Gardner Denver, Inc. GDI
Q2 2012 Earnings Call Transcript

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Transcript Call Date 07/20/2012

Operator: Greetings and welcome to the Gardner Denver Second Quarter 2012 Financial Results Conference. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Larsen, Interim CEO and CFO. Thank you. Mr. Larsen, you may begin.

Michael M. Larsen - Interim CEO, VP and CFO: Thank you, Rob and good morning everyone. Thank you for joining us. We issued our second quarter financial results last evening and a copy of the release is available on our website at gardnerdenver.com.

I'm joined this morning by Vik Kini, Gardner Denver Vice President, Head of Investor Relations and Financial Planning and Analysis. Before we get into the details of our second quarter results, I'm going to ask Vik to cover some information regarding forward-looking statements. Vik?

Vikram Kini - IR: Thank you, Michael and good morning, everyone. As a reminder, any statements made by Gardner Denver during the call other than historical facts are forward-looking statements made in reliance upon the Safe Harbor of the Private Securities Litigation Reform Act of 1995.

As a general matter, forward-looking statements are those focused upon anticipated events or trends and assumptions, expectations, and beliefs relating to matters that are not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to Gardner Denver's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company.

These uncertainties and factors could cause actual results to differ materially from those matters expressed in or implied by such forward-looking statements. Please refer to Gardner Denver's second quarter 2012 earnings press release issued on July 19, 2012 for further information regarding potential uncertainties and factors that could cause actual results to differ from anticipated results.

Gardner Denver does not undertake or plan to update these forward-looking statements even though the Company's situation may change. Therefore, you should not rely on these forward-looking statements as representing the Company's or its management's view as of any date subsequent to today.

As a reminder, this call is being broadcast in listen-only mode through a live webcast. This free webcast will be available for replay up to 90 days following the call through the Investor Relations page on the Gardner Denver website at gardnerdenver.com, or the Thomson StreetEvents site at earnings.com.

Now I'd like to turn the meeting over to Barry.

Michael M. Larsen - Interim CEO, VP and CFO: Thanks, Vick. Last night we announced second quarter results that exceeded our expectations in terms of diluted earnings per share. In a more challenging macro environment, the Gardner Denver team delivered margin expansion and a 19% increase in diluted earnings per share exceeding the second quarter guidance communicated on April 18, 2012.

Revenues in the second quarter of $613 million were essentially flat versus the same period last year as the Robuschi acquisition added 4% and currency was 4% headwind. Operating income for the second quarter was $108 million compared to $99.2 million, an increase of 9% versus the prior year reflecting the positive impact of our recent Robuschi acquisition and the impact of our operations excellence initiatives.

Transcript Call Date 07/20/2012

Operator: Brian Konigsberg, Vertical Research Partners Inc.

Brian Konigsberg - Vertical Research Partners Inc.: Just want to start out on pressure pumping. It sounds like cancellations have actually been fairly modest to-date. Just the conversations from your customers and the dynamics that you're seeing on the ground, you anticipate to accelerate into the second half of the year or do you feel as though the customers really have a grasp on supply and demand in the market?

Michael M. Larsen - Interim CEO, VP and CFO: What I would say is that we have a backlog now in pressure pumping that gives us confidence in our forecasts for the second half of the year. At the same time, I'll tell you that conditions are certainly not improving in pressure pumping. As a matter of fact our previous guidance which included a significant decline in the second half of the year is still valid, and if anything, we're also seeing that the aftermarket is becoming more challenging, so what I would say our view on pressure pumping that we expect on the last call that for the next 12 to 18 months in North America, there is ample supply of equipment that's still valid. Now that said you're right. The team did a great job working with our customer and kept the cancellations to a fairly modest level. We've also seen some pick-up in demand internationally, so I think we're developing – continue to develop our view of a very dynamic situation, but like I said we are not expecting any type of improvement here in the short-term.

Brian Konigsberg - Vertical Research Partners Inc.: Just on the aftermarket, it seems like that will become a much bigger focus for yourself and your compactors. To anticipate that there is going to be I guess substantial incremental pricing pressure in that business, maybe just give us a sense how you expect that to play out.

Michael M. Larsen - Interim CEO, VP and CFO: The way I would answer that is when we have a market that grows as quickly as pressure pumping has over the last say two year, and you have significant amount of capacity being added over the same time period. When thing slowdown, it would be reasonable to expect that the competitive pressures increase. That said if you look at our customer base which is concentrated on a fairly short list of large customers who value reliable aftermarket fluid end that is safe, that lasts, that is back by the warranty from a record level company, they really are not that many alternatives. So, I think that to some extent will offset or mitigate some of the pressure that you would expect to see on price, but clearly the dynamics here in the aftermarket are challenging.

Operator: Mike Halloran, Robert W. Baird.

Michael Halloran - Robert W. Baird: Just continuing on the aftermarket comment that you made that things were softening a little bit there even, could you maybe parse that out a little bit more finely. Is it the amount of capacity created by the original equipment side, and the fact that that there's fluid ends available there and there's more supply there? Is it the transition from nat gas towards oil rigs and the dislocation that happens there, or are you seeing activity levels slow on a broad basis, which is also impacting it? So, maybe just a little bit more finer detail there, please.

Executives

Vikram Kini : IR
Michael M. Larsen : Interim CEO, VP and CFO

Analysts

Nicholas Prendergast : BB&T Capital Markets
Jeffrey Hammond : KeyBanc Capital Markets, Inc.
Joe Mondillo : Sidoti & Company
Michael Wherley : Janney Montgomery Scott
Brian Konigsberg : Vertical Research Partners Inc.
Michael Halloran : Robert W. Baird
Joshua Pokrzywinski : MKM Partners
Cliff Ransom : Ransom Research
Julian Mitchell : Credit Suisse Securities
Jamie Sullivan : RBC Capital Markets

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Gardner Denver, Inc. GDIQ2 2012 Earnings Call Transcript

Gardner Denver, Inc. GDI
Q2 2012 Earnings Call Transcript