Gardner Denver Reports Third Quarter 2012 Results
WAYNE, PA -- (Marketwire) -- 10/29/12 -- Gardner Denver, Inc. (NYSE: GDI)
- Diluted earnings per share ("DEPS") of $1.30 exceeded previous guidance
- Increased full year 2012 DEPS guidance to range of $5.05 to $5.15
Gardner Denver, Inc. (NYSE: GDI) today reported third quarter 2012 revenues of $548.5 million, down 11% compared to the prior year third quarter (down 7% excluding the impact of foreign exchange). Operating income for the third quarter of 2012 was $89.1 million, compared to $106.6 million in the third quarter of the prior year, resulting in a decrease in operating margin of 110 basis points to 16.2%. Net income in the third quarter of 2012 was $64.1 million, or $1.30 diluted earnings per share, compared to $73.6 million, or $1.42 DEPS over the same period of 2011. Results for the third quarter of 2012 included unfavorable after-tax charges of $0.02 per diluted share primarily related to the Company's ongoing restructuring activities and severance related costs. Excluding these charges, Adjusted DEPS for the third quarter of 2012 was $1.32. (1)
For the nine months ended September 30, 2012, Gardner Denver (GDI) revenues increased 0.5% to $1.766 billion from $1.757 billion in the same period of 2011. Adjusted operating income was down 0.5% to $303 million, compared to $304 million earned in the first nine months of 2011. (1) Adjusted DEPS was $4.26 for the first nine months of 2012, up 7% from $3.98 per diluted share in the first nine months of 2011. (1)
"In a challenging environment, our commitment to operational excellence coupled with our diverse portfolio of businesses allowed us to exceed our third quarter earnings expectations and raise 2012 guidance. As we continue to successfully execute our strategy for profitable growth, we remain focused on improving productivity and reducing structural costs. We were pleased with our cash performance, as operating cash flow of $88 million for the third quarter was 137% of net income. Our strong balance sheet and sustained cash generation provide us ample opportunity to deploy capital in a disciplined and balanced manner as we focus on delivering consistent shareholder returns," said Michael M. Larsen, Gardner Denver's interim Chief Executive Officer and Chief Financial Officer.
Factors affecting third quarter results for the Company's business segments included: (2)
Engineered Products Group (EPG)
In the third quarter of 2012, EPG revenues decreased 20% (down 18% adjusted for foreign exchange) to $237 million compared to the same period of 2011. Operating income in the third quarter of 2012 decreased 27% to $49.7 million as operating margins decreased to 21.0%, down 210 basis points from last year's third quarter.
Industrial Products Group (IPG)
IPG revenues decreased 3% (up 2% adjusted for foreign exchange) to $312 million for the third quarter of 2012 compared to the same period of 2011. Operating income in the third quarter of 2012 increased 2% to $39.4 million despite lower revenues as adjusted operating margins increased to 13.0%, up 40 basis points from the second quarter of 2012.
"IPG executed well on margin expansion initiatives in a challenging global environment," said Larsen. "As expected, EPG revenues and operating margins declined versus the prior year driven primarily by lower demand for pressure pumps and loading arms. As we manage through macro conditions, we are implementing decisive actions, such as our previously announced European restructuring plan, and will continue to right-size and restructure our operations as needed. We believe these actions position Gardner Denver to achieve continued margin expansion and profitable growth," said Larsen.
Outlook
"Despite the sluggish global environment and headwind from currency, our diverse portfolio of attractive businesses and continued focus on operational excellence allowed Gardner Denver to exceed our third quarter targets. We expect global market conditions to remain challenging through the balance of 2012; however, based upon our third quarter results, we are increasing our earnings guidance for 2012," said Larsen.
Earnings for 2012 are now expected to be in the range of $5.05 to $5.15 per diluted share compared to previous guidance of $4.90 to $5.10 per diluted share provided on July 19, 2012. Fourth quarter 2012 earnings are expected to range between $1.17 and $1.27 DEPS. These projections include profit improvement costs and other items totaling $0.05 per diluted share for the fourth quarter and $0.42 per diluted share for the full year 2012. Fourth quarter 2012 Adjusted DEPS are expected to range between $1.22 and $1.32 and full year 2012 Adjusted DEPS are expected to range between $5.47 and $5.57, compared to previous guidance of $5.30 to $5.50. (1)
As previously announced on October 25, the Board of Directors, working together with its management team and the Company's financial advisor, is exploring strategic alternatives to enhance shareholder value. These alternatives could include, among other things, enhancing the Company's existing strategic plan or a possible sale or merger of Gardner Denver.
No decision has been made and there can be no assurance that the Board's exploration of strategic alternatives will result in any transaction being entered into or consummated.
Conference Call Today
Gardner Denver will host a conference call to discuss results for the third quarter of 2012 today, Monday, October 29, 2012 at 8:30 a.m. EDT through a live webcast. This 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 Nine Months Ended
September 30, September 30,
------------------ ----------------------
% %
2012 2011 Change 2012 2011 Change
-------- -------- ------ ---------- ---------- ------
Revenues $548,484 $614,682 (11) $1,765,854 $1,757,228 -
Cost of sales 360,562 409,197 (12) 1,163,495 1,157,019 1
-------- -------- ---------- ----------
Gross profit 187,922 205,485 (9) 602,359 600,209 -
Selling and
administrative
expenses 95,293 94,179 1 304,321 295,209 3
Other operating
expense, net 3,577 4,726 (24) 21,159 12,425 70
-------- -------- ---------- ----------
Operating income 89,052 106,580 (16) 276,879 292,575 (5)
Interest
expense 3,739 2,898 29 11,540 12,179 (5)
Other income,
net (1,252) (138) 807 (2,832) (821) 245
-------- -------- ---------- ----------
Income before
income taxes 86,565 103,820 (17) 268,171 281,217 (5)
Provision for
income taxes 22,194 29,543 (25) 73,082 79,345 (8)
-------- -------- ---------- ----------
Net income 64,371 74,277 (13) 195,089 201,872 (3)
Less: Net income
attributable to
noncontrolling
interests 268 694 (61) 887 1,690 (48)
-------- -------- ---------- ----------
Net income
attributable to
Gardner Denver $ 64,103 $ 73,583 (13) $ 194,202 $ 200,182 (3)
======== ======== ========== ==========
Earnings per
share
attributable to
Gardner Denver
common
stockholders:
Basic earnings
per share $ 1.31 $ 1.43 (8) $ 3.90 $ 3.85 1
======== ======== ========== ==========
Diluted
earnings per
share $ 1.30 $ 1.42 (8) $ 3.88 $ 3.82 2
======== ======== ========== ==========
Cash dividends
declared per
common share $ 0.05 $ 0.05 - $ 0.15 $ 0.15 -
======== ======== ========== ==========
Basic weighted
average number
of shares
outstanding 49,038 51,601 49,752 52,028
======== ======== ========== ==========
Diluted weighted
average number
of shares
outstanding 49,231 51,968 49,989 52,428
======== ======== ========== ==========
Shares
outstanding as
of September 30 49,099 50,577
======== ========
GARDNER DENVER, INC.
CONDENSED BALANCE SHEET ITEMS
(in thousands, except percentages)
(Unaudited)
%
9/30/2012 6/30/2012 Change 12/31/2011
----------- ----------- ------ -----------
Cash and cash equivalents $ 248,933 $ 225,093 11 $ 155,259
Accounts receivable, net 451,132 466,582 (3) 477,505
Inventories, net 353,371 343,064 3 311,679
Total current assets 1,117,095 1,094,582 2 1,015,734
Total assets 2,457,229 2,426,238 1 2,365,568
Short-term borrowings and
current maturities of long-term
debt 108,255 94,895 14 77,692
Accounts payable and accrued
liabilities 406,835 399,536 2 428,062
Total current liabilities 515,090 494,431 4 505,754
Long-term debt, less current
maturities 331,764 404,719 (18) 326,133
Total liabilities 1,089,413 1,144,932 (5) 1,085,937
Total stockholders' equity $ 1,367,816 $ 1,281,306 7 $ 1,279,631
GARDNER DENVER, INC.
BUSINESS SEGMENT RESULTS
(in thousands, except percentages)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
% %
2012 2011 Change 2012 2011 Change
--------- --------- ------ --------- --------- ------
Industrial
Products Group
Revenues $ 311,767 $ 320,171 (3) $ 967,316 $ 934,227 4
Operating income 39,401 38,607 2 95,765 103,734 (8)
% of revenues 12.6% 12.1% 9.9% 11.1%
Orders 288,967 327,226 (12) 972,636 974,424 -
Backlog 260,586 248,557 5 260,586 248,557 5
Engineered
Products Group
Revenues 236,717 294,511 (20) 798,538 823,001 (3)
Operating income 49,651 67,973 (27) 181,114 188,841 (4)
% of revenues 21.0% 23.1% 22.7% 22.9%
Orders 193,374 300,549 (36) 716,461 902,228 (21)
Backlog 333,225 420,824 (21) 333,225 420,824 (21)
Reconciliation of
Segment Results
to Consolidated
Results
Industrial
Products Group
operating income $ 39,401 $ 38,607 $ 95,765 $ 103,734
Engineered
Products Group
operating income 49,651 67,973 181,114 188,841
--------- --------- --------- ---------
Consolidated
operating income 89,052 106,580 276,879 292,575
% of revenues 16.2% 17.3% 15.7% 16.6%
Interest expense 3,739 2,898 11,540 12,179
Other income, net (1,252) (138) (2,832) (821)
--------- --------- --------- ---------
Income before
income taxes $ 86,565 $ 103,820 $ 268,171 $ 281,217
========= ========= ========= =========
% of revenues 15.8% 16.9% 15.2% 16.0%
========= ========= ========= =========
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 Nine Months Ended
September 30, September 30,
------------------ ------------------
% %
$ Millions Change $ Millions Change
---------- ------ ---------- ------
Industrial Products Group
2011 Revenues 320.2 934.2
Incremental effect of acquisitions 22.2 7 69.5 7
Effect of currency exchange rates (15.9) (5) (38.5) (4)
Organic growth (14.7) (5) 2.1 1
---------- ------ ---------- ------
2012 Revenues 311.8 (3) 967.3 4
2011 Orders 327.2 974.4
Incremental effect of acquisitions 18.4 6 71.0 7
Effect of currency exchange rates (15.0) (5) (37.5) (4)
Organic growth (41.6) (13) (35.3) (3)
---------- ------ ---------- ------
2012 Orders 289.0 (12) 972.6 -
Backlog as of 9/30/11 248.6
Incremental effect of acquisitions 21.1 8
Effect of currency exchange rates 0.5 -
Organic growth (9.6) (3)
---------- ------
Backlog as of 9/30/12 260.6 5
Engineered Products Group
2011 Revenues 294.5 823.0
Effect of currency exchange rates (6.2) (2) (16.4) (2)
Organic growth (51.6) (18) (8.1) (1)
---------- ------ ---------- ------
2012 Revenues 236.7 (20) 798.5 (3)
2011 Orders 300.5 902.2
Effect of currency exchange rates (6.8) (2) (15.7) (2)
Organic growth (100.3) (34) (170.0) (19)
---------- ------ ---------- ------
2012 Orders 193.4 (36) 716.5 (21)
Backlog as of 9/30/11 420.8
Effect of currency exchange rates (2.9) (1)
Organic growth (84.7) (20)
---------- ------
Backlog as of 9/30/12 333.2 (21)
Consolidated
2011 Revenues 614.7 1,757.2
Incremental effect of acquisitions 22.2 4 69.5 4
Effect of currency exchange rates (22.1) (4) (54.9) (3)
Organic growth (66.3) (11) (5.9) (1)
---------- ------ ---------- ------
2012 Revenues 548.5 (11) 1,765.9 -
2011 Orders 627.7 1,876.6
Incremental effect of acquisitions 18.4 3 71.0 4
Effect of currency exchange rates (21.8) (3) (53.2) (3)
Organic growth (141.9) (23) (205.3) (11)
---------- ------ ---------- ------
2012 Orders 482.4 (23) 1,689.1 (10)
Backlog as of 9/30/11 669.4
Incremental effect of acquisitions 21.1 3
Effect of currency exchange rates (2.4) -
Organic growth (94.3) (14)
---------- ------
Backlog as of 9/30/12 593.8 (11)
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 Nine Months Ended
September 30, 2012 September 30, 2012
------------------------------ -----------------------------
Industrial Engineered Industrial Engineered
Products Products Consoli- Products Products Consoli-
Group Group dated Group Group dated
---------- ---------- ------- ---------- ---------- --------
Operating
income $ 39,401 $ 49,651 $89,052 $ 95,765 $ 181,114 $276,879
% of
revenues 12.6% 21.0% 16.2% 9.9% 22.7% 15.7%
Adjustments
to operating
income:
Profit
improvement
initiatives (3) 1,102 358 1,460 12,491 3,119 15,610
Robuschi
backlog
and
inventory
amortization (4) - - - 7,391 - 7,391
Other, net
(5) (105) 35 (70) 2,100 730 2,830
---------- --------- ------- ---------- ---------- -------
Total
adjustments
to operating
income 997 393 1,390 21,982 3,849 25,831
Adjusted
operating
income $ 40,398 $ 50,044 $90,442 $ 117,747 $ 184,963 $302,710
% of
revenues,
as
adjusted 13.0% 21.1% 16.5% 12.2% 23.2% 17.1%
Three Months Ended Nine Months Ended
September 30, 2011 September 30, 2011
------------------------------ ------------------------------
Industrial Engineered Industrial Engineered
Products Products Consoli- Products Products Consoli-
Group Group dated Group Group dated
---------- ---------- -------- ---------- ---------- --------
Operating
income $ 38,607 $ 67,973 $106,580 $ 103,734 $ 188,841 $292,575
% of
revenues 12.1% 23.1% 17.3% 11.1% 22.9% 16.6%
Adjustments
to
operating
income:
Profit
improvement
initiatives(3) 1,690 935 2,625 5,261 1,327 6,588
Other, net
(5) 1,538 713 2,251 3,514 1,657 5,171
---------- ---------- -------- ---------- ---------- --------
Total
adjustments
to
operating
income 3,228 1,648 4,876 8,775 2,984 11,759
Adjusted
operating
income $ 41,835 $ 69,621 $111,456 $ 112,509 $ 191,825 $304,334
% of
revenues,
as
adjusted 13.1% 23.6% 18.1% 12.0% 23.3% 17.3%
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
% %
2012 2011 Change 2012 2011 Change
------- ------- ------ ------- ------- ------
Diluted earnings per share $ 1.30 $ 1.42 (8) $ 3.88 $ 3.82 2
Adjustments to diluted
earnings per share:
Profit improvement
initiatives (3) 0.02 0.03 0.23 0.09
Robuschi backlog and
inventory amortization
(4) - - 0.11 -
Other, net (5) (0.00) 0.03 0.04 0.07
------- ------- ------- -------
Total adjustments to diluted
earnings per share 0.02 0.06 0.38 0.16
Adjusted diluted earnings
per share $ 1.32 $ 1.48 (11) $ 4.26 $ 3.98 7
(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) Net 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, acquisition due
diligence costs, and the reversal of liabilities under long-term
incentive plans and share-based awards which will not eventually vest
due to the resignation of the Company's former President and Chief
Executive Officer, Barry L. Pennypacker. Charges in 2011 include costs
associated with certain severance payments, the closure of a
manufacturing facility, acquisition due diligence, and corporate
relocation.
Contact:
Vikram U. Kini
VP, Investor Relations
Tel. (610) 249-2009
Source: Gardner Denver, Inc.
