Gardner Denver, Inc. Delivers Solid Fourth Quarter 2010 Financial Results
Strong Revenue Growth and Margin Expansion Drive DEPS Improvement
Company Highlights (Attributable to Gardner Denver):
o Diluted Earnings per Share ("DEPS") were $1.08 for the fourth quarter of 2010, inclusive of corporate
relocation and due diligence costs totaling $0.07, compared to $0.71 in the previous year.
o Strong fourth quarter growth with orders and revenues up 31 percent and 18 percent, respectively.
o Operational improvements contribute to 310 basis points of operating margin expansion to 15.2 percent.
o Total year 2010 cash provided by operating activities of $202 million, 117 percent of net income.
o Guidance for 2011: first quarter DEPS of $0.88 to $0.93 and total year DEPS of $3.90 to $4.10, including
profit improvement costs and other items totaling $0.02 and $0.10 per diluted share, respectively.
WAYNE, PA (February 10, 2011) - Gardner Denver, Inc. (NYSE: GDI) today announced that revenues and operating
income for the three months ended December 31, 2010 were $530.0 million and $80.4 million, respectively, and net
income and DEPS attributable to Gardner Denver were $57.1 million and $1.08, respectively. The three-month period
of 2010 included expenses for corporate relocation, due diligence and other items totaling $4.7 million, or $0.07 DEPS.
Compared to the three-month period of 2009, revenues increased 18 percent and orders increased 31 percent. The
improvement in demand for Industrial Products was broad, occurring in every region of the world. Demand for
Engineered Products was strong, with the most significant increases resulting from incremental demand for petroleum
pump products and aftermarket services. Consolidated operating income improved 48% compared to the three-month
period of the prior year, increasing to $80.4 million from $54.4 million in 2009. Operating income as a percentage of
revenues was 15.2 percent in the three-month period of 2010, compared to 12.1 percent in the prior year period. The
increase in operating income was largely driven by incremental profitability on the revenue growth, favorable product
mix and the benefits of operational improvements previously implemented.
For the twelve-month period of 2010, revenues and operating income were $1,895.1 million and $252.4 million,
respectively, and net income and DEPS attributable to Gardner Denver were $173.0 million and $3.28, respectively.
The twelve-month period of 2010 included expenses for corporate relocation, due diligence and other items totaling
$7.6 million, or $0.11 DEPS. For the twelve-month period of 2009, the net loss and per share basis net loss attributable to Gardner Denver were $165.2 million and $3.18, respectively. The twelve-month period of 2009 included expenses
totaling $309.7 million, or $5.58 DEPS, for profit improvement initiatives, impairment charges and other items.
CEO's Comments
"The strong fourth quarter 2010 financial results reflect a continued improvement in our business environment
combined with solid operational execution of our strategic priorities," said Barry L. Pennypacker, Gardner Denver's
President and Chief Executive Officer. "We have positioned the Company to continue benefitting from strong organic
growth in faster-growing end markets and geographies, such as energy, infrastructure and Asia Pacific. I am generally
pleased with the progress we have made in executing our strategies and improving the operations, as evidenced by our
operating margins expanding approximately 300 basis points and our achievement of record-breaking inventory turns of
5.8 in the fourth quarter of 2010. Both of the Company's reportable segments were able to deliver sequential profit
improvement in the last three quarters of 2010. These results were driven by the efficiencies and focus that underpin the
Gardner Denver Way, positioning us well for the future.
"In 2010, cash provided by operating activities was more than $202 million, or 117 percent of net income attributable to
Gardner Denver. Our strong balance sheet and cash generation give us the flexibility to invest in the business and make
further share repurchases and selective acquisitions, if the appropriate opportunities become available. In addition, we
invested $33.0 million in capital expenditures in the twelve-month period of 2010, with a focus on reducing costs and
increasing production output. We will continue to be very disciplined in terms of capital allocation."
Outlook
Mr. Pennypacker stated, "For 2011, we expect gradual improvements in capacity utilization to continue to drive demand
for our Industrial Products and services including some replacement opportunities for industrial compressors and
blowers. As a result of our expectation for gradual economic improvement in developed markets, we anticipate
revenues for our Industrial Products to grow slightly in 2011, but continue to remain cautious in our outlook.
"Revenues for Engineered Products depend more on existing backlog levels than revenues for Industrial Products, and
orders for Engineered Products are frequently scheduled for shipment over an extended period of time. Many of these
products are used in process applications, such as oil and gas refining and chemical processing, which are industries that
typically experience increased demand later in an economic cycle. Our current outlook assumes that demand for drilling
pumps, well servicing equipment and OEM compressors will remain strong in 2011."
Mr. Pennypacker stated, "Based on this economic outlook, our existing backlog and productivity improvement plans,
we are projecting the first quarter 2011 DEPS attributable to Gardner Denver to be in a range of $0.88 to $0.93 and our
full-year 2011 DEPS to be in a range of $3.90 to $4.10. This projection includes first quarter and full year 2011 profit
improvement costs and other items totaling $0.02 and $0.10 per diluted share, respectively. Full-year 2011 DEPS attributable to Gardner Denver, adjusted to exclude profit improvement costs and other items, are expected to be in a
range of $4.00 to $4.20. The effective tax rate assumed in the DEPS guidance for 2011 is 28 percent. The Company
expects capital expenditures to total approximately $45 million in 2011, as we continue to invest in growth initiatives
and margin expansion projects on the shop floor."
Fourth Quarter Results
Revenues increased $79.2 million (18 percent) to $530.0 million for the three months ended December 31, 2010,
compared to the same period of 2009. Organically, order and revenue growth were 32 percent and 19 percent,
respectively, in the fourth quarter of 2010, compared to the prior year period.
Orders and revenues for the Industrial Products segment increased 23 percent and 17 percent, respectively, in the fourth
quarter, compared to the same period of 2009, reflecting on-going improvement in demand for OEM products and
aftermarket parts and services on a global basis. In the fourth quarter of 2010, unfavorable changes in foreign currency
exchange rates reduced orders and revenues for the Industrial Products segment by 2 percent. Organically, this segment
generated order and revenue growth of 25 percent and 19 percent, respectively, in the fourth quarter of 2010, compared
to the prior year period. See "Selected Financial Data Schedule" at the end of this press release.
Engineered Products segment orders and revenues increased 45 percent and 18 percent, respectively, for the three
months ended December 31, 2010, compared to the same period of 2009, reflecting strong demand for drilling and well
servicing pumps. In the fourth quarter of 2010, unfavorable changes in foreign currency exchange rates reduced orders
and revenues for the Engineered Products segment by 1 percent. The ILMVAC acquisition, completed in the third
quarter of 2010, increased orders and revenues by 3 percent and 2 percent, respectively. Organically, this segment
generated order and revenue growth of 43 percent and 17 percent, respectively, in the fourth quarter of 2010, compared
to the prior year period. See "Selected Financial Data Schedule" at the end of this press release.
Gross profit increased $36.4 million (25 percent) to $180.7 million for the three months ended December 31, 2010,
compared to the same period of 2009, primarily as a result of volume improvements, favorable product mix and cost
reductions, despite the impact of unfavorable changes in foreign currency exchange rates. Gross margin increased to
34.1 percent in the three months ended December 31, 2010, from 32.0 percent in the same period of 2009. The increase
in gross margin was due to the benefits of operational improvements, cost reductions, volume leverage and favorable
product mix.
Selling and administrative expenses increased $14.5 million to $99.0 million in the three-month period ended December
31, 2010, compared to the same period of 2009, primarily due to corporate relocation costs and increases in
compensation and benefit expenses, partially offset by cost reductions and changes in foreign currency exchange rates
($2.2 million). The ILMVAC acquisition, completed in the third quarter of 2010, added $1.1 million to selling and administrative expenses in the fourth quarter of 2010. As a percentage of revenues, selling and administrative expenses
remained flat at 18.7 percent for the three-month period ended December 31, 2010, compared to the same period of
2009.
Depreciation and amortization expense was $15.4 million for the three-month period of 2010 and $17.4 million in the
three-month period of 2009.
Operating income, as adjusted to exclude the net impact of expenses incurred for corporate relocation costs ($2.6
million), due diligence on an abandoned transaction ($2.2 million) and other items ("Adjusted Operating Income") for
the three-month period ended December 31, 2010 was $85.0 million, compared to $59.2 million in the prior year period.
Adjusted Operating Income as a percentage of revenues improved to 16.0 percent from 13.1 percent in the three-month
period of 2009. DEPS attributable to Gardner Denver, as adjusted for the impact of corporate relocation costs, due
diligence and other items ("Adjusted DEPS") for the three-month period ended December 31, 2010, were $1.15,
compared to $0.73 in the three-month period of 2009. Adjusted Operating Income, on a consolidated and segment basis
and Adjusted DEPS are both financial measures that are not in accordance with generally accepted accounting
principles in the U.S. ("GAAP"). See "Reconciliation of Operating Income (Loss) 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 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.
Adjusted Operating Income for the Industrial Products segment in the fourth quarter of 2010 was $30.8 million and
segment Adjusted Operating Income as a percentage of revenues was 10.1 percent. By comparison, Adjusted Operating
Income for the Industrial Products segment was $19.5 million, or 7.5 percent of revenues, in the three-month period of
2009. Segment operating income(1) and segment operating margin(1), as reported under GAAP, for the Industrial
Products segment for the three months ended December 31, 2010 were $26.9 million and 8.9 percent, respectively.
Segment operating income (1) and segment operating margin(1) for the Industrial Products segment, as reported under
GAAP, for the three months ended December 31, 2009 was $20.7 million and 8.0 percent of revenues, respectively.
The improvement in Adjusted Operating Income for this segment was primarily attributable to cost reductions and
incremental profit on revenue growth. See the "Selected Financial Data Schedule" and the "Reconciliation of Operating
Income (Loss) and DEPS to Adjusted Operating Income and Adjusted DEPS" at the end of this press release.
Adjusted Operating Income for the Engineered Products segment for the fourth quarter of 2010 was $54.3 million and
segment Adjusted Operating Income as a percentage of revenues was 24.0 percent. Adjusted Operating Income for the
Engineered Products segment in the three-month period of 2009 was $39.8 million, or 20.9 percent of revenues.
Segment operating income(1), as reported under GAAP, for the Engineered Products segment for the three months ended
December 31, 2010 was $53.4 million and segment operating margin(1) was 23.7 percent, compared to $33.7 million
and 17.7 percent, respectively, in the same period of 2009. The improvement in Adjusted Operating Income for this
segment was primarily attributable to cost reductions, favorable product mix and incremental profitability on revenue
growth. See the "Selected Financial Data Schedule" and the "Reconciliation of Operating Income (Loss) and DEPS to
Adjusted Operating Income and Adjusted DEPS" at the end of this press release.
The provision for income taxes for the three months ended December 31, 2010 increased $7.5 million to $18.0 million,
compared to the same period of 2009. The effective tax rates for the three-month periods of 2010 and 2009 were 24
percent and 22 percent, respectively.
Net income attributable to Gardner Denver for the three months ended December 31, 2010 increased $19.9 million to
$57.1 million, compared to $37.2 million in the same period of 2009. Diluted earnings per share attributable to Gardner
Denver for the three months ended December 31, 2010 were $1.08, compared to $0.71 for the same period of the
previous year.
Twelve Month Results
Revenues in the twelve-month period of 2010 increased $117.0 million (7 percent) to $1,895.1 million, compared to
$1,778.1 million in the same period of 2009. This increase was primarily attributable to on-going improvements in
demand for petroleum products, OEM products, and aftermarket parts and services, partially offset by unfavorable
changes in foreign currency exchange rates.
Gross profit increased $75.8 million (14 percent) to $626.4 million in the twelve months ended December 31, 2010,
compared to the same period of 2009, primarily as a result of volume improvements and cost reductions, despite the
impact of unfavorable changes in foreign currency exchange rates. Gross margin increased to 33.1 percent in the
twelve-month period of 2010, compared with 31.0 percent in the twelve-month period of 2009, primarily due to cost
reductions and favorable product mix.
Compared to 2009, selling and administrative expenses increased $13.3 million in the twelve-month period of 2010 to
$369.5 million due primarily to corporate relocation costs and increases in compensation and benefit expenses, partially
offset by cost reductions. As a percentage of revenues, selling and administrative expenses decreased to 19.5 percent in
the twelve months ended December 31, 2010, compared to 20.0 percent in 2009, primarily due to cost reductions and
revenue leverage.
Depreciation and amortization expense was $60.2 million in the twelve-month period of 2010 and $68.7 million in the
twelve-month period of 2009.
For the twelve-month period, operating income increased $366.1 million to $252.4 million in 2010, compared to an
operating loss of $113.7 million in same period of 2009. Operating income as a percentage of revenues was 13.3
percent in the twelve-month period of 2010. The operating loss in 2009 was impacted by impairment charges ($262.4
million), as well as profit improvement initiatives and other items (totaling $47.3 million). The year-over-year increase
in operating income was also attributable to cost reductions, revenue volume improvements and favorable product mix.
Adjusted Operating Income (a non-GAAP financial measure) for the twelve-month period ended December 31, 2010
was $260.0 million, compared to $196.0 million in the prior year period. Adjusted Operating Income as a percentage of
revenues increased to 13.7 percent from 11.0 percent in the twelve-month period of 2009. See "Reconciliation of
Operating Income (Loss) and DEPS to Adjusted Operating Income and Adjusted DEPS" at the end of this press release.
The provision for income taxes was $56.9 million in the twelve months ended December 31, 2010, compared to $24.9
million in the same period of 2009. The effective tax rate for the twelve-month period of 2010 was 25 percent. The
provision in 2009 reflected the reversal of deferred tax liabilities totaling $11.6 million associated with the intangible
asset impairment charges and, in the first quarter of 2009, expense of $8.6 million associated with the write-off of
deferred tax assets related to net operating losses recorded in connection with the acquisition of CompAir. In the first
quarter of 2009, the Company also recognized a $3.6 million benefit as a result of a reversal of an income tax reserve
and related interest associated with the completion of a foreign tax examination.
The Company generated net income attributable to Gardner Denver of $173.0 million in the twelve-month period of
2010, compared to a net loss of $165.2 million in the same period of 2009. The Company generated DEPS attributable
to Gardner Denver of $3.28 in the twelve-month period of 2010, compared to a net loss on a per share basis of $3.18 for
the same period of the previous year. Adjusted DEPS (a non-GAAP financial measure) for the twelve-month period
ended December 31, 2010 were $3.39, compared to Adjusted DEPS for the prior year period of $2.40, reflecting a 41
percent improvement on a 7 percent improvement in revenues. See "Reconciliation of Operating Income (Loss) and
DEPS to Adjusted Operating Income and Adjusted DEPS" at the end of this press release.
Comparisons of the financial results for the three and twelve-month periods ended December 31, 2010 and 2009 follow.
Gardner Denver will broadcast a conference call to discuss results for the fourth quarter of 2010 on Friday, February 11,
2011 at 9:30 a.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 Center on the Gardner Denver website at
www.GardnerDenver.com or through Thomson StreetEvents at www.earnings.com.
Gardner Denver, Inc., with 2010 revenues of approximately $1.9 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).
(1) Segment operating income (loss) (defined as income before interest expense, other income, net, and income taxes) and segment
operating margin (defined as segment operating income (loss) divided by segment revenues) are indicative of short-term
operational performance and ongoing profitability. For a reconciliation of segment operating income (loss) to consolidated
operating income (loss) and consolidated income (loss) before income taxes, see "Business Segment Results" at the end of this
press release.
