Third Quarter Revenues Increase 63%, Net Income Increases 64% Compared to the
Previous Year
QUINCY, Ill., Oct. 27 /PRNewswire-FirstCall/ -- Gardner Denver, Inc.
(NYSE: GDI) announced that revenues for the three months ended September 30,
2004 were $182.6 million, a 63% increase compared to the third quarter of the
previous year, primarily as a result of acquisitions. Net income for the three
months ended September 30, 2004 was $8.7 million, a 64% increase compared to
the same period last year.
CEO's Comments Regarding Results
"We have continued to show strong revenue growth and flow-through
profitability, both sequentially on a quarter-over-quarter basis and year-
over-year. Our two acquisitions this year have opened new markets and added
new channels of distribution for our existing products. I am pleased with the
pace of our integration activities and excited about the synergistic
opportunities that these acquisitions will provide in the future.
Additionally, strong demand continues for well stimulation pumps and our
aftermarket business for pumps used in oil and gas well drilling and
servicing. Furthermore, we are also beginning to see increased orders for
drilling pumps," stated Ross Centanni, Chairman, President and CEO.
"The end markets for industrial products continue to slowly improve. We
continue to benefit from improving industrial demand in the U.S. and Europe,
along with our efforts to gain market share in Europe, South Africa and China,
which have resulted in increased shipments of compressors and blowers. The
transportation market remains strong, which impacts demand for our positive
displacement blowers. We are also beginning to see increased demand for our
compressors used on locomotives. Additionally, the profitability programs we
initiated in the fourth quarter of 2003 are increasing flow-through
profitability. Total segment operating earnings as a percentage of revenues,
for businesses that existed prior to our 2004 acquisitions, were 10.2% for the
third quarter of 2004. This is approximately 2-percentage points higher than
the third quarter of 2003.
"We have nearly completed the integration of Syltone into the operations
of our existing businesses. These efforts should help us to further leverage
the benefits of the Syltone acquisition in 2005. Additionally, we have
initiated the integration process of nash_elmo's operations. Similar to the
Syltone integration, we believe there are opportunities to generate
synergistic benefits via facility and product rationalization, sales channel
leverage and material cost reductions.
"On September 30, 2004, we celebrated the official opening of our new
compressor assembly and packaging facility in Shanghai, China. We are excited
about our opportunities for this facility. Capital has also been invested in
integrating businesses onto our common enterprise resource planning system,
introducing new products to market, and improving our operations. In the first
nine months of 2004, we had capital expenditures of approximately $12 million,
and we expect total capital expenditures for the year to approximate
$20 million."
Note on Segments
The Company continues to be organized based upon the products and services
it offers. Prior to the Company's acquisition of nash_elmo in September of
this year, the Company was organized into three operating divisions:
Compressor, Blower, and Fluid Transfer. With the addition of nash_elmo, a
fourth division has been added. This new addition, the Liquid Ring Pump
Division, comprises liquid ring pump products, as well as related engineered
systems and aftermarket services. The nash_elmo side channel blower product
line is now included in the Company's Blower Division. These four divisions
comprise two reportable segments, Compressor and Vacuum Products and Fluid
Transfer Products.
Outlook
Looking forward, Mr. Centanni stated, "I expect the demand outlook for
industrial products to continue gradually improving during the last quarter of
2004 and into 2005. Elevated oil and natural gas prices also continue to
drive demand. This improving environment bodes well for future revenue and
profitability levels."
"Given the current economic environment, as well as our existing backlog
and recent order trends, we expect DEPS to be approximately $0.45 to $0.49 for
the fourth quarter of 2004 and $1.68 to $1.72 for the year. This guidance
includes the impact from our two recent acquisitions. We currently believe
that these acquisitions will contribute approximately $0.18 to $0.21 to DEPS
in the current calendar year. If industrial demand continues to strengthen in
the U.S. and Europe and higher oil and natural gas prices continue to
stimulate demand for our well servicing and drilling products, we believe DEPS
will be approximately $1.90 to $2.10 in 2005, including $0.25 to $0.29 from
the acquisition of nash_elmo. Our estimate of the incremental DEPS provided by
the nash_elmo acquisition was increased from our previous guidance as a result
of lower than anticipated amortization expense and incremental growth in the
Asian market."
Third Quarter Results
Revenues for the third quarter of 2004 increased $70.6 million (63%) to
$182.6 million for the three months ended September 30, 2004, compared to the
same period of 2003. This increase was primarily due to acquisitions
($58.8 million) and increased shipments of well stimulation pumps, compressors
and blowers. Favorable changes in currency exchange rates and price increases
also contributed to this increase. Compared to the same period of 2003,
revenues for the Compressor and Vacuum Products segment increased
$55.6 million to $147.1 million for the three months ended September 30, 2004.
This 61% increase was primarily due to acquisitions ($48.0 million), increased
volume in the U.S., Europe, South Africa and China, favorable changes in
currency exchange rates and price increases. Fluid Transfer Products segment
revenues increased $15.0 million to $35.5 million for the three months ended
September 30, 2004, compared to the same period of 2003. This 73% increase is
primarily due to an acquisition ($10.8 million), increased shipments of well
stimulation pumps, water jetting systems and related aftermarket services, as
well as price increases.
The two acquisitions completed in 2004 increased backlog by $117.0 million
for the three months ended September 30, 2004, compared to the same period in
2003; Compressor and Vacuum Products segment increased $93.3 million and Fluid
Transfer Products increased $23.7 million. Orders for the three-month period
increased by $59.5 million due to the recent acquisitions compared to the
previous year. Incremental orders from acquisitions contributed $44.0 million
to the Compressor and Vacuum Products segment for the three months ended
September 30, 2004 and $15.5 million to the Fluid Transfer Products segment.
For the nine-month period of 2004, acquisitions added $103.6 million to
compressor and vacuum product orders and $43.5 million to orders for fluid
transfer products.
Gross margin (defined as revenues less cost of sales) as a percentage of
sales increased to 32.5% in the three-month period ended September 30, 2004,
from 30.2% in the same period of 2003. This increase was principally
attributable to increased revenues in both segments and the related positive
impact of better leverage of fixed and semi-fixed costs over a higher revenue
base. The recent acquisitions positively impacted gross margin percentage, as
their gross margin percentage was higher than that of the Company's previously
existing businesses. Favorable sales mix also contributed to the improvement
since the third quarter of 2004 included a higher percentage of aftermarket
sales compared to the prior year.
Selling and administrative expenses increased in the three-month period of
2004 by 78% to $37.5 million from $21.1 million in the same period of 2003,
primarily due to acquisitions ($15.1 million). Changes in currency exchange
rates also contributed to this increase.
Total segment operating earnings as a percentage of revenues for the
Company were 8.7% in the three months ended September 30, 2004, an increase
from 8.1% for the same period of 2003. Operating earnings for the Compressor
and Vacuum Products segment were 9.2% of revenues in the three months ended
September 30, 2004, an increase from 7.7% in the same period of 2003. This
increase was primarily attributable to the positive impact of increased
leverage of fixed and semi-fixed costs over a higher revenue base. Favorable
sales mix also contributed to this increase. These favorable factors were
partially offset by lower operating margins at the businesses acquired in
2004. Operating earnings from the Compressor and Vacuum Products businesses
that existed prior to the Syltone and nash_elmo acquisitions were 9.5% of
revenues for the three months ended September 30, 2004. The Fluid Transfer
Products segment generated operating earnings as a percentage of revenues of
6.8% for the three months ended September 30, 2004, compared to 9.6% in the
same period of 2003. This decrease was primarily attributable to the Syltone
acquisition and lower drilling pump shipments. This negative factor was
partially offset by the positive impact of increased leverage of fixed and
semi-fixed costs and operational improvements. Operating earnings as a
percentage of revenues from Fluid Transfer Products segment businesses that
existed prior to the Syltone acquisition were 13.0% for the three months ended
September 30, 2004.
Interest expense increased $1.4 million (133%) to $2.5 million for the
three months ended September 30, 2004, compared to the same period of 2003,
due to higher average borrowings stemming from the nash_elmo and Syltone
acquisitions and higher average rates.
Net income for the three months ended September 2004 increased
$3.4 million (64%) to $8.7 million ($0.43 diluted earnings per share),
compared to $5.3 million ($0.32 diluted earnings per share) in same period of
2003. This increase was primarily attributable to higher operating earnings,
including the incremental impact from acquisitions, partially offset by higher
interest expense and a higher effective tax rate in 2004 as a result of
increased profits generated at international operations. The incremental
impact on diluted earnings per share from the two acquisitions in the three-
month period of 2004 was $0.04. Without the stock offering completed near the
end of the first quarter of 2004, DEPS for the third quarter would have been
$0.06 higher.
Nine Months Results
Revenues for the nine months ended September 30, 2004 increased
$175.4 million (54%) to $498.3 million, compared to the same period of 2003.
This increase was primarily due to acquisitions completed in 2004
($138.6 million) and increased shipments of well stimulation pumps, pump
parts, compressors and blowers. Favorable changes in currency exchange rates
and price increases also contributed to this increase. For the nine months
ended September 30, 2004, revenues for the Compressor and Vacuum Products
increased $125.0 million (46%) to $396.2 million, compared to the same period
of 2003. This increase is primarily due to recent acquisitions
($102.9 million), changes in currency exchange rates, increased volume of
compressor and blower shipments in the U.S., Europe, South Africa and China
and price increases. Fluid Transfer Products segment revenues increased
$50.4 million to $102.2 million for the nine months ended September 30, 2004,
compared to the same period of 2003. This 97% increase was primarily due to an
acquisition ($35.7 million), increased volume of well stimulation pumps, water
jetting systems and related aftermarket, as well as price increases. These
positive factors were partially offset by fewer drilling pump shipments.
Net income for the nine months ended September 30, 2004 increased
$9.3 million (66%) to $23.5 million, compared to the same period of 2003.
Diluted earnings per share for the first nine months of 2004 increased to
$1.23 from $0.87 for the same period of 2003. The stock offering completed
earlier in 2004 reduced DEPS for the nine-month period by approximately $0.13.
The increase in net income was primarily attributable to increased leverage of
fixed and semi-fixed costs over a higher revenue base, a favorable sales mix,
operational improvements and a large foreign currency transaction gain in the
first quarter of 2004. These positive factors were partially offset by higher
compensation, fringe benefits, warranty expense and a higher effective tax
rate in 2004. The two recent acquisitions contributed approximately $0.10 to
diluted earnings per share during the first nine months of 2004.
During the first nine months of 2004, the Company generated cash from
operations totaling $22.3 million, compared to $23.7 million in the prior year
period. This unfavorable comparison was primarily due to the higher levels of
operating working capital due to increased activity levels, partially offset
by higher net income and cash generated by acquisitions in 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 identify, negotiate and
complete possible future acquisitions; (2) the speed with which the Company is
able to integrate acquisitions and realize the related financial benefits; (3)
the ability to maintain and to enter into key purchasing, supply and
outsourcing relationships; (4) purchased material cost changes, including
metal surcharges; (5) the ability to effectively manage the transition of iron
casting supply to alternate sources and the skill, commitment and availability
of such alternate sources; (6) the successful implementation of other
strategic initiatives, including, without limitation, restructuring plans,
inventory reduction programs and other cost reduction efforts; (7) 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; (8) changes in domestic and/or worldwide industrial production and
industrial capacity utilization rates, which affect demand for the Company's
compressor and vacuum products; (9) pricing of the Company's products; (10)
the degree to which the Company is able to penetrate niche and international
markets; (11) changes in currency exchange rates (primarily between the U.S.
dollar, the euro and the British pound); (12) changes in interest rates; (13)
the ability to attract and retain quality management personnel; (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 continued ability to effectively manage and
defend litigation matters pending, or asserted in the future, against the
Company; (16) the development and acceptance of the Company's new product
offerings; and (17) the continued successful implementation and utilization of
the Company's electronic services; (18) changes in laws and regulations,
including accounting standards and tax requirements. 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 nine-month periods
ended September 30, 2004 and 2003 follow.
Gardner Denver will broadcast its conference call to discuss third quarter
earnings on Thursday, October 28, 2004 at 9:30 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 2003 revenues of $440 million ($790 million on a pro
forma basis including the acquisitions of Syltone plc and nash_elmo Holdings
LLC, which were completed in 2004), is a leading 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 Nine Months Ended
September 30, September 30,
% %
2004 2003 Change 2004 2003 Change
Revenues $ 182,616 $ 112,061 63 $ 498,341 $ 322,940 54
Costs and
Expenses:
Cost of sales 123,296 78,198 58 336,457 225,123 49
Depreciation
and
amortization 5,925 3,740 58 16,074 11,053 45
Selling and
administrative 37,461 21,063 78 106,031 62,421 70
Interest
expense 2,491 1,070 133 5,949 3,411 74
Other expense
(income), net 332 230 44 (1,756) 133 N/M
Income before
income taxes 13,111 7,760 69 35,586 20,799 71
Provision for
income taxes 4,457 2,483 80 12,099 6,656 82
Net income $8,654 $5,277 64 23,487 $14,143 66
Basic earnings
per share $0.44 $0.33 33 $1.26 $0.88 43
Diluted earnings
per share $0.43 $0.32 34 $1.23 $0.87 41
Basic weighted
average number
of shares
outstanding 19,806 16,079 18,645 16,047
Diluted weighted
average number
of shares
outstanding 20,188 16,393 19,032 16,269
Shares outstanding
as of 9/30 19,850 16,094
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
% %
2004 2003 Change 2004 2003 Change
Compressor and
Vacuum Products
Revenues $147,148 $91,554 61 $396,170 $271,183 46
Operating
earnings 13,519 7,089 91 32,422 21,364 52
% of Revenues 9.2% 7.7% 8.2% 7.9%
Orders 146,466 90,272 62 415,756 265,133 57
Backlog 161,227 56,521 185 161,227 56,521 185
Fluid Transfer
Products
Revenues 35,468 20,507 73 102,171 51,757 97
Operating
earnings 2,415 1,971 23 7,357 2,979 147
% of Revenues 6.8% 9.6% 7.2% 5.8%
Orders 50,423 18,944 166 128,225 53,386 140
Backlog 51,553 8,707 492 51,553 8,707 492
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
9/30/04 6/30/04 Change 12/31/03
Cash and equivalents $48,055 $26,252 83 $132,803
Receivables, net 152,459 119,471 28 81,345
Inventories, net 141,977 95,708 48 64,327
Current assets 360,974 252,560 43 287,809
Total assets 999,970 677,007 48 589,733
Short-term debt and cur.
maturities 28,964 47,131 39 16,875
Accounts payable and
accrued liabilities 171,609 124,742 38 84,081
Current liabilities 200,573 171,873 17 100,956
Long-term debt, ex.
cur. maturities 309,564 61,737 401 165,756
Total liabilities 623,859 313,983 99 323,828
Total stockholders'
equity 376,111 363,024 4 265,905
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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