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FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-23654
GARDNER DENVER, INC.
(FORMERLY KNOWN AS GARDNER DENVER MACHINERY INC.)
(Exact name of Registrant as Specified in its Charter)
DELAWARE 76-0419383
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62301
(Address of Principal Executive Offices and Zip Code)
(217) 222-5400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
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Number of shares outstanding of the issuer's Common Stock, par value $.01 per
share, as of May 1, 1998: 16,112,081 shares.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
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<S> <C> <C>
Revenues $89,792 $66,075
Costs and Expenses:
Cost of sales (excluding depreciation
and amortization) 59,398 44,453
Depreciation and amortization 2,895 2,260
Selling and administrative expenses 12,954 9,361
Interest expense 1,179 977
Other expense 155 --
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Income before income taxes 13,211 9,024
Provision for income taxes 5,130 3,700
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Net income $ 8,081 $ 5,324
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Basic earnings per share $ 0.51 $ 0.36
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Diluted earnings per share $ 0.49 $ 0.34
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The accompanying notes are an integral part of this statement.
</TABLE>
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<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
<CAPTION>
(Unaudited)
MARCH 31, DECEMBER 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 11,969 $ 8,831
Receivables, net 81,553 62,307
Inventories, net 64,782 48,324
Deferred income taxes 3,858 2,784
Other 2,419 2,637
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Total current assets 164,581 124,883
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Property, plant and equipment, net 47,994 37,530
Intangibles, net 114,230 85,524
Deferred income taxes 13,672 15,845
Other assets 5,131 5,356
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Total assets $345,608 $269,138
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 459 $ 459
Accounts payable and accrued liabilities 78,320 58,471
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Total current liabilities 78,779 58,930
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Long-term debt, less current maturities 87,061 51,227
Postretirement benefits other than pensions 52,075 52,977
Other long-term liabilities 4,791 2,393
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Total liabilities 222,706 165,527
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Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares
authorized; 16,100,656 shares issued and
outstanding at March 31, 1998 161 154
Capital in excess of par value 151,283 139,524
Treasury stock at cost, 40,474 shares at
March 31, 1998 (914) (333)
Retained deficit (25,351) (33,432)
Cumulative translation adjustments (2,277) (2,302)
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Total stockholders' equity 122,902 103,611
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Total liabilities and stockholders' equity $345,608 $269,138
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The accompanying notes are an integral part of this statement.
</TABLE>
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<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,081 $ 5,324
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,895 2,260
Stock issued for employee benefit plans 466 355
Deferred income taxes 848 (800)
Changes in assets and liabilities:
Receivables (9,096) (7,317)
Inventories (3,620) 97
Accounts payable and accrued liabilities 9,967 3,483
Other assets and liabilities, net (558) 37
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Net cash provided by operating activities 8,983 3,439
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Cash flows from investing activities:
Business acquisitions, net of cash acquired (39,602) --
Foreign currency hedging transactions 1,278 --
Capital expenditures (2,266) (1,040)
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Net cash used for investing activities (40,590) (1,040)
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Cash flows from financing activities:
Principal payments on long-term debt (22,106) (6,368)
Proceeds from long-term borrowings 57,950 --
Debt issuance costs (67) --
Proceeds from stock options, net of
treasury stock transactions 219 219
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Net cash provided by (used for) financing
activities 35,996 (6,149)
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Effect of exchange rate changes (1,251) --
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Increase (decrease) in cash and equivalents 3,138 (3,750)
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Cash and equivalents, beginning of period 8,831 8,610
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Cash and equivalents, end of period $ 11,969 $ 4,860
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The accompanying notes are an integral part of this statement.
</TABLE>
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NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation. The accompanying financial statements include the
accounts of Gardner Denver Machinery Inc. ("Gardner Denver" or the "Company")
and its subsidiaries. All significant intercompany transactions and accounts
have been eliminated. Investments in entities in which the Company has
twenty to fifty percent ownership are accounted for by the equity method.
All shares of common stock and per share amounts have been adjusted to give
retroactive effect to a three-for-two stock split distributed on December 29,
1997 to stockholders of record at the close of business on December 8, 1997,
effected in the form of a stock dividend.
The financial information presented as of any date other than December 31 has
been prepared from the books and records without audit. The accompanying
consolidated financial statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and the
footnotes required by generally accepted accounting principles for complete
statements. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of such
financial statements, have been included.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto for the year ended
December 31, 1997 contained in the Company's 1997 Annual Report to
Stockholders.
Financial Instruments. Off balance sheet derivative financial instruments as
of March 31, 1998 consist of an interest rate swap agreement used to fix
interest rates on floating rate debt. Included on the balance sheet is a
foreign currency forward contract in Finnish Marka to hedge foreign exchange
risk on the Company's investment in its Finnish subsidiary, Oy Tamrotor Ab
("Tamrotor"). The contract is marked to market and both unrealized and
realized gains and losses are included in the cumulative translation
adjustments component of stockholders' equity.
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NOTE 2. ACQUISITIONS.
On June 30, 1997, the Company purchased 100% of the issued and outstanding
stock of Tamrotor, a subsidiary of Tamrock Corporation located in Tampere,
Finland, for approximately $26.2 million. The purchase price was allocated
to assets and liabilities based on their respective fair values at the date
of acquisition, and resulted in cost in excess of net assets acquired of
$15.4 million.
On January 5, 1998, the Company purchased substantially all of the assets and
assumed certain agreed upon liabilities of Geological Equipment Corporation
("Geoquip"), located in Fort Worth, Texas for approximately $12.0 million.
The purchase price was paid in cash ($1.5 million) and 430,695 shares of
Gardner Denver common stock. The Company also paid approximately $2 million
to acquire patents, previously owned by Geoquip shareholders, for products
manufactured by Geoquip. The purchase price was allocated to assets and
liabilities based on their respective fair values at the date of acquisition
and resulted in cost in excess of net assets acquired of $7.4 million.
On January 29, 1998, the Company purchased substantially all of the assets
and assumed certain agreed upon liabilities of Champion Pneumatic Machinery
Company, Inc. ("Champion"), a subsidiary of CRL Industries, Inc., for
approximately $24.0 million. Champion is located in Princeton, Illinois.
The purchase price was allocated to assets and liabilities based on their
respective fair values at the date of acquisition and resulted in cost in
excess of net assets acquired of $18.1 million.
On March 9, 1998, the Company purchased substantially all of the assets and
assumed certain agreed upon liabilities of the Wittig Division of Mannesmann
Demag A.G. for approximately $12.0 million. Wittig is located in Schophfeim,
Germany. The purchase price was allocated to assets and liabilities based on
their respective fair values at the date of acquisition and resulted in cost
in excess of net assets acquired of $2.4 million.
As a result of the stability of the product technology, markets and customers
associated with these four acquisitions, the cost in excess of net assets
acquired for each acquisition is being amortized over 40 years using the
straight-line method.
All acquisitions have been accounted for by the purchase method, and
accordingly, the results of operations of Tamrotor, Geoquip, Champion and
Wittig are included in the Company's Consolidated Statement of Operations
from the dates of acquisition. Certain estimates of fair market value of
assets received and liabilities assumed were made with adjustments to each
separate company's historical financial statements. The estimates and
adjustments for these four acquisitions have not been finalized.
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NOTE 3. INCOME TAXES.
In the first three months of 1998 and 1997, the Company paid $1.3 million and
$1.0 million, respectively, to the various taxing authorities and recognized
$5.1 million and $3.7 million, respectively, in income tax expense.
NOTE 4. INVENTORIES.
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
Raw materials, including parts and
subassemblies $ 57,721 $ 47,992
Work-in-process 13,598 9,667
Finished goods 15,158 11,003
Perishable tooling and supplies 2,571 2,571
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89,048 71,233
Excess of current standard costs
over LIFO costs (12,014) (10,964)
Allowance for obsolete and slow-
moving inventory (12,252) (11,945)
-------- --------
Inventories, net $ 64,782 $ 48,324
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</TABLE>
NOTE 5. LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS.
Long-term debt at March 31, 1998 consisted of certain notes and credit
facilities due between 2000 and 2006. In September 1996, the Company entered
into an unsecured senior note agreement for $35 million. This debt has a
ten-year final, seven-year average maturity with principal payments beginning
in 2000. In January 1998, the Company refinanced its existing bank debt with
an unsecured five-year revolving loan. The total credit line available on
the revolving loan is $125 million, of which $74 million remained available
for additional borrowings or to issue as letters of credit at March 31, 1998.
The revolving loan will mature on January 20, 2003. Maturities of long-term
debt for the five years subsequent to March 31, 1998 are $0.5 million for
1999; $0.4 million for 2000; $5.3 million for 2001; $5.2 million for 2002;
and $56.0 million for 2003.
Interest paid for the first three months of 1998 totaled $1.8 million, while
the interest paid for the first three months of 1997 was $1.5 million.
NOTE 6. EARNINGS PER SHARE.
The 1998 and 1997 basic earnings per share for the three month period ended
March 31 were calculated based on 15,940,454 and 14,844,048 weighted average
shares outstanding, respectively. The 1998 and 1997 diluted earnings per
share for the three month period ended March 31 were calculated based on
16,636,560 and 15,678,246 weighted average shares outstanding. Basic and
diluted weighted average shares outstanding were adjusted for the stock split
effected on December 29, 1997. The basic and diluted earnings per share were
calculated in accordance with Statement of Financial Accounting Standards 128
("SFAS 128").
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NOTE 7. INTEREST RATE SWAP AGREEMENTS.
At March 31, 1998, the Company had an interest rate swap agreement with a
commercial bank (the "Counter Party") outstanding, having a notional
principal amount of $15 million. The swap provides a fixed interest rate of
6%. The interest rate swap terminated in November 1997, but was extended for
one additional year at the option of the Counter Party. The Company is
exposed to credit loss in the event of nonperformance by the Counter Party to
the interest rate swap agreement. However, the Company does not anticipate
such nonperformance.
NOTE 8. COMPREHENSIVE INCOME.
In June 1997, the Financial Accounting Standards Board (FASB) adopted SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and disclosure of comprehensive income and its components.
Effective January 1, 1998, the Company adopted SFAS No. 130. For the periods
ended March 31, 1998 and 1997, comprehensive income was $8.1 million and $5.3
million, respectively. The other items included in the Company's
comprehensive income consist solely of cumulative translation adjustments
which had a minimal effect in the first quarters of both years.
NOTE 9. SUBSEQUENT EVENTS
On May 5, 1998, the stockholders of the Company approved an amendment to the
Company's Certificate of Incorporation to change the corporate name to
"Gardner Denver, Inc."
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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.
Date: May 26, 1998 By: /s/Ross J. Centanni
-----------------------------------------
Ross J. Centanni
President and Chief Executive Officer
Date: May 26, 1998 By: /s/Philip R. Roth
-----------------------------------------
Philip R. Roth
Vice President, Finance and
Chief Financial Officer
