Gardner Denver has announced that revenues and net income for the three months ended June 30, 2007 were $459.9 million and $44.8 million, respectively. For the six-month period of 2007, revenues and net income were $901.3 million and $87.6 million, respectively. Diluted earnings per share ("DEPS") for the three months ended June 30, 2007 were $0.83, 34 percent higher than the comparable period of 2006. For the six-month period of 2007, DEPS were $1.63, 37 percent higher than the comparable period of the previous year. The DEPS improvement is primarily attributable to the incremental flow-through profitability of organic revenue growth, operational improvements, including the benefits from acquisition integration, and a lower effective tax rate.
"Gardner Denver achieved a new record in revenues and net income during the second quarter," said Ross J Centanni, Chairman, President and CEO of Gardner Denver. "Year-over-year, we continued to expand the Company's total segment operating earnings as a percentage of revenues and net income grew more than three times faster than revenues. We continued to realize the benefit of some of our integration activities and have initiated additional cost reduction programs in Europe. I believe reductions in inventory will be realized in the second half of 2007 as we continue our focus on lean manufacturing initiatives and business process improvements.
"In the second quarter of 2007, Compressor and Vacuum Products segment revenues grew 9 percent compared to the second quarter of 2006. Sequentially, organic growth accelerated as we resolved some manufacturing inefficiencies associated with our acquisition integration initiatives. We continued to see strong demand outside of the United States, particularly in Europe and Asia, while year-over-year orders and revenues were relatively flat in the United States, as expected, primarily due to lower demand for transportation applications.
"Although we made improvements during the second quarter, we believe manufacturing plant relocations in Europe negatively impacted orders and production efficiency during the quarter. As I stated last quarter, we expect this effect to be temporary. Furthermore, year-over-year comparisons in Compressor and Vacuum Products segment orders were negatively impacted by a reporting change to exclude some OEM orders with delivery times beyond 90 days, which was implemented in the fourth quarter of 2006.
Commenting on profitability initiatives, Centanni stated: "Our previously announced integration projects remain substantially on schedule, while additional profitability improvement projects were initiated in the second quarter. Our product line transfers from Nuremberg, Germany to China and Brazil were substantially completed during the second quarter. Labor productivity and supply chain efficiencies are now being realized, which are expected to result in annualized savings of approximately $3 million. Approximately $0.3 million of this benefit was realized in the second quarter of 2007.
"The manufacturing integration of the Schopfheim, Germany facilities also continues as planned," said Centanni. "Upon the completion of the manufacturing upgrade, process improvements are expected to increase productivity, while reducing lead-times and inventory. The project is expected to be completed by the end of the fourth quarter of 2007 and generate cost savings of approximately $6.4 million annually.
Commenting on the outlook for the rest of 2007, he said: "As we consider the second half of 2007, we anticipate demand for our industrial equipment to remain strong in Europe and Asia and relatively flat in the US. We expect future organic revenue and earnings growth based on our current backlog and improving manufacturing execution of production schedules."
"Given our current economic outlook, existing backlog, expected operational improvements from integration projects, and lower effective tax rate, we are raising our full-year 2007 DEPS outlook range to $3.10 to $3.18. Third quarter DEPS is expected to be $0.72 to $0.77. Our outlook for the third quarter assumes fewer production days due to holidays in Europe and scheduled manufacturing shutdowns in the US. The midpoint of the DEPS range for the third quarter of 2007 ($0.75) represents a 25 percent increase over the same period of 2006. The midpoint of the new DEPS range for the full-year 2007 ($3.14) represents a 26 percent increase over 2006 results. Based on current expectations, the effective tax rate assumed in the DEPS guidance for the third and fourth quarters of 2007 is 31 percent."
The stated guidance above excludes the effect of a recently announced German corporate tax rate reduction, which was enacted in the third quarter of 2007 and will become effective beginning January 1, 2008.
