Gardner Denver has announced that revenues and net income for the three months to September 30, 2006 were $414.0 million and $32.1 million, respectively. Diluted earnings per share (DEPS) were $0.60, 88 percent higher than the comparable period of 2005. The improvement in financial results for the three-month period reflects incremental profitability attributable to organic revenue growth, price increases and cost reductions, including acquisition integration activities. For the nine-month period of 2006, revenues and net income were $1.2 billion and $95.6 million, respectively.
DEPS for the nine-month period of 2006 were $1.79, 103 percent higher than the comparable period of the previous year. Acquisitions contributed to the improvement in financial results for the nine-month period of 2006, compared to 2005, in addition to the organic growth, price increases and cost reductions mentioned previously.
Commenting on the results, Chairman, President and CEO Ross J Centanni said: "I am proud of the overall efforts of our employees in achieving another successful quarter. Our results reflect continued strength in our end market segments and my outlook remains positive. Although I expect our rate of growth to begin to slow in 2007, demand for compressor and vacuum products remains broad-based, both regionally and across product lines. In the third quarter, we began to see some increased demand for engineered products in North America. We believe we have gained share in compressor and vacuum product market segments, particularly in Europe and Asia where results continue to improve."
He continued: "I am also pleased with our operational improvements, including the inventory turnover improvements achieved this quarter as a result of previously completed lead-time reductions. In the third quarter, we continued to work with our suppliers to improve their performance and we completed the expansion of a manufacturing facility in China. The previously announced project to transfer production from Nuremberg, Germany to China and Brazil is expected to generate annualized savings in excess of $3 million beginning in the second quarter of 2007.
"The rationalization of our European blower product lines and manufacturing facilities is well underway and the project remains on schedule and within budget. Through this project, we have merged the Rietschle and Wittig operations (located in Schopfheim, Germany) and are in the process of relocating the mobile blower product line from Wittig to a Gardner Denver facility in the UK, where other European mobile equipment is manufactured. In the fourth quarter of 2006, we expect to complete the rearrangement of the manufacturing facility in the UK and the installation of new machine tools required to increase output. As part of this project, we also plan to rationalize the Elmo and Rietschle side-channel blower product lines and centralize production of standard products. By the fourth quarter of 2007, when the integration project is scheduled for completion, common manufacturing processes will have been implemented to increase productivity and reduce lead-times and inventory. We also expect to reduce administrative and manufacturing overhead expenses. Once completed, this project is expected to reduce costs by approximately $6.4 million annually and add manufacturing capacity.
"The Company expects orders for its compressor and vacuum products to remain strong through the remainder of 2006 and the rate of order growth for these products to begin to slow in 2007 from the current double-digit level. We anticipate revenue growth to continue in 2007 through a combination of the order growth and some reduction in backlog as operational improvements are achieved and integration projects are completed. During the third quarter of 2006, we experienced improved demand for engineered products in North America, primarily for geothermal applications and environmental projects. Lead-times associated with engineered products typically exceed those of more standard products, providing the Company more visibility into 2007 revenues. The economic environment in Europe and Asia also remains strong. We continue to experience good demand for our petroleum pumps and are currently taking orders for delivery of these products in the second half of 2007, also contributing to our visibility and favorable outlook. Further revenue increases for oil and natural gas-related products will depend upon our ability to identify additional outsourcing alternatives, implement incremental price increases and add machining capacity through selective capital investment."
