WAYNE, PA--(Marketwire -07/19/12)- Gardner Denver, Inc. (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. (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 Engineered Industrial Engineered
Products Products Consoli- Products Products Consoli-
Group Group dated Group Group dated
-------- -------- -------- -------- -------- --------
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 Engineered Industrial Engineered
Products Products Consoli- Products Products Consoli-
Group Group dated Group Group dated
-------- -------- -------- -------- -------- --------
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.
Michael M. Larsen
Interim CEO and CFO
Tel. (610) 249-2002
