Gardner Denver Announced Continued Growth
Gardner Denver, Inc. announced continued strong growth in business levels in the third quarter of 2005. Orders, revenues, and net income in the three months ended September 30, 2005 were $411.3 million, $356.1 million and $16.7 million respectively.
These results represent a 109% increase in orders, 95% increase in revenues and 93% increase in net income, compared to the third quarter of the previous year. These improved results were primarily a result of the Thomas Industries and Nash Elmo acquisitions and strong organic growth.
Third Quarter Results
Revenues increased $173.5 million (95%) to $356.1 million for the three months ended September 30, 2005, compared to the same period of 2004. This increase was due to the acquisitions of Thomas Industries, Nash Elmo and Bottarini, which contributed incremental revenue of $143.0 million and higher volumes and pricing in both segments.
For the three months ended September 30, 2005, revenues for the Compressor and Vacuum Products segment increased $152.7 million (104%) to $299.8 million, compared to the same period of 2004, primarily due to the acquisitions of Thomas, Nash Elmo and Bottarini. Higher volumes of compressor and blower shipments in the U.S., Europe and China and improved pricing also contributed to this increase. Fluid Transfer Products segment revenues increased $20.8 million (59%) to $56.3 million for the three months ended September 30, 2005 compared to the same period of 2004. This improvement was primarily due to increased volume of drilling and well stimulation pumps, water jetting systems and related aftermarket parts, and pricing.
Orders for compressor and vacuum products for the three months ended September 30, 2005 increased $154.0 million compared to the same period of 2004. Organically, compressor and vacuum product orders increased $11.8 million (8%), compared to the previous year. Compressor and vacuum products backlog of $294.1 million at September 30, 2005 represented an increase of $132.9 million (82%) from one year ago. The acquired Bottarini and Thomas Industries businesses accounted for $89.8 million of this increase. The remaining increase of $43.1 million represents organic backlog growth of approximately 30% from one year ago.
Backlog for fluid transfer products increased $97.5 million (189%) as of September 30, 2005, compared to September 30, 2004. Orders for fluid transfer products for the three-month period ended September 30, 2005 increased by $60.3 million, representing organic growth of 120% compared to the previous year.
Gross margin (defined as revenues less cost of sales) as a percentage of revenues (gross margin percentage) was 32.5% in both the third quarters of 2005 and 2004. Increased volume and pricing in both segments and the related positive impact of increased leverage of fixed and semi-fixed costs over a higher revenue base contributed favorably. The impact of recording the Thomas Industries inventory at fair value on the acquisition date and higher material costs offset these positive factors.
Depreciation and amortization for the three months ended September 30, 2005 increased $5.4 million (91%) to $11.3 million, compared to the same period of 2004, primarily due to the Thomas Industries and Nash Elmo acquisitions. The third quarter results included a one-time amortization reduction ($0.7 million) as a result of the finalization of the allocation of the Nash Elmo purchase price.
Selling and administrative expense increased $33.6 million (90%) in the three-month period of 2005 to $71.1 million, compared to the same period of 2004, primarily due to incremental expenses of the acquired companies (approximately $31.0 million). However, selling and administrative expenses declined as a percentage of revenues from 20.5% in the three months ended September 30, 2004 to 20.0% in the same period of 2005.
The Compressor and Vacuum Products segment generated operating earnings (defined as revenues less cost of sales, depreciation and amortization, and selling and administrative expenses) as a percentage of revenues of 8.0% in the three-month period ended September 30, 2005, a decrease from 9.2% for the same period of 2004. Excluding the effect of acquisitions, Compressor and Vacuum Products segment operating earnings as a percentage of revenues were 9.5% for the three-month period ended September 30, 2005. This improvement compared to the previous year was primarily attributable to the positive impact of increased leverage of the segment's fixed and semi-fixed costs over a higher revenue base and cost reductions, partially offset by higher material and selling and administrative costs.
The Fluid Transfer Products segment generated operating earnings as a percentage of revenues of 16.2% for the three-month period ended September 30, 2005, compared to 6.8% in the same period of 2004. This increase is primarily due to the positive impact of increased leverage of the fixed and semi-fixed costs over a higher revenue base and price increases.
Interest expense increased $7.9 million to $10.4 million for the three months ended September 30, 2005, compared to the same period of 2004, due to funds borrowed to complete the acquisition of Thomas Industries and higher interest rates. The weighted average interest rate for the three-month period ended September 30, 2005 was 7.1%, compared to 5.6% in the comparable prior year period.
The Company's effective tax rate for the three months ended September 30, 2005 decreased to 30% compared to 34% in the prior year period principally due to a higher proportion of earnings derived from lower-taxed non-U.S. jurisdictions and tax planning initiatives.
Net income for the three months ended September 30, 2005 increased $8.0 million (93%) to $16.7 million ($0.63 DEPS), compared to $8.7 million ($0.43 DEPS) in the same period of 2004. This increase was attributable to the higher income before taxes and a lower effective tax rate in 2005, partially offset by the issuance of 5.7 million shares in May 2005 in advance of the Thomas Industries acquisition.
Nine Months Results
Revenues increased $346.9 million (70%) to $845.3 million for the nine months ended September 30, 2005, compared to the same period of 2004. This increase was primarily due to incremental revenues from the Nash Elmo, Bottarini and Thomas Industries acquisitions ($272.3 million). Significantly higher demand for drilling pumps, continuing improved demand for industrial compressor and vacuum products and price increases were the primary factors contributing to the balance of the increase.
For the nine months ended September 30, 2005, revenues for the Compressor and Vacuum Products segment increased $297.3 million (75%) to $693.5 million compared to the same period of 2004. This increase was primarily due to the acquisitions of Nash Elmo, Bottarini and Thomas Industries. Organic revenue growth for compressor and vacuum products for the nine-month period of 2005, compared to the same period of 2004, was approximately 5%. Fluid transfer products segment revenues increased $49.6 million (49%) to $151.8 million for the nine months ended September 30, 2005, compared to the same period of 2004. This increase was primarily due to increased volumes of drilling and well stimulation pumps, water jetting systems and related aftermarket parts. Price increases and changes in currency exchange rates also contributed to this increase.
Net income for the nine months ended September 30, 2005 increased $18.1 million (77%) to $41.6 million ($1.75 DEPS), compared to $23.5 million ($1.23 DEPS) in same period of 2004. Acquisitions contributed approximately $7 million to the increase. The balance of the improvement is attributable to higher revenue volume and price increases, partially offset by material cost increases, and a lower effective tax rate in 2005. The increase in DEPS was partially offset by higher average shares outstanding for the nine-month period of 2005 as a result of the Thomas Industries acquisition financing.
The Company invested approximately $23 million in capital expenditures for the first nine months of 2005, and expects total capital expenditures for the year to be approximately $35 million to $40 million, including capital investments for the recently acquired operations of Thomas Industries. Capital spending is currently expected to be approximately $45 million to $50 million in 2006, and is targeted to be invested primarily to integrate businesses, introduce new products and improve operations. Cash provided by operating activities was approximately $50 million in the first nine months of 2005, compared to $22 million in the same period of 2004.
Source: Gardner Denver, Inc.
