Gardner Denver, Inc. Reports Second Quarter Earnings Per Share of $0.34: EPS Increases 17% Compared to Q1 2002

01.08.2002

Gardner Denver, Inc. (NYSE: GDI), a leading manufacturer of compressors and blowers for industrial applications and pumps for the petroleum and industrial markets, announced that revenues for the three months ended June 30, 2002 were $104.9 million, a slight increase compared with the results of the second quarter of 2001. Diluted earnings per share (DEPS) in the second quarter of 2002 were $0.34, 17% less than the second quarter of 2001, but 17% better than the results of the first quarter of 2002.

The company is very pleased with the progress we have made in improving its operations, despite the delayed recovery in the U.S. industrial market. It continue to realize the benefit of its cost reduction and acquisition integration efforts in the form of operating margin improvements. These efforts, which include quality initiatives, lean manufacturing techniques and material cost reductions, should position the Company for additional performance improvements when revenue volume increases more substantially. Gardner Denver has relocated the manufacture of its Hoffman centrifugal blower product line, acquired in September 2001, to its plant in Georgia and has begun realizing cost reductions associated with this acquisition integration program. It completed the rationalization of the Belliss & Morcom sales and administrative staffs in both the U.S. and the U.K., which also reduced costs. As a result of all of these efforts, operating margin for the Compressed Air segment and consolidated net income increased significantly compared to the first quarter of 2002. This represents the second consecutive quarter that margin has improved in the Compressed Air Products segment, even after adjusting for goodwill amortization expense in the fourth quarter of 2001.

"Revenues fell slightly compared to the previous quarter due to continued reductions in demand for petroleum pumps, which more than offset the modest improvement in Compressed Air revenues. But we continue to maintain tight controls on discretionary spending and pursue cost reduction projects to offset the impact of lower revenues. In fact, excluding acquisitions, selling and administrative expenses were less in the second quarter of 2002 than in the comparable period of the previous year.", stated Ross J. Centanni, Chairman, President and CEO. "We continue to generate strong operating cash flow, which was approximately $7.9 million for the quarter and $12.4 million year-to-date. These favorable cash flows, supplemented by existing cash reserves, were used to pay down $15.6 million in debt in the second quarter of 2002, $23.2 million year-to-date, enabling us to continue actively pursuing our strategies for growth, including acquisitions. We also invested $2.9 million in capital expenditures in the second

quarter of 2002, $4.8 million year-to-date, primarily for further cost reduction efforts and new product development."

Outlook

Looking forward, Mr. Centanni stated, "We continue to see modest improvements in demand for compressed air products in the U.S. and are pleased with the share gains we continue to achieve in Europe. We had previously hoped to see substantial improvement in the U.S. industrial market by the end of the second quarter, which would have implied more significant increases in demand for our compressed air products in the second half of 2002. Typically, demand for these products improves approximately six months after manufacturing capacity utilization and other leading indicators of industrial activity increase. Although these indicators are improving, we believe it could be late in the fourth quarter of this year before the growth in the U.S. industrial market stimulates increased demand for our compressed air products."

"As rig counts increase, we expect eventual improvement in demand for pump replacement parts and, if sustained, drilling pumps. Although rig count increased in both May and June, it remains at its lowest level since mid 2000. Therefore, we currently anticipate that revenues for pump products will be driven by backlog consumption, at least through the third quarter of this year. If higher natural gas and oil prices are sustained, supported by an economic recovery, demand for oil well servicing and drilling could return to higher levels, stimulating demand for petroleum pumps in late 2002 or early 2003."

"Based on these observations, the Company's updated expectations are that DEPS will be approximately $0.33 to $0.39 for the third quarter of 2002. Our expectations for DEPS for the year have also changed. We now expect DEPS for 2002 to be approximately $1.35 to $1.50."

Second Quarter Results

Revenues for the three-month period increased slightly to $104.9 million, compared to the same period of 2001, as a result of acquisitions. Excluding acquisitions, revenues declined $16.7 million (16%) compared to the second quarter of 2001. Compressed Air Products revenues, including $17.0 million from acquisitions, increased $15.3 million (21%). Revenues from Compressed Air Products, excluding the benefit of acquisitions, declined due to weakness in the U.S. and European industrial markets, which reduced demand for compressors and blowers. Pump Products revenues for the three-month period of 2002 were $15.0 million (49%) less than the same period of 2001. This decrease reflects the reduced demand for petroleum pumps due to lower natural gas prices and rig counts, which began negatively impacting the Company in the second half of 2001. Given the relatively high fixed-cost nature of this business, the operating margin for Pump Products declined compared to the previous quarter due to decreased leverage olower revenues. Net income was $5.5 million for the three-month period of 2002, compared to $6.4 million in same period of 2001. Diluted earnings per share decreased 17% to $0.34 for the second quarter of 2002, compared to $0.41 for the same period of 2001, as a result of the decline in revenues (excluding acquisitions) and the associated reduction in fixed cost leverage.

Six Month Results

Revenues for the first half of 2002 increased $6.0 million (3%) compared to the six-month period of 2001 due to acquisitions. Excluding acquisitions, revenues for the six-month period of 2002 were $35.0 million (17%) less than the previous year. Compressed Air Products revenues, including $41.0 million from acquisitions, increased $29.5 million (20%). Weak economic conditions in the U.S. and European industrial markets led to lower demand for compressors and blowers, which was the primary cause for an 8% decline in Compressed Air Products revenues (excluding acquisitions) compared to the six-month period of 2001. Pump Products revenues for the six-month period decreased $23.5 million (41%), compared to the same period of 2001, primarily as a result of reduced demand for petroleum pumps.

Net income was $10.1 million for the first six months of 2002, compared to $11.2 million in 2001. Diluted earnings per share decreased 13% to $0.63 for the six months of 2002, compared to $0.72 for the same period of 2001, due to the lower revenue volume and the related de-leverage of operations.

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