-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I/ClZYtOOJANtnDfDmASuzovtu5m52WFAqDjuio862TAvIhdANM88rEXuK308EgN wva7lXzs6yW6Z9lOFT0hKQ== /in/edgar/work/20000811/0001068800-00-000313/0001068800-00-000313.txt : 20000921 0001068800-00-000313.hdr.sgml : 20000921 ACCESSION NUMBER: 0001068800-00-000313 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARDNER DENVER INC CENTRAL INDEX KEY: 0000916459 STANDARD INDUSTRIAL CLASSIFICATION: [3560 ] IRS NUMBER: 760419383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13215 FILM NUMBER: 694250 BUSINESS ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172225400 MAIL ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 FORMER COMPANY: FORMER CONFORMED NAME: GARDNER DENVER MACHINERY INC DATE OF NAME CHANGE: 19931221 10-Q 1 0001.txt GARDNER DENVER, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13215 GARDNER DENVER, INC. (Exact name of Registrant as Specified in its Charter) DELAWARE 76-0419383 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1800 GARDNER EXPRESSWAY QUINCY, ILLINOIS 62301 (Address of Principal Executive Offices and Zip Code) (217) 222-5400 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No ------ ------ Number of shares outstanding of the issuer's Common Stock, par value $.01 per share, as of July 31, 2000: 15,316,013 shares. ============================================================================ PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. GARDNER DENVER, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ----------------------- 2000 1999 2000 1999 ------- ------- -------- -------- Revenues $93,963 $85,410 $182,266 $155,634 Costs and Expenses: Cost of sales (excluding depreciation and amortization) 65,241 56,726 126,519 105,086 Depreciation and amortization 4,031 3,391 7,922 6,910 Selling and administrative expenses 15,285 13,967 30,748 25,765 Interest expense 1,959 1,469 3,775 2,676 Other (income)/expense, net (62) 103 (590) 226 ------- ------- -------- -------- Income before income taxes 7,509 9,754 13,892 14,971 Provision for income taxes 2,861 3,765 5,293 5,779 ------- ------- -------- -------- Net income $ 4,648 $ 5,989 $ 8,599 $ 9,192 ======= ======= ======== ======== Basic earnings per share $ 0.30 $ 0.40 $ 0.56 $ 0.61 ======= ======= ======== ======== Diluted earnings per share $ 0.30 $ 0.39 $ 0.56 $ 0.60 ======= ======= ======== ======== The accompanying notes are an integral part of this statement.
- 2 - GARDNER DENVER, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share amounts)
(UNAUDITED) JUNE 30, DECEMBER 31, 2000 1999 ----------- ------------ ASSETS Current assets: Cash and equivalents $ 20,318 $ 27,317 Receivables, net 79,526 72,272 Inventories, net 62,157 60,356 Deferred income taxes 4,759 3,664 Other 3,049 2,770 -------- -------- Total current assets 169,809 166,379 -------- -------- Property, plant and equipment, net 63,687 62,892 Intangibles, net 140,920 138,584 Deferred income taxes 5,318 6,151 Other assets 5,182 5,413 -------- -------- Total assets $384,916 $379,419 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings and current maturities of long-term debt $ 5,295 $ 5,289 Accounts payable and accrued liabilities 57,836 54,320 -------- -------- Total current liabilities 63,131 59,609 -------- -------- Long-term debt, less current maturities 109,286 114,200 Postretirement benefits other than pensions 41,547 43,377 Other long-term liabilities 9,675 9,624 -------- -------- Total liabilities 223,639 226,810 -------- -------- Stockholders' equity: Common stock, $.01 par value; 50,000,000 shares authorized; 15,306,269 shares issued and outstanding at June 30, 2000 169 167 Capital in excess of par value 159,088 157,367 Treasury stock at cost, 1,643,551 shares at June 30, 2000 (24,251) (23,541) Retained earnings 29,953 21,354 Accumulated other comprehensive loss (3,682) (2,738) -------- -------- Total stockholders' equity 161,277 152,609 -------- -------- Total liabilities and stockholders' equity $384,916 $379,419 ======== ======== The accompanying notes are an integral part of this statement.
- 3 - GARDNER DENVER, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (Unaudited)
SIX MONTHS ENDED JUNE 30, ----------------------- 2000 1999 -------- -------- Cash flows from operating activities: Net income $ 8,599 $ 9,192 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,922 6,910 Net gain on asset dispositions (851) --- Stock issued for employee benefit plans 916 981 Deferred income taxes 206 3,102 Changes in assets and liabilities: Receivables (6,978) 845 Inventories (733) (2,700) Accounts payable and accrued liabilities 974 (10,422) Other assets and liabilities, net (1,845) (2,682) -------- -------- Net cash provided by operating activities 8,210 5,226 -------- -------- Cash flows from investing activities: Business acquisitions, net of cash acquired (9,261) (17,014) Foreign currency hedging transactions 3,261 2,424 Capital expenditures (5,051) (6,261) Disposals of plant and equipment 909 581 -------- -------- Net cash used for investing activities (10,142) (20,270) -------- -------- Cash flows from financing activities: Principal payments on long-term debt (16,187) (16,163) Proceeds from long-term borrowings 12,000 37,940 Proceeds from stock options 807 529 Purchase of treasury stock (710) (10,954) -------- -------- Net cash (used)/provided by financing activities (4,090) 11,352 -------- -------- Effect of exchange rate changes on cash and equivalents (977) (850) -------- -------- Decrease in cash and equivalents (6,999) (4,542) -------- -------- Cash and equivalents, beginning of period 27,317 24,474 -------- -------- Cash and equivalents, end of period $ 20,318 $ 19,932 ======== ======== The accompanying notes are an integral part of this statement.
- 4 - NOTES TO CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share data) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Basis of Presentation. The accompanying condensed financial statements include the accounts of Gardner Denver, Inc. ("Gardner Denver" or the "Company") and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. Investments in entities in which the Company has twenty to fifty percent ownership are accounted for by the equity method. The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in Gardner Denver's Annual Report on Form 10-K for the year ended December 31, 1999. The results of operations for the six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the full year. NOTE 2. RECENT ACQUISITIONS. Effective January 1, 2000, the Company acquired substantially all of the assets and assumed certain agreed upon liabilities of Invincible Airflow Systems, Co. ("Invincible"). Invincible, located in Baltic, Ohio, manufactures single and fabricated multistage centrifugal blowers. During 1999, the Company completed three acquisitions. On October 25, 1999, the Company purchased 100% of the issued and outstanding stock of Air Relief, Inc. ("Air Relief"), located in Mayfield, Kentucky. On April 5, 1999, the Company purchased 100% of the issued and outstanding stock of Butterworth Jetting Systems, Inc. ("Butterworth"), located in Houston, Texas. On April 1, 1999, the Company purchased 100% of the issued and outstanding stock of Allen-Stuart Equipment Co., Inc. ("Allen-Stuart"), also located in Houston, Texas. All acquisitions have been accounted for by the purchase method, and accordingly, their results are included in the Company's consolidated financial statements from the respective dates of acquisition. Under the purchase method, the purchase price is allocated based on the fair value of assets received and liabilities assumed as of the acquisition date. The purchase price allocations for Invincible and Air Relief, used in preparation of the June 30, 2000 consolidated balance sheet, are preliminary and subject to adjustment when finalized. - 5 - As a result of the stability of the product technology, markets and customers associated with these acquisitions, the cost in excess of net assets acquired for each acquisition is being amortized over 40 years using the straight-line method. NOTE 3. EARNINGS PER SHARE. The following table details the calculation of basic and diluted earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Basic EPS: Net income $ 4,648 $ 5,989 $ 8,599 $ 9,192 ======= ======= ======= ======= Shares Weighted average number of common shares outstanding 15,310 14,895 15,261 15,070 ======= ======= ======= ======= Basic earnings per common share $ 0.30 $ 0.40 $ 0.56 $ 0.61 ======= ======= ======= ======= Diluted EPS: Net income $ 4,648 $ 5,989 $ 8,599 $ 9,192 ======= ======= ======= ======= Shares Weighted average number of common shares outstanding 15,310 14,895 15,261 15,070 Assuming conversion of dilutive stock options issued and outstanding 199 386 225 361 ------- ------- ------- ------- Weighted average number of common shares outstanding, as adjusted 15,509 15,281 15,486 15,431 ======= ======= ======= ======= Diluted earnings per common share $ 0.30 $ 0.39 $ 0.56 $ 0.60 ======= ======= ======= =======
- 6 - NOTE 4. INVENTORIES.
JUNE 30, DECEMBER 31, 2000 1999 -------- ------------ Raw materials, including parts and subassemblies $39,289 $37,597 Work-in-process 10,142 9,395 Finished goods 25,935 25,543 Perishable tooling and supplies 2,506 2,506 ------- ------- 77,872 75,041 Excess of current standard costs over LIFO costs (6,767) (6,455) Allowance for obsolete and slow- moving inventory (8,948) (8,230) ------- ------- Inventories, net $62,157 $60,356 ======= =======
NOTE 6. COMPREHENSIVE INCOME. For the three months ended June 30, 2000 and 1999, comprehensive income was $4.5 million and $4.9 million, respectively. For the six months ended June 30, 2000 and 1999, comprehensive income was $7.7 million and $8.3 million, respectively. Items impacting the Company's comprehensive income, but not included in net income, consist of foreign currency translation adjustments. NOTE 7. CASH FLOW INFORMATION. In the first six months of 2000 and 1999, the Company paid $2.1 million and $5.4 million, respectively, to the various taxing authorities for income taxes. Interest paid for the first six months of 2000 and 1999, totaled $4.2 million and $2.7 million respectively. NOTE 8. SEGMENT INFORMATION.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ----------------------- 2000 1999 2000 1999 ------- ------- -------- -------- Revenues: Compressed Air Products $80,976 $78,960 $158,678 $142,550 Petroleum Products 12,987 6,450 23,588 13,084 ------- ------- -------- -------- Total $93,963 $85,410 $182,266 $155,634 ======= ======= ======== ======== Operating Earnings: Compressed Air Products $ 8,947 $11,682 $ 16,375 $ 18,261 Petroleum Products 1,067 202 1,913 600 ------- ------- -------- -------- Total 10,014 11,884 18,288 18,861 Interest expense 1,959 1,469 3,775 2,676 General corporate 546 661 621 1,214 ------- ------- -------- -------- Income before income taxes $ 7,509 $ 9,754 $ 13,892 $ 14,971 ======= ======= ======== ========
- 7 - NOTE 8. SUBSEQUENT EVENT. Effective July 1, 2000, the Company acquired 100% of the stock of CRS Power Flow, Inc. ("CRS"). CRS, located in Houston, Texas, manufactures aftermarket products for the water jetting industry. This acquisition will be accounted for by the purchase method and accordingly, the results of its operations will be included in the Company's consolidated financial statements from the date of acquisition. - 8 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS. PERFORMANCE IN THE QUARTER ENDED JUNE 30, 2000 COMPARED WITH THE QUARTER ENDED JUNE 30, 1999 Revenues Revenues increased $8.6 million (10%) to $94.0 million for the three months ended June 30, 2000, compared to the same period of 1999. Excluding incremental revenue from acquisitions, revenues increased $3.5 million (4%) over the same period of 1999. See Note 2 to the Financial Statements for further information on the Company's recent acquisitions. For the three months ended June 30, 2000, revenues for the Compressed Air Products segment increased $2.0 million (3%) to $81.0 million compared to the same period of 1999. Excluding incremental revenue from acquisitions, compressed air product revenues declined $3.1 million (4%) due to unfavorable foreign currency translation and dampened economic activity resulting from actions taken by the Federal Reserve to increase interest rates. Petroleum Products segment revenues increased $6.5 million (101%) to $13.0 million for the three months ended June 30, 2000, compared to the same period of 1999. This increase resulted from heightened demand for petroleum products, primarily well stimulation pumps, due to higher oil prices. Costs and Expenses Gross margin (defined as sales less cost of sales excluding depreciation and amortization) was $28.7 million for both three-month periods ended June 30, 2000 and 1999. Gross margin as a percentage of revenues (gross margin percentage) decreased to 30.6% in the three-month period of 2000 from 33.6% in the same period of 1999. This reduction in the gross margin percentage was due to a significantly unfavorable sales mix (including lower parts/aftermarket sales of compressed air products), increased manufacturing overhead spending and deleverage on the lower volume in the base compressed air products segment. Depreciation and amortization increased 19% to $4.0 million in the three-month period ended June 30, 2000, compared with $3.4 million for the same period of 1999. This increase was due to goodwill amortization associated with acquisitions and ongoing capital expenditures. Due to these factors, depreciation and amortization as a percentage of revenues also increased to 4.3% in the second quarter of 2000 from 4.0% in the same period of 1999. Selling and administrative expenses increased in the second quarter of 2000 by 9% to $15.3 million from $14.0 million in the same period of 1999. Excluding incremental expenses from acquisitions, selling and administrative expenses increased $0.5 million (4%), which was primarily the result of higher commissions, payroll related expenses and increased spending on customer service initiatives. Selling and administrative expenses as a percentage of revenues improved slightly to 16.3% in the second quarter of 2000 compared to 16.4% in 1999 due to higher revenues. - 9 - The Compressed Air Products segment generated operating margins (defined as revenues, less cost of sales, depreciation and amortization, and selling and administrative expenses excluding unallocated corporate administrative expenses) of 11.0% for the three-month period ended June 30, 2000, a decrease from 14.8% for the same period of 1999. This decline is primarily due to the unfavorable sales mix referred to above, increased manufacturing overhead and selling and administrative expenses and deleverage on the lower volume in the base compressed air products business. The Petroleum Products segment generated operating margins of 8.2% for the three-month period ended June 30, 2000, compared to 3.1% for the same period in 1999. This increase is primarily attributable to the positive impact of increased leverage of the segment's fixed and semi- fixed costs over a higher revenue base and improved manufacturing efficiencies. Interest expense increased $0.5 million (33%) to $2.0 million for the three months ended June 30, 2000, as a result of higher average borrowings and interest rates. The average interest rate for second quarter of 2000 was 6.5%, compared to 6.0% for the same period of 1999. Income before income taxes declined $2.2 million (23%) to $7.5 million for the three months ended June 30, 2000, compared to the same period of 1999, primarily due to the lower gross margin percentage discussed above. Higher levels of depreciation and amortization, interest expense and selling and administrative expenses also contributed to the decline. The provision for income taxes decreased by $0.9 million to $2.9 million for the second quarter of 2000 compared to $3.8 million for the same period in 1999, as a result of the lower income before taxes and a lower overall effective tax rate. The Company's effective tax rate for the three months ended June 30, 2000 was 38.1%, compared to 38.6% in the prior year period. Net income for the three months ended June 30, 2000 declined $1.3 million (22%) to $4.6 million ($0.30 diluted earnings per share), compared to $6.0 million ($0.39 diluted earnings per share) for the same period of 1999. This decrease in net income is attributable to the same factors that resulted in decreased income before taxes noted above. PERFORMANCE IN THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1999 Revenues Revenues increased $26.6 million (17%) to $182.2 million for the six months ended June 30, 2000, compared to the same period of 1999. Excluding incremental revenue from acquisitions, revenues increased $9.1 million (6%) over the same period of 1999. See Note 2 to the Financial Statements for further information on the Company's recent acquisitions. For the six months ended June 30, 2000, revenues for the Compressed Air Products segment increased $16.1 million (11%) to $158.7 million compared to the same period of 1999. Excluding incremental revenue - 10 - from acquisitions, compressed air product revenues decreased $1.4 million (1%) primarily due to unfavorable foreign currency translation. Petroleum Products segment revenues increased $10.5 million (80%) to $23.6 million for the six months ended June 30, 2000, compared to the same period of 1999, as a result of heightened demand due to higher oil prices. Costs and Expenses Gross margin (defined as sales less cost of sales excluding depreciation and amortization) for the six months ended June 30, 2000 increased $5.2 million (10%) to $55.7 million from $50.5 million in the same period of 1999. Gross margin as a percentage of revenues (gross margin percentage) decreased to 30.6% in the six-month period of 2000 from 32.5% in the same period of 1999. This reduction in the gross margin percentage was principally attributable to an unfavorable sales mix, increased manufacturing overhead spending and deleverage on the lower volume in the base compressed air products segment. Depreciation and amortization increased 15% to $7.9 million in the first six months of 2000, compared with $6.9 million for the same period of 1999. The increase in depreciation and amortization expense was due to goodwill amortization associated with acquisitions and ongoing capital expenditures. For both six-month periods, depreciation and amortization expense as a percentage of revenues was 4.4%. Selling and administrative expenses increased in the first six months of 2000 by 19% to $30.7 million from $25.8 million in the same period of 1999. Excluding incremental expenses from acquisitions, selling and administrative expenses increased $2.3 million (9%), which was primarily the result of higher commissions, payroll related expenses and customer service initiatives. Due to these factors, selling and administrative expenses as a percentage of revenues also increased to 16.9% in the six months of 2000 compared to 16.6% in 1999. The change in other (income)/expense, net is primarily due to a gain recorded from the sale of the Company's idle facility in Syracuse, New York. The Compressed Air Products segment generated operating margins (defined as revenues, less cost of sales, depreciation and amortization, and selling and administrative expenses excluding unallocated corporate administrative expenses) of 10.3% for the six-month period ended June 30, 2000, a decrease from 12.8% for the six-month period of 1999. This decline is due to an unfavorable sales mix, increased manufacturing overhead spending and deleverage on the lower volume in the base compressed air products segment combined with increased commission, payroll and customer service related expenses. The Petroleum Products segment generated operating margins of 8.1% for the six-month period ended June 30, 2000, compared to 4.6% for the same period in 1999. This increase is primarily attributable to the positive impact of increased leverage of the segment's fixed and semi-fixed costs over a higher revenue base and improved manufacturing efficiencies. - 11 - Interest expense increased $1.1 million (41%) to $3.8 million for the six-month period ended June 30, 2000, as a result of higher average borrowings and average interest rates. The average interest rate for the first half of 2000 was 6.2%, compared to 5.8% for the same period of 1999. Income before income taxes declined $1.1 million (7%) to $13.9 million for the six months ended June 30, 2000, compared to the same period of 1999, primarily due to the lower gross margin percentage discussed above. Higher levels of depreciation and amortization, interest expense and selling and administrative expenses also contributed to the decline. These negative factors were partially offset by the gain on the sale of the Syracuse property. The provision for income taxes decreased by $0.5 million to $5.3 million for the first six months of 2000 compared to $5.8 million for the same period of 1999, as a result of the lower income before taxes and a lower overall effective tax rate. The Company's effective tax rate for the six months ended June 30, 2000 was 38.1%, compared to 38.6% in the prior year period. Net income for the six months ended June 30, 2000 decreased $0.6 million (6%) to $8.6 million ($0.56 diluted earnings per share), compared to $9.2 million ($0.60 diluted earnings per share) for the same period of 1999. This decrease in net income is attributable to the same factors that resulted in decreased income before taxes noted above. Outlook Demand for petroleum products is related to market expectations for oil and natural gas prices. Orders for petroleum products were $15.0 million in the second quarter of 2000, an increase of $6.2 million compared to the same period of 1999. For the first six months of 2000, petroleum product orders were $28.6 million, an increase of $18.5 million compared to the same period of 1999. Compared to June 30, 1999, backlog for this business segment increased $8.0 million to $11.6 million on June 30, 2000. These increases are primarily the result of market recovery from the depressed level of demand during the first half of 1999 due to the substantial decline in the prices of oil and natural gas in 1998 and early 1999. Demand for these products are dependent upon oil and natural gas prices, which the Company cannot predict. However, the price of oil increased significantly in late 1999 and during the first half of 2000, and the Company has experienced appreciable improvement in orders for well servicing and drilling pumps. The Company believes that if oil and natural gas prices remain near current levels, and day rates and the rig count continue to increase, demand for well servicing pumps may continue to improve during the second half of 2000 and increased drilling pump revenues may occur by the fourth quarter of 2000. In general, demand for compressed air products follows the rate of manufacturing capacity utilization and the rate of change of industrial production because air is often used as a fourth utility in the manufacturing process. Over longer time periods, demand also follows the economic growth patterns indicated by the rates of change in the Gross Domestic Product. In the second quarter of 2000, orders for compressed air products were $74.8 million, including $5.1 million from acquisitions, compared to $77.3 million in the same period of 1999. For the first six months of 2000, orders for compressed air products, including $17.0 million from acquisitions, were $154.5 million, compared to $142.6 million in the same period of 1999. Order backlog for compressed air products, including $0.8 million from acquisitions, was $44.2 million - 12 - as of June 30, 2000, compared to $50.7 million as of June 30, 1999. Adjusted for acquisitions, the decline in both orders and backlog for the compressed air products segment is a result of actions taken by the Federal Reserve in late 1999 and early 2000 to increase interest rates and dampen U.S economic activity, which have had a significantly negative impact on the sectors of the manufacturing economy served by this segment. The Company believes these depressed order and sales levels should not continue much beyond the third quarter of this year. LIQUIDITY AND CAPITAL RESOURCES Operating Working Capital During the six months ended June 30, 2000, operating working capital (defined as receivables plus inventories, less accounts payable and accrued liabilities) increased $5.5 million with acquisitions representing $1.4 million of this increase. Excluding acquisitions, the remaining increase in operating working capital was primarily related to an increase in receivables due to the timing of shipments and collections in the second quarter. Cash Flows During the first half of 2000, the Company generated cash from operations totaling $8.2 million, compared to $5.2 million in the prior year period. This source of cash was primarily the result of net income plus depreciation and amortization partially offset by an increase in receivables. Borrowings of $12.0 million on long-term debt were used to fund acquisitions and capital expenditures. Total repayments on long-term debt were $16.2 million during the six months ended June 30, 2000. The cash flows provided by operating and used for investing and financing activities resulted in a net cash decrease of $7.0 million for the six months ended June 30, 2000. Capital Expenditures and Commitments Capital projects to increase operating efficiency and flexibility, expand production capacity and product quality resulted in expenditures of $5.1 million in the first six months of 2000. This was $1.2 million less than the level of capital expenditures in the comparable period in 1999, due to the timing of expenditures on capital projects. Commitments for capital expenditures at June 30, 2000 totaled $4.2 million. Management expects additional capital authorizations to be committed during the remainder of the year and that capital expenditures for 2000 will approximate $12-15 million, primarily due to expenditures made for machining capacity and cost reductions at certain operations. Capital expenditures related to environmental projects have not been significant in the past and are not expected to be significant in the foreseeable future. In October 1998, Gardner Denver's Board of Directors authorized the repurchase of up to 1,600,000 shares of the Company's common stock to be used for general corporate purposes. Approximately 200,000 shares remain available for repurchase under this program. The Company has also established a Stock Repurchase Program for its executive officers to provide a means for them to sell Gardner Denver common stock and obtain sufficient funds to meet alternative minimum tax obligations which arise from the exercise of incentive stock options. As of June 30, 2000, a total of 1,563,542 shares have been repurchased at a cost of $22.6 million under both repurchase programs. During the six months ended June 30, 1999, the Company accepted shares of its common stock, valued at $0.2 million, which were tendered for the exercise of stock options. - 13 - Liquidity The Company has a revolving line of credit agreement with an aggregate $125 million borrowing capacity (the "Credit Line"). On June 30, 2000, the Credit Line had an outstanding balance of approximately $69.6 million, leaving $55.4 million available for future use. The Credit Line requires no principal payments during the term of the agreement, which expires in January 2003. The Company's borrowing arrangements are generally unsecured and permit certain investments and dividend payments. There are no material restrictions on the Company as a result of these arrangements, other than customary covenants regarding certain earnings, liquidity, and capital ratios. Management currently expects that the Company's future cash flows will be sufficient to fund the scheduled debt service under existing credit facilities and provide required resources for working capital and capital investments. NEW ACCOUNTING STANDARDS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for fiscal years beginning after June 15, 2000 and thus, the Company will adopt SFAS 133 on January 1, 2001. The Company has reviewed its current derivative instruments and hedging activities and has determined that the adoption of SFAS 133 would not have a material impact on its consolidated financial statements as of June 30, 2000. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements are those focused upon anticipated events or trends and expectations and beliefs relating to matters that are not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. Such uncertainties and factors could cause actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. Such uncertainties and factors could include among others: the speed with which the Company is able to integrate its recent acquisitions and realize the related financial benefits; the level of oil and natural gas prices, drilling and production, which affect demand for the Company's petroleum products; pricing of Gardner Denver's products; changes in the general level of industrial production and industrial capacity utilization rates in the United States and the rate of economic growth outside the United States, which affect demand for the Company's compressed air products; the degree to which the Company is able to penetrate niche markets; and the successful implementation of cost reduction efforts. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes in the Company's exposure to market risk between December 31, 1999 and June 30, 2000. - 14 - PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders (the "Annual Meeting") was held pursuant to notice on May 2, 2000. At the Annual Meeting, Ross J. Centanni, Alan E. Riedel and Richard L. Thompson were elected to serve as directors for a three-year term expiring in 2003. There were 13,090,417 affirmative votes cast and 130,807 votes withheld concerning Mr. Centanni's election as a director; 13,044,594 affirmative votes cast and 176,630 votes withheld concerning Mr. Riedel's election as a director; and 13,104,591 affirmative votes cast and 116,633 votes withheld concerning Mr. Thompson's election as a director. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: 27.0 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 30, 2000. - 15 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GARDNER DENVER, INC. Date: August 11, 2000 By: /s/Ross J. Centanni ---------------------------------- Ross J. Centanni Chairman, President & CEO Date: August 11, 2000 By: /s/Philip R. Roth ---------------------------------- Philip R. Roth Vice President, Finance & CFO Date: August 11, 2000 By: /s/Daniel C. Rizzo, Jr. ---------------------------------- Daniel C. Rizzo, Jr. Vice President and Corporate Controller (Chief Accounting Officer) - 16 - GARDNER DENVER, INC. EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27.0 Financial Data Schedule. - 17 - EX-27.0 2 0002.txt FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF GARDNER DENVER, INC. FOR THE YEAR- TO-DATE PERIOD ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 20,318 0 84,401 (4,875) 62,157 169,809 180,922 (117,235) 384,916 63,131 114,581 169 0 0 161,108 384,916 181,369 182,266 126,519 126,519 7,332 388 3,775 13,892 5,293 8,599 0 0 0 8,599 0.56 0.56
-----END PRIVACY-ENHANCED MESSAGE-----