Other income, net (210) (435) (52) (97) (567) (83)
Income before
income taxes 7,863 8,369 (6) 13,039 15,306 (15)
Provision for
income taxes 2,517 2,845 (12) 4,173 5,204 (20)
Net income $5,346 $5,524 (3) $8,866 $10,102 (12)
Basic earnings
per share $0.33 $0.35 (6) $0.55 $0.64 (14)
Diluted earnings
per share $0.33 $0.34 (3) $0.55 $0.63 (13)
Basic weighted
average number of
shares outstanding 16,052 15,856 16,031 15,806
Diluted weighted
average number of
shares outstanding 16,260 16,139 16,214 16,069
Shares outstanding
as of 6/30 16,067 15,876
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
% %
2003 2002 Change 2003 2002 Change
Compressed Air
Products
Revenues $92,443 $89,240 4 $179,629 $177,751 1
Operating earnings 7,699 8,800 (13) 14,275 16,140 (12)
% of Revenues 8.3% 9.9% 7.9% 9.1%
Orders 81,726 93,631 (13) 174,861 179,183 (2)
Backlog 56,875 61,156 (7) 56,875 61,156 (7)
Pump Products
Revenues 16,945 15,614 9 31,250 33,712 (7)
Operating earnings 1,090 864 26 1,008 2,011 (50)
% of Revenues 6.4% 5.5% 3.2% 6.0%
Orders 13,713 12,854 7 34,442 26,240 31
Backlog 10,099 13,102 (23) 10,099 13,102 (23)
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
06/30/03 3/31/03 Change 12/31/02
Cash and equivalents $23,031 $21,065 9 $25,667
Receivables, net 75,986 69,091 10 74,490
Inventories, net 73,042 71,102 3 67,448
Current assets 183,341 170,239 8 177,775
Total assets 477,726 464,148 3 472,181
Short-term debt and
cur. maturities 10,625 7,500 42 7,500
Current liabilities 77,456 71,043 9 77,660
Long-term debt, ex.
cur. maturities 100,272 104,030 (4) 112,663
Total liabilities 237,907 234,304 2 249,258
Total stockholders' equity 239,819 229,844 4 222,923
SOURCE Gardner Denver, Inc.
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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
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