Gardner Denver Reports Record First Quarter

These increases were primarily a result of the September 2004 acquisition of Nash Elmo and continued improvement in demand for pumps used in oil and natural gas well drilling and stimulation.

CEO’s Comments Regarding Results

“Our year began with a very strong first quarter, both in terms of demand and financial results. In fact, diluted earnings per share of $0.50 represents a record first quarter for us. Organic revenue growth, excluding the Nash Elmo acquisition and the effect of changes in foreign currency rates, exceeded 12% for the first quarter, compared to the previous year. Orders grew faster than shipments, resulting in increasing backlog across most product lines. Total segment operating earnings as a percentage of revenues (operating margins) increased to 7.6% for the three months ended March 31, 2005, compared to 6.4% for the comparable period of 2004, a 120 basis point improvement. We continue to see strong demand from many end markets served by our Fluid Transfer Products segment, primarily due to elevated energy prices. These favorable conditions have led to increased orders and shipments of pumps and related aftermarket parts used in oil and natural gas exploration and well servicing applications. Demand for blowers used in the transportation market segment, for dry and liquid bulk conveyance, also remains strong. Additionally, we have begun to see improving demand in end markets for many of our industrial products, such as water jetting systems, compressors and some engineered packages containing centrifugal blowers and liquid ring pumps,” stated Ross Centanni, Chairman, President and CEO.

“We believe the integration of the Syltone acquisition is substantially complete. In March 2005, we divested another small, non-core operation that was acquired with Syltone. We anticipate that there are opportunities to generate synergistic benefits via facility and product rationalization, sales channel leverage and material cost reductions through further integration of Nash Elmo into the Gardner Denver business platform. These integration efforts are on plan, with a primary focus on systems integration at present. We expect to close the acquisition of Thomas Industries within the next two to four months, subject to Thomas Industries’ shareholder approval, regulatory approvals in Europe and other customary conditions.”

“Capital has been invested in integrating businesses onto our common enterprise resource planning system, introducing new products to market, and improving our operations. In the three months of 2005, we had capital expenditures of approximately $5 million, and we expect total capital expenditures for the year to be approximately $22 million to $24 million, excluding Thomas Industries. Cash used in operating activities was $12.1 million in the first quarter of 2005, compared to cash provided of $3.5 million in the comparable period of 2004. This change is primarily a result of higher operating working capital needs due to increased activity levels and timing of payments, partially offset by higher net income. Days sales outstanding, inventory turnover and debt to total capital improved slightly during the period.”

Outlook

Looking forward, Mr. Centanni stated, “Given the current economic environment, as well as our existing backlog and recent order trends, we expect diluted earnings per share (DEPS) to be approximately $0.55 to $0.65 for the second quarter of 2005 and $2.35 to $2.55 for the year (an increase from our previous expectation of $2.15 to $2.40 DEPS), before any dilution from the anticipated equity offering and excluding any potential impact from the planned acquisition of Thomas Industries. This guidance now includes approximately $0.44 to $0.48 DEPS in 2005 from our most recent acquisition, Nash Elmo, approximately $0.06 DEPS better than our previously communicated expectation. The remaining improvement in the Company’s earnings guidance, compared to previous expectations, is primarily due to increased demand for drilling and well stimulation pumps and the delay of expensing stock options. As allowed by a recent Securities and Exchange Commission announcement, the Company plans to defer the adoption of the new accounting rule requiring the expensing of stock options until January 1, 2006.

The Company had previously expected to be required to adopt this new accounting rule in 2005, which would have resulted in a $0.03 to $0.05 reduction to DEPS in the second half of the year.”

First Quarter Results

Revenues increased $84.4 million (55%) to $238.8 million for the three months ended March 31, 2005, compared to the same period of 2004. This increase was primarily due to the Nash Elmo acquisition, which contributed $62.4 million in revenues. Increased shipments of drilling and well stimulation pumps, compressors and blowers, combined with changes in currency exchange rates and price increases, also contributed to this improvement.

For the three months ended March 31, 2005, revenues for the Compressor and Vacuum Products segment increased $69.7 million (57%) to $192.7 million, compared to the same period of 2004. This increase was primarily due to the acquisition of Nash Elmo. Higher volumes of compressor and blower shipments in the U.S., Europe and China, changes in currency exchange rates and price increases also contributed to this increase. Fluid Transfer Products segment revenues increased $14.7 million (47%) to $46.1 million for the three months ended March 31, 2005, compared to the same period of 2004. This increase was primarily due to increased shipments of drilling and well stimulation pumps, water jetting systems and related aftermarket parts, as well as price increases.

Backlog for the businesses that existed prior to the acquisition of Nash Elmo increased over 66% as of March 31, 2005, compared to March 31, 2004. The Nash Elmo acquisition, which was completed in September of 2004, contributed another $96.5 million to the increase in backlog compared to the previous year. Orders for compressor and vacuum products for the three-month period of 2005 increased by $5.2 million for the businesses that existed prior to the acquisition, representing growth of 4% compared to the previous year. Orders for fluid transfer products increased more than $39.0 million (107%) in the three-month period, compared to the previous year, driving a corresponding 167% increase in backlog for this segment, as a result of increased demand in almost all major product lines.

Gross margin (defined as revenues less cost of sales) for the three months ended March 31, 2005 increased $27.9 million (56%) to $77.8 million compared to the same period of 2004, primarily due to the increase in revenues. Gross margin as a percentage of revenues (gross margin percentage) increased to 32.6% in the three-month period of 2005 from 32.3% in the same period of 2004 due to the acquisition of Nash Elmo, which had a higher gross margin percentage than the Company’s previously existing businesses, and due to increased volume in both segments. As volume increases, the Company realizes benefits through the related positive impact of increased leverage of fixed and semi-fixed costs over a higher revenue base. These positive factors were partially offset by higher material costs due to surcharges on castings and other components stemming from increases in scrap iron and other metal prices.

Depreciation and amortization for the three months ended March 31, 2005 increased $2.1 million (42%) to $7.3 million, compared to the same period of 2004, primarily due to the Nash Elmo acquisition. Selling and administrative expenses increased $17.5 million (50%) in the three-month period of 2005 to $52.4 million, compared to the same period of 2004, primarily due to the acquisition of Nash Elmo (approximately $15.5 million). Higher compensation and fringe benefit costs and changes in currency exchange rates also contributed to this increase.

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 7.0% in the three-month period ended March 31, 2005, an increase from 6.7% for the same period of 2004. This increase was primarily attributable to the addition of Nash Elmo and the positive impact of increased leverage of the segment’s costs over a higher revenue base, partially offset by higher material costs and compensation and fringe benefit expense.

The Fluid Transfer Products segment generated operating earnings as a percentage of revenues of 10.1% for the three-month period ended March 31, 2005, compared to 5.1% in the same period of 2004. This increase is primarily due to the positive impact of increased leverage of the segment’s costs over a higher revenue base and favourable sales mix as a result of increased drilling pump shipments. These factors were partially offset by higher material costs.

Interest expense increased $2.0 million (99%) to $4.0 million for the three months ended March 31, 2005, compared to the same period of 2004, due to higher average borrowings stemming from the Nash Elmo acquisition and higher average rates. The average interest rate for the three-month period ended March 31, 2005 was 5.1% compared to 4.4% in the comparable prior year period.

The provision for income taxes increased by $1.0 million to $4.4 million for the three-month period of 2005, compared to the prior year period, as a result of the higher pretax income, partially offset by a lower effective tax rate. The Company’s effective tax rate for the three months ended March 31, 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 other tax planning initiatives.

Net income for the three months ended March 31, 2005 increased $3.7 million (57%) to $10.3 million ($0.50 DEPS), compared to $6.6 million ($0.39 DEPS) in same period of 2004. This increase was primarily attributable to the acquisition of Nash Elmo, which contributed approximately $0.10 DEPS, increased shipments as a result of improving demand in certain end markets and a lower effective tax rate in 2005. In 2004, a non-recurring $1.2 million foreign currency transaction gain, related to the appreciation of U.S. dollar borrowings that were converted to British pounds prior to being used to consummate the Syltone acquisition, was included in other income, net. This transaction gain contributed approximately $0.05 to DEPS in the prior year. The operational improvement in DEPS in 2005 was also partially offset by a $0.08 effect from the stock offering completed in March 2004.