10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-13215

GARDNER DENVER, 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 62305
(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 requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 52,304,074 shares of Common Stock, par value $0.01 per share, as of July 30, 2010.

GARDNER DENVER, INC.
Table of Contents

	Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Statements of Operations		3
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Cash Flows		5
Notes to Condensed Consolidated Financial Statements		6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3 Quantitative and Qualitative Disclosures About Market Risk		47
Item 4 Controls and Procedures		48
PART II OTHER INFORMATION
Item 1 Legal Proceedings		50
Item 1A Risk Factors		50
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		50
Item 6 Exhibits		50
SIGNATURES		51
INDEX TO EXHIBITS		52
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

GARDNER DENVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Revenues	$	449,519		$	436,049		$	871,683		$	898,529
Cost of sales		297,919			305,513			586,276			627,382
Gross profit		151,600			130,536			285,407			271,147
Selling and administrative expenses		91,745			87,170			179,439			181,753
Other operating expense, net		3,268			20,379			1,917			28,555
Impairment charges		—			(3,935	)		—			261,065
Operating income (loss)		56,587			26,922			104,051			(200,226	)
Interest expense		6,062			6,611			12,178			14,268
Other income, net		(2	)		(1,243	)		(637	)		(1,431	)
Income (loss) before income taxes		50,527			21,554			92,510			(213,063	)
Provision for income taxes		12,603			(6,493	)		22,333			7,362
Net income (loss)		37,924			28,047			70,177			(220,425	)
Less: Net income attributable to noncontrolling interests		590			648			885			1,345
Net income (loss) attributable to Gardner Denver	$	37,334		$	27,399		$	69,292		$	(221,770	)
Net earnings (loss) per share attributable to Gardner Denver common stockholders
Basic earnings (loss) per share	$	0.71		$	0.53		$	1.33		$	(4.28	)
Diluted earnings (loss) per share	$	0.71		$	0.53		$	1.31		$	(4.28	)
Cash dividends declared per common share	$	0.05		$	—		$	0.10		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)

	June 30,			December 31,
	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	111,138		$	109,736
Accounts receivable (net of allowance of $11,334 at June 30, 2010 and $10,690 at December 31, 2009)		342,750			326,234
Inventories, net		220,080			226,453
Deferred income taxes		29,291			30,603
Other current assets		19,813			25,485
Total current assets		723,072			718,511
Property, plant and equipment (net of accumulated depreciation of $317,547 at June 30, 2010 and $320,635 at December 31, 2009)		270,658			306,235
Goodwill		542,937			578,014
Other intangibles, net		273,821			314,410
Other assets		22,130			21,878
Total assets	$	1,832,618		$	1,939,048
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	34,797		$	33,581
Accounts payable		106,550			94,887
Accrued liabilities		168,838			195,062
Total current liabilities		310,185			323,530
Long-term debt, less current maturities		278,986			330,935
Postretirement benefits other than pensions		15,033			15,269
Deferred income taxes		55,768			67,799
Other liabilities		124,487			137,506
Total liabilities		784,459			875,039
Stockholders’ equity:
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,248,495 and 52,191,675 shares outstanding at June 30, 2010 and December 31, 2009, respectively		591			586
Capital in excess of par value		575,374			558,733
Retained earnings		607,294			543,272
Accumulated other comprehensive income		4,781			82,514
Treasury stock at cost; 6,829,526 and 6,438,993 shares at June 30, 2010 and December 31, 2009, respectively		(150,800	)		(132,935	)
Total Gardner Denver stockholders’ equity		1,037,240			1,052,170
Noncontrolling interests		10,919			11,839
Total stockholders’ equity		1,048,159			1,064,009
Total liabilities and stockholders’ equity	$	1,832,618		$	1,939,048

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2010			2009
Cash Flows From Operating Activities
Net income (loss)	$	70,177		$	(220,425	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		30,348			34,925
Impairment charges		—			261,065
Foreign currency transaction (gain) loss, net		(628	)		1,562
Net loss on asset dispositions		629			124
Stock issued for employee benefit plans		1,863			2,198
Stock-based compensation expense		3,022			1,954
Excess tax benefits from stock-based compensation		(1,903	)		(88	)
Deferred income taxes		(4,754	)		(766	)
Changes in assets and liabilities:
Receivables		(36,234	)		52,503
Inventories		(10,762	)		39,583
Accounts payable and accrued liabilities		6,629			(73,481	)
Other assets and liabilities, net		9,230			(6,144	)
Net cash provided by operating activities		67,617			93,010
Cash Flows From Investing Activities
Capital expenditures		(12,338	)		(28,104	)
Disposals of property, plant and equipment		1,154			589
Other, net		(8	)		(19	)
Net cash used in investing activities		(11,192	)		(27,534	)
Cash Flows From Financing Activities
Principal payments on short-term borrowings		(11,804	)		(21,613	)
Proceeds from short-term borrowings		12,984			14,220
Principal payments on long-term debt		(43,410	)		(95,416	)
Proceeds from long-term debt		8,016			31,366
Proceeds from stock option exercises		9,712			583
Excess tax benefits from stock-based compensation		1,903			88
Purchase of treasury stock		(17,864	)		(285	)
Cash dividends paid		(5,246	)		—
Other		(996	)		(847	)
Net cash used in financing activities		(46,705	)		(71,904	)
Effect of exchange rate changes on cash and cash equivalents		(8,318	)		6,177
Net increase (decrease) in cash and cash equivalents		1,402			(251	)
Cash and cash equivalents, beginning of year		109,736			120,735
Cash and cash equivalents, end of period	$	111,138		$	120,484

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts and amounts described in millions)

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying condensed consolidated financial statements include the accounts of Gardner Denver, Inc. and its majority-owned subsidiaries (collectively referred to herein as “Gardner Denver” or the “Company”). In consolidation, all significant intercompany transactions and accounts have been eliminated.

     The Condensed Consolidated Statements of Operations and Cash Flows and all segment information for the three and six-month periods ended June 30, 2009 reflect the adoption in 2009 of new reporting guidance for noncontrolling interests codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.

     The financial information presented as of any date other than December 31, 2009 has been prepared from the books and records of the Company without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial 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 unaudited interim condensed consolidated financial statements should be read in conjunction with the complete consolidated financial statements and notes thereto included in Gardner Denver’s Annual Report on Form 10-K for the year ended December 31, 2009.

     The results of operations for the six-month period ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year. The balance sheet at December 31, 2009 has been derived from the audited financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements.

     Other than as specifically indicated in these “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, the Company has not materially changed its significant accounting policies from those disclosed in its Form 10-K for the year ended December 31, 2009.

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New Accounting Standards

Recently Adopted Accounting Pronouncements

     In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). This update requires the following new disclosures: (i) the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and a description of the reasons for the transfers; and (ii) a reconciliation for fair value measurements using significant unobservable inputs (Level 3), including separate information about purchases, sales, issuance, and settlements. The update also clarifies existing requirements about fair value measurement disclosures and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the reconciliation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. See Note 11 “Hedging Activities and Fair Value Measurements” for the disclosures required by ASU 2010-06. Adoption of this guidance had no effect on the Company’s results of operations, financial position and cash flows.

     In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855) – Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09, among other provisions, eliminates the requirement to disclose the date through which subsequent events have been evaluated, and was adopted by the Company in the first quarter of 2010.

Recently Issued Accounting Pronouncements

     In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605) - Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force (“ASU 2009-13”). It updates the existing multiple-element revenue arrangements guidance currently included under FASB ASC 605-25, Revenue Recognition, Multiple-Element Arrangements. The revised guidance primarily provides two significant changes: (i) eliminates the need for objective and reliable evidence of fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and (ii) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance expands the disclosure requirements for revenue recognition. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. The Company is currently assessing the impact of this new guidance on its consolidated financial statements and related disclosures.

Note 2. Restructuring

     In 2008 and 2009, the Company finalized and announced certain restructuring plans designed to address (i) rationalization of the Company’s manufacturing footprint, (ii) slowing global economic growth and the resulting deterioration in the Company’s end markets and (iii) integration of CompAir Holdings Ltd. (“CompAir”) into its existing operations. These plans included the closure and consolidation of manufacturing facilities in Europe and the United States (“U.S.”), and various voluntary and involuntary employee termination and relocation programs. In accordance with FASB ASC 420, Exit or Disposal Cost Obligations, and FASB ASC 712, Compensation — Nonretirement Postemployment Benefits, charges totaling $57.2 million (included in “Other operating expense,

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net”) were recorded in 2008 and 2009, of which $34.3 million was associated with the Industrial Products Group and $22.9 million was associated with the Engineered Products Group. Additional net charges totaling $2.7 million were recorded in the six-month period ended June 30, 2010, of which $4.0 million was associated with the Industrial Products Group. A net credit of $1.3 million, reflecting the finalization of certain employee termination plans, was recorded in the Engineered Products Group. Implementation of these plans was substantively completed during the first and second quarters of 2010. Payment of employee benefits is expected to be substantively completed in 2010.

     In 2009 and 2010, the Company recorded charges totaling approximately $8.0 million in connection with the consolidation of certain U.S. operations, which it expects to be funded by a state grant. The anticipated amount of the grant was recorded as a reduction in the associated charge and the establishment of a current receivable. To date, the Company has received funding of approximately $7.8 million. If the Company does not maintain certain employment and payroll levels specified in the grant over a ten-year period, it will be obligated to return a portion of the grant funds to the state on a pro-rata basis. Any such amounts that may be returned to the state will be charged to operating income when identified. The Company currently expects to meet the required employment and payroll levels.

     In connection with the acquisition of CompAir, the Company has been implementing plans identified at or prior to the acquisition date to close and consolidate certain former CompAir functions and facilities, primarily in North America and Europe. These plans included various voluntary and involuntary employee termination and relocation programs affecting both salaried and hourly employees and exit costs associated with the sale, lease termination or sublease of certain manufacturing and administrative facilities. The terminations, relocations and facility exits were substantively completed during 2009. A liability of $8.9 million was included in the allocation of the CompAir purchase price for the estimated cost of these actions at October 20, 2008. This liability was increased by $2.1 million in 2009 to reflect the finalization of certain of these plans.

     The following table summarizes the activity in the restructuring accrual accounts:

	Termination
	Benefits			Other			Total
Balance as of December 31, 2009	$	17,325		$	3,655		$	20,980
Charged to expense		1,003			1,693			2,696
Paid		(8,147	)		(2,691	)		(10,838	)
Other, net		(1,927	)		296			(1,631	)
Balance as of June 30, 2010	$	8,254		$	2,953		$	11,207

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Note 3. Inventories

     Inventories as of June 30, 2010 and December 31, 2009 consisted of the following:

	June 30,			December 31,
	2010			2009
Raw materials, including parts and subassemblies	$	150,598		$	150,085
Work-in-process		29,608			39,691
Finished goods		55,939			51,638
		236,145			241,414
Excess of FIFO costs over LIFO costs		(16,065	)		(14,961	)
Inventories, net	$	220,080		$	226,453

Note 4. Goodwill and Other Intangible Assets

     The changes in the carrying amount of goodwill attributable to each business segment for the six-month period ended June 30, 2010, and the year ended December 31, 2009, are presented in the table below. The adjustments to goodwill in 2009 are primarily related to the finalization of the valuation of certain CompAir intangible assets.

	Industrial			Engineered
	Products			Products			Total
Balance as of December 31, 2008	$	491,052		$	313,596		$	804,648
Adjustments to goodwill		16,275			(2	)		16,273
Impairment of goodwill		(252,533	)		—			(252,533	)
Foreign currency translation		2,030			7,596			9,626
Balance as of December 31, 2009		256,824			321,190			578,014
Foreign currency translation		(17,887	)		(17,190	)		(35,077	)
Balance as of June 30, 2010	$	238,937		$	304,000		$	542,937

     The net goodwill impairment charge in 2009 of $252.5 million was the result of the continuing significant decline in order rates for certain products in the Industrial Products Group during the first quarter of 2009, the uncertain outlook regarding when such order rates might return to levels and growth rates experienced in recent years and the sustained decline in the price of the Company’s common stock through March 31, 2009. The net goodwill balances as of June 30, 2010 and December 31, 2009 reflect cumulative impairment charges of $252.5 million and zero for the Industrial Products and Engineered Products Groups, respectively.

     As a result of its annual evaluation of indefinite-lived intangible assets, the Company recorded a $9.9 million non-cash impairment charge during 2009, primarily associated with a trade name in the Industrial Products Group segment.

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     The following table presents the gross carrying amount and accumulated amortization of identifiable intangible assets, other than goodwill, at the dates presented:

	June 30, 2010					December 31, 2009
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Amortized intangible assets:
Customer lists and relationships	$	107,490	$	(24,790	)	$	121,990	$	(24,580	)
Acquired technology		87,172		(46,114	)		98,163		(47,162	)
Trade names		50,028		(7,330	)		56,245		(6,604	)
Other		7,549		(3,713	)		7,555		(3,781	)
Unamortized intangible assets:
Trade names		103,529		—			112,584		—
Total other intangible assets	$	355,768	$	(81,947	)	$	396,537	$	(82,127	)

     Amortization of intangible assets for the three and six-month periods ended June 30, 2010 was $4.3 million and $8.8 million, respectively. Amortization of intangible assets for the three and six-month periods ended June 30, 2009 was $4.8 million and $9.9 million, respectively. Amortization of intangible assets is anticipated to be approximately $17.1 million in 2011 through 2014 based upon exchange rates as of June 30, 2010 and intangible assets with finite useful lives included in the balance sheet as of June 30, 2010.

Note 5. Accrued Product Warranty

     A reconciliation of the changes in the accrued product warranty liability for the three and six-month periods ended June 30, 2010 and 2009 is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Balance at beginning of period	$	18,134		$	18,634		$	19,312		$	19,141
Product warranty accruals		5,360			6,383			10,950			11,157
Settlements		(5,784	)		(6,755	)		(11,985	)		(11,642	)
Effect of foreign currency translation		(704	)		774			(1,271	)		380
Balance at end of period	$	17,006		$	19,036		$	17,006		$	19,036

Note 6. Pension and Other Postretirement Benefits

     The following table summarizes the components of net periodic benefit cost for the Company’s defined benefit pension plans and other postretirement benefit plans recognized for the three and six-month periods ended June 30, 2010 and 2009:

10

	Three Months Ended June 30,
	Pension Benefits												Other
	U.S. Plans						Non-U.S. Plans						Postretirement Benefits
	2010			2009			2010			2009			2010			2009
Service cost	$	—		$	—		$	252		$	269		$	4		$	6
Interest cost		965			1,093			2,808			2,709			249			266
Expected return on plan assets		(885	)		(913	)		(2,509	)		(2,223	)		—			—
Recognition of:
Unrecognized prior-service cost		—			3			6			8			(25	)		(50	)
Unrecognized net actuarial loss (gain)		359			455			238			(18	)		(325	)		(325	)
Net periodic benefit cost (income)		439			638			795			745			(97	)		(103	)
FASB ASC 715-30 curtailment gain		—			—			—			(118	)		—			—
Total net periodic benefit cost (income)	$	439		$	638		$	795		$	627		$	(97	)	$	(103	)

	Six Months Ended June 30,
	Pension Benefits												Other
	U.S. Plans						Non-U.S. Plans						Postretirement Benefits
	2010			2009			2010			2009			2010			2009
Service cost	$	—		$	—		$	524		$	529		$	8		$	11
Interest cost		1,930			2,186			5,772			5,258			498			530
Expected return on plan assets		(1,770	)		(1,826	)		(5,134	)		(4,301	)		—			—
Recognition of:
Unrecognized prior-service cost		—			6			12			15			(50	)		(100	)
Unrecognized net actuarial loss (gain)		718			910			494			(35	)		(650	)		(650	)
Net periodic benefit cost (income)		878			1,276			1,668			1,466			(194	)		(209	)
FASB ASC 715-30 curtailment gain		—			—			(837	)		(118	)		—			—
Total net periodic benefit cost (income)	$	878		$	1,276		$	831		$	1,348		$	(194	)	$	(209	)

     In March of 2010, the Patient Protection and Affordable Care Act (HR 3590) and the Health Care Education and Affordability Reconciliation Act (HR 4872) (the “Acts”) became law in the U.S. Based on the Company’s current understanding of the provisions of the Acts, it does not expect that the Acts will have a significant impact on its accounting for and valuation of retiree medical benefit plans. The Company will continue to assess the accounting implications of the Acts as related regulations and interpretations of the Acts become available. The Company’s accumulated benefit obligation for its U.S. post-retirement benefit plan was $15.6 million at December 31, 2009.

     The Company previously disclosed in its financial statements for the year ended December 31, 2009, that it expects to contribute approximately $3.6 million to its non-U.S. pension plans in fiscal 2010. In the first quarter of 2010, the Company elected to make additional discretionary contributions to such plans and, as a result, contributions to its non-U.S. pension plans as of the date of this report are expected to be $5.8 million in fiscal 2010.

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Note 7. Debt

     The Company’s debt at June 30, 2010 and December 31, 2009 is summarized as follows:

	June 30,		December 31,
	2010		2009
Short-term debt	$	6,341	$	5,497
Long-term debt:
Credit Line, due 2013 (1)	$	—	$	2,500
Term Loan, denominated in U.S. dollars, due 2013 (2)		94,000		113,000
Term Loan, denominated in euro (“EUR”), due 2013 (3)		73,716		100,310
Senior Subordinated Notes at 8%, due 2013		125,000		125,000
Secured Mortgages (4)		6,976		8,500
Capitalized leases and other long-term debt		7,750		9,709
Total long-term debt, including current maturities		307,442		359,019
Current maturities of long-term debt		28,456		28,084
Total long-term debt, less current maturities	$	278,986	$	330,935

(1)	The loans under this facility may be denominated in U.S. dollars (“USD”) or several foreign currencies. The interest rates under the facility are based on prime, federal funds and/or LIBOR for the applicable currency.
(2)	The interest rate for this loan varies with prime, federal funds and/or LIBOR. At June 30, 2010, this rate was 2.9% and averaged 2.8% for the six-month period ended June 30, 2010.
(3)	The interest rate for this loan varies with LIBOR. At June 30, 2010, this rate was 2.9% and averaged 2.9% for the six-month period ended June 30, 2010.
(4)	This amount consists of two fixed-rate commercial loans with an outstanding balance of €5,704 at June 30, 2010. The loans are secured by the Company’s facility in Bad Neustadt, Germany.

Note 8. Stock-Based Compensation

     The following table summarizes the total stock-based compensation expense included in the consolidated statements of operations and the realized excess tax benefits included in the consolidated statements of cash flows for the three and six-month periods ended June 30, 2010 and 2009.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Selling and administrative expenses	$	1,165		$	834		$	3,022		$	1,954
Total stock-based compensation expense included in operating expenses	$	1,165		$	834		$	3,022		$	1,954
Income (loss) before income taxes		(1,165	)		(834	)		(3,022	)		(1,954	)
Provision for income taxes		357			213			964			559
Net income (loss)	$	(808	)	$	(621	)	$	(2,058	)	$	(1,395	)
Net cash provided by operating activities	$	(414	)	$	(60	)	$	(1,903	)	$	(88	)
Net cash used in financing activities	$	414		$	60		$	1,903		$	88

Stock Option Awards

     A summary of the Company’s stock option activity for the six-month period ended June 30, 2010 is presented in the following table (underlying shares in thousands):

								Weighted-
				Outstanding				Average
				Weighted-		Aggregate		Remaining
				Average		Intrinsic		Contractual
	Shares			Exercise Price		Value		Life
Outstanding at December 31, 2009		1,381		$	27.10
Granted		279		$	43.85
Exercised		(401	)	$	24.25
Forfeited		(57	)	$	27.87
Expired or canceled		(9	)	$	20.79
Outstanding at June 30, 2010		1,193		$	31.98	$	15,224	4.6 years
Exercisable at June 30, 2010		692		$	31.00	$	9,483	3.5 years

     The aggregate intrinsic value was calculated as the difference between the exercise price of the underlying stock options and the quoted closing price of the Company’s common stock at June 30, 2010 multiplied by the number of in-the-money stock options. The weighted-average estimated grant-date fair value of employee stock options granted during the three and six-month periods ended June 30, 2010 were $17.34 and $16.55, respectively.

     The total pre-tax intrinsic values of stock options exercised during the three-month periods ended June 30, 2010 and 2009 were $1.9 million and $0.6 million, respectively. The total pre-tax intrinsic values of stock options exercised during the first half of 2010 and 2009 were $8.2 million and $0.7 million, respectively. Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $4.2 million as of June 30, 2010 and will be recognized as expense over a weighted-average period of 2.1 years.

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Valuation Assumptions

     The fair value of each stock option grant under the Company’s Amended and Restated Long-Term Incentive Plan was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used for the periods indicated are noted in the table below.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Assumptions:
Risk-free interest rate		1.7	%		1.7	%		2.3	%		1.7	%
Dividend yield		0.5	%		—			0.5	%		—
Volatility factor		46			45			43			42
Expected life (in years)		3.8			4.0			4.7			4.6

Restricted Share Awards

     A summary of the Company’s restricted share award activity for the six-month period ended June 30, 2010 is presented in the following table (underlying shares in thousands):

				Weighted-
				Average Grant-
				Date Fair Value
	Shares			(per share)
Nonvested at December 31, 2009		143		$	29.92
Granted		55		$	44.60
Vested		(21	)	$	38.84
Forfeited		—		$	—
Nonvested at June 30, 2010		177		$	33.41

     The restricted shares granted in the six-month period of 2010 were valued at the market close price of the Company’s common stock on the date of grant. Pre-tax unrecognized compensation expense for nonvested restricted share awards, net of estimated forfeitures, was $3.1 million as of June 30, 2010, which will be recognized as expense over a weighted-average period of 2.0 years. The total fair value of restricted share awards that vested during the six-month periods of 2010 and 2009 was $0.8 million and $1.6 million, respectively.

Note 9. Stockholders’ Equity and Earnings (Loss) Per Share

     In November 2008, the Company’s Board of Directors authorized a share repurchase program to acquire up to 3.0 million shares of the Company’s outstanding common stock. During the six-month period ended June 30, 2010, the Company repurchased 0.4 million shares under this program at a total cost of $17.6 million.

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     The following table details the calculation of basic and diluted earnings (loss) per common share for the three and six-month periods ended June 30, 2010 and 2009 (shares in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Net income (loss) attributable to Gardner Denver	$	37,334	$	27,399	$	69,292	$	(221,770	)
Weighted average shares of common stock outstanding:
Basic		52,399		51,852		52,275		51,809
Effect of stock-based compensation awards (1)		403		250		421		—
Diluted		52,802		52,102		52,696		51,809
Earnings (Loss) Per Share:
Basic	$	0.71	$	0.53	$	1.33	$	(4.28	)
Diluted	$	0.71	$	0.53	$	1.31	$	(4.28	)

(1) Share equivalents totaling 198 thousand, consisting of outstanding stock options and nonvested restricted share awards, were excluded from the computation of diluted loss per share in the six-month period ended June 30, 2009 because the net loss for the period caused all potentially dilutive shares to be anti-dilutive.

     For the three-month periods ended June 30, 2010 and 2009, respectively, anti-dilutive equity-based awards to purchase 245 thousand and 786 thousand weighted-average shares of common stock were outstanding. For the six-month periods ended June 30, 2010 and 2009, respectively, anti-dilutive equity-based awards to purchase 207 thousand and 1,022 thousand weighted-average shares of common stock were outstanding. Antidilutive equity-based awards outstanding were not included in the computation of diluted earnings (loss) per common share.

Note 10. Accumulated Other Comprehensive Income (Loss)

     The Company’s other comprehensive income (loss) consists of (i) unrealized foreign currency net gains and losses on the translation of the assets and liabilities of its foreign operations, (ii) unrealized gains and losses on hedges of net investments in foreign operations, (iii) unrealized gains and losses on cash flow hedges (consisting of interest rate swaps), net of income taxes, and (iv) pension and other postretirement prior service cost and actuarial gains or losses, net of income taxes.

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     The following table sets forth the changes in each component of accumulated other comprehensive income (loss):

							Unrealized
	Cumulative			Foreign			Gains						Accumulated
	Currency			Currency			(Losses) on			Pension and			Other
	Translation			Gains and			Cash Flow			Postretirement			Comprehensive
	Adjustment(1)			(Losses)			Hedges			Benefit Plans			Income
Balance at December 31, 2008	$	113,344		$	(22,982	)	$	—		$	(17,955	)	$	72,407
Before tax (loss) income		(29,688	)		1,512			—			73			(28,103	)
Income tax effect		—			(2,886	)		—			(28	)		(2,914	)
Other comprehensive (loss) income		(29,688	)		(1,374	)		—			45			(31,017	)
Currency translation (2)		—			—			—			—			—
Balance at March 31, 2009		83,656			(24,356	)		—			(17,910	)		41,390
Before tax income		32,931			6,682			366			73			40,052
Income tax effect		—			1,294			(139	)		(28	)		1,127
Other comprehensive income		32,931			7,976			227			45			41,179
Currency translation (2)		—			—			—			1			1
Balance at June 30, 2009	$	116,587		$	(16,380	)	$	227		$	(17,864	)	$	82,570
Balance at December 31, 2009	$	134,573		$	(21,319	)	$	(250	)	$	(30,490	)	$	82,514
Before tax (loss) income		(38,820	)		8,920			(706	)		272			(30,334	)
Income tax effect		—			297			268			(84	)		481
Other comprehensive (loss) income		(38,820	)		9,217			(438	)		188			(29,853	)
Currency translation (2)		—			—			—			15			15
Balance at March 31, 2010		95,753			(12,102	)		(688	)		(30,287	)		52,676
Before tax (loss) income		(47,788	)		664			(495	)		252			(47,367	)
Income tax effect		—			(649	)		188			(75	)		(536	)
Other comprehensive (loss) income		(47,788	)		15			(307	)		177			(47,903	)
Currency translation (2)		—			—			—			8			8
Balance at June 30, 2010	$	47,965		$	(12,087	)	$	(995	)	$	(30,102	)	$	4,781

(1)	Income taxes are generally not provided for foreign currency translation adjustments, as such adjustments relate to permanent investments in international subsidiaries.
(2)	The Company uses the historical rate approach in determining the USD amounts of changes to accumulated other comprehensive income associated with non-U.S. pension benefit plans.

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     The Company’s comprehensive income (loss) for the three and six-month periods ended June 30, 2010 and 2009 was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010			2009		2010			2009
Net income (loss) attributable to Gardner Denver	$	37,334		$	27,399	$	69,292		$	(221,770	)
Other comprehensive (loss) income		(47,903	)		41,179		(77,756	)		10,162
Comprehensive (loss) income attributable to Gardner Denver		(10,569	)		68,578		(8,464	)		(211,608	)
Net income attributable to noncontrolling interests		590			648		885			1,345
Other comprehensive (loss) income		(86	)		557		(809	)		745
Comprehensive income attributable to noncontrolling interest		504			1,205		76			2,090
Total comprehensive (loss) income	$	(10,065	)	$	69,783	$	(8,388	)	$	(209,518	)

Note 11. Hedging Activities and Fair Value Measurements

Hedging Activities

     The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in commodity prices, interest rates, and foreign currency exchange rates. The Company’s exposure to these risks is managed through a combination of operating and financing activities. The Company selectively uses derivative financial instruments (“derivatives”), including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates, respectively. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in commodity prices, interest rates, and foreign currency exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

     The Company’s exposure to interest rate risk results primarily from its borrowings of $313.8 million at June 30, 2010. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by maintaining a mixture of fixed and variable rate debt and, from time to time, uses pay-fixed interest rate swaps as cash flow hedges of variable rate debt in order to adjust the relative proportions.

     A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the U.S. in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Other than the USD, the EUR, British pound sterling (“GBP”), and Chinese yuan (“CNY”) are the principal currencies in which the Company and its subsidiaries enter into transactions. The Company is exposed to the impacts of changes in foreign currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities, and earnings into USD. The Company partially offsets these exposures by having certain of its non-U.S. subsidiaries act as the obligor on a portion of its borrowings and by denominating such borrowings, as well as a portion of the borrowings for which the Company is the obligor, in currencies other than the USD.

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     The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances monthly. The Company also selectively uses forward currency contracts to manage this risk. These contracts for the sale or purchase of European and other currencies generally mature within one year.

     In accordance with FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), the Company records its derivatives as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are recognized either in net income or in other comprehensive income (“OCI”), depending on the designated purpose of the derivative. All cash flows associated with derivatives are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows. It is the Company’s policy not to speculate in derivative instruments.

     Fluctuations due to changes in foreign currency exchange rates in the value of non-USD borrowings that have been designated as hedges of the Company’s net investment in foreign operations are included in other comprehensive income.

     The following tables summarize the notional amounts, fair values and classification of the Company’s outstanding derivatives by risk category and instrument type within the Condensed Consolidated Balance Sheets:

	June 30, 2010
				Asset		Liability
		Notional		Derivatives		Derivatives
	Balance Sheet Location	Amount (1)		Fair Value (1)		Fair Value (1)
Derivatives designated as hedging instruments under FASB ASC 815
Interest rate swap contracts	Other liabilities	$	74,459	$	—	$	1,658
Derivatives not designated as hedging instruments under FASB ASC 815
Foreign currency forwards	Other current assets	$	104,784	$	2,048	$	1,005

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	December 31, 2009
				Asset		Liability
		Notional		Derivatives		Derivatives
	Balance Sheet Location	Amount (1)		Fair Value (1)		Fair Value (1)
Derivatives designated as hedging instruments under FASB ASC 815
Interest rate swap contracts	Other assets	$	132,320	$	—	$	479
Derivatives not designated as hedging instruments under FASB ASC 815
Foreign currency forwards	Accrued liabilities	$	3,049	$	6	$	128
Foreign currency forwards	Other current assets	$	119,738	$	1,603	$	11

(1) Notional amounts represent the gross contract amounts of the outstanding derivatives excluding the total notional amount of positions that have been effectively closed through offsetting positions. The net gains and net losses associated with positions that have been effectively closed through offsetting positions but not yet settled are included in the asset and liability derivatives fair value columns, respectively.

     Gains and losses on derivatives designated as cash flow hedges in accordance with FASB ASC 815 included in the Condensed Consolidated Statement of Operations for the three and six-month periods ended June 30, 2010 and 2009, respectively, are as presented in the table below.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Interest rate swap contracts (1)	2010			2009			2010			2009
Amount of gain or (loss) recognized in AOCI on derivatives (effective portion)	$	(825	)	$	207		$	(1,912	)	$	207
Amount of gain or (loss) reclassified from AOCI into income (effective portion)		(330	)		(159	)		(711	)		(159	)
Amount of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)		(5	)		—			(5	)		—

(1) Losses on derivatives reclassified from accumulated other comprehensive income (“AOCI”) into income (effective portion) were included in the interest expense line on the face of the Condensed Consolidated Statements of Operations.

     At June 30, 2010, the Company is the fixed rate payor on three interest rate swap contracts that effectively fix the LIBOR-based index used to determine the interest rates charged on a total of $50.0 million and €20.0 million of the Company’s LIBOR-based variable rate borrowings. These contracts carry fixed rates ranging from 1.8% to 2.2% and have expiration dates ranging from 2012 to 2013. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted LIBOR-based interest payments. Based on LIBOR-based swap yield curves as of June 30, 2010, the Company expects to reclassify losses of $1.0 million out of AOCI into earnings during the next 12 months. The Company’s LIBOR-based variable rate borrowings outstanding at June 30, 2010 were $94.0 million and €60.3 million.

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     There were 41 foreign currency forward contracts outstanding as of June 30, 2010 with notional amounts ranging from $0.1 million to $10.7 million. The Company has not designated any forward contracts as hedging instruments. The majority of these contracts are used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in foreign currency exchange rates. The changes in the fair value of these contracts generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included in the other operating expense, net, line on the face of the Condensed Consolidated Statements of Operations. The Company recorded net gains of $2.2 million and net losses of $20.1 million during the three-month periods ended June 30, 2010 and 2009, respectively, relating to foreign currency forward contracts outstanding during all or part of each period. During the six-month periods ended June 30, 2010 and 2009, the Company recorded net gains of $5.4 million and net losses of $13.9 million, respectively, relating to foreign currency forward contracts outstanding during all or part of each period. Total net foreign currency gains or losses reported in other operating expense, net, were losses of $0.4 million and $1.8 million for the three-month periods ended June 30, 2010 and 2009, respectively, and a net gain of $0.6 million and a loss of $1.6 million in the six-month periods ended June 30, 2010 and 2009, respectively.

     As of June 30, 2010, the Company has designated a portion of its term loan denominated in EUR of approximately €16.0 million as a hedge of the Company’s net investment in subsidiaries with EUR functional currencies. Accordingly, changes in the fair value of this debt due to changes in the USD to EUR exchange rate are recorded through other comprehensive income. During the three-month periods ended June 30, 2010 and 2009, the Company recorded gains of $1.6 million and losses of $5.5 million, net of tax, respectively, through other comprehensive income. During the six-month periods ended June 30, 2010 and 2009, the Company recorded gains of $2.6 million and losses of $0.4 million, net of tax, respectively, through other comprehensive income. As of June 30, 2010 and 2009, the net balances of such gains and losses included in accumulated other comprehensive income were losses of $2.8 million and $3.6 million, net of tax, respectively.

Fair Value Measurements

     The Company’s financial instruments consist primarily of cash equivalents, trade receivables, trade payables, deferred compensation assets and obligations, derivatives and debt instruments. The book values of these instruments, other than the Senior Subordinated Notes, are a reasonable estimate of their respective fair values.

     The Senior Subordinated Notes outstanding are carried at cost. Their estimated fair value was approximately $127.5 million as of June 30, 2010 based upon non-binding market quotations that were corroborated by observable market data (Level 2).

     The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010:

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	Level 1		Level 2		Level 3		Total
Financial Assets
Foreign currency forwards (1)	$	—	$	2,048	$	—	$	2,048
Trading securities held in deferred compensation plan (2)		8,515		—		—		8,515
Total	$	8,515	$	2,048	$	—	$	10,563
Financial Liabilities
Foreign currency forwards (1)	$	—	$	1,005	$	—	$	1,005
Interest rate swaps (3)		—		1,658		—		1,658
Phantom stock plan (4)		—		3,330		—		3,330
Deferred compensation plan (5)		8,515		—		—		8,515
Total	$	8,515	$	5,993	$	—	$	14,508

(1)	Based on internally-developed models that use as their basis readily observable market parameters such as current spot and forward rates, and the LIBOR index.
(2)	Based on the observable price of publicly traded mutual funds which, in accordance with FASB ASC 710, Compensation – General, are classified as “Trading” securities and accounted for using the mark-to-market method.
(3)	Measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of June 30, 2010. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties.
(4)	Based on the price of the Company’s common stock.
(5)	Based on the fair value of the investments in the deferred compensation plan.

Note 12. Income Taxes

     As of June 30, 2010, the total balance of unrecognized tax benefits was $5.5 million compared with $5.2 million at December 31, 2009. The increase in the balance was primarily related to an increase in tax reserves related to the tax audits in Germany and the State of Wisconsin, net of a Canadian settlement. The unrecognized tax benefits at June 30, 2010 include $5.5 million of uncertain tax positions that would affect the Company’s effective tax rate if recognized, of which $2.6 million would be offset by a reduction of a corresponding deferred tax asset. The Company does not expect any significant changes to its unrecognized tax benefits within the next twelve months.

     The Company’s accounting policy with respect to interest expense on underpayments of income tax and related penalties is to recognize such interest expense and penalties as part of the provision for income taxes. The Company’s income tax liabilities at June 30, 2010 include approximately $1.3 million of accrued interest and $0.3 million of penalties.

     The Company’s U.S. federal income tax returns for the tax years 2005 to 2007 are under examination by the Internal Revenue Service. As of the date of this report, the examination has not identified any material changes. The statutes of limitations for the U.S. state tax returns are open beginning with the 2006 tax year, except for four states for which the statutes have been extended, beginning with the 2003 tax year for one state, the 2004 tax year for one state and the 2005 tax year for two states.

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     The Company is subject to income tax in approximately 30 jurisdictions outside the U.S. The statute of limitations varies by jurisdiction. The Company’s significant operations outside the U.S. are located in China, the United Kingdom and Germany. In Germany, six subsidiaries are under audit for the tax years beginning with the 2003 tax year, two subsidiaries beginning with the 2004 tax year, six subsidiaries beginning with the 2005 tax year and one subsidiary beginning with the 2006 tax year. As of the date of this report, the examinations have not identified any material changes. In China and the United Kingdom, tax years prior to 2006 are closed. In addition, audits are being conducted in other various countries. To date, no material adjustments have been proposed as a result of these audits.

     The provision for income taxes was $22.3 million for the six-month period ended June 30, 2010, compared to $7.4 million for the six-month period ended June 30, 2009. The provision in the six-month period of 2009 reflected the reversal of deferred tax liabilities totaling $11.6 million associated with a portion of the net goodwill and all of the trade name impairment charges recorded in the second quarter of 2009. Deferred tax liabilities were recorded when the trade name was established and as tax deductible goodwill was amortized, a corresponding deferred tax liability was established. A portion of the goodwill for which the impairment charge was taken was not amortizable for tax purposes and, accordingly, deferred tax liabilities were not recorded when the goodwill was established and a corresponding tax benefit did not arise upon the impairment of that portion of goodwill. In addition, a $3.6 million credit for the reversal of an income tax reserve and the related interest associated with the completion of a foreign tax examination was recorded in the six-month period of 2009. These benefits were partially offset by an $8.6 million valuation allowance against deferred tax assets related to net operating losses recorded in connection with the acquisition of CompAir based on revised financial projections.

Note 13. Supplemental Information

     The components of other operating expense, net, and supplemental cash flow information are as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010			2009
Other Operating Expense, Net
Foreign currency losses (gains), net	$	373	$	1,774		$	(628	)	$	1,563
Restructuring charges (1)		1,342		19,755			2,696			27,619
Other, net		1,553		(1,150	)		(151	)		(627	)
Total other operating expense, net	$	3,268	$	20,379		$	1,917		$	28,555
Supplemental Cash Flow Information
Cash taxes paid						$	25,381		$	18,968
Interest paid							11,329			13,624

⁽¹⁾ See Note 2 “Restructuring.”

Note 14. Contingencies

     The Company is a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature. In addition, due to the bankruptcies of several asbestos manufacturers and other primary defendants, among other things, the Company has been named as a defendant in a number of asbestos

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personal injury lawsuits. The Company has also been named as a defendant in a number of silica personal injury lawsuits. The plaintiffs in these suits allege exposure to asbestos or silica from multiple sources and typically the Company is one of approximately 25 or more named defendants. In the Company’s experience to date, the substantial majority of the plaintiffs have not suffered an injury for which the Company bears responsibility.

     Predecessors to the Company sometimes manufactured, distributed and/or sold products allegedly at issue in the pending asbestos and silicosis litigation lawsuits (the “Products”). However, neither the Company nor its predecessors ever mined, manufactured, mixed, produced or distributed asbestos fiber or silica sand, the materials that allegedly caused the injury underlying the lawsuits. Moreover, the asbestos-containing components of the Products, if any, were enclosed within the subject Products.

     The Company has entered into a series of cost-sharing agreements with multiple insurance companies to secure coverage for asbestos and silica lawsuits. The Company also believes some of the potential liabilities regarding these lawsuits are covered by indemnity agreements with other parties.

     The Company believes that the pending and future asbestos and silica lawsuits are not likely to, in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or liquidity, based on: the Company’s anticipated insurance and indemnification rights to address the risks of such matters; the limited potential asbestos exposure from the components described above; the Company’s experience that the vast majority of plaintiffs are not impaired with a disease attributable to alleged exposure to asbestos or silica from or relating to the Products or for which the Company otherwise bears responsibility; various potential defenses available to the Company with respect to such matters; and the Company’s prior disposition of comparable matters. However, due to inherent uncertainties of litigation and because future developments, including, without limitation, potential insolvencies of insurance companies or other defendants, could cause a different outcome, there can be no assurance that the resolution of pending or future lawsuits will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

     The Company has been identified as a potentially responsible party (“PRP”) with respect to several sites designated for cleanup under federal “Superfund” or similar state laws that impose liability for cleanup of certain waste sites and for related natural resource damages. Persons potentially liable for such costs and damages generally include the site owner or operator and persons that disposed or arranged for the disposal of hazardous substances found at those sites. Although these laws impose joint and several liability, in application, the PRPs typically allocate the investigation and cleanup costs based upon the volume of waste contributed by each PRP. Based on currently available information, the Company was only a small contributor to these waste sites, and the Company has, or is attempting to negotiate, de minimis settlements for their cleanup. The cleanup of the remaining sites is substantially complete and the Company’s future obligations entail a share of the sites’ ongoing operating and maintenance expense.

     The Company is also addressing three on-site cleanups for which it is the primary responsible party. Two of these cleanup sites are in the operation and maintenance stage and the third is in the implementation stage. Based on currently available information, the Company does not anticipate that any of these sites will result in material additional costs beyond those already accrued on its balance sheet.

     The Company has an accrued liability on its balance sheet to the extent costs are known or can be reasonably estimated for its remaining financial obligations for these matters. Based upon consideration of currently available information, the Company does not anticipate any material adverse effect on its results of operations,

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financial condition, liquidity or competitive position as a result of compliance with federal, state, local or foreign environmental laws or regulations, or cleanup costs relating to the sites discussed above.

Note 15. Guarantor Subsidiaries

     The Company’s obligations under its 8% Senior Subordinated Notes due 2013 are jointly and severally, fully and unconditionally guaranteed by certain wholly-owned domestic subsidiaries of the Company (the “Guarantor Subsidiaries”). The Company’s subsidiaries that do not guarantee the Senior Subordinated Notes are referred to as the “Non-Guarantor Subsidiaries.” The guarantor condensed consolidating financial data below presents the statements of operations, balance sheets and statements of cash flows data (i) for Gardner Denver, Inc. (the “Parent Company”), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis (which is derived from Gardner Denver’s historical reported financial information); (ii) for the Parent Company alone (accounting for its Guarantor Subsidiaries and Non-Guarantor Subsidiaries on a cost basis under which the investments are recorded by each entity owning a portion of another entity at historical cost); (iii) for the Guarantor Subsidiaries alone; and (iv) for the Non-Guarantor Subsidiaries alone.

24

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2010

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	92,973		$	101,229		$	341,020		$	(85,703	)	$	449,519
Cost of sales		66,178			70,709			245,592			(84,560	)		297,919
Gross profit		26,795			30,520			95,428			(1,143	)		151,600
Selling and administrative expenses		24,049			10,145			57,551			—			91,745
Other operating (income) expense, net		(4,661	)		2,519			5,410			—			3,268
Operating income		7,407			17,856			32,467			(1,143	)		56,587
Interest expense (income)		5,713			(3,394	)		3,743			—			6,062
Other expense (income), net		230			(20	)		(212	)		—			(2	)
Income before income taxes		1,464			21,270			28,936			(1,143	)		50,527
Provision for income taxes		1,201			10,942			767			(307	)		12,603
Net income		263			10,328			28,169			(836	)		37,924
Less: Net income attributable to noncontrolling interests		—			—			590			—			590
Net income attributable to Gardner Denver	$	263		$	10,328		$	27,579		$	(836	)	$	37,334

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2009

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	86,637		$	84,884		$	329,404		$	(64,876	)	$	436,049
Cost of sales		64,067			60,795			247,254			(66,603	)		305,513
Gross profit		22,570			24,089			82,150			1,727			130,536
Selling and administrative expenses		16,845			9,752			60,573			—			87,170
Other operating expense (income), net		4,457			(7,319	)		23,241			—			20,379
Impairment charges		47,990			11,503			(63,428	)		—			(3,935	)
Operating (loss) income		(46,722	)		10,153			61,764			1,727			26,922
Interest expense (income)		2,400			(4,212	)		8,423			—			6,611
Other income, net		(944	)		(3	)		(296	)		—			(1,243	)
(Loss) income before income taxes		(48,178	)		14,368			53,637			1,727			21,554
Provision for income taxes		(5,449	)		9,088			(10,632	)		500			(6,493	)
Net (loss) income		(42,729	)		5,280			64,269			1,227			28,047
Less: Net income attributable to noncontrolling interests		—			—			648			—			648
Net (loss) income attributable to Gardner Denver	$	(42,729	)	$	5,280		$	63,621		$	1,227		$	27,399

25

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2010

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	167,425		$	199,299		$	669,363		$	(164,404	)	$	871,683
Cost of sales		120,982			144,155			483,739			(162,600	)		586,276
Gross profit		46,443			55,144			185,624			(1,804	)		285,407
Selling and administrative expenses		43,798			20,159			115,482			—			179,439
Other operating (income) expense, net		(6,989	)		4,744			4,162			—			1,917
Operating income		9,634			30,241			65,980			(1,804	)		104,051
Interest expense (income)		11,593			(7,164	)		7,749			—			12,178
Other income, net		(175	)		(24	)		(438	)		—			(637	)
(Loss) income before income taxes		(1,784	)		37,429			58,669			(1,804	)		92,510
Provision for income taxes		457			16,469			5,936			(529	)		22,333
Net (loss) income		(2,241	)		20,960			52,733			(1,275	)		70,177
Less: Net income attributable to noncontrolling interests		—			—			885			—			885
Net (loss) income attributable to Gardner Denver	$	(2,241	)	$	20,960		$	51,848		$	(1,275	)	$	69,292

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2009

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	179,871		$	195,175		$	662,387		$	(138,904	)	$	898,529
Cost of sales		131,209			141,082			496,208			(141,117	)		627,382
Gross profit		48,662			54,093			166,179			2,213			271,147
Selling and administrative expenses		38,309			22,520			120,924			—			181,753
Other operating (income) expense, net		(1,840	)		(2,249	)		32,644			—			28,555
Impairment charges		47,990			11,503			201,572			—			261,065
Operating (loss) income		(35,797	)		22,319			(188,961	)		2,213			(200,226	)
Interest expense (income)		6,077			(8,427	)		16,618			—			14,268
Other income, net		(880	)		(8	)		(543	)		—			(1,431	)
(Loss) income before income taxes		(40,994	)		30,754			(205,036	)		2,213			(213,063	)
Provision for income taxes		(3,256	)		15,369			(5,569	)		818			7,362
Net (loss) income		(37,738	)		15,385			(199,467	)		1,395			(220,425	)
Less: Net income attributable to noncontrolling interests		—			—			1,345			—			1,345
Net (loss) income attributable to Gardner Denver	$	(37,738	)	$	15,385		$	(200,812	)	$	1,395		$	(221,770	)

26

Condensed Consolidating Balance Sheet
June 30, 2010

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	3,963		$	1		$	107,174	$	—		$	111,138
Accounts receivable, net		53,604			56,694			232,452		—			342,750
Inventories, net		32,650			52,614			151,677		(16,861	)		220,080
Deferred income taxes		20,173			—			5,468		3,650			29,291
Other current assets		2,920			2,806			14,087		—			19,813
Total current assets		113,310			112,115			510,858		(13,211	)		723,072
Intercompany (payable) receivable		(91,832	)		77,451			14,381		—			—
Investments in affiliates		972,966			186,314			72,856		(1,232,136	)		—
Property, plant and equipment, net		52,265			44,391			174,002		—			270,658
Goodwill		76,680			190,010			276,247		—			542,937
Other intangibles, net		8,247			44,160			221,414		—			273,821
Other assets		27,704			304			6,237		(12,115	)		22,130
Total assets	$	1,159,340		$	654,745		$	1,275,995	$	(1,257,462	)	$	1,832,618
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	26,776		$	—		$	8,021	$	—		$	34,797
Accounts payable and accrued liabilities		54,703			59,493			162,375		(1,183	)		275,388
Total current liabilities		81,479			59,493			170,396		(1,183	)		310,185
Long-term intercompany payable (receivable)		183,908			(299,352	)		115,444		—			—
Long-term debt, less current maturities		266,361			75			12,550		—			278,986
Deferred income taxes		—			24,239			43,644		(12,115	)		55,768
Other liabilities		64,829			741			73,950		—			139,520
Total liabilities		596,577			(214,804	)		415,984		(13,298	)		784,459
Stockholders’ equity:
Common stock		591			—			—		—			591
Capital in excess of par value		574,176			607,693			625,641		(1,232,136	)		575,374
Retained earnings		141,953			257,119			219,594		(11,372	)		607,294
Accumulated other comprehensive (loss) income		(3,157	)		4,737			3,857		(656	)		4,781
Treasury stock, at cost		(150,800	)		—			—		—			(150,800	)
Total Gardner Denver stockholders’ equity		562,763			869,549			849,092		(1,244,164	)		1,037,240
Noncontrolling interests		—			—			10,919		—			10,919
Total stockholders’ equity		562,763			869,549			860,011		(1,244,164	)		1,048,159
Total liabilities and stockholders’ equity	$	1,159,340		$	654,745		$	1,275,995	$	(1,257,462	)	$	1,832,618

27

Condensed Consolidating Balance Sheet
December 31, 2009

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	3,404		$	54		$	106,278	$	—		$	109,736
Accounts receivable, net		49,997			38,128			238,109		—			326,234
Inventories, net		29,907			56,049			155,874		(15,377	)		226,453
Deferred income taxes		22,440			—			7,043		1,120			30,603
Other current assets		4,824			5,826			14,835		—			25,485
Total current assets		110,572			100,057			522,139		(14,257	)		718,511
Intercompany (payable) receivable		(49,624	)		36,969			12,655		—			—
Investments in affiliates		949,584			203,516			72,856		(1,225,956	)		—
Property, plant and equipment, net		54,693			44,743			206,799		—			306,235
Goodwill		76,680			190,010			311,324		—			578,014
Other intangibles, net		8,890			44,724			260,796		—			314,410
Other assets		28,923			214			5,606		(12,865	)		21,878
Total assets	$	1,179,718		$	620,233		$	1,392,175	$	(1,253,078	)	$	1,939,048
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	27,630		$	—		$	5,951	$	—		$	33,581
Accounts payable and accrued liabilities		59,701			48,330			185,195		(3,277	)		289,949
Total current liabilities		87,331			48,330			191,146		(3,277	)		323,530
Long-term intercompany payable (receivable)		162,211			(304,515	)		142,304		—			—
Long-term debt, less current maturities		314,866			76			15,993		—			330,935
Deferred income taxes		—			24,995			55,669		(12,865	)		67,799
Other liabilities		65,817			707			86,251		—			152,775
Total liabilities		630,225			(230,407	)		491,363		(16,142	)		875,039
Stockholders’ equity:
Common stock		586			—			—		—			586
Capital in excess of par value		557,626			587,521			639,542		(1,225,956	)		558,733
Retained earnings		149,619			236,004			167,746		(10,097	)		543,272
Accumulated other comprehensive (loss) income		(25,403	)		27,115			81,685		(883	)		82,514
Treasury stock, at cost		(132,935	)		—			—		—			(132,935	)
Total Gardner Denver stockholders’ equity		549,493			850,640			888,973		(1,236,936	)		1,052,170
Noncontrolling interests		—			—			11,839		—			11,839
Total stockholders’ equity		549,493			850,640			900,812		(1,236,936	)		1,064,009
Total liabilities and stockholders’ equity	$	1,179,718		$	620,233		$	1,392,175	$	(1,253,078	)	$	1,939,048

28

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net Cash Provided by (Used In) Operating Activities	$	42,256		$	(10,184	)	$	35,545		$	—	$	67,617
Cash Flows From Investing Activities
Capital expenditures		(2,053	)		(3,662	)		(6,623	)		—		(12,338	)
Disposals of property, plant and equipment		29			198			927			—		1,154
Other		151			(159	)		—			—		(8	)
Net cash used in investing activities		(1,873	)		(3,623	)		(5,696	)		—		(11,192	)
Cash Flows From Financing Activities
Net change in long-term intercompany receivables/payables		7,600			13,752			(21,352	)		—		—
Principal payments on short-term borrowings		(1,266	)		—			(10,538	)		—		(11,804	)
Proceeds from short-term borrowings		—			—			12,984			—		12,984
Principal payments on long-term debt		(42,414	)		—			(996	)		—		(43,410	)
Proceeds from long-term debt		8,000			—			16			—		8,016
Proceeds from stock option exercises		9,712			—			—			—		9,712
Excess tax benefits from stock-based compensation		1,804			—			99			—		1,903
Purchase of treasury stock		(17,864	)		—			—			—		(17,864	)
Cash dividends paid		(5,246	)		—			—			—		(5,246	)
Other		—			—			(996	)		—		(996	)
Net cash (used in) provided by financing activities		(39,674	)		13,752			(20,783	)		—		(46,705	)
Effect of exchange rate changes on cash and cash equivalents		(150	)		2			(8,170	)		—		(8,318	)
Net increase (decrease) in cash and cash equivalents		559			(53	)		896			—		1,402
Cash and cash equivalents, beginning of year		3,404			54			106,278			—		109,736
Cash and cash equivalents, end of period	$	3,963		$	1		$	107,174		$	—	$	111,138

29

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2009

							Non-
	Parent			Guarantor			Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net Cash Provided By Operating Activities	$	52,755		$	3,844		$	36,411		$	—	$	93,010
Cash Flows From Investing Activities
Capital expenditures		(7,006	)		(3,012	)		(18,086	)		—		(28,104	)
Disposals of property, plant and equipment		50			235			304			—		589
Other, net		159			(177	)		(1	)		—		(19	)
Net cash used in investing activities		(6,797	)		(2,954	)		(17,783	)		—		(27,534	)
Cash Flows From Financing Activities
Net change in long-term intercompany receivables/payables		24,264			(980	)		(23,284	)		—		—
Principal payments on short-term borrowings		(1,456	)		—			(20,157	)		—		(21,613	)
Proceeds from short-term borrowings		1			—			14,219			—		14,220
Principal payments on long-term debt		(81,568	)		—			(13,848	)		—		(95,416	)
Proceeds from long-term debt		20,000			—			11,366			—		31,366
Proceeds from stock option exercises		583			—			—			—		583
Excess tax benefits from stock-based compensation		88			—			—			—		88
Purchase of treasury stock		(285	)		—			—			—		(285	)
Other		(87	)		—			(760	)		—		(847	)
Net cash used in financing activities		(38,460	)		(980	)		(32,464	)		—		(71,904	)
Effect of exchange rate changes on cash and cash equivalents		2,553			(120	)		3,744			—		6,177
Net increase (decrease) in cash and cash equivalents		10,051			(210	)		(10,092	)		—		(251	)
Cash and cash equivalents, beginning of year		2,126			807			117,802			—		120,735
Cash and cash equivalents, end of period	$	12,177		$	597		$	107,710		$	—	$	120,484

30

Note 16. Segment Results

     The Company has determined its reportable segments in accordance with FASB ASC 280 Segment Reporting (“FASB ASC 280”) and evaluates the performance of its reportable segments based on, among other measures, operating income (loss), which is defined as income (loss) before interest expense, other income, net, and income taxes. Reportable segment operating income (loss) and segment operating margin (defined as segment operating income (loss) divided by segment revenues) are indicative of short-term operating performance and ongoing profitability. Management closely monitors the operating income and operating margin of each reportable segment to evaluate past performance and actions required to improve profitability.

     In the Industrial Products Group, the Company designs, manufactures, markets and services the following products and related aftermarket parts for industrial and commercial applications: rotary screw, reciprocating, and sliding vane air and gas compressors; positive displacement, centrifugal and side channel blowers; and vacuum pumps primarily serving manufacturing, transportation and general industry and selected original equipment manufacturer (“OEM”) and engineered system applications. The Company also designs, manufactures, markets and services complementary ancillary products. Stationary air compressors are used in manufacturing, process applications and materials handling, and to power air tools and equipment. Blowers are used primarily in pneumatic conveying, wastewater aeration, numerous applications in industrial manufacturing and engineered vacuum systems. The markets served are primarily in Europe, the U.S. and Asia.

     In the Engineered Products Group, the Company designs, manufactures, markets and services a diverse group of pumps, compressors, liquid ring vacuum pumps, water jetting and loading arm systems and related aftermarket parts. These products are used in well drilling, well servicing and production of oil and natural gas; industrial, commercial and transportation applications; and in industrial cleaning and maintenance. Liquid ring pumps are used in many different applications such as water removal, distilling, reacting, flare gas recovery, efficiency improvement, lifting and handling, and filtering, principally in the pulp and paper, industrial manufacturing, petrochemical and power industries. This segment also designs, manufactures, markets and services other engineered products and components and equipment for the chemical, petroleum and food industries. The markets served are primarily in the U.S., Europe, Canada and Asia.

     The following table provides financial information by business segment for the three and six-month periods ended June 30, 2010 and 2009.

31

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Industrial Products Group
Revenues	$	268,650		$	250,281		$	515,044		$	504,154
Operating income (loss)		20,157			(6,321	)		39,710			(267,711	)
Operating income (loss) as a percentage of revenues		7.5	%		(2.5	)%		7.7	%		(53.1	)%
Engineered Products Group
Revenues	$	180,869		$	185,768		$	356,639		$	394,375
Operating income		36,430			33,243			64,341			67,485
Operating income as a percentage of revenues		20.1	%		17.9	%		18.0	%		17.1	%
Reconciliation of Segment Results to Consolidated Results
Total segment operating income (loss)	$	56,587		$	26,922		$	104,051		$	(200,226	)
Interest expense		6,062			6,611			12,178			14,268
Other income, net		(2	)		(1,243	)		(637	)		(1,431	)
Consolidated income (loss) before income taxes	$	50,527		$	21,554		$	92,510		$	(213,063	)

Note 17. Subsequent Events

     On July 1, 2010, the Company acquired ILMVAC GmbH (“ILMVAC”) for a preliminary purchase price of €13.3 million (approximately $16.3 million), including assumed debt and net of cash acquired. The final purchase price is subject to certain post-closing adjustments. ILMVAC, headquartered in Ilmenau, Germany, is a European provider of vacuum pumps, systems and accessories for research and development laboratories and industrial applications, and will be included in the Company’s Engineered Products Group Segment.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, including the financial statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations, and the interim condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q.

Operating Segments

     In the Industrial Products Group, the Company designs, manufactures, markets and services the following products and related aftermarket parts for industrial and commercial applications: rotary screw, reciprocating, and sliding vane air and gas compressors; positive displacement, centrifugal and side channel blowers; and vacuum pumps primarily serving manufacturing, transportation and general industry and selected OEM and engineered system applications. The Company also designs, manufactures, markets and services complementary ancillary products. Stationary air compressors are used in manufacturing, process applications and materials handling, and to power air tools and equipment. Blowers are used primarily in pneumatic conveying, wastewater aeration,

32

numerous applications in industrial manufacturing and engineered vacuum systems. The markets served are primarily in Europe, the U.S. and Asia.

     In the Engineered Products Group, the Company designs, manufactures, markets and services a diverse group of pumps, compressors, liquid ring vacuum pumps, water jetting and loading arm systems and related aftermarket parts. These products are used in well drilling, well servicing and production of oil and natural gas; industrial, commercial and transportation applications; and in industrial cleaning and maintenance. Liquid ring pumps are used in many different applications such as water removal, distilling, reacting, flare gas recovery, efficiency improvement, lifting and handling, and filtering, principally in the pulp and paper, industrial manufacturing, petrochemical and power industries. This segment also designs, manufactures, markets and services other engineered products and components and equipment for the chemical, petroleum and food industries. The markets served are primarily in the U.S., Europe, Canada and Asia.

     The Company has determined its reportable segments in accordance with FASB ASC 280 and evaluates the performance of its reportable segments based on, among other measures, operating income (loss), which is defined as income (loss) before interest expense, other income, net, and income taxes. Reportable segment operating income (loss) and segment operating margin (defined as segment operating income (loss) divided by segment revenues) are indicative of short-term operating performance and ongoing profitability. Management closely monitors the operating income and operating margin of each reportable segment to evaluate past performance and actions required to improve profitability. See Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

     To supplement the Company’s financial information presented in accordance with GAAP, management, from time to time, uses additional measures to clarify and enhance understanding of past performance and prospects for the future. These measures may exclude, for example, the impact of unique and infrequent items or items outside of management’s control (e.g. foreign currency exchange rates and impairment charges). Such measures are provided in addition to and should not be considered to be a substitute for, or superior to, the comparable measure under GAAP.

Results of Operations

Performance during the Quarter Ended June 30, 2010 Compared
with the Quarter Ended June 30, 2009

Revenues

     Revenues increased $13.5 million, or 3%, to $449.5 million in the three-month period ended June 30, 2010, compared to $436.0 million in the three-month period of 2009. This increase was attributable to increased volume ($11.6 million, or 3%, in total) and net price increases ($6.5 million, or 1%), partially offset by unfavorable changes in foreign currency exchange rates ($4.6 million, or 1%).

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     Revenues in the Industrial Products Group increased $18.4 million, or 7%, to $268.7 million in the second quarter of 2010, compared to $250.3 million in the second quarter of 2009. This increase reflects higher volume (8%) and price increases (1%), partially offset by unfavorable changes in foreign currency exchange rates (2%). The volume increase was attributable to improvement in demand for OEM products and aftermarket parts and services on a global basis.

     Revenues in the Engineered Products Group decreased $4.9 million, or 3%, to $180.9 million in the second quarter of 2010, compared to $185.8 million in the second quarter of 2009. This decrease reflects lower volume (5%) and unfavorable changes in foreign currency exchange rates (1%), partially offset by net price increases (3%). The decline in volume reflected shipments of loading arms and engineered packages out of backlog in 2009 that did not recur in 2010, partially offset by increased shipments of well servicing and OEM products.

Gross Profit

     Gross profit increased $21.1 million, or 16%, to $151.6 million in the three-month period ended June 30, 2010, compared to $130.5 million in the three-month period of 2009, and as a percentage of revenues was 33.7% in 2010, compared to 29.9% in 2009. The increase in gross profit primarily reflects the net volume increases discussed above and favorable product mix, partially offset by unfavorable changes in foreign currency exchange rates. The improvement in gross profit as a percentage of revenues was due primarily to the benefits of operational improvements, cost reductions, volume leverage and favorable product mix.

Selling and Administrative Expenses

     Selling and administrative expenses increased $4.5 million, or 5%, to $91.7 million in the second quarter of 2010, compared to $87.2 million in the second quarter of 2009. This increase reflects higher variable compensation and benefit expenses, partially offset by cost reductions and the favorable effect of changes in foreign currency exchange rates ($1.4 million). As a percentage of revenues, selling and administrative expenses increased slightly to 20.4% in the second quarter of 2010 compared to 20.0% in the second quarter of 2009, primarily as a result of the higher variable compensation costs discussed above.

Other Operating Expense, Net

     Other operating expense, net, was $3.3 million in the second quarter of 2010 compared to $20.4 million in the second quarter of 2009. The year-over-year change was due primarily to lower restructuring charges in 2010.

Impairment Charges

     In the first quarter of 2009, the Company recorded a preliminary $265.0 million non-cash impairment charge to reduce the carrying amount of goodwill in its Industrial Products Group based on the results of an interim assessment of such goodwill. This assessment was conducted as a result of the continuing significant decline in order rates for certain products in the Industrial Products Group during the first quarter of 2009, the uncertain outlook regarding when such order rates might return to levels and growth rates experienced in recent years and the sustained decline in the price of the Company’s common stock through March 31, 2009. During the second quarter of 2009, following completion of asset valuations and related analysis, the Company recorded a $14.3

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million credit, reducing the net charge to $250.7 million. The net goodwill impairment charge in 2009 of $252.5 million was finalized in the fourth quarter of 2009. Also during the second quarter of 2009, the Company recorded a non-cash impairment charge of $10.4 million primarily to reduce the carrying value of a trade name in the Industrial Products Group. The net trade name impairment charge in 2009 of $9.9 million was finalized in the third quarter of 2009. See Note 4 “Goodwill and Other Intangible Assets” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q

Operating Income

     Operating income of $56.6 million in the second quarter of 2010 increased $29.7 million, or 110%, compared to $26.9 million in the second quarter of 2009. This improvement reflects the gross profit, selling and administrative expense, other operating expense, net, and impairment charge factors discussed above. Operating income as a percentage of revenues in the second quarter of 2010 was 12.6% and reflects charges totaling $1.8 million, or 0.4% of revenues, associated with profit improvement initiatives and other items. Operating income as a percentage of revenues in the second quarter of 2009 was 6.2% and reflects net charges totaling $16.0 million, or 3.6% of revenues, associated with profit improvement initiatives, the impairment credit and other items.

     The Industrial Products Group generated segment operating income and segment operating margin of $20.2 million and 7.5%, respectively, in the second quarter of 2010, compared to a segment operating loss of $6.3 million in the second quarter of 2009 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income (loss) to consolidated income (loss) before income taxes). Results in the second quarter of 2010 reflect charges totaling $3.0 million, or 1.1% of segment revenues, associated with profit improvement initiatives and other items. Results in the second quarter of 2009 reflect the net goodwill and trade name impairment credit of $3.9 million and charges totaling $16.5 million associated with profit improvement initiatives and other items. Other than the impairment credit and the lower charges for profit improvement initiatives and other items, the year over year improvement in operating income was primarily attributable to cost reductions completed over the previous twelve months and incremental profit on revenue growth.

     The Engineered Products Group generated segment operating income and segment operating margin of $36.4 million and 20.1%, respectively, in the second quarter of 2010, compared to $33.2 million and 17.9%, respectively, in the second quarter of 2009 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income (loss) to consolidated income (loss) before income taxes). Results in the second quarter of 2010 reflect a net credit associated with profit improvement initiatives and other items which improved segment operating income by $1.2 million, or 0.6% of segment revenues. Results in the second quarter of 2009 were negatively impacted by charges totaling $3.4 million, or 1.8% of segment revenues, associated with profit improvement initiatives and other items. Other than these items, performance declined slightly primarily due to volume reductions and unfavorable product mix, partially offset by cost reductions completed over the previous twelve months.

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Interest Expense

     Interest expense of $6.1 million in the second quarter of 2010 decreased $0.5 million from $6.6 million in the second quarter of 2009 due to lower average borrowings in the second quarter of 2010 compared to the second quarter of 2009, partially offset by the effect in 2010 of the pay-fixed interest rate swaps that the Company executed in the second quarter of 2009. The weighted average interest rate, including the amortization of debt issuance costs, increased to 7.3% in the second quarter of 2010 compared to 5.4% in the second quarter of 2009 due to the effect of the aforementioned pay-fixed interest rate swaps and the greater relative weight of the fixed interest rate on the Company’s 8% Senior Subordinated Notes.

Provision for Income Taxes

     The provision for income taxes was $12.6 million and the effective tax rate was 24.9% in the second quarter of 2010, compared to a credit of $6.5 million recorded in the second quarter of 2009. The benefit in the second quarter of 2009 reflects the reversal of deferred tax liabilities totaling $11.6 million associated with a portion of the net goodwill and all of the trade name impairment charges recorded in the second quarter of 2009 as described above. Deferred tax liabilities were recorded when the trade name was established and as tax deductible goodwill was amortized, a corresponding deferred tax liability was established. A portion of the goodwill for which the impairment charge was taken was not amortizable for tax purposes and, accordingly, deferred tax liabilities were not recorded when the goodwill was established and a corresponding tax benefit did not arise upon the impairment of that portion of goodwill.

Net Income Attributable to Gardner Denver

     Net income of $37.3 million and diluted earnings per share (“DEPS”) of $0.71 attributable to Gardner Denver in the second quarter of 2010 compares with net income and DEPS of $27.4 million and $0.53, respectively, in the second quarter of 2009. Results in the second quarter of 2010 include charges for profit improvement initiatives and other items totaling $1.3 million after income taxes, or $0.02 on a per diluted share basis. Results in the second quarter of 2009 reflect the net goodwill and trade name impairment credit and related deferred income tax liability reversal totaling $15.6 million after income tax ($0.30 per diluted share) and charges for profit improvement initiatives and other items totaling $13.8 million after income taxes ($0.27 per diluted share). These items increased second quarter 2009 net income by $1.8 million and DEPS by $0.03.

Performance during the Six Months Ended June 30, 2010 Compared
with the Six Months Ended June 30, 2009

Revenues

     Revenues decreased $26.8 million, or 3%, to $871.7 million in the six-month period ended June 30, 2010, compared to $898.5 million in the six-month period of 2009. This decrease was due to lower volume ($47.0 million, or 6%, in total) attributable to the global economic slowdown that reduced shippable backlog in the first quarter of 2010, partially offset by net price increases ($5.3 million, or 1%) and favorable changes in foreign currency exchange rates ($14.9 million, or 2%).

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     Revenues in the Industrial Products Group increased $10.9 million, or 2%, to $515.0 million in the six-month period of 2010, compared to $504.1 million in the six-month period of 2009. This increase reflects favorable changes in foreign currency exchange rates (2%) and price increases (1%), partially offset by lower volume (1%). The volume decline was attributable to the global economic slowdown and was realized across most product lines and geographic regions, other than Asia Pacific.

     Revenues in the Engineered Products Group decreased $37.8 million, or 10%, to $356.6 million in the six-month period of 2010, compared to $394.4 million in the six-month period of 2009. This decrease reflects lower volume (11%), partially offset by favorable changes in foreign currency exchange rates (1%). The decline in volume was attributable to the global economic slowdown and was realized across most product lines and geographic regions, other than OEM products.

Gross Profit

     Gross profit increased $14.3 million, or 5%, to $285.4 million in the six-month period ended June 30, 2010, compared to $271.1 million in the six-month period of 2009, and as a percentage of revenues was 32.7% in 2010, compared to 30.2% in 2009. The increase in gross profit primarily reflects the cost reduction projects and favorable changes in foreign currency exchange rates, partially offset by the volume reductions discussed above and unfavorable product mix. The improvement in gross profit as a percentage of revenues was due primarily to the benefits of operational improvements and cost reductions, partially offset by unfavorable product mix and the loss of volume leverage. The unfavorable product mix was primarily related to lower petroleum product volume in the first quarter, which provides a gross margin percentage above the Company average.

Selling and Administrative Expenses

     Selling and administrative expenses decreased $2.3 million, or 1%, to $179.4 million in the six-month period ended June 30, 2010, compared to $181.7 million in the six-month period of 2009. This decrease reflects cost reductions, partially offset by higher variable compensation and benefit expenses and the unfavorable effect of changes in foreign currency exchange rates ($3.2 million). As a percentage of revenues, selling and administrative expenses increased slightly to 20.6% in the six-month period of 2010 compared to 20.2% in the six-month period of 2009, primarily due to the reduced leverage resulting from lower revenues.

Other Operating Expense, Net

     Other operating expense, net, was $1.9 million in the six-month period ended June 30, 2010, compared to $28.6 million in the six-month period of 2009. The year-over-year change was due primarily to lower restructuring charges and an increase in foreign currency gains in 2010 compared to 2009, as well as an insurance settlement received in the first quarter of 2010.

Impairment Charges

     In the six-month period ended June 30, 2009, the Company recorded non-cash impairment charges of $250.7 million and $10.4 million to reduce the carrying amount of goodwill and a trade name, respectively, in its

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Industrial Products Group. See the discussion of impairment charges under results of operations for the second quarter for further information about these charges.

Operating Income (Loss)

     Operating income of $104.1 million in the six-month period ended June 30, 2010 compares to an operating loss of $200.2 million in the six-month period of 2009. These results reflect the gross profit, selling and administrative expense, other operating expense, net, and impairment charge factors discussed above. Operating income as a percentage of revenues in the six-month period of 2010 was 11.9% and reflects charges totaling $2.8 million, or 0.4% of revenues, associated with profit improvement initiatives and other items. The operating loss recorded in the six-month period of 2009 reflects the $261.1 million net goodwill and trade name impairment charge and charges totaling $28.0 million associated with profit improvement initiatives and other items.

     The Industrial Products Group generated segment operating income and segment operating margin of $39.7 million and 7.7%, respectively, in the six-month period of 2010, compared to a segment operating loss of $267.7 million in the six-month period of 2009 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income (loss) to consolidated income (loss) before income taxes). Results in the six-month period of 2010 reflect charges totaling $3.9 million, or 0.8% of segment revenues, associated with profit improvement initiatives and other items. Results in the six-month period of 2009 reflect the net goodwill and trade name impairment charge of $261.1 million and charges totaling $18.1 million associated with profit improvement initiatives and other items. Other than the charges for profit improvement initiatives, impairment and other items, the year over year improvement was primarily attributable to cost reductions completed over the previous fifteen months and incremental profit on revenue growth.

     The Engineered Products Group generated segment operating income and segment operating margin of $64.3 million and 18.0%, respectively, in the six-month period of 2010, compared to $67.5 million and 17.1%, respectively, in the six-month period of 2009 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income (loss) to consolidated income (loss) before income taxes). Results in the six-month period of 2010 reflect a net credit associated with profit improvement initiatives and other items which improved segment operating income by $1.1 million, or 0.3% of segment revenues. Results in the six-month period of 2009 were negatively impacted by charges totaling $9.9 million, or 2.5% of segment revenues, associated with profit improvement initiatives and other items. Other than these items, the decline in year over year performance was primarily attributable to volume reductions and unfavorable product mix, partially offset by cost reductions.

Interest Expense

     Interest expense of $12.2 million in the six-month period ended June 30, 2010 decreased $2.1 million from $14.3 million in the six-month period of 2009 due primarily to lower average borrowings in the six-month period of 2010, compared to the six-month period of 2009, partially offset by the effect in 2010 of the pay-fixed interest rate swaps that the Company executed in the second quarter of 2009. The weighted average interest rate, including the amortization of debt issuance costs, increased to 7.1% in the six-month period of 2010, compared to

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5.6% in the six-month period of 2009, due to the effect of the aforementioned pay-fixed interest rate swaps and the greater relative weight of the fixed interest rate on the Company’s 8% Senior Subordinated Notes.

Provision for Income Taxes

     The provision for income taxes was $22.3 million and the effective tax rate was 24.1% in the six-month period ended June 30, 2010 compared to an income tax provision of $7.4 million in the six-month period of 2009. The provision in the six-month period of 2009 reflected the reversal of deferred tax liabilities totaling $11.6 million associated with a portion of the net goodwill and all of the trade name impairment charges recorded in the second quarter of 2009. Deferred tax liabilities were recorded when the trade name was established and as tax deductible goodwill was amortized, a corresponding deferred tax liability was established. A portion of the goodwill for which the impairment charge was taken was not amortizable for tax purposes and, accordingly, deferred tax liabilities were not recorded when the goodwill was established and a corresponding tax benefit did not arise upon the impairment of that portion of goodwill. In addition, a $3.6 million credit for the reversal of an income tax reserve and the related interest associated with the completion of a foreign tax examination was recorded in the six-month period of 2009. These benefits were partially offset by an $8.6 million valuation allowance against deferred tax assets related to net operating losses recorded in connection with the acquisition of CompAir based on revised financial projections.

Net Income (Loss) Attributable to Gardner Denver

     Net income of $69.3 million and DEPS of $1.31 attributable to Gardner Denver in the six-month period ended June 30, 2010 compares with a net loss of $221.8 million, or $4.28 per diluted share, in the six-month period of 2009. Results in the six-month period of 2010 include charges for profit improvement initiatives and other items totaling $2.2 million after income taxes, or $0.04 on a per diluted share basis. Results in the six-month period of 2009 reflect the net goodwill and trade name impairment charge of $261.1 million and related $11.6 million deferred income tax liability reversal ($4.80 per diluted share, net), charges for profit improvement initiatives and other items totaling $19.5 million after income taxes ($0.39 per diluted share) and the income tax items discussed above totaling $5.1 million ($0.10 per diluted share). These items reduced net income in the six-month period of 2009 by $274.1 million, or $5.29 per diluted share.

Outlook

     In general, the Company believes that demand for products in its Industrial Products Group tends to correlate with the rate of total industrial capacity utilization and the rate of change of industrial production because compressed air is often used as a fourth utility in the manufacturing process. Capacity utilization rates above 80% have historically indicated a good demand environment for industrial equipment such as compressor and vacuum products. Over longer time periods, the Company believes that demand also tends to follow economic growth patterns indicated by the rates of change in the gross domestic product around the world. The significant contraction in manufacturing capacity utilization in the U.S. and Europe, which began in 2008, has resulted in lower demand for capital equipment, such as compressor packages, as existing equipment remained idle. The Company believes there have been recent improvements in global capacity utilization rates, which indicate a slightly more positive environment for aftermarket parts and services for industrial equipment, but that the

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improvements have not been sufficient to warrant significant capital investments by manufacturing companies in the U.S. and Europe.

     In the second quarter of 2010, orders in the Industrial Products Group increased $68.3 million, or 32%, to $281.9 million, compared to $213.6 million in the second quarter of 2009. This increase reflected on-going improvement in demand for OEM products and aftermarket parts and services on a global basis ($70.2 million, or 33%), partially offset by the unfavorable effect of changes in foreign currency exchange rates ($1.9 million, or 1%). Order backlog for the Industrial Products Group increased 10% to $213.1 million as of June 30, 2010 from $193.2 million at December 31, 2009 due primarily to the impact of orders exceeding shipments during the first six months of 2010 ($36.3 million, or 19%), partially offset by the unfavorable effect of changes in foreign currency exchange rates ($16.4 million, or 9%). Order backlog for the Industrial Products Group as of June 30, 2010 declined 4% compared to $221.6 million as of June 30, 2009, primarily due to shipments exceeding orders during the twelve-month period and unfavorable changes in foreign currency exchange rates. As a result of the Company’s expectations for a slow economic recovery, it anticipates demand for Industrial Products to continue to gradually improve, but continues to remain cautious in its outlook given the reliance on incoming orders to achieve revenue growth.

     Orders in the Engineered Products Group increased 45% to $218.4 million in the second quarter of 2010, compared to $150.8 million in the second quarter of 2009, due to increased demand for petroleum products, improving demand for aftermarket parts and services for engineered packages and continuing strong demand for OEM products ($68.5 million, or 46%), partially offset by the unfavorable effect of changes in foreign currency exchange rates ($0.9 million, or 1%). Order backlog for the Engineered Products Group increased 28% to $259.3 million as of June 30, 2010 from $202.0 million at December 31, 2009 due primarily to the impact of orders exceeding shipments during the first six months of 2010 ($70.0 million, or 34%), partially offset by the unfavorable effect of changes in foreign currency exchange rates ($12.7 million, or 6%). Order backlog for the Engineered Products Group as of June 30, 2010 increased 12% compared to $232.0 million as of June 30, 2009, primarily as a result of increased demand during the first six months of 2010, partially offset by the unfavorable effect of changes in foreign currency exchange rates. Orders for products in the Company’s Engineered Products Group have historically corresponded to demand for petrochemical products and been influenced by prices for oil and natural gas, and rig count, among other factors, which the Company cannot predict. Revenues for Engineered Products depend more on existing backlog levels than revenues for Industrial Products. Many of these products are used in process applications, such as oil and gas refining and chemical processing, which are industries that typically experience increased demand very late in economic cycles. At present, orders for products used in these applications are primarily for replacement units, aftermarket parts and services. Furthermore, the Company is uncertain whether reduced prices for natural gas will ultimately affect demand for well servicing pumps and related aftermarket parts and services. The Company’s current outlook assumes that demand for drilling pumps will not improve before the fourth quarter of 2010, but that demand for well servicing equipment will remain strong through the balance of the year, consistent with on-going development of shale formations.

     Order backlog consists of orders believed to be firm for which a customer purchase order has been received or communicated. However, since orders may be rescheduled or canceled, order backlog is not necessarily indicative of future revenue levels.

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Liquidity and Capital Resources

Operating Working Capital

     During the six-month period ended June 30, 2010, net working capital (defined as total current assets less total current liabilities) increased to $412.9 million from $395.0 million at December 31, 2009. Operating working capital (defined as accounts receivable plus inventories, less accounts payable and accrued liabilities) increased $24.7 million to $287.4 million from $262.7 million at December 31, 2009 due to reduced accrued liabilities ($26.2 million) and higher accounts receivable ($16.5 million), partially offset by higher accounts payable ($11.6 million) and lower inventory ($6.4 million). The decrease in accrued liabilities was due primarily to the effect of changes in foreign currency exchange rates and cash payments in the first quarter of 2010 for employee termination benefits. The increase in accounts receivable was due primarily to the timing of shipments within the second quarter, partially offset by the effect of changes in foreign currency exchange rates. Days sales in receivables increased to 69 at June 30, 2010 from 67 at December 31, 2009 due primarily to the timing of shipments within the second quarter, and were down from 71 days at June 30, 2009. The decrease in inventory primarily reflects the strengthening of the USD versus the EUR, partially offset by growth attributable to increases in both orders and backlog during the first half of 2010 primarily as a result of increased demand for petroleum and OEM products. Inventory turns were 5.4 in both the second quarter of 2010 and the fourth quarter of 2009, and improved from 4.9 in the second quarter of 2009.

Cash Flows

     Cash provided by operating activities of $67.6 million in the six-month period of 2010 decreased $25.4 million from $93.0 million in the comparable period of 2009. This change was primarily due to increases in accounts receivable and inventories (excluding the effect of changes in foreign currency exchange rates) in the six-month period of 2010 compared with decreases in the six-month period of 2009, partially offset by higher earnings (excluding non-cash charges for the impairment of intangible assets, depreciation and amortization and unrealized foreign currency transaction gains) and a net increase in accounts payable and accrued liabilities (excluding the effect of changes in foreign currency exchange rates) in 2010 compared to a net decrease in 2009. Cash used for operating working capital of $40.4 million in the six-month period of 2010 compares to cash generated of $18.6 million in the six-month period of 2009. Cash used by accounts receivable of $36.2 million in the six-month period of 2010 compares with cash generated of $52.5 million in the six-month period of 2009. The reduction in the amount of cash provided by accounts receivable primarily reflects the increasing revenues in 2010, compared to the prior year period. Cash used by inventories of $10.8 million in the six-month period of 2010 compares with cash generated of $39.6 million in the six-month period of 2009. The reduction in the amount of cash provided by inventories in 2010, compared to 2009, reflects increased inventory levels to support higher levels of production in response to growth in both orders and backlog, primarily for petroleum and OEM products. Cash inflows from accounts payable and accrued liabilities of $6.6 million in the six-month period of 2010 compares to outflows of $73.5 million in the six-month period of 2009. The year over year change primarily reflects higher accruals for variable compensation and benefits expense in 2010 and cash payments under the Company’s restructuring plans in 2009.

     Net cash used in investing activities of $11.2 million and $27.5 million in the six-month periods of 2010 and 2009, respectively, consisted primarily of capital expenditures on assets intended to increase operating efficiency

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and flexibility, support acquisition integration initiatives and bring new products to market. The Company currently expects capital expenditures to total approximately $35 to $40 million for the full year 2010. As a result of the Company’s application of lean principles, non-capital or less capital-intensive solutions are often utilized in process improvement initiatives and capital replacement. Capital expenditures related to environmental projects have not been significant in the past and are not expected to be significant in the foreseeable future.

     Net cash used in financing activities of $46.7 million in the six-month period of 2010 compares with $71.9 million used in the six-month period of 2009. Cash provided by operating activities was used for net repayments of short-term and long-term borrowings totaling $34.2 million in the six-month period of 2010 and $71.4 million in the six-month period of 2009. Lower debt repayments in the six-month period of 2010 compared with the six-month period of 2009 were partly attributable to the Company’s repurchase of shares of its common stock totaling $17.9 million, including shares exchanged or surrendered in connection with its stock option plans of $0.2 million, the payment of cash dividends on its common stock of $5.2 million, and the maintenance of certain cash balances to complete the acquisition of ILMVAC on July 1, 2010.

Share Repurchase Program

     In November 2008, the Company’s Board of Directors authorized a share repurchase program to acquire up to 3.0 million shares of the Company’s outstanding common stock, of which approximately 2.6 million shares remain available for repurchase as of June 30, 2010.

Liquidity

     The Company’s debt to total capital ratio (defined as total debt divided by the sum of total debt plus total stockholders’ equity) was 23.0% as of June 30, 2010 compared to 25.5% as of December 31, 2009. This decrease primarily reflects a $50.7 million net decrease in borrowings between the two dates.

     The Company’s primary cash requirements include working capital, capital expenditures, funding of employee termination and other restructuring costs, principal and interest payments on indebtedness, cash dividends on its common stock, selective acquisitions and any stock repurchases. The Company’s primary sources of funds are its ongoing net cash flows from operating activities and availability under its Revolving Line of Credit (as defined below). At June 30, 2010, the Company had cash and cash equivalents of $111.1 million, of which $2.8 million was pledged to financial institutions as collateral to support the issuance of standby letters of credit and similar instruments. The Company also had $293.9 million of unused availability under its Revolving Line of Credit at June 30, 2010. Based on the Company’s financial position at June 30, 2010 and its pro-forma results of operations for the twelve months then ended, the unused availability under its Revolving Line of Credit would not have been limited by the financial ratio covenants in the 2008 Credit Agreement (as further described below).

     On September 19, 2008, the Company entered into the 2008 Credit Agreement consisting of (i) a $310.0 million Revolving Line of Credit (the “Revolving Line of Credit”), (ii) a $180.0 million term loan (“U.S. Dollar Term Loan”) and (iii) a €120.0 million term loan (“Euro Term Loan”). In addition, the 2008 Credit Agreement provides for a possible increase in the revolving credit facility of up to $200.0 million.

     The interest rates per annum applicable to loans under the 2008 Credit Agreement are, at the Company’s option, either a base rate plus an applicable margin percentage or a Eurocurrency rate plus an applicable margin.

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The base rate is the greater of (i) the prime rate or (ii) one-half of 1% over the weighted average of rates on overnight federal funds as published by the Federal Reserve Bank of New York. The Eurocurrency rate is LIBOR.

     The initial applicable margin percentage over LIBOR under the 2008 Credit Agreement was 2.5% with respect to the term loans and 2.1% with respect to loans under the Revolving Line of Credit, and the initial applicable margin percentage over the base rate was 1.25%. After the Company’s delivery of its financial statements and compliance certificate for each fiscal quarter, the applicable margin percentages are subject to adjustments based upon the ratio of the Company’s consolidated total debt to consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (each as defined in the 2008 Credit Agreement) being within certain defined ranges. The initial margins described above continued to be in effect through June 30, 2010.

     The obligations under the 2008 Credit Agreement are guaranteed by the Company’s existing and future domestic subsidiaries. The obligations under the 2008 Credit Agreement are also secured by a pledge of the capital stock of each of the Company’s existing and future material domestic subsidiaries, as well as 65% of the capital stock of each of the Company’s existing and future first-tier material foreign subsidiaries.

     The 2008 Credit Agreement includes customary covenants. Subject to certain exceptions, these covenants restrict or limit the ability of the Company and its subsidiaries to, among other things: incur liens; engage in mergers, consolidations and sales of assets; incur additional indebtedness; pay dividends and redeem stock; make investments (including loans and advances); enter into transactions with affiliates, make capital expenditures and incur rental obligations. In addition, the 2008 Credit Agreement requires the Company to maintain compliance with certain financial ratios on a quarterly basis, including a maximum total leverage ratio test and a minimum interest coverage ratio test. As of June 30, 2010, the Company was in compliance with each of the financial ratio covenants under the 2008 Credit Agreement.

     The 2008 Credit Agreement contains customary events of default, including upon a change of control. If an event of default occurs, the lenders under the 2008 Credit Agreement will be entitled to take various actions, including the acceleration of amounts due under the 2008 Credit Agreement.

     The U.S. Dollar and Euro Term Loans have a final maturity of October 15, 2013. The U.S. Dollar Term Loan requires quarterly principal payments aggregating approximately $6.7 million, $17.5 million, $29.5 million and $40.3 million in fiscal years 2010 through 2013, respectively. The Euro Term Loan requires quarterly principal payments aggregating approximately €4.3 million, €11.2 million, €19.0 million and €25.8 million in fiscal years 2010 through 2013, respectively.

     The Revolving Line of Credit also matures on October 15, 2013. Loans under this facility may be denominated in USD or several foreign currencies and may be borrowed by the Company or two of its foreign subsidiaries as outlined in the 2008 Credit Agreement.

     The Company issued $125.0 million of 8% Senior Subordinated Notes (the “Notes”) in 2005. The Notes have a fixed annual interest rate of 8% and are guaranteed by certain of the Company’s domestic subsidiaries (the “Guarantors”). The Company may redeem all or a part of the Notes issued under the Indenture among the Company, the Guarantors and The Bank of New York Trust Company, N.A. (the “Indenture”) at varying redemption prices, plus accrued and unpaid interest. The Company may also repurchase Notes from time to time in open market purchases or privately negotiated transactions. Upon a change of control, as defined in the Indenture, the Company is required to offer to purchase all of the Notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest. The Indenture contains events of default and affirmative,

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negative and financial covenants customary for such financings, including, among other things, limits on incurring additional debt and restricted payments.

     Management currently expects that the Company’s cash on hand and future cash flows from operating activities will be sufficient to fund its working capital, capital expenditures, funding of employee termination and other restructuring costs, scheduled principal and interest payments on indebtedness, cash dividends on its common stock and any stock repurchases for at least the next twelve months. The Company continues to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. In the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.

Contractual Obligations and Commitments

     The following table and accompanying disclosures summarize the Company’s significant contractual obligations at June 30, 2010 and the effect such obligations are expected to have on its liquidity and cash flow in future periods.

			Payments Due by Period
(Dollars in millions)			Balance						After
Contractual Cash Obligations	Total		of 2010		2011 – 2012		2013 – 2014		2014
Debt	$	306.2	$	18.7	$	87.0	$	197.6	$	2.9
Estimated interest payments (1)		61.6		9.6		34.0		10.7		7.3
Capital leases		7.6		0.6		1.3		0.5		5.2
Operating leases		84.1		12.9		34.3		16.0		20.9
Purchase obligations (2)		181.1		170.9		9.5		0.7		—
Total	$	640.6	$	212.7	$	166.1	$	225.5	$	36.3

(1)

Estimated interest payments for long-term debt were calculated as follows: for fixed-rate debt and term debt, interest was calculated based on applicable rates and payment dates; for variable-rate debt and/or non-term debt, interest rates and payment dates were estimated based on management’s determination of the most likely scenarios for each relevant debt instrument.

(2)

Purchase obligations consist primarily of agreements to purchase inventory or services made in the normal course of business to meet operational requirements. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which the Company is contractually obligated as of June 30, 2010. For this reason, these amounts will not provide a complete and reliable indicator of the Company’s expected future cash outflows.

     The above table does not include the Company’s total pension and other postretirement benefit liabilities and net deferred income tax liabilities recognized on the consolidated balance sheet as of June 30, 2010 because such liabilities, due to their nature, do not represent expected liquidity needs. There have not been material changes to such liabilities or the Company’s minimum pension funding obligations other than as disclosed in Note 6 “Pension and Other Postretirement Benefits” and Note 12 “Income Taxes” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q. Also please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

     In the normal course of business, the Company or its subsidiaries may sometimes be required to provide surety bonds, standby letters of credit or similar instruments to guarantee its performance of contractual or legal

44

obligations. As of June 30, 2010, the Company had $61.3 million in such instruments outstanding and had pledged $2.8 million of cash to the issuing financial institutions as collateral for such instruments.

Contingencies

     Refer to Note 14 “Contingencies” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for a description of various legal proceedings, lawsuits and administrative actions.

New Accounting Standards

     Refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for a description of new accounting pronouncements, including the expected impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Critical Accounting Policies and Estimates

     Management has evaluated the accounting policies used in the preparation of the Company’s condensed financial statements and related notes and believes those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving management judgments and estimates may be found in the Company’s 2009 Annual Report on Form 10-K, filed on February 26, 2010, in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis and in Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements.” There were no significant changes to the Company’s critical accounting polices during the quarter ended June 30, 2010.

Cautionary Statement Regarding Forward-Looking Statements

     All of the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” other than historical facts, are forward-looking statements, including, without limitation, the statements made under the caption “Outlook.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words “could,” “anticipate,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative thereof or variations thereon, and similar expressions identify forward-looking statements.

     The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the

45

control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.

     These risks, uncertainties and other factors include, but are not limited to: (1) the Company’s exposure to the risks associated with weak global economic growth, which may negatively impact its revenues, liquidity, suppliers and customers; (2) exposure to economic downturns and market cycles, particularly the level of oil and natural gas prices and oil and natural gas drilling production, which affect demand for the Company’s petroleum products, and industrial production and manufacturing capacity utilization rates, which affect demand for the Company’s industrial products; (3) the risks associated with intense competition in the Company’s market segments, particularly the pricing of the Company’s products; (4) the risks that the Company will not realize the expected financial and other benefits from the acquisition of CompAir and restructuring actions; (5) the risks of large or rapid increases in raw material costs or substantial decreases in their availability, and the Company’s dependence on particular suppliers, particularly iron casting and other metal suppliers; (6) economic, political and other risks associated with the Company’s international sales and operations, including changes in currency exchange rates (primarily between the USD, the EUR, the GBP and the CNY); (7) the risk of non-compliance with U.S. and foreign laws and regulations applicable to the Company’s international operations, including the U.S. Foreign Corrupt Practices Act and other similar laws; (8) the risks associated with the potential loss of key customers for petroleum products and the potential resulting negative impact on the Company’s profitability and cash flows; (9) the risks associated with potential product liability and warranty claims due to the nature of the Company’s products; (10) the risk of possible future charges if the Company determines that the value of goodwill and other intangible assets, representing a significant portion of the Company’s total assets, are impaired; (11) the ability to attract and retain quality executive management and other key personnel; (12) risks associated with the Company’s indebtedness and changes in the availability or costs of new financing to support the Company’s operations and future investments; (13) the ability to continue to identify and complete strategic acquisitions and effectively integrate such acquired companies to achieve desired financial benefits; (14) changes in discount rates used for actuarial assumptions in pension and other postretirement obligation and expense calculations and market performance of pension plan assets; (15) the risks associated with environmental compliance costs and liabilities, including the compliance costs and liabilities of future climate change regulations; (16) the risk that communication or information systems failure may disrupt the Company’s business and result in financial loss and liability to its customers; (17) the risks associated with pending asbestos and silica personal injury lawsuits; (18) the risks associated with enforcing the Company’s intellectual property rights and defending against potential intellectual property claims; and (19) the ability to avoid employee work stoppages and other labor difficulties. The foregoing factors should not be construed as exhaustive and should be read together with important information regarding risks and factors that may affect the Company’s future performance set forth under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

     These statements reflect the current views and assumptions of management with respect to future events. 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. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The Company is exposed to certain market risks during the normal course of business arising from adverse changes in commodity prices, interest rates, and foreign currency exchange rates. The Company’s exposure to these risks is managed through a combination of operating and financing activities. The Company selectively uses derivatives, including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in commodity prices, interest rates, and foreign currency exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

     Notional transaction amounts and fair values for the Company’s outstanding derivatives, by risk category and instrument type, as of June 30, 2010, are summarized in Note 11 “Hedging Activities and Fair Value Measurements” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q.

Commodity Price Risk

     The Company is a purchaser of certain commodities, principally aluminum. In addition, the Company is a purchaser of components and parts containing various commodities, including cast iron, aluminum, copper, and steel. The Company generally buys these commodities and components based upon market prices that are established with the vendor as part of the purchase process. The Company does not use commodity derivatives to hedge commodity prices.

     The Company has long-term contracts with some of its suppliers of key components. However, to the extent that commodity prices increase and the Company does not have firm pricing from its suppliers, or its suppliers are not able to honor such prices, the Company may experience margin declines to the extent it is not able to increase selling prices of its products.

Interest Rate Risk

     The Company’s exposure to interest rate risk results primarily from its borrowings of $313.8 million at June 30, 2010. The Company manages its exposure to interest rate risk by maintaining a mixture of fixed and variable rate debt and, from time to time, uses pay-fixed interest rate swaps as cash flow hedges of variable rate debt in order to adjust the relative proportions of fixed and variable rate debt. The interest rates on approximately 66% of the Company’s borrowings were effectively fixed as of June 30, 2010. If the relevant LIBOR-based interest rates for all of the Company’s borrowings had been 100 basis points higher than actual in the six-month period of 2010, the Company’s interest expense would have increased by $0.6 million.

Exchange Rate Risk

     A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the U.S. in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business

47

primarily in their local currencies, which are also their functional currencies. Other than the USD, the EUR, GBP, and CNY are the principal currencies in which the Company and its subsidiaries transact.

     The Company is exposed to the impacts of changes in foreign currency exchange rates on the translation of its non-U.S. subsidiaries’ net assets and earnings into USD. The Company partially offsets these exposures by having certain of its non-U.S. subsidiaries act as the obligor on a portion of its borrowings and by denominating such borrowings, as well as a portion of the borrowings for which the Company is the obligor, in currencies other than the USD. Of the Company’s total net assets of $1,048.2 million at June 30, 2010, approximately $860.0 million was denominated in currencies other than the USD. Borrowings by the Company’s non-U.S. subsidiaries at June 30, 2010 totaled $20.6 million, and the Company’s consolidated borrowings denominated in currencies other than the USD totaled $94.3 million. Fluctuations due to changes in foreign currency exchange rates in the value of non-USD borrowings that have been designated as hedges of the Company’s net investment in foreign operations are included in other comprehensive income.

     The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances monthly. The Company also selectively uses forward currency contracts to manage this risk. At June 30, 2010, the notional amount of open forward currency contracts was $104.8 million and their aggregate fair value was an asset of $1.0 million.

     To illustrate the impact of foreign currency exchange rates on the Company’s financial results, the Company’s operating income for the six-month period of 2010 would have decreased by approximately $6.6 million if the USD had been 10 percent more valuable than actual relative to other currencies. This calculation assumes that all currencies change in the same direction and proportion to the USD and that there are no indirect effects of the change in the value of the USD such as changes in non-USD sales volumes or prices.

Item 4. Controls and Procedures

     The Company’s management carried out an evaluation (as required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), with the participation of the President and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, the President and Chief Executive Officer and Executive Vice President, Finance and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to the Company and its consolidated subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

     In addition, the Company’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of the President and Chief Executive Officer and the Executive Vice

48

President, Finance and Chief Financial Officer, of changes in the Company’s internal control over financial reporting. Based on this evaluation, the President and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer concluded that there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2010 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     The Company is a party to various legal proceedings and administrative actions. The information regarding these proceedings and actions is included under Note 14 “Contingencies” to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

     For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see (i) the risk factors discussion provided under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and (ii) the “Cautionary Statement Regarding Forward-Looking Statements” included in Part I, Item 2 of this Quarterly Report on Form 10-Q, which are incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Repurchases of equity securities during the three months ended June 30, 2010 are listed in the following table.

					Total Number of		Maximum Number
					Shares Purchased		of Shares that May
	Total Number				as Part of Publicly		Yet Be Purchased
	of Shares		Average Price		Announced Plans		Under the Plans or
Period	Purchased (1)		Paid per Share (2)		or Programs (3)		Programs (3)
April 1, 2010 – April 30, 2010		—		n/a		—		2,805,000
May 1, 2010 – May 31, 2010		—		n/a		—		2,805,000
June 1, 2010 – June 30, 2010		189,632	$	47.58		188,013		2,616,987
Total		189,632	$	47.58		188,013		2,616,987

(1)	Includes 1,619 shares withheld to pay the tax obligation with respect to previously issued restricted stock unit awards under Gardner Denver’s Amended and Restated Long-Term Incentive Plan.
(2)	Excludes commissions.
(3)	In November 2008, the Board of Directors authorized the Company to acquire up to 3.0 million shares of its common stock. As of June 30, 2010, 383,013 shares had been repurchased under this repurchase program.

Item 6. Exhibits

     See the list of exhibits in the Index to Exhibits to this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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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. (Registrant)
Date: August 5, 2010	By:	/s/ Barry L. Pennypacker
		Barry L. Pennypacker
		President and Chief Executive Officer
Date: August 5, 2010	By:	/s/ Helen W. Cornell
		Helen W. Cornell
		Executive Vice President, Finance and Chief Financial Officer
Date: August 5, 2010	By:	/s/ David J. Antoniuk
		David J. Antoniuk
		Vice President and Corporate Controller (Principal Accounting Officer)

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GARDNER DENVER, INC.

INDEX TO EXHIBITS

Exhibit
No.	Description
3.1	Certificate of Incorporation of Gardner Denver, Inc., as amended on May 3, 2006, filed as Exhibit 3.1 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed May 3, 2006, and incorporated herein by reference.
3.2	Amended and Restated Bylaws of Gardner Denver, Inc., filed as Exhibit 3.2 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed August 4, 2008, and incorporated herein by reference.
4.1	Amended and Restated Rights Agreement, dated as of January 17, 2005, between Gardner Denver, Inc. and National City Bank as Rights Agent, filed as Exhibit 4.1 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed January 21, 2005, and incorporated herein by reference.
4.2	Amendment No. 1 to the Amended and Restated Rights Agreement, dated as of October 29, 2009, between Gardner Denver, Inc. and Wells Fargo Bank, National Association as Rights Agent, filed as Exhibit 4.2 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed October 29, 2009, and incorporated herein by reference.
4.3	Form of Indenture by and among Gardner Denver, Inc., the Guarantors and The Bank of New York Trust Company, N.A., as trustee, filed as Exhibit 4.1 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed May 4, 2005, and incorporated herein by reference.
10.1*	Gardner Denver, Inc. Executive Annual Bonus Plan, filed as Appendix A to Gardner Denver’s proxy statement on Schedule 14A relating to the 2010 Annual Meeting of Stockholders of Gardner Denver, filed on March 17, 2010, and incorporated herein by reference.
31.1**	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1***	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2***	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS§	XBRL Instance Document
101.SCH§	XBRL Taxonomy Extension Schema Document
101.CAL§	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB§	XBRL Taxonomy Extension Label Linkbase Document

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Exhibit
No.	Description
101.PRE§	XBRL Taxonomy Extension Presentation Linkbase Document

*	Management contract or compensatory plan or arrangement.
**	Filed herewith.
***	This exhibit is furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
§	These exhibits are furnished herewith. In accordance with Rule 406T of Regulation S-T, these exhibits are not deemed to be filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are not deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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EX-31.1

Exhibit 31.1

CEO Form 10-Q Certification

I, Barry L. Pennypacker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gardner Denver, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2010	/s/ Barry L. Pennypacker
	Barry L. Pennypacker
	President and Chief Executive Officer Gardner Denver, Inc.

EX-31.2

Exhibit 31.2

CFO Form 10-Q Certification

I, Helen W. Cornell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gardner Denver, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2010	/s/ Helen W. Cornell
	Helen W. Cornell
	Executive Vice President, Finance and Chief Financial Officer Gardner Denver, Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gardner Denver, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Barry L. Pennypacker, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, that:

(1) The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry L. Pennypacker  

Barry L. Pennypacker 

President and Chief Executive Officer
Gardner Denver, Inc.
August 5, 2010 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gardner Denver, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Helen W. Cornell, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, that:

(1) The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Helen W. Cornell  

Helen W. Cornell 

Executive Vice President, Finance and
Chief Financial Officer
Gardner Denver, Inc.
August 5, 2010 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.