Third Quarter Results of Gardner Denver

12.11.2002

Gardner Denver, Inc. Reports Third Quarter Revenues of $103 Million And Earnings Per Share of $0.30: Strong Cash Flow Results in Continuing Debt Reduction

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 September 30, 2002 were $102.8 million, a slight decrease compared with the results of the third quarter of 2001. Diluted earnings per share (DEPS) in the third quarter of 2002 were $0.30, 14% less than the third quarter of 2001.

CEO's Comments Regarding Results

"We continue to operate in a very difficult sales environment. The industrial economy is very soft and the recovery generally expected for the second half of this year has given no sign of materializing to date. In addition, demand for the Company's petroleum-related products is off dramatically from a year ago," stated Ross J. Centanni, Chairman, President and CEO.

"Despite the difficult sales environment, the Company is making significant progress on many of its objectives for the year. The successful integration of the Belliss & Morcom and Hoffman acquisitions, made in the third quarter last year, enabled us to report higher sales and operating earnings for the Compressed Air segment, despite the difficult economy for these products. Our cost reduction efforts are continuing on plan and I would expect to see additional benefits from these efforts when U.S. industrial demand improves and our revenues increase accordingly. We are investing capital to reduce our costs, implementing lean manufacturing techniques to improve our leadtime and throughput, expanding our quality systems to improve customer satisfaction and streamlining our operations. The benefit of these efforts is demonstrated in the operating margin for the Compressed Air segment, as a percentage of revenues, which is higher for the nine months of 2002 than the comparable period of 2001. The Company is well-positioned for profitability improvements when the sales environment strengthens."

"We continue to tightly control spending. Excluding acquisitions and the effect of changes in foreign exchange rates, selling and administrative expenses were less in the nine months of 2002 than in the comparable period of 2001, despite increased post retirement and medical expenses in the current year."

"I am pleased with the strong cash flow our operations continue to generate. In the third quarter, we were able to use this cash to repay almost $14 million of debt, nearly $37 million in the nine-month period. The ability of our business to generate such strong cash flows positions us to actively pursue our strategies for growth, including seeking value-added acquisitions, even in a period of weak economic demand. We are also able to use this cash to improve our existing businesses through capital investments. In the first nine months of this year, we invested $7.5 million in capital to improve our operations, primarily through cost reduction projects and new product development."

Outlook

Looking forward, Mr. Centanni stated, "It appears that the U.S. industrial market and demand for our compressor products have reached a trough and should not further decline. Although significant improvements in near term demand for compressed air products in the U.S. are not anticipated, significant reductions in our future order rate are not expected to occur either. We continue to gain additional market share in Europe and are pleased with the improvements and cost reductions we are achieving in our business processes. Key economic indicators, such as manufacturing capacity utilization and industrial production, are being monitored for signs of improvement in the U.S. industrial market. Typically, demand for our compressed air products improves approximately six months after these indicators of industrial activity increase. Increased demand for compressed air products is anticipated in the second half of 2003 as a result of an improving industrial market in the U.S. Given our improved cost structure and the fixed cost leverage associated with our business, we anticipate enhanced flow-through profitability to result from a rebound in revenues."

"As rig counts increase further, eventual improvement in demand for pumps and replacement parts is expected. Although rig count increased from April through July 2002, it remains approximately 20% below the average level in 2000 and 2001. Therefore, we anticipate that revenues for pump products will be driven by backlog consumption with some modest order conversion, at least through the second quarter of 2003. If natural gas prices increase, supported by an economic recovery, demand for well servicing and drilling could return to higher levels, stimulating demand for petroleum pumps by mid 2003."

"I am pleased with the progress made to date in re-sourcing our supply of iron castings, necessitated by the downsizing of a key supplier. This logistical effort is being effectively managed to minimize production disruptions and we are achieving purchased material cost reductions in the process. As previously announced, the disruption in supply and incremental costs associated with expediting new castings is expected to negatively impact financial results through the first quarter of 2003. We believe that the magnitude of this impact will be approximately $0.03 to $0.06 per share in the fourth quarter of 2002 and $0.02 to $0.04 in the first quarter of 2003. The most significant aspects of this change should be completed by the first quarter of 2003 and the Company should then continue to benefit from lower material costs through the remainder of the year."

"Based on these observations, the Company's updated expectations are that DEPS will be approximately $0.25 to $0.30 for the fourth quarter of 2002 and $1.18 to $1.23 for the year.

"Similar to most companies in the U.S. today, rising medical and post retirement benefit expenses continue to pressure the Company's earnings. We do not expect a change in this in the near future and, in fact, anticipate that increases in these expenses will reduce DEPS approximately $0.15-$0.18 in 2003, as compared to the level incurred in 2002. Despite this increase, we expect DEPS for 2003 to be approximately $1.10 to $1.30, assuming that a modest market recovery in the industrial economy occurs in the second half of 2003. Given the fixed cost nature of our business, if revenues improve more substantially, financial results next year could exceed this outlook. Future acquisitions could also add to earnings."

Third Quarter Results

Revenues for the three-month period decreased slightly to $102.8 million, compared to the same period of 2001, and included incremental revenue of $12.4 million from acquisitions. Excluding acquisitions, revenues declined $13.1 million (13%) compared to the third quarter of 2001. Compressed Air Products revenues, including incremental revenues from acquisitions, increased $10.5 million (14%). Revenues for this business segment, excluding the benefit of acquisitions, declined 3% compared to the third quarter of 2001 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 $11.1 million (39%) less than the same period of 2001. This revenue decrease reflects reduced demand for petroleum pumps related to lower natural gas prices and rig counts, which began negatively impacting this business segment's order rate in the second half of 2001.

Net income was $4.8 million for the three-month period of 2002, compared to $5.6 million in same period of 2001. Diluted earnings per share decreased 14% to $0.30 for the third quarter of 2002, compared to $0.35 for the same period of 2001, primarily as a result of the decline in revenues (excluding acquisitions), the associated reduction in fixed cost leverage and additional medical and post retirement benefit expenses.

Nine Month Results

Revenues for the first nine months of 2002 increased $5.4 million (2%) to $314.3 million compared to the comparable period of 2001 due to acquisitions, which added $54.1 million. Compressed Air Products revenues, including the benefit of acquisitions, increased $40.0 million (18%). Weak economic conditions in the U.S. and European industrial markets led to lower demand for compressors and blowers, resulting in a 6% decline in Compressed Air Products revenues (excluding acquisitions) compared to the nine-month period of 2001. Pump Products revenues for the nine-month period decreased $34.6 million (40%), compared to the same period of 2001, as a result of reduced demand for petroleum pumps.

Net income was $14.9 million for the first nine months of 2002, compared to $16.8 million in 2001. Diluted earnings per share decreased 13% to $0.93 for the nine months of 2002, compared to $1.07 for the same period of 2001, due to the lower revenue volume, the related de-leverage of operations and higher medical and post retirement benefit expenses.

Safe Harbor

All of the statements in this release, other than historical facts, are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995, including the statements under the "Outlook" section. As a general matter, forward-looking statements are those focused upon anticipated events or trends and expectations and beliefs relating to matters that are not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to Gardner Denver's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These uncertainties and factors could cause actual results to differ

materially from those matters expressed in or implied by such forward-looking statements. The following uncertainties and factors, among others, could affect future performance and cause actual results to differ materially from those expressed in or implied by forward-looking statements: the ability to identify, negotiate and complete future acquisitions; the speed with which the Company is able to integrate its recent acquisitions and realize the related financial benefit; the domestic and/or worldwide level of oil and natural gas prices and oil and gas drilling and production, which affect demand for the Company's petroleum products; changes in domestic and/or worldwide industrial production and industrial capacity utilization rates, which affect demand for the Company's compressed air products; pricing of Gardner Denver products; the degree to which the Company is able to penetrate niche markets; the ability to maintain and to enter into key purchasing and supply relationships; the ability to attract and retain quality management personnel; and the continued successful implementation of cost reduction efforts. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future.

Gardner Denver, with 2001 revenues of $420 million, is a leading manufacturer of reciprocating, rotary and vane compressors and blowers for various industrial applications and pumps used in the petroleum and industrial markets. Gardner Denver's news releases are available by facsimile (800-758-5804, extension 303875) or by visiting the Company's website

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