-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M4t/sRUrcEMgq6nlU1z7k+UK9iHQD5IWkW4kJxJhaMAKqskX6qnwYrNRlkhS2zuo aHkXrElHlAVZteKvmur8/A== 0000950114-98-000383.txt : 19980817 0000950114-98-000383.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950114-98-000383 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARDNER DENVER INC CENTRAL INDEX KEY: 0000916459 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 760419383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13215 FILM NUMBER: 98690031 BUSINESS ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172225400 MAIL ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 FORMER COMPANY: FORMER CONFORMED NAME: GARDNER DENVER MACHINERY INC DATE OF NAME CHANGE: 19931221 10-Q 1 GARDNER DENVER, INC. FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13215 GARDNER DENVER, INC. (formerly known as Gardner Denver Machinery Inc.) (Exact name of Registrant as Specified in its Charter) Delaware 76-0419383 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1800 Gardner Expressway Quincy, Illinois 62301 (Address of Principal Executive Offices and Zip Code) (217) 222-5400 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No ---------- ---------- Number of shares outstanding of the issuer's Common Stock, par value $.01 per share, as of August 10, 1998: 16,192,157 shares. =============================================================================== 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements. GARDNER DENVER, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
Three Months Ended June 30, ----------------------- 1998 1997 -------- ------- Revenues $103,509 $69,447 Costs and Expenses: Cost of sales (excluding depreciation and amortization) 70,131 45,743 Depreciation and amortization 3,221 2,190 Selling and administrative expenses 13,738 9,292 Interest expense 1,386 936 Other expense 123 -- -------- ------- Income before income taxes 14,910 11,286 Provision for income taxes 5,710 4,473 -------- ------- Net income $ 9,200 $ 6,813 ======== ======= Basic earnings per share $ 0.57 $ 0.45 ======== ======= Diluted earnings per share $ 0.55 $ 0.43 ======== ======= The accompanying notes are an integral part of this statement.
-2- 3 GARDNER DENVER, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
Six Months Ended June 30, ----------------------- 1998 1997 -------- -------- Revenues $193,301 $135,522 Costs and Expenses: Cost of sales (excluding depreciation and amortization) 129,529 90,196 Depreciation and amortization 6,116 4,450 Selling and administrative expenses 26,692 18,653 Interest expense 2,565 1,913 Other expense 278 -- -------- -------- Income before income taxes 28,121 20,310 Provision for income taxes 10,840 8,173 -------- -------- Net income $ 17,281 $ 12,137 ======== ======== Basic earnings per share $ 1.08 $ 0.81 ======== ======== Diluted earnings per share $ 1.04 $ 0.77 ======== ======== The accompanying notes are an integral part of this statement.
-3- 4 GARDNER DENVER, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share amounts) (Unaudited)
June 30, December 31, 1998 1997 -------- ------------ ASSETS Current assets: Cash and equivalents $ 11,546 $ 8,831 Receivables, net 86,507 62,307 Inventories, net 62,617 48,324 Deferred income taxes 5,281 2,784 Other 1,935 2,637 -------- -------- Total current assets 167,886 124,883 -------- -------- Property, plant and equipment, net 49,897 37,530 Intangibles, net 113,254 85,524 Deferred income taxes 13,290 15,845 Other assets 4,452 5,356 -------- -------- Total assets $348,779 $269,138 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 804 $ 459 Accounts payable and accrued liabilities 69,918 58,471 -------- -------- Total current liabilities 70,722 58,930 -------- -------- Long-term debt, less current maturities 89,536 51,227 Postretirement benefits other than pensions 50,958 52,977 Other long-term liabilities 4,983 2,393 -------- -------- Total liabilities 216,199 165,527 -------- -------- Stockholders' equity: Common stock, $.01 par value; 50,000,000 shares authorized; 16,131,480 shares issued and outstanding at June 30, 1998 161 154 Capital in excess of par value 151,884 139,524 Treasury stock at cost, 40,724 shares at June 30, 1998 (921) (333) Retained deficit (16,314) (33,432) Cumulative translation adjustments (2,230) (2,302) -------- -------- Total stockholders' equity 132,580 103,611 -------- -------- Total liabilities and stockholders' equity $348,779 $269,138 ======== ======== The accompanying notes are an integral part of this statement.
-4- 5 GARDNER DENVER, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (Unaudited)
Six Months Ended June 30, ----------------------- 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 17,281 $ 12,137 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,116 4,450 Stock issued for employee benefit plans 963 725 Deferred income taxes (189) (1,021) Changes in assets and liabilities: Receivables (13,953) (6,508) Inventories (1,373) 1,859 Accounts payable and accrued liabilities 1,766 1,760 Other assets and liabilities, net (470) (2,023) -------- -------- Net cash provided by operating activities 10,141 11,379 -------- -------- Cash flows from investing activities: Business acquisitions, net of cash acquired (39,295) (26,153) Foreign currency hedging transactions 851 -- Capital expenditures (6,269) (2,475) -------- -------- Net cash used for investing activities (44,713) (28,628) -------- -------- Cash flows from financing activities: Principal payments on long-term debt (28,890) (9,435) Proceeds from long-term borrowings 67,450 23,000 Debt issuance costs (67) -- Proceeds from stock options, net of treasury stock transactions 316 762 Other (163) -- -------- -------- Net cash provided by financing activities 38,646 14,327 -------- -------- Effect of exchange rate changes (1,359) -- -------- -------- Increase (decrease) in cash and equivalents 2,715 (2,922) -------- -------- Cash and equivalents, beginning of period 8,831 8,610 -------- -------- Cash and equivalents, end of period $ 11,546 $ 5,688 ======== ======== The accompanying notes are an integral part of this statement.
-5- 6 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies. Basis of Presentation. The accompanying financial statements include the accounts of Gardner Denver, Inc. ("Gardner Denver" or the "Company") and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. Investments in entities in which the Company has twenty to fifty percent ownership are accounted for by the equity method. All shares of common stock and per share amounts have been adjusted to give retroactive effect to a three-for-two stock split distributed on December 29, 1997 to stockholders of record at the close of business on December 8, 1997, effected in the form of a stock dividend. The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and the footnotes required by generally accepted accounting principles for complete statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 1997 contained in the Company's 1997 Annual Report to Stockholders. Financial Instruments. Off balance sheet derivative financial instruments as of June 30, 1998 consist of an interest rate swap agreement used to fix interest rates on floating rate debt. Included on the balance sheet is a foreign currency forward contract in Finnish Marka to hedge foreign exchange risk on the Company's investment in its Finnish subsidiary, Oy Tamrotor Ab ("Tamrotor"). The contract is marked to market and both unrealized and realized gains and losses are included in the cumulative translation adjustments component of stockholders' equity. Note 2. Acquisitions. On June 30, 1997, the Company purchased 100% of the issued and outstanding stock of Tamrotor, a subsidiary of Tamrock Corporation located in Tampere, Finland, for approximately $26.2 million. The purchase price was allocated to assets and liabilities based on their respective fair values at the date of acquisition, and resulted in cost in excess of net assets acquired of $15.4 million. -6- 7 On January 5, 1998, the Company purchased substantially all of the assets and assumed certain agreed upon liabilities of Geological Equipment Corporation ("Geoquip"), located in Fort Worth, Texas for approximately $12.0 million. The purchase price was paid in cash ($1.5 million) and 430,695 shares of Gardner Denver common stock. The Company also paid approximately $2 million to acquire patents, previously owned by Geoquip shareholders, for products manufactured by Geoquip. The purchase price was allocated to assets and liabilities based on their respective fair values at the date of acquisition and resulted in cost in excess of net assets acquired of $7.4 million. On January 29, 1998, the Company purchased substantially all of the assets and assumed certain agreed upon liabilities of Champion Pneumatic Machinery Company, Inc. ("Champion"), a subsidiary of CRL Industries, Inc., for approximately $23.7 million. Champion is located in Princeton, Illinois. The purchase price was allocated to assets and liabilities based on their respective fair values at the date of acquisition and resulted in cost in excess of net assets acquired of $17.8 million. On March 9, 1998, the Company purchased substantially all of the assets and assumed certain agreed upon liabilities of the Wittig Division of Mannesmann Demag A.G. for approximately $12.0 million. Wittig is located in Schophfeim, Germany. The purchase price was allocated to assets and liabilities based on their respective fair values at the date of acquisition and resulted in cost in excess of net assets acquired of $2.4 million. As a result of the stability of the product technology, markets and customers associated with these four acquisitions, the cost in excess of net assets acquired for each acquisition is being amortized over 40 years using the straight-line method. All acquisitions have been accounted for by the purchase method, and accordingly, the results of operations of Tamrotor, Geoquip, Champion and Wittig are included in the Company's Consolidated Statement of Operations from the dates of acquisition. Certain estimates of fair market value of assets received and liabilities assumed were made with adjustments to each separate company's historical financial statements. The estimates and adjustments for the acquisitions of Geoquip, Champion and Wittig have not been finalized. Note 3. Income Taxes. In the first six months of 1998 and 1997, the Company paid $11.3 million and $8.6 million, respectively, to the various taxing authorities and recognized $10.8 million and $8.2 million, respectively, in income tax expense. -7- 8 Note 4. Inventories.
June 30, December 31, 1998 1997 -------- ------------ Raw materials, including parts and subassemblies $ 57,365 $ 47,992 Work-in-process 12,137 9,667 Finished goods 15,445 11,003 Perishable tooling and supplies 2,571 2,571 -------- -------- 87,518 71,233 Excess of current standard costs over LIFO costs (12,036) (10,964) Allowance for obsolete and slow- moving inventory (12,865) (11,945) -------- -------- Inventories, net $ 62,617 $ 48,324 ======== ========
Note 5. Long-term Debt and Other Borrowing Arrangements. Long-term debt at June 30, 1998 consisted of certain notes and credit facilities due between 2000 and 2018. In September 1996, the Company entered into an unsecured senior note agreement for $35 million. This debt has a ten-year final, seven-year average maturity with principal payments beginning in 2000. In January 1998, the Company refinanced its existing bank debt with an unsecured five-year revolving loan. The total credit line available on the revolving loan is $125 million, of which $81 million remained available for additional borrowings or to issue as letters of credit at June 30, 1998. The revolving loan will mature on January 20, 2003. On April 23, 1998, the Fayette County Development Authority issued $9.5 million in Industrial Revenue Bonds, on behalf of the Company, to finance the cost of constructing and equipping the Company's new manufacturing facility in Peachtree City, Georgia. These variable rate bonds mature on March 1, 2018. Maturities of long-term debt for the five years subsequent to June 30, 1998 are $0.8 million for 1999; $0.6 million for 2000; $5.3 million for 2001; $5.1 million for 2002; and $49.1 million for 2003. Total interest expense during the first six months of 1998 and 1997 totaled $2.6 and $1.9 million, respectively. Interest paid for the first six months of 1998 totaled $2.5 million, while the interest paid for the first six months of 1997 was $2.0 million. Note 6. Earnings per share. The 1998 and 1997 basic earnings per share for the three month period ended June 30 were calculated based on 16,114,626 and 15,025,385 weighted average shares outstanding, respectively. The 1998 and 1997 basic earnings per share for the six month period ended June 30 were calculated based on 16,034,526 and 14,934,717 weighted average shares outstanding, respectively. The 1998 and 1997 diluted earnings per share for the three month period ended June 30 were calculated based on 16,708,154 and 15,799,083 weighted average shares outstanding. The 1998 and 1997 diluted earnings per share for the six month period ended June 30 were calculated based on 16,680,102 and 15,738,666 weighted average shares outstanding. -8- 9 Basic and diluted weighted average shares outstanding were adjusted for the stock split effected on December 29, 1997. The basic and diluted earnings per share were calculated in accordance with Statement of Financial Accounting Standards 128 ("SFAS 128"). Note 7. Interest Rate Swap Agreements. At June 30, 1998, the Company had an interest rate swap agreement with a commercial bank (the "Counter Party") outstanding, having a notional principal amount of $15 million. The swap provides a fixed interest rate of 6%. The interest rate swap terminated in November 1997, but was extended for one additional year at the option of the Counter Party. The Company is exposed to credit loss in the event of nonperformance by the Counter Party to the interest rate swap agreement. However, the Company does not anticipate such nonperformance. Note 8. Comprehensive Income. In June 1997, the Financial Accounting Standards Board (FASB) adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and disclosure of comprehensive income and its components. Effective January 1, 1998, the Company adopted SFAS No. 130. For the six months ended June 30, 1998 and 1997, comprehensive income was $17.3 million and $12.2 million, respectively. For the three months ended June 30, 1998 and 1997, comprehensive income was $9.2 million and $6.9 million, respectively. Items impacting the Company's comprehensive income, but not included in net income, consist of changes in cumulative translation adjustments and a foreign currency hedge in 1998. In 1997, the adjustment from net income to comprehensive income consists solely of changes in cumulative translation adjustments. The net impact of these items was minimal in each year. Note 9. New Accounting Standards. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability, measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999 and will be adopted at that time. The Company has reviewed its current derivative instruments and hedging activities and has determined that the adoption of SFAS No. 133 would not have a material impact on its financial statements as of June 30, 1998. -9- 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations. Revenues Revenues increased $57.8 million (43%) to $193.3 million for the six months ended June 30, 1998, compared to the same period of 1997. Incremental revenues from acquisitions completed since June 1997 contributed $42.5 million of this increase. Excluding acquisitions, revenues increased $15.3 million (11%) over the same period of 1997. See Note 2 to the Financial Statements contained in this document for further information on the Company's recent acquisitions. For the six months ended June 30, 1998, revenues for the Compressed Air Products segment increased $41.5 million (39%) to $148.1 million compared to the same period of 1997. Excluding acquisitions, which contributed $37.7 million, compressor products revenues increased $3.8 million (4%), primarily related to growth in the U.S. economy, increased shipments of engineered packages and penetration of niche markets such as field gas gathering. Petroleum Products segment revenues increased $16.3 million (56%) in the six months ended June 30, 1998, compared to the same period of 1997. An acquisition contributed $4.8 million of this increase. Excluding this acquisition, petroleum products revenues increased $11.5 million (40%), primarily as a result of growth in oil and gas well drilling and stimulation over the last eighteen months. The Company has been able to leverage its manufacturing operations and administrative expenses, and obtain significant price increases in the Petroleum Products segment as a result of the increased demand for petroleum products. For the three months ended June 30, 1998, revenues were $103.5 million, compared to $69.4 million in the same period of 1997. Approximately $26.5 million of this increase is attributable to incremental revenues from acquisitions which the Company has completed since June 1997. Excluding incremental revenues from acquisitions, revenues increased approximately $7.6 million (11%) for the quarter, compared to the same period of 1997. Revenues for the Compressed Air Products segment increased $23.9 million (44%) to $78.1 million for the quarter ended June 30, 1998, compared to $54.2 million for the same period of 1997 as a result of incremental revenues from acquisitions. Petroleum Products segment revenues increased 66% to $25.4 million for the quarter ended June 30, 1998, compared to the same period of 1997. Incremental revenues from acquisitions generated $2.5 million of the $10.1 million increase in petroleum products revenues. The remaining increase was primarily a result of increased drilling and stimulation activity over the last eighteen months. Compared to the first quarter of 1998, the Company's revenues increased $13.7 million in the three-month period ending June 30, 1998. Petroleum Products segment revenues increased $5.7 million (29%) in the second quarter of 1998, compared to the first quarter of 1998, primarily due to shipments of drilling pumps ordered in the fourth quarter of 1997. Revenues for the -10- 11 Compressed Air Products segment increased $8.0 million (12%), due primarily to incremental revenues from acquisitions. In general, demand for compressor products follows economic growth patterns as indicated by the rate of change in GDP and industrial production. In the U.S., orders for compressor products declined somewhat in the second quarter of 1998, compared to the same period of 1997 and to the first quarter of 1998, as a result of uncertainty concerning the economy's rate of growth. In Europe, demand for compressor products increased during the second quarter of 1998, as a result of improving economic conditions in this region. Demand for petroleum products correlates with the prices of oil and natural gas. Future increases in demand for these products is dependent upon further appreciation in oil and gas prices. Costs and Expenses Gross margins (defined as sales less cost of sales excluding depreciation and amortization) for the six month period of 1998 increased $18.5 million (41%) to $63.8 million from $45.3 million in the same period of 1997. Gross margin as a percentage of revenues decreased to 33.0% in the six month period of 1998 from 33.4% in the same period of 1997. Excluding the effect of the acquisitions, gross margin as a percentage of revenues increased to 33.7%. Increases in gross margin are primarily attributable to increased volume, with some improvement resulting from cost reduction efforts, such as manufacturing process improvements, and price increases for petroleum products which were implemented in 1997. For the second quarter of 1998, the gross margin increased $9.7 million (41%) to $33.4 million from $23.7 million in the same period of 1997. Gross margin as a percentage of revenues declined to 32.2% in the three month period of 1998 from 34.1% in the same period of 1997. Excluding the effect of the acquisitions, gross margin as a percentage of revenues decreased to 33.5% for the three month period of 1998. For the three month period, the decrease in gross margin as a percentage of revenues is primarily attributable to the Company incurring expenses related to a plant relocation, which is planned to occur in the fourth quarter of 1998 and an unfavorable mix of shipments compared to the same period of the previous year. Depreciation and amortization increased 37% to $6.1 million in the first six months of 1998, compared with $4.5 million for the same period of 1997. For the second quarter, depreciation and amortization increased 47% to $3.2 million, compared with $2.2 million for the same period of 1997. The increases in depreciation and amortization expense in both the six and three month periods, compared to the previous year, were due to the acquisitions and capital expenditures. Depreciation and amortization as a percentage of revenues was 3.2% and 3.1% for the respective three and six-month periods of 1998, which was relatively unchanged from the comparable periods of 1997. Selling and administrative expenses increased in the first six months of 1998 by 43% to $26.7 million from $18.7 million for the same period of 1997. Approximately $6.9 million of the $8.0 million increase is attributable to newly acquired operations. For the second quarter of 1998, selling and administrative expenses increased 48% to $13.7 million from $9.3 million in the same period of 1997, primarily due to newly acquired operations. As a percentage of revenues, selling -11- 12 and administrative expenses were 13.3% and 13.8% for the respective three and six-month periods of 1998, which was relatively unchanged from the comparable periods of 1997. As a result of the significant volume increases in petroleum product revenues, this business segment has leveraged its fixed and semi-fixed costs to generate improvements in operating margins (defined as revenues, less cost of sales, depreciation and amortization, and selling and administrative expenses excluding corporate administrative expenses). Significant price increases for this segment have also contributed to this improvement. For the second quarter of 1998, the Petroleum Products segment generated operating margins of 24.6%, compared to 21.6% for the same period of 1997. The Compressed Air Products segment generated operating margins of 13.7% for the second quarter of 1998, a decline from the 17.1% for the comparable three month period of 1997. This decline is primarily due to newly acquired operations which currently generate a lower operating margin (after amortization of goodwill associated with the acquisitions) than does the balance of the Company's existing operations. Excluding the incremental effect of acquisitions completed since June 1997 on the results of 1998, the operating margin for compressor products would have remained flat at 17.1%. Interest expense increased $0.7 million (34%) for the six month period of 1998 compared to the same period of 1997, due to incremental debt incurred for the acquisitions. The average interest rate for the six-month period of 1998 was 6.2% compared to 7.5% for the same period of 1997, primarily due to lower interest rates on incremental borrowings. During the second quarter of 1998, interest expense increased $0.5 million (48%) to $1.4 million compared to the same period in 1997 due to incremental debt incurred for acquisitions. See Note 5 to the Financial Statements contained in this document for further information on the Company's borrowing arrangements. Income before income taxes improved $7.8 million (38%) for the six months ended June 30, 1998, compared to the same period of 1997. Approximately $1.7 million of this increase is attributable to the acquisitions, net of interest expense on debt incurred to complete the acquisitions and the related amortization of goodwill. The remaining $6.1 million increase is primarily a result of incremental revenues, improved gross margin and lower interest expense (excluding debt related to acquisitions) in 1998 compared to the previous year. Income before income taxes improved $3.6 million (32%) for the second quarter of 1998, compared to the same period in 1997. Approximately $0.6 million of this increase is attributable to the acquisitions, net of interest expense on debt incurred to complete the acquisitions and the related amortization of goodwill. The remaining $3.0 million increase is attributable to incremental revenues and lower interest expense (excluding debt related to acquisitions). Compared to 1997, the provision for income taxes increased by $2.7 million to $10.8 million for the first six months of 1998 and by $1.2 million to $5.7 million for the second quarter of 1998, as a result of the increase in income before taxes. The Company's effective tax rate was 38.5% for the first six months of 1998, compared to 40.2% for the first six months of 1997; and 38.3% for the second quarter of 1998, compared to 39.6% for the second quarter of 1997. The lower effective rate in 1998 is due to the tax savings from the Foreign Sales Corporation (the "FSC"), the lower statutory tax rate in Finland compared to the U.S., and the implementation of other tax strategies, partly offset by an increase in nondeductible goodwill resulting from some of the acquisitions. -12- 13 Net income for the six months ended June 30, 1998 increased $5.1 million (42%) to $17.3 million ($1.04 diluted earnings per share), compared to $12.1 million ($0.77 diluted earnings per share) for the same period of 1997. Acquisitions provided $1.1 million ($0.07 diluted earnings per share) of the net income increase in the six month period of 1998. The remaining $4.0 million ($0.20 diluted earnings per share) increase is a result of revenue growth, price increases for petroleum products and leverage of manufacturing costs and administrative expenses as volume increased. Net income for the second quarter of 1998 increased $2.4 million (35%) to $9.2 million ($0.55 diluted earnings per share) from $6.8 million ($0.43 diluted earnings per share) for the same period in 1997. Net income for the second quarter of 1998 included approximately $0.5 million ($0.03 diluted earnings per share) in incremental income from acquisitions. Excluding the incremental income from acquisitions, net income increased $1.9 million (28%) for the quarter, a $0.09 diluted earnings per share improvement, for the reasons discussed previously. Liquidity and Capital Resources Operating Working Capital During the six months ended June 30, 1998, operating working capital (defined as receivables plus inventories, less accounts payable and accrued liabilities) increased $27.0 million to $79.2 million, with the acquisitions causing $12.9 million of this increase. The remaining increase in operating working capital was due to an increase in inventory and receivables. Receivables increased $24.2 million since the end of 1997, of which $12.1 million was due to acquisitions. The remaining increase in receivables was due to higher revenues in 1998 compared to 1997, the timing of the sales within the second quarter of 1998, and a delay in payments by a key customer which should be resolved prior to December 31, 1998. Inventories increased $14.3 million to $62.6 million at June 30, 1998, compared to December 31, 1997. The acquisitions generated $13.0 million of this increase. The remaining increase in inventories was due to longer lead times on purchased material requiring higher levels of safety stock. The $11.4 million increase in accounts payable and accrued liabilities is primarily attributable to the acquisitions. Cash Flows During the six months of 1998, the Company generated cash flows from operations totaling $10.1 million, a decrease of $1.2 million (11%) compared to the same period in 1997. This decrease was primarily the result of the increase in receivables, as discussed previously. The increase in receivables and inventories was partially offset by higher net income. During this six month period, the Company borrowed $18.0 million under a new revolving credit facility and utilized the funds to repay all outstanding commitments under its previous credit facility. The Company also borrowed $40.0 million to finance the purchase of acquisitions, and issued $10.5 million of stock to fund the balance of the purchase price for Geoquip. In April of 1998, the Fayette County Development Authority issued $9.5 million in Industrial Revenue Bonds on the Company's behalf to finance the construction of the Peachtree City, Georgia facility, as discussed below. The remaining cash flows enabled the Company to expend $6.3 million on capital expenditures and -13- 14 repay $28.9 million of long-term debt, resulting in an increase in the cash balance of $2.7 million as of June 30, 1998. Capital Expenditures and Commitments Capital projects to increase operating efficiency and flexibility, expand production capacity and product quality resulted in expenditures of $6.3 million in the first six months of 1998. This was $3.8 million higher than the level of capital expenditures in the comparable period in 1997. Most of the increase was due to expenditures made for production equipment and construction of the new manufacturing facility in Peachtree City, Georgia. Commitments for capital expenditures at June 30, 1998 totaled $11.3 million. Management expects additional capital authorizations to be committed during the remainder of the year and that capital expenditures for 1998 will approximate $18 to $21 million, primarily due to the construction of the new facility in Georgia, expenditures made at newly acquired facilities and expenditures for capacity expansion and cost reductions at other operations. In 1997 the Company announced that it will close its blower manufacturing plant in Syracuse, New York, and consolidate operations at its new site in Georgia. The new plant should be operating by the fourth quarter of 1998, at which time the Syracuse plant will be shut down. The Company expects to spend approximately $7.0 million in capital for the facility. Impact of the Year 2000 Issue The "Year 2000 Issue" is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or statements, perform material requirements planning or engage in similar normal business activities. The Company believes the 1997 implementation of its integrated management information system addresses the Year 2000 Issue for the programs replaced with the new system. The Company has completed its assessment of the impact of the Year 2000 Issue on other parts of its business, including embedded systems not involving information technology. The Company expects to implement the remaining upgrades necessary to address the Year 2000 Issue by the first quarter of 1999 without a material impact on the results of operations. These upgrades include significant enhancements other than addressing the Year 2000 Issue. The Company is communicating with its significant suppliers and large customers to determine the extent to which the Company would be vulnerable to those third parties' failure to remediate their own Year 2000 Issue. The Company also plans to perform on-site review of critical suppliers and is considering contingency plans, if needed. The success of the Company's suppliers and customers in remediating their respective Year 2000 Issue is not within the Company's control, -14- 15 but the Company does not currently expect that its operations will be materially impacted by the Year 2000 Issue due to its suppliers or customers. Cautionary Statements Regarding Forward-Looking Statements This Management's Discussion and Analysis contains forward-looking statements within the meaning of the federal securities laws. 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 the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. Such factors could include among others; the speed with which the Company is able to integrate its recent acquisitions; the level of oil and gas drilling and production, which affects demand for the Company's petroleum products; pricing of Gardner Denver's products; changes in the general level of industrial production and industrial capacity utilization rates in the United States and the rate of economic growth in Europe, which affect demand for the Company's compressor products; the degree to which the Company is able to penetrate niche markets; and the extent to which the Company is able to operate without disruption due to the Year 2000 Issue. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. - --------------- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders (the "Annual Meeting") was held pursuant to notice on May 5, 1998. At the Annual Meeting, Frank J. Hansen and Thomas M. McKenna were elected to serve as directors for a three-year term expiring in 2001. There were 14,288,068 affirmative votes cast and 72,379 votes withheld concerning Mr. Hansen's election as a director, and 14,268,251 affirmative votes cast and 92,196 votes withheld concerning Mr. McKenna's election as a director. At the Annual Meeting, the Company's stockholders approved an amendment to the Company's Articles of Incorporation, changing the corporate name to "Gardner Denver, Inc." There were 14,288,904 affirmative votes cast, 15,241 votes cast against and 116,302 abstaining votes concerning this amendment. -15- 16 Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: 3.1 Certificate of Incorporation of Gardner Denver, Inc. as amended on May 5, 1998. 3.2 ByLaws of Gardner Denver, Inc. as amended on May 5, 1998. 11.1 Computation of earnings per share for the three months ended June 30, 1998 and June 30, 1997. 11.2 Computation of earnings per share for the six months ended June 30, 1998 and June 30, 1997. 27.0 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 30, 1998. -16- 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GARDNER DENVER, INC. Date: August 13, 1998 By: /s/Ross J. Centanni ----------------------------------------- Ross J. Centanni President and Chief Executive Officer Date: August 13, 1998 By: /s/Philip R. Roth ----------------------------------------- Philip R. Roth Vice President, Finance and Chief Financial Officer -17- 18 GARDNER DENVER, INC. Exhibit Index
Exhibit No. Description 3.1 Certificate of Incorporation of Gardner Denver, Inc. as amended on May 5, 1998. 3.2 ByLaws of Gardner Denver, Inc. as amended on May 5, 1998. 11.1 Computation of earnings per share for the three months ended June 30, 1998 and June 30, 1997. 11.2 Computation of earnings per share for the six months ended June 30, 1998 and June 30, 1997. 27.0 Financial Data Schedule.
EX-3.1 2 CERTIFICATE OF INCORPORATION 1 CERTIFICATE OF INCORPORATION OF GARDNER DENVER, INC. ARTICLE I Name ---- Section 1.01 Name. The name of the corporation is Gardner Denver, Inc. ---- (the "Corporation"). ARTICLE II Registered Office and Registered Agent -------------------------------------- Section 2.01 Registered Office and Agent. The address of the --------------------------- Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III Purpose ------- Section 3.01 Purpose. The nature of the business or purposes to be ------- conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV Terms of Shares --------------- Section 4.01 Amount Authorized. The total number of shares of stock which ----------------- the Corporation shall have authority to issue is sixty million (60,000,000), of which ten million (10,000,000) shares shall be preferred stock, par value $.01 per share ("Preferred Stock"), and fifty million (50,000,000) shares shall be common stock, par value $.01 per share ("Common Stock"). Shares of any class of stock of the Corporation may be issued for such consideration and for such corporate purposes as the Board of Directors of the Corporation may from time to time determine. Section 4.02 Preferred Stock. The Preferred Stock may be issued from time --------------- to time in one or more series, each such series to have distinctive designations. The powers, preferences and rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. The Board of Directors hereby is -1- 2 expressly granted authority to cause the Preferred Stock to be issued in one or more series and with respect to each such series prior to the issuance thereof to fix by resolution the following: (a) the designation of the series, which may be by distinguishing number, letter or title; (b) the number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease (but not below the number of shares thereof then outstanding); (c) the voting powers of the shares, which may be full or limited, or may be without voting power; (d) the dividend rights of the series, if any, including without limitation, the dividend rates, the dividend payment dates, whether dividends will be cumulative, any conditions for payment and any payment preferences in relation to the dividends payable on any other class or classes or series of stock; (e) the redemption rights, if any, and the price or prices for the shares of the series; (f) sinking fund requirements, if any, for the purchase or redemption of shares of the series; (g) rights upon the liquidation, dissolution or winding up of the Corporation or upon the distribution of the assets of the Corporation; (h) whether the shares shall be convertible into shares of any other class or classes or any other series of the same or any other class or classes of stock, and if so, the conversion price, any adjustments thereof, and all other terms and conditions upon which such conversion may be made; (i) the benefit of any conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on and the purchase, redemption or other acquisition by the Corporation or any subsidiary of any outstanding stock of the Corporation; and (j) such other powers, preferences, and rights, and such other qualifications, limitations or restrictions as the Board of Directors shall determine; all as shall be stated in the resolution or resolutions of the Board of Directors providing for the issue of such Preferred Stock. -2- 3 The relative powers, preferences and rights of each series of Preferred Stock in relation to the powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in this Section 4.02, and the consent, by class or series vote or otherwise, of the holders of Preferred Stock of such of the series of the Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences, and rights of such outstanding series, or any of them, unless and to the extent that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of the holders of a majority (or such other proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance Of any or all other series of Preferred Stock. Shares of any series of Preferred Stock that (i) have been redeemed by the Corporation in accordance with the express terms thereof, (ii) are purchased in satisfaction of any sinking fund requirements provided for shares of such series or (iii) are converted in accordance with the express terms thereof shall be cancelled and not reissued. Any shares of Preferred Stock otherwise acquired by the Corporation shall resume the status of authorized and unissued shares of Preferred Stock without series designation. Section 4.03 Dividends. Subject to the preferential rights, if any, of the --------- holders of Preferred Stock, the holders of Common Stock shall be entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors from funds legally available therefor. Section 4.04 Liquidation, Dissolution, Winding Up. After distribution in ------------------------------------ full of the preferential amount, if any, to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of the Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders, ratably in proportion to the number of shares of the Common Stock held by each. Section 4.05 Voting. Except as may otherwise be required by law, this ------ Certificate of Incorporation or, in the case of Preferred Stock, the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to Section 4.02 of this Article IV, each holder of Preferred Stock and each holder of Common Stock shall have one vote in respect of each share of Preferred Stock and each share of Common Stock held by such holder on each matter voted upon by the stockholders. Section 4.06 No Cumulative Voting. Cumulative voting of shares is -------------------- prohibited. Section 4.07 No Preemptive Rights. No holder of shares of any class of -------------------- stock of the Corporation shall, as such holder, have any preemptive right to purchase shares of any class of stock of the Corporation or shares or other securities convertible into or exchangeable for or carrying rights or options to purchase shares of any class of stock of the Corporation, whether such class of stock, -3- 4 shares or other securities are now or hereafter authorized, which at any time may be proposed to be issued by the Corporation or subjected to rights or options to purchase granted by the Corporation. ARTICLE V Meetings -------- Section 5.01 No Written Consents. No action required to be taken or that ------------------- may be taken at an annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. ARTICLE VI Board of Directors ------------------ Section 6.01 Removal. Notwithstanding any other provisions of this ------- Certificate of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the bylaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time, but only for cause. ARTICLE VII Amendment of Bylaw ------------------ Section 7.01 Amendment of By-laws. In furtherance and not in limitation -------------------- of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the Corporation. ARTICLE VIII Indemnification and Limitation of Liability ------------------------------------------- Section 8.01 Limitation of Liability. No director of the Corporation ----------------------- shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except that the foregoing provision shall not eliminate or limit the liability of a director (i) for any breach of such director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Title 8, Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which such director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation on personal liability of directors, then the liability of a director of the Corporation, in -4- 5 addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Section 8.02 Indemnification. Any person who was or is made a party or is --------------- threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Corporation) (hereinafter a "proceeding"), by reason of the fact that he is or was a Director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him or her in connection therewith; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) that was initiated by such person only if such proceeding (or part thereof) was authorized or ratified by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 8.02 shall be a contract right. For purposes of this Section 8.02, reference to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued would have had power and authority to indemnify its directors and officers so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section 8.02, with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 8.03 Payment of Expenses in Advance. Expenses (including ------------------------------ attorneys' fees) incurred by an officer or director in defending an action, suit or proceeding referred to in Section 8.02 above may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or an behalf of the director or officer to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation as authorized in Section 8.02. Section 8.04 Indemnification Not Exclusive. The indemnification provided ----------------------------- under Section 8.02 shall not be deemed exclusive of (i) any other rights to which those seeking indemnification may be entitled under any bylaw, any agreement, any insurance purchased by the Corporation, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office or (ii) the power of the Corporation to indemnify any person who is or was an employee or agent of the Corporation or of another corporation, joint venture, trust or other enterprise that he or she is serving or has -5- 6 served at the request of the Corporation, to the same extent and in the same situations and subject to the same determinations with respect to directors and officers. The indemnification provided by Section 8.02 shall continue as to any person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. Section 8.05 Other. Any repeal or modification of this Article VIII by the ----- stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation or the Indemnification of any officer or director of the Corporation existing at the time of such repeal or modification. ARTICLE IX Amendment of Certificate of Incorporation ----------------------------------------- Section 9.01 Amendment of Certificate of Incorporation. Notwithstanding ----------------------------------------- anything contained in this Certificate of Incorporation or the bylaws of the Corporation to the contrary (and notwithstanding that a lesser percentage may be specified by law), the affirmative vote of the holders of at least 80% of the voting power of all of the securities of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles V and VI hereof. ARTICLE X Incorporator ------------ Section 10.01 Name and Mailing Address. The name and the mailing address ------------------------ of the incorporator is: Lisa Rush 811 Dallas Avenue Houston, Texas 77002 ARTICLE XI Initial Board of Directors -------------------------- Section 11.01 Initial Board. The name and mailing address of the persons ------------- who shall serve as directors of the Corporation until the first annual meeting of stockholders or until their successors are elected and qualify are:
Name Address ---- ------- Alan E. Riedel 1001 Fannin Street Suite 4000 Houston, Texas 77002 Michael J. Sebastian 1001 Fannin Street Suite 4000 Houston, Texas 77002 Ross J. Centanni 1800 Gardner Expressway Quincy, Illinois 62305 -6-
EX-3.2 3 BYLAWS 1 GARDNER DENVER, INC. BYLAWS ARTICLE I OFFICES ------- Section 1.1. Registered Office. The registered office of the Corporation ----------------- shall be at such place in the City of Wilmington, County of New Castle, State of Delaware as the Board of Directors shall from time to time designate. Section 1.2. Other Offices. The Corporation also may have offices at such ------------- other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ Section 2.1. Annual Meeting. The annual meeting of the stockholders of -------------- the Corporation shall be held on a date determined by the Board of Directors. The business to be transacted at the meeting shall be the election of directors and any other proper business as may be brought before the meeting. Section 2.2. Special Meetings. Special meetings of the stockholders, for ---------------- any purpose or purposes, unless otherwise prescribed by statute, shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote at such meeting. Such request shall state the purpose or purposes of the proposed meeting. Section 2.3. Time and Place of Meetings. All meetings of the stockholders -------------------------- shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware, and at such time as may be fixed by the Board of Directors and as specified in the notice of meeting. Section 2.4. Notice of Meetings. Written notice of each annual or special ------------------ meeting of the stockholders, stating the time, date, hour, place and, with respect to any special meeting, the purpose or purposes thereof, shall be given to each stockholder of record as of the applicable record date who is entitled to vote thereat, by mailing the same, postage prepaid, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to his or her address as it appears on the records of the Corporation. -1- 2 Section 2.5. Waiver of Notice. Notice of any stockholders' meeting may be ---------------- waived in writing by any stockholder either before or after such meeting, and the attendance of any stockholder at any meeting without protesting, prior to or at the commencement of the meeting, shall be deemed to be a waiver by such stockholder of notice of such meeting. Section 2.6. Quorum. Except as otherwise provided by statute, the ------ certificate of incorporation or these bylaws, the holders of a majority of the capital stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. At any meeting, whether a quorum is present or not, the holders of a majority of the voting shares represented in person or by proxy may adjourn from time to time, without notice other than by announcement at the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. Section 2.7. Voting. When a quorum is present at any meeting, the vote of ------ the holders of a majority of the capital stock of the Corporation having voting power present in person or by proxy shall decide any question brought before such meeting, except that if the question is one upon which a different vote is required by statute, the certificate of incorporation or these bylaws, then in such case the terms of the statute, the certificate of incorporation or these bylaws shall govern and control the decision of such question. Every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by instrument in writing subscribed by such stockholder, bearing a date not more than three years prior to voting, unless such instrument provides for a longer period, and filed with the Secretary of the Corporation before, or at the time of, the meeting. Section 2.8. Director Nominations and Other Business. Subject to any rights --------------------------------------- of holders of shares of the Preferred Stock of the Corporation, nominations for the election of directors shall be made by the Board of Directors or by any stockholder entitled to vote in elections of directors. However, any stockholder entitled to vote in election of directors may nominate one or more persons for election as director only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States registered or certified mail, postage prepaid, to the Secretary of the Corporation not less than sixty (60) nor more than ninety (90) days prior to meeting of the stockholders called for the election of directors; provided however, that in the event that less than seventy (70) days' notice of the date of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the meeting was mailed to stockholders or public disclosure of the date of the meeting was made, whichever occurs first. Each notice shall set forth (i) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated, (ii) a representation that the stockholder is a holder of record of shares of capital stock of the Corporation entitled to vote at such meeting and intends to appear in person or by -2- 3 proxy at the meeting to nominate the person or persons specified in the notice, (iii) a description of all arrangements, understandings or relationships between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder and (iv) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors, and shall include a consent signed by each such nominee to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given notice thereof in writing to the Secretary of the Corporation either by personal delivery or by United States registered or certified mail, postage prepaid, not less than sixty (60) nor more than ninety (90) days prior to the date of such meeting. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting, including the complete text of any resolutions to be presented at the meeting, with respect to such business, and the reasons for conducting such business at the meeting, (ii) the name and address of record of the stockholder proposing such business, (iii) the class and number of shares of capital stock of the Corporation that are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. In the event that a stockholder attempts to bring business before an annual meeting without complying with the foregoing procedure, the chairman of the meeting may declare to the meeting that the business was not properly brought before the meeting and, if he shall so declare, such business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.8, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations thereunder with respect to the matters set forth in this Section 2.8. Nothing in this Section 2.8 shall be deemed to affect any rights of stockholders to request inclusion of a proposal in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any similar provision). ARTICLE III BOARD OF DIRECTORS ------------------ Section 3.1. Number; Election; Term. The number of directors which shall ---------------------- constitute the whole board shall be not less than three (3) nor more than nine (9), and the number of directors shall be determined from time to time by a majority vote of the directors in office. No reduction in the number of directors shall have the effect of shortening the term of any incumbent director and when so fixed such number shall continue to be the authorized number of directors until changed by the Board of Directors by vote as aforesaid. The directors shall be divided into three (3) classes, Class I, Class II and Class III, each class to be as nearly equal in number as possible. The -3- 4 term of office of each director shall be until the third annual meeting following his election and until the election and qualification of his successor; provided, however, that the directors first serving as Class I directors shall serve for a term expiring at the annual meeting next following December 31, 1994, the directors first serving as Class II directors shall serve for a term expiring at the second annual meeting next following December 31, 1994, and the directors first serving as Class III directors shall serve for a term expiring at the third annual meeting next following December 31, 1994. Subject to any rights of holders of Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, removal from office or any other cause, shall be filled solely by the Board of Directors, acting by not less than a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and not by the stockholders. Section 3.2. Powers of the Board. The business of the Corporation shall be ------------------- managed by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done exclusively by the stockholders. Section 3.3. Quorum. A majority of the Board of Directors shall constitute ------ a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as otherwise specifically provided by statute, by the certificate of incorporation or by these bylaws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.4. Regular Meetings. A regular meeting of the Board of Directors ---------------- shall be held each year, without other notice than this bylaw, at the place of, and immediately following, the annual meeting of stockholders; other regular meetings of the Board of Directors shall be held at such times and places within or without the State of Delaware as may be determined by the Board by resolution, without other notice than such resolution. Section 3.5. Special Meetings. Special meetings of the Board of Directors ---------------- may be held at any time within or without the State of Delaware upon call by the Chairman of the Board or the President. Notice of such meeting shall be given to each director either by letter, telefax, telegram or in person not less than two (2) days prior to such meeting. Special meetings of the Board of Directors shall be called by the President or Secretary in like manner and on like notice on the written request of at least two (2) directors. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice of the meeting, except that notice shall be given of any proposed amendment to the bylaws if it is to be adopted at the special Meeting or with respect to any other matter where notice is required by statute. Section 3.6. Waiver of Notice. Notice of any meeting of the Board of ---------------- Directors may be waived in writing by any director either before or after such meeting, and the attendance of any director at -4- 5 any meeting without protesting, prior to or at the commencement of the meeting, shall be deemed to be a waiver by him or her of notice of such meeting. Section 3.7. Directors' Consent. Unless otherwise restricted by the ------------------ certificate of incorporation or by these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or such committee. Section 3.8. Telephonic Participation at Meetings. Unless otherwise ------------------------------------ restricted by the certificate of incorporation or by these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 3.9. Committees. The Board of Directors may, by resolution passed ---------- by a majority of the whole board, designate one or more committees, including if they shall so determine, an Executive Committee, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolutions of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power Or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Corporation Law fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the bylaws of the Corporation; and, unless the resolution, these bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power of authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required or requested. -5- 6 Section 3.10. Compensation. The Board of Directors is authorized to fix a ------------ reasonable compensation for directors and to provide a fee and reimbursement of expenses for attendance at any meeting of the directors to be paid to each director who is not otherwise a salaried officer or employee of the Corporation or any of its wholly-owned subsidiaries. Members of committees may be allowed like compensation for attending committee meetings. ARTICLE IV OFFICERS -------- Section 4.1. Officers Designated. The Board of Directors shall elect a ------------------- President, Treasurer and a Secretary, and in its discretion a Chairman of the Board, one or more Vice Presidents, an Assistant Secretary, an Assistant Treasurer, and such other officers as the directors may see fit. The Chairman of the Board, if any, shall be chosen from among the directors. Any two or more offices, other than that of President and Vice President, or Secretary and Assistant Secretary, or Treasurer and Assistant Treasurer, may be held simultaneously by the same person, but no officer shall execute, acknowledge, verify, or countersign on behalf of the Corporation any instrument in more than one capacity. Section 4.2. Tenure of Office. The officers of the Corporation shall be ---------------- elected annually by the Board of Directors at its first regular meeting held after the annual meeting of stockholders or as soon thereafter as conveniently possible. Each officer shall hold office until his successor is chosen and qualified, except in case of resignation, death or removal. Any officer may be removed at any time with or without cause by the affirmative vote of a majority of the Board of Directors, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. A vacancy in any office, however created, may be filled by the Board of Directors. Section 4.3. Chairman of the Board of Directors. The Chairman of the Board ---------------------------------- of Directors, if any, shall have such powers and duties as generally appertain to that office and as may be prescribed by the Board of Directors. Section 4.4. President. The President shall in general supervise and --------- control the business and affairs of the Corporation and have such powers and duties as generally appertain to that office and as may be prescribed by the Board of Directors. Section 4.5. Vice Presidents. The Vice Presidents, if any, in the order --------------- designated by the Board of Directors, shall perform the duties of the President in case of the absence or disability of the latter, or when circumstances prevent the latter from acting, together with such other duties as the Board of Directors may prescribe. In case the President and such Vice Presidents are absent or unable to perform their duties, the Board of Directors may appoint a President pro tempore. Section 4.6. Secretary. The Secretary shall keep the minutes of all --------- meetings of the stockholders and the Board of Directors. The Secretary shall keep such books as may be required by the Board of Directors, shall have charge of the seal, minute books and stock books of the Corporation, and shall give all notices of meetings of the stockholders and of the directors, and shall have such -6- 7 other powers and duties as generally appertain to that office and as the Board of Directors may prescribe. Section 4.7. Assistant Secretary. The Assistant Secretary, if any, shall ------------------- perform the duties of the Secretary in case of the absence or disability of the latter, or when circumstances prevent the latter from acting, together with such other duties as the Board of Directors may prescribe. Section 4.8. Treasurer. The Treasurer shall receive and have in his charge --------- all money, bills, notes, bonds, shares in other corporations and similar property belonging to the Corporation, and shall do with the same as may be ordered by the Board of Directors. The Treasurer shall formulate and administer credit and collection policies and procedures, and shall represent the Corporation in its relations with banks and other financial institutions, subject to instructions from the Board of Directors, and shall have such other powers and duties as generally appertain to that office and as the Board of Directors may prescribe. Section 4.9. Assistant Treasurer. The Assistant Treasurer, if any, shall ------------------- perform the duties of the Treasurer in case of the absence or disability of the latter, or when circumstances prevent the latter from acting, together with such other duties as the Board of Directors may prescribe. Section 4.10. Other Officers. The other officers, if any, shall have such -------------- powers and duties as the Board of Directors may prescribe. Section 4.11. Change in Power and Duties of Officers. Anything in this -------------------------------------- Article IV to the contrary notwithstanding, the Board of Directors may, from time to time, increase or reduce the powers and duties of the respective officers of the Corporation whether or not the same are set forth in these bylaws and may permanently or temporarily delegate the duties of any officer to any other officer, agent or employee and may generally control the action of the officers and require performance of all duties imposed upon them. Section 4.12. Compensation. The Board of Directors is authorized to ------------ determine or to provide the method of determining the compensation of officers. Section 4.13. Bond. Any officer, if required by the Board of Directors, ---- shall give bond for the faithful performance of his duties. Any surety on such bond shall be at the expense of the Corporation. Section 4.14. Signing Checks and Other Instruments. The Board of Directors ------------------------------------ is authorized to determine or provide the method of determining how checks, notes, bills of exchange and similar instruments shall be signed, countersigned or endorsed. Section 4.15. Authority to Transfer and Vote Securities. The Chairman of ----------------------------------------- the Board, if any, the President, the Secretary or the Treasurer of the Corporation are each authorized to sign the name of the Corporation and to perform all acts necessary to effect a transfer of any shares, bonds, or other evidences of indebtedness or obligations, subscription rights, warrants and other securities of another corporation owned by the Corporation and to issue the necessary powers of attorney -7- 8 for the same; and each such officer is authorized on behalf of the Corporation to vote such securities, to appoint proxies with respect thereto, and to execute consents, waivers and releases with respect thereto, or to cause any such action to be taken. ARTICLE V ISSUE AND TRANSFER OF STOCK --------------------------- Section 5.1. Certificates. Each stockholder of the Corporation shall be ------------ entitled to a certificate or certificates showing the number of shares of stock registered in his name on the books of the Corporation. The certificates shall be in such form as may be determined by the Board of Directors, shall be issued in numerical order and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and Rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class of stock; provided that, except as otherwise provided by statute, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and rights. Section 5.2. Facsimile Signatures. Any of or all the signatures on a -------------------- certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 5.3. Lost Certificates. The Board of Directors may direct a new ----------------- certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed. -8- 9 Section 5.4. Transfer of Stock. Upon surrender to the Corporation or the ----------------- transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 5.5. Fixing Record Date. In order that the Corporation may ------------------ determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect to any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.6. Registered Stockholders. The Corporation shall be entitled to ----------------------- treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claims to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VI GENERAL PROVISIONS ------------------ Section 6.1. Dividends. Dividends upon the capital stock of the --------- Corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to applicable law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 6.2. Seal. The corporate seal shall have inscribed thereon the ---- name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE VII AMENDMENTS ---------- Section 7.1. Amendment. These bylaws may be altered, amended or repealed, --------- in whole or in part, by The affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power of the Corporation with respect thereto at an annual or special meeting called for such purpose, except that, notwithstanding any other provisions of these bylaws or any -9- 10 provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of stock required by law or these bylaws, the affirmative vote of at least 80% of the Corporation's voting power shall be required to alter, amend or repeal Section 2.2, Section 3.1 or Section 7.1 of these bylaws. These bylaws also may be altered, amended or repealed at any regular meeting of the Board of Directors without prior notice, or at any special meeting of the Board of Directors if notice of such alteration, amendment or repeal is contained in the notice of such special meeting; provided that any bylaw adopted by the Board of Directors may be altered, amended or repealed by the stockholders in the manner set forth above. -10- EX-11.1 4 COMPUTATION OF EARNINGS 1 Exhibit 11.1 COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts)
Three Months Ended June 30, ---------------------- 1998 1997 ------- ------- Basic EPS: Net income $ 9,200 $ 6,813 ======= ======= Shares Weighted average number of common shares outstanding 16,115 15,025 ======= ======= Basic earnings per common share $ 0.57 $ 0.45 ======= ======= Diluted EPS: Net income $ 9,200 $ 6,813 ======= ======= Shares Weighted average number of common shares outstanding 16,115 15,025 Assuming conversion of options issued and outstanding 593 774 ------- ------- Weighted average number of common shares outstanding, as adjusted 16,708 15,799 ======= ======= Diluted earnings per common share $ 0.55 $ 0.43 ======= ======= This calculation is submitted in accordance with SFAS 128, "Earnings Per Share," which requires disclosure of the calculation of basic and diluted earnings per share.
EX-11.2 5 COMPUTATION OF EARNINGS 1 Exhibit 11.2 COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts)
Six Months Ended June 30, ---------------------- 1998 1997 ------- ------- Basic EPS: Net income $17,281 $12,137 ======= ======= Shares Weighted average number of common shares outstanding 16,035 14,935 ======= ======= Basic earnings per common share $ 1.08 $ 0.81 ======= ======= Diluted EPS: Net income $17,281 $12,137 ======= ======= Shares Weighted average number of common shares outstanding 16,035 14,935 Assuming conversion of options issued and outstanding 645 804 ------- ------- Weighted average number of common shares outstanding, as adjusted 16,680 15,739 ======= ======= Diluted earnings per common share $ 1.04 $ 0.77 ======= ======= This calculation is submitted in accordance with SFAS 128, "Earnings Per Share," which requires disclosure of the calculation of basic and diluted earnings per share.
EX-27 6 ARTICLE 5 FDS
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF GARDNER DENVER, INC. FOR THE YEAR-TO-DATE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 11,546 0 88,943 (3,432) 62,617 167,886 152,816 (102,919) 348,779 70,722 90,340 161 0 0 132,419 348,779 192,457 193,301 129,356 129,529 173 122 2,639 28,121 10,840 17,281 0 0 0 17,281 1.08 1.04
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