SOURCE: Gardner Denver, Inc.

Gardner Denver, Inc.

July 19, 2012 16:30 ET

Gardner Denver Reports Second Quarter 2012 Results

WAYNE, PA--(Marketwire - Jul 19, 2012) -  Gardner Denver, Inc. (NYSE: GDI)

  • Diluted earnings per share ("DEPS") of $1.51 up 19% from the prior year, exceeding previous guidance
  • Operating margins expanded 140 basis points to 17.6%
  • Revised full-year forecast down $0.30 to $4.90 to $5.10 DEPS, or $5.30 to $5.50 on an Adjusted DEPS basis, driven by slower economic growth, principally in Europe, and headwind from foreign exchange (1)

Gardner Denver, Inc. (NYSE: GDI) today reported second quarter 2012 net income of $75.3 million, or $1.51 per diluted share, compared to $67.1 million, or $1.27 per diluted share in the second quarter of 2011. Results for the second quarter of 2012 included unfavorable after-tax charges of $0.02 diluted earnings per share primarily related to the Company's disposition of two facilities and acquisition related costs, resulting in Adjusted DEPS of $1.53. (1)

Second quarter 2012 revenues were $613.0 million, an increase of 0.4% compared to the prior year second quarter. The positive contribution from the recent Robuschi acquisition as well as increased sales of pressure pumps and associated after markets parts, and late cycle projects in the Engineered Products Group ("EPG") were offset by headwind from foreign exchange, as the U.S. Dollar appreciated against other major currencies, as well as declines in the Industrial Products Group ("IPG") primarily in Europe.

Operating income for the second quarter of 2012 was $108.0 million, compared to $99.2 million in the second quarter of the prior year, resulting in an increase in operating margins of 140 basis points to 17.6%. Operating margins expanded in both segments driven by tight cost controls and the impact of the recent Robuschi acquisition.

"In a slower growth environment, Gardner Denver had a good second quarter as DEPS increased 19% over the prior year to $1.51, exceeding our previously stated guidance," said Michael M. Larsen, Gardner Denver's interim Chief Executive Officer. "We executed well on our margin expansion initiatives as operating margins expanded in both segments and we continued to take steps toward optimizing our cost structure, as we announced the closure of 8 facilities globally and reduced staffing by 3%. Our cash flow from operating activities was $66 million, an increase of 36% compared to the first quarter of 2012, and we returned over $107 million in cash to our shareholders in the second quarter through the repurchase of 1.664 million shares of our common stock and the payment of dividends." 

Factors affecting second quarter results for the Company's business segments included: (2)

Engineered Products Group (EPG)
EPG revenues increased 0.2% to $283 million for the second quarter of 2012 compared to the prior year second quarter principally as a result of higher unit volumes in pressure pumps and associated aftermarket parts offset by declines in the shorter cycle Thomas business. Operating income in the second quarter of 2012 increased 4% to $67.2 million as operating margins improved to 23.7%, up 80 basis points from last year's second quarter.

"Second quarter shipments of OEM pressure pumps and fluid ends increased at a double-digit rate versus the same period in the prior year. As expected, EPG orders declined 36% driven by significantly lower demand for Petroleum and Industrial Pumps partially offset by orders for Nash pumps as a result of strength in chemical and oil & gas end markets. In our Petroleum and Industrial Pumps business we continue to focus on capturing the aftermarket opportunity and taking decisive cost actions to partially offset the impact of the expected decline in shipments in the second half of 2012," said Larsen.

Industrial Products Group (IPG)
IPG revenues increased 0.6% to $330 million for the second quarter of 2012 compared to the prior year second quarter driven primarily by the positive contribution from the recent Robuschi acquisition and strong demand in the Asia Pacific region, offset by lower sales principally in Europe and China as well as headwind from foreign exchange. Operating income in the second quarter of 2012 increased 19% to $40.8 million as operating margins expanded to 12.4%, up 190 basis points from last year's second quarter.

"IPG had a solid second quarter as the team delivered on our '14 x 14' margin expansion strategy in a slower growth environment, and we were very pleased with the operational and financial performance of our recent Robuschi acquisition. In addition, we continue to take the necessary steps to optimize our cost structure in a more challenging environment as the development of our European restructuring plans is nearing completion," said Larsen.

Outlook
"Halfway through 2012 we are pleased with our operational and financial performance as revenues in the first six months of 2012 increased 7% and Adjusted DEPS increased 17% over the same period in 2011. (1) Looking forward to the balance of 2012, we face headwinds from a more challenging macroeconomic environment, principally in Europe, lower shipments of OEM pressure pumps in line with previous expectations and foreign exchange. We remain fully committed to our strategic initiatives, supported by the lean principles of the Gardner Denver Way, as we continue to execute on our plans for margin expansion and cash generation. Our capital deployment strategy of opportunistically repurchasing our stock remains unchanged and we currently have a 1.6 million share repurchase authorization from our Board of Directors," said Larsen.

The company now expects full-year DEPS to be in the range of $4.90 to $5.10 as compared to its prior guidance of $5.20 to $5.40. This new forecast represents a $0.30 adjustment driven principally by a broadly weaker economy in Europe and the exchange rate impact of foreign currencies. Third quarter 2012 earnings are expected to be in the range of $1.12 to $1.22 DEPS. These projections include profit improvement costs and other items totaling $0.03 per diluted share for the third quarter and $0.40 per diluted share for the total year. Third quarter 2012 Adjusted DEPS are expected to be in a range of $1.15 to $1.25 and full year 2012 Adjusted DEPS are expected to be in a range of $5.30 to $5.50, as compared to prior guidance of $5.60 to $5.80. (1)

Conference Call
Gardner Denver will broadcast a conference call to discuss results for the second quarter of 2012 on Friday, July 20, 2012 at 8:30 a.m. EDT 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 Investors section on the Gardner Denver website at www.GardnerDenver.com or through Thomson StreetEvents at www.earnings.com.

Corporate Profile
Gardner Denver, Inc., with 2011 revenues of approximately $2.4 billion, is a leading worldwide manufacturer of highly engineered products, including compressors, liquid ring pumps and blowers for various industrial, medical, environmental, transportation and process applications, pumps used in the petroleum and industrial market segments and other fluid transfer equipment, such as loading arms and dry break couplers, serving chemical, petroleum and food industries. Gardner Denver's news releases are available by visiting the Investors section on the Company's website (www.GardnerDenver.com).

Forward-Looking Information
This press release contains forward-looking statements that involve risks and uncertainties. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "could," "should," "anticipate," "expect," "believe," "will," "project," "lead," or the negative thereof or variations thereon or similar terminology. The actual future performance of the Company could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: execution of restructuring plans, senior management turnover, changing economic conditions; pricing of the Company's products and other competitive market pressures; the costs and availability of raw materials; fluctuations in foreign currency exchange rates and energy prices; risks associated with the Company's current and future litigation; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its Annual Report on Form 10-K for the fiscal year ending December 31, 2011, and its subsequent quarterly reports on Form 10-Q for the 2012 fiscal year. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, although its situation and circumstances may change in the future.

(1) Adjusted Operating Income and Adjusted Operating Margin, on a consolidated and segment basis, and Adjusted DEPS are financial measures that are not in accordance with GAAP. For reconciliation to the comparable GAAP number for reported historic periods please see "Reconciliation of Operating Income and DEPS to Adjusted Operating Income and Adjusted DEPS" at the end of this press release. Gardner Denver believes the non-GAAP financial measures of Adjusted Operating Income, Adjusted Operating Margin and Adjusted DEPS provide important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. Gardner Denver believes excluding the specified items from operating income and DEPS provides a more meaningful comparison to the corresponding reported periods and internal budgets and forecasts, assists investors in performing analysis that is consistent with financial models developed by investors and research analysts, provides management with a more relevant measurement of operating performance and is more useful in assessing management performance.

(2) Segment operating income (defined as income before interest expense, other income, net, and income taxes) and segment operating margin (defined as segment operating income divided by segment revenues) are indicative of short-term operational performance and ongoing profitability. For a reconciliation of segment operating income to consolidated operating income and consolidated income before income taxes, see "Business Segment Results" at the end of this press release.

   
GARDNER DENVER, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share amounts and percentages)  
(Unaudited)  
                         
      Three Months Ended           Six Months Ended      
      June 30,           June 30,      
                %                 %  
      2012     2011   Change       2012     2011   Change  
                                     
Revenues   $ 613,014   $ 610,693   -     $ 1,217,370   $ 1,142,546   7  
  Cost of sales     401,144     400,425   -       802,933     747,822   7  
Gross profit     211,870     210,268   1       414,437     394,724   5  
  Selling and administrative expenses     103,115     105,009   (2 )     209,028     201,030   4  
  Other operating expense, net     720     6,087   (88 )     17,582     7,699   128  
Operating income     108,035     99,172   9       187,827     185,995   1  
  Interest expense     3,967     3,934   1       7,801     9,281   (16 )
  Other (income) expense, net     (357 )   279   (228 )     (1,580 )   (683 ) 131  
Income before income taxes     104,425     94,959   10       181,606     177,397   2  
  Provision for income taxes     28,822     27,263   6       50,888     49,802   2  
Net income     75,603     67,696   12       130,718     127,595   2  
Less: Net income attributable to noncontrolling interests     336     575   (42 )     619     996   (38 )
Net income attributable to Gardner Denver   $ 75,267   $ 67,121   12     $ 130,099   $ 126,599   3  
                                     
Earnings per share attributable to Gardner Denver common stockholders:                                    
  Basic earnings per share   $ 1.52   $ 1.28   19     $ 2.60   $ 2.42   7  
  Diluted earnings per share   $ 1.51   $ 1.27   19     $ 2.58   $ 2.40   8  
                                     
Cash dividends declared per common share   $ 0.05   $ 0.05   -     $ 0.10   $ 0.10   -  
                                     
Basic weighted average number of shares outstanding     49,582     52,285           50,110     52,246      
Diluted weighted average number of shares outstanding     49,808     52,684           50,372     52,662      
                                     
Shares outstanding as of June 30     48,971     52,316                        
                                     
                                     
 
GARDNER DENVER, INC.
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
            %      
    6/30/2012   3/31/2012   Change     12/31/2011
                         
                         
Cash and cash equivalents   $ 225,093   $ 186,862   20     $ 155,259
Accounts receivable, net     466,582     484,014   (4 )     477,505
Inventories, net     343,064     356,660   (4 )     311,679
Total current assets     1,094,582     1,104,348   (1 )     1,015,734
                         
Total assets     2,426,238     2,478,590   (2 )     2,365,568
                         
Short-term borrowings and current maturities of long-term debt    
94,895
   
89,808
  6      
77,692
Accounts payable and accrued liabilities     399,536     461,108   (13 )     428,062
Total current liabilities     494,431     550,916   (10 )     505,754
Long-term debt, less current maturities     404,719     314,641   29       326,133
                         
Total liabilities     1,144,932     1,122,634   2       1,085,937
                         
Total stockholders' equity   $ 1,281,306   $ 1,355,956   (6 )   $ 1,279,631
                         
                         
   
GARDNER DENVER, INC.  
BUSINESS SEGMENT RESULTS  
(in thousands, except percentages)  
(Unaudited)  
                                     
    Three Months Ended           Six Months Ended        
    June 30,           June 30,        
                %                 %  
    2012     2011     Change     2012     2011     Change  
Industrial Products Group                                            
  Revenues   $ 329,722     $ 327,846     1     $ 655,549     $ 614,056     7  
  Operating income     40,825       34,325     19       56,364       65,127     (13 )
  % of revenues     12.4 %     10.5 %           8.6 %     10.6 %      
    Orders     326,160       323,687     1       683,669       647,198     6  
    Backlog     280,042       254,490     10       280,042       254,490     10  
                                             
Engineered Products Group                                            
  Revenues     283,292       282,847     -       561,821       528,490     6  
  Operating income     67,210       64,847     4       131,463       120,868     9  
  % of revenues     23.7 %     22.9 %           23.4 %     22.9 %      
    Orders     200,302       313,264     (36 )     523,087       601,679     (13 )
    Backlog     373,878       427,168     (12 )     373,878       427,168     (12 )
                                             
Reconciliation of Segment Results to Consolidated Results                                            
                                             
Industrial Products Group operating income   $ 40,825     $ 34,325           $ 56,364     $ 65,127        
Engineered Products Group operating income     67,210       64,847             131,463       120,868        
Consolidated operating income     108,035       99,172             187,827       185,995        
  % of revenues     17.6 %     16.2 %           15.4 %     16.3 %      
Interest expense     3,967       3,934             7,801       9,281        
Other (income) expense, net     (357 )     279             (1,580 )     (683 )      
Income before income taxes   $ 104,425     $ 94,959           $ 181,606     $ 177,397        
  % of revenues     17.0 %     15.5 %           14.9 %     15.5 %      
                                             
                                             

The Company evaluates the performance of its reportable segments based on operating income, which is defined as income before interest expense, other income, net, and income taxes. Reportable segment operating income and segment operating margin (defined as segment operating income divided by segment revenues) are indicative of short-term operating performance and ongoing profitability. Management closely monitors the operating income and operating margin of each business segment to evaluate past performance and identify actions required to improve profitability.    

   
GARDNER DENVER, INC.  
SELECTED FINANCIAL DATA SCHEDULE  
(in millions, except percentages)  
(Unaudited)  
                         
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
 
 
 
 
 
$ Millions
 
 
 
 
%
Change
 
 
 
 
 
$ Millions
 
 
 
 
%
Change
 
 
Industrial Products Group                        
2011 Revenues   327.8           614.1        
Incremental effect of acquisitions   25.1     8     47.3     8  
Effect of currency exchange rates   (17.9 )   (5 )   (22.6 )   (4 )
Organic growth   (5.3 )   (2 )   16.7     3  
2012 Revenues   329.7     1     655.5     7  
                         
2011 Orders   323.7           647.2        
Incremental effect of acquisitions   23.8     7     52.6     8  
Effect of currency exchange rates   (17.7 )   (5 )   (22.5 )   (3 )
Organic growth   (3.6 )   (1 )   6.4     1  
2012 Orders   326.2     1     683.7     6  
                         
Backlog as of 6/30/11   254.5                    
Incremental effect of acquisitions   24.6     10              
Effect of currency exchange rates   (17.1 )   (7 )            
Organic growth   18.0     7              
Backlog as of 6/30/12   280.0     10              
                         
Engineered Products Group                        
2011 Revenues   282.8           528.5        
Effect of currency exchange rates   (8.6 )   (3 )   (10.2 )   (2 )
Organic growth   9.1     3     43.5     8  
2012 Revenues   283.3     -     561.8     6  
                         
2011 Orders   313.3           601.7        
Effect of currency exchange rates   (6.9 )   (2 )   (8.9 )   (1 )
Organic growth   (106.1 )   (34 )   (69.7 )   (12 )
2012 Orders   200.3     (36 )   523.1     (13 )
                         
Backlog as of 6/30/11   427.2                    
Effect of currency exchange rates   (16.6 )   (4 )            
Organic growth   (36.7 )   (8 )            
Backlog as of 6/30/12   373.9     (12 )            
                         
Consolidated                        
2011 Revenues   610.7           1,142.5        
Incremental effect of acquisitions   25.1     4     47.3     4  
Effect of currency exchange rates   (26.5 )   (4 )   (32.8 )   (3 )
Organic growth   3.7     -     60.4     6  
2012 Revenues   613.0     -     1,217.4     7  
                         
2011 Orders   637.0           1,248.9        
Incremental effect of acquisitions   23.8     4     52.6     4  
Effect of currency exchange rates   (24.6 )   (4 )   (31.4 )   (3 )
Organic growth   (109.7 )   (17 )   (63.3 )   (4 )
2012 Orders   526.5     (17 )   1,206.8     (3 )
                         
Backlog as of 6/30/11   681.7                    
Incremental effect of acquisitions   24.6     4              
Effect of currency exchange rates   (33.7 )   (5 )            
Organic growth   (18.7 )   (3 )            
Backlog as of 6/30/12   653.9     (4 )            
                         
                         
   
GARDNER DENVER, INC.  
RECONCILIATION OF OPERATING INCOME AND DEPS TO  
ADJUSTED OPERATING INCOME AND ADJUSTED DEPS  
(in thousands, except per share amounts and percentages)  
(Unaudited)  
                                                 

While Gardner Denver, Inc. reports financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP"), this press release includes non-GAAP measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Gardner Denver, Inc. believes the non-GAAP financial measures of Adjusted Operating Income and Adjusted DEPS provide important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. Gardner Denver believes excluding the specified items from operating income and DEPS provides management a more meaningful comparison to the corresponding reported periods and internal budgets and forecasts, assists investors in performing analysis that is consistent with financial models developed by investors and research analysts, provides management with a more relevant measurement of operating performance, and is more useful in assessing management performance.   

                                 
                                 
      Three Months Ended       Six Months Ended  
      June 30, 2012       June 30, 2012  
     Industrial Products Group      Engineered Products Group      Consolidated      Industrial Products Group      Engineered Products Group      Consolidated  
                                                 
Operating income   $ 40,825     $ 67,210     $ 108,035     $ 56,364     $ 131,463     $ 187,827  
  % of revenues     12.4 %     23.7 %     17.6 %     8.6 %     23.4 %     15.4 %
                                                 
Adjustments to operating income:                                                
   Profit improvement initiatives (3)     (613 )     543       (70 )     11,389       2,761       14,150  
   Robuschi backlog and inventory amortization (4)     -       -       -       7,391       -       7,391  
   Other, net (5)     1,195       416       1,611       2,205       695       2,900  
Total adjustments to operating income     582       959       1,541       20,985       3,456       24,441  
                                                 
Adjusted operating income   $ 41,407     $ 68,169     $ 109,576     $ 77,349     $ 134,919     $ 212,268  
  % of revenues, as adjusted     12.6 %     24.1 %     17.9 %     11.8 %     24.0 %     17.4 %
                                                 
      Three Months Ended       Six Months Ended  
      June 30, 2011       June 30, 2011  
     Industrial Products Group      Engineered Products Group      Consolidated      Industrial Products Group      Engineered Products Group      Consolidated  
                                                 
Operating income   $ 34,325     $ 64,847     $ 99,172     $ 65,127     $ 120,868     $ 185,995  
  % of revenues     10.5 %     22.9 %     16.2 %     10.6 %     22.9 %     16.3 %
                                                 
Adjustments to operating income:                                                
   Profit improvement initiatives (3)     2,680       303       2,983       3,571       392       3,963  
   Other, net (5)     1,463       766       2,229       1,976       944       2,920  
Total adjustments to operating income     4,143       1,069       5,212       5,547       1,336       6,883  
                                                 
Adjusted operating income   $ 38,468     $ 65,916     $ 104,384     $ 70,674     $ 122,204     $ 192,878  
  % of revenues, as adjusted     11.7 %     23.3 %     17.1 %     11.5 %     23.1 %     16.9 %
                                                 
      Three Months Ended       Six Months Ended  
      June 30,       June 30,  
                      %                       %  
      2012       2011       Change       2012       2011       Change  
                                                 
Diluted earnings per share   $ 1.51     $ 1.27       19     $ 2.58     $ 2.40       8  
                                                 
Adjustments to diluted earnings per share:                                                
   Profit improvement initiatives (3)     (0.00 )     0.05               0.20       0.06          
   Robuschi backlog and inventory amortization (4)     -       -               0.11       -          
   Other, net (5)     0.02       0.03               0.04       0.04          
Total adjustments to diluted earnings per share     0.02       0.08               0.35       0.10          
                                                 
Adjusted diluted earnings per share   $ 1.53     $ 1.35       13     $ 2.93     $ 2.50       17  
   
(3) Charges in both years reflect costs, including employee termination benefits, to streamline operations and reduce overhead costs.
   
(4) Relates to amortization of the fair market value adjustments to backlog and inventory acquired as part of the acquisition of Robuschi SpA.
   
(5) Charges in 2012 consist primarily of fair value adjustments related to the exit of a business, costs associated with the closure of certain manufacturing facilities, certain severance payments and acquisition due diligence costs. Charges in 2011 consist primarily of costs associated with the closure of a manufacturing facility and corporate relocation.
   

Contact Information

  • Contact:
    Michael M. Larsen
    Interim CEO and CFO
    Tel. (610) 249-2002