e10vq
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 1-13215
GARDNER DENVER, INC.
(Exact name of registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  76-0419383
(I.R.S. Employer
Identification No.)
1500 Liberty Ridge Drive, Suite 3000
Wayne, Pennsylvania 19087

(Address of principal executive offices and Zip Code)
(610) 249-2000
(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 requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 52,280,052 shares of Common Stock, par value $0.01 per share, as of April 29, 2011.
 
 

 


 

GARDNER DENVER, INC.
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 EX-31.1
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 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
GARDNER DENVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Revenues
  $ 531,853     $ 422,164  
Cost of sales
    347,397       288,357  
 
           
Gross profit
    184,456       133,807  
Selling and administrative expenses
    96,021       87,694  
Other operating expense (income), net
    1,612       (1,351 )
 
           
Operating income
    86,823       47,464  
Interest expense
    5,347       6,116  
Other income, net
    (962 )     (635 )
 
           
Income before income taxes
    82,438       41,983  
Provision for income taxes
    22,539       9,730  
 
           
Net income
    59,899       32,253  
Less: Net income attributable to noncontrolling interests
    421       295  
 
           
Net income attributable to Gardner Denver
  $ 59,478     $ 31,958  
 
           
 
               
Net earnings per share attributable to Gardner Denver common stockholders
               
Basic earnings per share
  $ 1.14     $ 0.61  
 
           
Diluted earnings per share
  $ 1.13     $ 0.61  
 
           
 
               
Cash dividends declared per common share
  $ 0.05     $ 0.05  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
                 
    March 31,     December 31,  
    2011     2010  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 185,305     $ 157,029  
Accounts receivable (net of allowance of $11,654 at March 31, 2011 and $11,531 at December 31, 2010)
    398,736       369,860  
Inventories, net
    295,586       241,485  
Deferred income taxes
    30,881       34,628  
Other current assets
    31,177       25,535  
 
           
Total current assets
    941,685       828,537  
 
           
Property, plant and equipment (net of accumulated depreciation of $353,309 at March 31, 2011 and $338,010 at December 30, 2010)
    287,883       286,563  
Goodwill
    586,156       571,796  
Other intangibles, net
    297,091       289,588  
Other assets
    51,338       50,614  
 
           
Total assets
  $ 2,164,153     $ 2,027,098  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Short-term borrowings and current maturities of long-term debt
  $ 37,622     $ 37,228  
Accounts payable
    183,539       143,331  
Accrued liabilities
    193,974       179,041  
 
           
Total current liabilities
    415,135       359,600  
 
           
Long-term debt, less current maturities
    245,721       250,682  
Postretirement benefits other than pensions
    13,408       13,678  
Deferred income taxes
    64,375       62,157  
Other liabilities
    147,453       151,308  
 
           
Total liabilities
    886,092       837,425  
 
           
Stockholders’ equity:
               
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,240,515 and 52,181,335 shares outstanding at March 31, 2011 and December 31, 2010, respectively
    596       595  
Capital in excess of par value
    599,362       591,988  
Retained earnings
    762,557       705,699  
Accumulated other comprehensive income
    92,177       61,425  
Treasury stock at cost; 7,351,869 and 7,268,653 shares at March 31, 2011 and December 31, 2010, respectively
    (188,729 )     (182,544 )
 
           
Total Gardner Denver stockholders’ equity
    1,265,963       1,177,163  
Noncontrolling interests
    12,098       12,510  
 
           
Total stockholders’ equity
    1,278,061       1,189,673  
 
           
Total liabilities and stockholders’ equity
  $ 2,164,153     $ 2,027,098  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Cash Flows From Operating Activities
               
Net income
  $ 59,899     $ 32,253  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    14,921       15,629  
Foreign currency transaction loss (gain), net
    1,245       (1,001 )
Net loss (gain) on asset dispositions
    716       (310 )
Stock issued for employee benefit plans
    476       971  
Stock-based compensation expense
    2,334       1,857  
Excess tax benefits from stock-based compensation
    (1,513 )     (1,489 )
Deferred income taxes
    149       3,247  
Changes in assets and liabilities:
               
Receivables
    (19,907 )     (14,798 )
Inventories
    (47,055 )     (4,585 )
Accounts payable and accrued liabilities
    47,671       (6,545 )
Other assets and liabilities, net
    (11,091 )     1,459  
 
           
Net cash provided by operating activities
    47,845       26,688  
 
           
 
               
Cash Flows From Investing Activities
               
Capital expenditures
    (8,030 )     (4,759 )
Disposals of property, plant and equipment
    492       187  
Other, net
    (21 )      
 
           
Net cash used in investing activities
    (7,559 )     (4,572 )
 
           
 
               
Cash Flows From Financing Activities
               
Principal payments on short-term borrowings
    (6,595 )     (3,505 )
Proceeds from short-term borrowings
    3,646       7,307  
Principal payments on long-term debt
    (6,578 )     (24,711 )
Proceeds from long-term debt
    10       8,010  
Proceeds from stock option exercises
    3,037       7,339  
Excess tax benefits from stock-based compensation
    1,513       1,489  
Purchase of treasury stock
    (6,169 )     (8,841 )
Cash dividends paid
    (2,622 )     (2,624 )
Other
    (1,024 )     (1,001 )
 
           
Net cash used in financing activities
    (14,782 )     (16,537 )
 
           
 
               
Effect of exchange rate changes on cash and cash equivalents
    2,772       (2,492 )
 
           
 
               
Net increase in cash and cash equivalents
    28,276       3,087  
Cash and cash equivalents, beginning of year
    157,029       109,736  
 
           
 
               
Cash and cash equivalents, end of period
  $ 185,305     $ 112,823  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

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GARDNER DENVER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts and amounts described in millions)
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
     The accompanying condensed consolidated financial statements include the accounts of Gardner Denver, Inc. and its majority-owned subsidiaries (collectively referred to herein as “Gardner Denver” or the “Company”). Certain prior year balance sheet items have been reclassified to conform to the current year presentation. In consolidation, all significant intercompany transactions and accounts have been eliminated.
     The financial information presented as of any date other than December 31, 2010 has been prepared from the books and records of the Company without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such financial statements.
     The unaudited interim condensed consolidated financial statements should be read in conjunction with the complete consolidated financial statements and notes thereto included in Gardner Denver’s Annual Report on Form 10-K for the year ended December 31, 2010.
     The results of operations for the three-month period ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year. The balance sheet at December 31, 2010 has been derived from the audited financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements.
     Other than as specifically indicated in these “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, the Company has not materially changed its significant accounting policies from those disclosed in its Form 10-K for the year ended December 31, 2010.
New Accounting Standards
Recently Adopted Accounting Pronouncements
     In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (“ASU 2009-13”). ASU 2009-13 updates the existing multiple-element revenue arrangements guidance currently included under FASB Accounting Standards

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Codification (“ASC”) 605-25, Revenue Recognition, Multiple-Element Arrangements. The revised guidance primarily provides two significant changes: (i) eliminates the need for objective and reliable evidence of fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and (ii) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance expands the disclosure requirements for revenue recognition. ASU 2009-13 was effective for fiscal years beginning on or after June 15, 2010. Adoption of this guidance in the first quarter of 2011 did not have a material effect on the Company’s results of operations, financial position and cash flows.
     In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). This update requires the following new disclosures: (i) the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and a description of the reasons for the transfers; and (ii) a reconciliation for fair value measurements using significant unobservable inputs (Level 3), including separate information about purchases, sales, issuance, and settlements. The update also clarifies existing requirements about fair value measurement disclosures and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures were effective for interim and annual reporting periods beginning after December 15, 2009, except for the reconciliation of Level 3 activity, which was effective for the Company in the first quarter of 2011. See Note 11 “Hedging Activities and Fair Value Measurements” for the disclosures required by ASU 2010-06. Adoption of this guidance had no effect on the Company’s results of operations, financial position and cash flows.
Note 2. Restructuring
     In 2008, 2009 and 2010, the Company announced restructuring plans designed to address (i) rationalization of the Company’s manufacturing footprint, (ii) slowing global economic growth and the resulting deterioration in the Company’s end markets, (iii) integration of CompAir Holdings Limited (“CompAir”) into its existing operations and (iv) additional cost reductions and margin improvement initiatives. These plans included the closure and consolidation of manufacturing facilities in Europe and the U.S., and various voluntary and involuntary employee termination and relocation programs. Execution of these plans was substantively completed during 2010. The Company recorded additional charges during the three-month period of 2011 in connection with the continued rationalization of facilities and other cost reduction initiatives. Charges recorded in connection with these plans, in accordance with FASB ASC 420, Exit or Disposal Cost Obligations and FASB ASC 712, Compensation-Nonretirement Postemployment Benefits, are included in “Other operating expense (income), net” in the Condensed Consolidated Statements of Operations, and are summarized for the fiscal years ended December 31, 2009 and 2010 and the three-month period ended March 31, 2011 by reportable segment as follows:
                         
    Industrial     Engineered Products        
    Products Group     Group     Total  
Fiscal year 2009
  $ 25,791     $ 20,335     $ 46,126  
Fiscal year 2010
    3,687       (1,491 )     2,196  
Three months ended March 31, 2011
    891       89       980  
 
                 
Total
  $ 30,369     $ 18,933     $ 49,302  
 
                 

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     The following table summarizes the activity in the restructuring accrual accounts:
                         
    Termination              
    Benefits     Other     Total  
Balance as of December 31, 2010
  $ 4,593     $ 1,450     $ 6,043  
Charged to expense
    384       596       980  
Paid
    (2,184 )     (809 )     (2,993 )
Other, net
    474       29       503  
 
                 
Balance as of March 31, 2011
  $ 3,267     $ 1,266     $ 4,533  
 
                 
Note 3. Inventories
     Inventories as of March 31, 2011 and December 31, 2010 consisted of the following:
                 
    March 31,     December 31,  
    2011     2010  
Raw materials, including parts and subassemblies
  $ 197,004     $ 163,192  
Work-in-process
    55,490       38,419  
Finished goods
    59,148       54,898  
 
           
 
    311,642       256,509  
Excess of FIFO costs over LIFO costs
    (16,056 )     (15,024 )
 
           
Inventories, net
  $ 295,586     $ 241,485  
 
           
Note 4. Goodwill and Other Intangible Assets
     The changes in the carrying amount of goodwill attributable to each business segment for the three-month period ended March 31, 2011, and the year ended December 31, 2010, are presented in the table below:
                         
    Industrial     Engineered        
    Products Group     Products Group     Total  
Balance as of December 31, 2009
  $ 256,824     $ 321,190     $ 578,014  
Acquisitions
          5,202       5,202  
Foreign currency translation
    (6,740 )     (4,680 )     (11,420 )
 
                 
Balance as of December 31, 2010
    250,084       321,712       571,796  
Foreign currency translation
    6,613       7,747       14,360  
 
                 
Balance as of March 31, 2011
  $ 256,697     $ 329,459     $ 586,156  
 
                 
     The net goodwill balances as of March 31, 2011 and December 31, 2010 and 2009 reflect cumulative impairment charges of $252.5 million and zero for the Industrial Products and Engineered Products Groups, respectively.
     The $5.2 million increase in goodwill related to acquisitions in 2010 was associated with the valuation of ILMVAC GmbH (“ILMVAC”).

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     The following table presents the gross carrying amount and accumulated amortization of identifiable intangible assets, other than goodwill, at the dates presented:
                                 
    March 31, 2011     December 31, 2010  
    Gross             Gross        
    Carrying     Accumulated     Carrying     Accumulated  
    Amount     Amortization     Amount     Amortization  
Amortized intangible assets:
                               
Customer lists and relationships
  $ 124,377     $ (33,048 )   $ 118,844     $ (29,973 )
Acquired technology
    98,321       (56,641 )     94,689       (53,224 )
Trade names
    57,547       (9,445 )     55,320       (8,621 )
Other
    7,523       (3,667 )     7,344       (3,424 )
Unamortized intangible assets:
                               
Trade names
    112,124             108,633        
 
                       
Total other intangible assets
  $ 399,892     $ (102,801 )   $ 384,830     $ (95,242 )
 
                       
     Amortization of intangible assets for the three-month periods ended March 31, 2011 and 2010 was $4.3 million and $4.5 million, respectively. Amortization of intangible assets held as of March 31, 2011 is anticipated to be approximately $16.8 million annually in 2012 through 2015 based upon exchange rates as of March 31, 2011. The increase in the carrying amount of identifiable assets other than goodwill between December 31, 2010 and March 31, 2011 was due primarily to the effect of changes in foreign currency exchange rates.
Note 5. Accrued Liabilities
Accrued liabilities as of March 31, 2011 and December 31, 2010 consisted of the following:
                 
    March 31,     December 31,  
    2011     2010  
Salaries, wages and related fringe benefits
  $ 49,716     $ 50,540  
Taxes
    35,730       25,367  
Advance payments on sales contracts
    40,157       39,026  
Product warranty
    21,033       19,100  
Other
    47,338       45,008  
 
           
Total accrued liabilities
  $ 193,974     $ 179,041  
 
           

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     A reconciliation of the changes in the accrued product warranty liability for the three-month periods ended March 31, 2011 and 2010 is as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Balance at beginning of period
  $ 19,100     $ 19,312  
Product warranty accruals
    6,732       5,590  
Settlements
    (5,308 )     (6,201 )
Effect of foreign currency translation
    509       (567 )
 
           
Balance at end of period
  $ 21,033     $ 18,134  
 
           
Note 6. Pension and Other Postretirement Benefits
     The following table summarizes the components of net periodic benefit cost for the Company’s defined benefit pension plans and other postretirement benefit plans recognized for the three-month periods ended March 31, 2011 and 2010:
                                                 
    Three Months Ended March 31,  
    Pension Benefits     Other Postretirement  
    U.S. Plans     Non-U.S. Plans     Benefits  
    2011     2010     2011     2010     2011     2010  
Service cost
  $     $     $ 262     $ 272     $ 7     $ 4  
Interest cost
    897       965       2,970       2,964       193       249  
Expected return on plan assets
    (1,054 )     (885 )     (2,757 )     (2,625 )            
Recognition of:
                                               
Unrecognized prior service cost
                9       6       (15 )     (25 )
Unrecognized net actuarial loss (gain)
    308       359       219       256       (318 )     (325 )
 
                                   
Net periodic benefit cost (income)
    151       439       703       873       (133 )     (97 )
FASB ASC 715-30 curtailment gain
                      (837 )            
 
                                   
Total net periodic benefit cost (income)
  $ 151     $ 439     $ 703     $ 36     $ (133 )   $ (97 )
 
                                   

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Note 7. Debt
     The Company’s debt at March 31, 2011 and December 31, 2010 is summarized as follows:
                 
    March 31,     December 31,  
    2011     2010  
Short-term debt
  $ 5,111     $ 7,440  
 
           
Long-term debt:
               
Credit Line, due 2013 (1)
  $     $  
Term Loan, denominated in U.S. dollars, due 2013 (2)
    71,538       75,000  
Term Loan, denominated in euros (“EUR”), due 2013 (3)
    65,978       65,250  
Senior Subordinated Notes at 8%, due 2013 (4)
    125,000       125,000  
Secured Mortgages (5)
    7,762       7,322  
Capitalized leases and other long-term debt
    7,954       7,898  
 
           
Total long-term debt, including current maturities
    278,232       280,470  
Current maturities of long-term debt
    32,511       29,788  
 
           
Total long-term debt, less current maturities
  $ 245,721     $ 250,682  
 
           
 
(1)   The loans under this facility may be denominated in U.S. dollars (“USD”) or several foreign currencies. The interest rates under the facility are based on prime, federal funds and/or LIBOR for the applicable currency.
 
(2)   The interest rate for this loan varies with prime, federal funds and/or LIBOR. At March 31, 2011, this rate was 2.3% and averaged 2.3% for the three-month period ended March 31, 2011.
 
(3)   The interest rate for this loan varies with LIBOR. At March 31, 2011, this rate was 2.9% and averaged 2.8% for the three-month period ended March 31, 2011.
 
(4)   On March 23, 2011, the Company issued notice to redeem all $125.0 million in aggregate principal amount outstanding of its Senior Subordinated Notes at 8%, plus accrued and unpaid interest to, but not including, the date of redemption. The redemption occurred on May 2, 2011. See Note 17 “Subsequent Events.”
 
(5)   This amount consists of two fixed-rate commercial loans with an outstanding balance of €5,476 at March 31, 2011. The loans are secured by the Company’s facility in Bad Neustadt, Germany.

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Note 8. Stock-Based Compensation
     The following table summarizes the total stock-based compensation expense included in the consolidated statements of operations and the realized excess tax benefits included in the consolidated statements of cash flows for the three-month periods ended March 31, 2011 and 2010:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Selling and administrative expenses
  $ 2,334     $ 1,857  
 
           
Total stock-based compensation expense included in operating expenses
  $ 2,334     $ 1,857  
 
               
Income before income taxes
    (2,334 )     (1,857 )
Provision for income taxes
    659       607  
 
           
Net income
  $ (1,675 )   $ (1,250 )
 
           
 
               
Net cash provided by operating activities
  $ (1,513 )   $ (1,489 )
Net cash used in financing activities
  $ 1,513     $ 1,489  
Stock Option Awards
     A summary of the Company’s stock option activity for the three-month period ended March 31, 2011 is presented in the following table (underlying shares in thousands):
                                 
                            Weighted-  
            Outstanding             Average  
            Weighted-     Aggregate     Remaining  
            Average     Intrinsic     Contractual  
    Shares     Exercise Price     Value     Life  
Outstanding at December 31, 2010
    863     $ 32.69                  
Granted
    166     $ 75.79                  
Exercised
    (102 )   $ 29.92                  
Forfeited
        $                  
Expired or canceled
        $                  
 
                             
Outstanding at March 31, 2011
    927     $ 40.64     $ 34,675     4.8 years
 
                               
Exercisable at March 31, 2011
    493     $ 31.37     $ 23,013     3.7 years
     The aggregate intrinsic value was calculated as the difference between the exercise price of the underlying stock options and the quoted closing price of the Company’s common stock at March 31, 2011 multiplied by the number of in-the-money stock options. The weighted-average estimated grant-date fair value of employee stock options granted during the three-month period ended March 31, 2011 was $28.16.
     The total pre-tax intrinsic values of stock options exercised during the three-month periods ended March 31, 2011 and 2010 were $4.5 million and $6.3 million, respectively. Pre-tax unrecognized stock-based compensation

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expense for stock options, net of estimated forfeitures, was $5.8 million as of March 31, 2011 and will be recognized as expense over a weighted-average period of 2.4 years.
Valuation Assumptions
     The fair value of each stock option grant under the Company’s Amended and Restated Long-Term Incentive Plan was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used for the periods indicated are noted in the table below:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Assumptions:
               
Risk-free interest rate
    2.0 %     2.3 %
Dividend yield
    0.3 %     0.5 %
Volatility factor
    44       43  
Expected life (in years)
    4.4       4.8  
Restricted Share Awards
     A summary of the Company’s restricted share award activity for the three-month period ended March 31, 2011 is presented in the following table (underlying shares in thousands):
                 
 
          Weighted-
 
          Average Grant-
 
          Date Fair Value
 
  Shares   (per share)
Nonvested at December 31, 2010
    161     $ 35.13  
Granted
    30     $ 75.32  
Vested
    (34 )   $ 35.88  
Forfeited
        $  
 
             
Nonvested at March 31, 2011
    157     $ 42.73  
 
             
     The restricted shares granted in the three-month period of 2011 were valued at the market close price of the Company’s common stock on the date of grant. Pre-tax unrecognized compensation expense for nonvested restricted share awards, net of estimated forfeitures, was $3.5 million as of March 31, 2011, which will be recognized as expense over a weighted-average period of 2.2 years. The total fair value of restricted share awards that vested during the three-month periods of 2011 and 2010 was $2.5 million and $0.2 million, respectively.
Note 9. Stockholders’ Equity and Earnings Per Share
     In November 2008, the Company’s Board of Directors authorized a share repurchase program to acquire up to 3.0 million shares of the Company’s outstanding common stock. During the three-month period ended March 31, 2011, the Company repurchased 72 thousand shares under this program at a total cost of $5.3 million.

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     The following table details the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2011 and 2010 (shares in thousands):
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Net income attributable to Gardner Denver
  $ 59,478     $ 31,958  
Weighted average shares of common stock outstanding:
               
Basic
    52,207       52,245  
Effect of stock-based compensation awards
    427       440  
 
           
Diluted
    52,634       52,685  
 
           
Earnings Per Share:
               
Basic
  $ 1.14     $ 0.61  
 
           
Diluted
  $ 1.13     $ 0.61  
 
           
     For the three-month periods ended March 31, 2011 and 2010, respectively, anti-dilutive equity-based awards to purchase 82 thousand and 129 thousand weighted-average shares of common stock were outstanding. Antidilutive equity-based awards outstanding were not included in the computation of diluted earnings per common share.
Note 10. Accumulated Other Comprehensive Income (Loss)
     The Company’s other comprehensive income (loss) consists of (i) unrealized foreign currency net gains and losses on the translation of the assets and liabilities of its foreign operations, (ii) realized and unrealized foreign currency gains and losses on intercompany notes of a long-term nature and certain hedges of foreign subsidiaries, (iii) unrealized gains and losses on cash flow hedges (consisting of interest rate swaps), net of income taxes, and (iv) pension and other postretirement prior service cost and actuarial gains or losses, net of income taxes.

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     The following table sets forth the changes in each component of accumulated other comprehensive income (loss):
                                         
                    Unrealized                
    Cumulative             Gains             Accumulated  
    Currency     Foreign     (Losses) on     Pension and     Other  
    Translation     Currency Gains     Cash Flow     Postretirement     Comprehensive  
    Adjustment(1)     (Losses)     Hedges     Benefit Plans     Income  
Balance at December 31, 2009
  $ 134,573     $ (21,319 )   $ (250 )   $ (30,490 )   $ 82,514  
Before tax (loss) income
    (38,820 )     8,920       (706 )     287       (30,319 )
Income tax effect
          297       268       (84 )     481  
 
                             
Other comprehensive (loss) income
    (38,820 )     9,217       (438 )     203       (29,838 )
 
                             
Balance at March 31, 2010
  $ 95,753     $ (12,102 )   $ (688 )   $ (30,287 )   $ 52,676  
 
                             
 
Balance at December 31, 2010
  $ 69,282     $ 19,095     $ (933 )   $ (26,019 )   $ 61,425  
Before tax income (loss)
    31,245       3,524       404       (669 )     34,504  
Income tax effect
          (3,527 )     (154 )     (71 )     (3,752 )
 
                             
Other comprehensive income (loss)
    31,245       (3 )     250       (740 )     30,752  
 
                             
Balance at March 31, 2011
  $ 100,527     $ 19,092     $ (683 )   $ (26,759 )   $ 92,177  
 
                             
 
(1)   Income taxes are generally not provided for foreign currency translation adjustments, as such adjustments relate to permanent investments in international subsidiaries.
     The Company’s comprehensive income (loss) for the three-month periods ended March 31, 2011 and 2010 was as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Net income attributable to Gardner Denver
  $ 59,478     $ 31,958  
Other comprehensive income (loss)
    30,752       (29,838 )
 
           
Comprehensive income attributable to Gardner Denver
    90,230       2,120  
 
           
Net income attributable to noncontrolling interests
    421       295  
Other comprehensive income (loss)
    192       (723 )
 
           
Comprehensive income (loss) attributable to noncontrolling interests
    613       (428 )
 
           
Total comprehensive income
  $ 90,843     $ 1,692  
 
           
Note 11. Hedging Activities and Fair Value Measurements
Hedging Activities
     The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in commodity prices, interest rates, and foreign currency exchange rates. The Company’s exposure to

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these risks is managed through a combination of operating and financing activities. The Company selectively uses derivative financial instruments (“derivatives”), including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates, respectively. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in commodity prices, interest rates, and foreign currency exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.
     The Company’s exposure to interest rate risk results primarily from its borrowings of $283.3 million at March 31, 2011. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by maintaining a mixture of fixed and variable rate debt and, from time to time, uses pay-fixed interest rate swaps as cash flow hedges of variable rate debt in order to adjust the relative proportions.
     A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the U.S. in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. The USD, EUR, British pound sterling (“GBP”), and Chinese yuan (“CNY”) are the principal currencies in which the Company and its subsidiaries enter into transactions. The Company is exposed to the impacts of changes in foreign currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities, and earnings into USD. The Company partially offsets these exposures by having certain of its non-U.S. subsidiaries act as the obligor on a portion of its borrowings and by denominating such borrowings, as well as a portion of the borrowings for which the Company is the obligor, in currencies other than the USD.
     The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances monthly. The Company also selectively uses forward currency contracts to manage this risk. These contracts for the sale or purchase of European and other currencies generally mature within one year.
     In accordance with FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), the Company records its derivatives as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are recognized either in net income or in other comprehensive income, depending on the designated purpose of the derivative. All cash flows associated with derivatives are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows. It is the Company’s policy not to speculate in derivative instruments.
     Fluctuations due to changes in foreign currency exchange rates in the value of non-USD borrowings that have been designated as hedges of the Company’s net investment in foreign operations are included in other comprehensive income.

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     The following tables summarize the notional amounts, fair values and classification of the Company’s outstanding derivatives by risk category and instrument type within the Condensed Consolidated Balance Sheets:
                                 
    March 31, 2011  
                    Asset     Liability  
            Notional     Derivatives     Derivatives  
    Balance Sheet Location     Amount(1)     Fair Value(1)     Fair Value(1)  
Derivatives designated as hedging instruments under FASB ASC 815
                               
Interest rate swap contracts
  Other liabilities   $ 78,349     $     $ 1,157  
 
                               
Derivatives not designated as hedging instruments under FASB ASC 815
                               
Foreign currency forwards
  Current liabilities   $ 118,023     $ 770     $ 1,798  
                                 
    December 30, 2010  
                    Asset     Liability  
            Notional     Derivatives     Derivatives  
    Balance Sheet Location     Amount(1)     Fair Value(1)     Fair Value(1)  
Derivatives designated as hedging instruments under FASB ASC 815
                               
Interest rate swap contracts
  Other liabilities   $ 76,742     $     $ 1,560  
 
                               
Derivatives not designated as hedging instruments under FASB ASC 815
                               
Foreign currency forwards
  Accrued liabilities   $ 113,871     $ 709     $ 1,884  
 
(1)   Notional amounts represent the gross contract amounts of the outstanding derivatives excluding the total notional amount of positions that have been effectively closed through offsetting positions. The net gains and net losses associated with positions that have been effectively closed through offsetting positions but not yet settled are included in the asset and liability derivatives fair value columns, respectively.

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     Gains and losses on derivatives designated as cash flow hedges in accordance with FASB ASC 815 included in the Condensed Consolidated Statement of Operations for the three-month periods ended March 31, 2011 and 2010, respectively, are as presented in the table below:
                 
    Three Months Ended
    March 31,
Interest rate swap contracts(1)   2011   2010
Amount of gain or (loss) recognized in AOCI on derivatives (effective portion)
  $ (282 )   $ (1,087 )
Amount of gain or (loss) reclassified from AOCI into income (effective portion)
    122       (381 )
Amount of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
           
 
(1)   Losses on derivatives reclassified from accumulated other comprehensive income (“AOCI”) into income (effective portion) were included in the interest expense line on the face of the Condensed Consolidated Statements of Operations.
     At March 31, 2011, the Company is the fixed rate payor on three interest rate swap contracts that effectively fix the LIBOR-based index used to determine the interest rates charged on a total of $50.0 million and €20.0 million of the Company’s LIBOR-based variable rate borrowings. These contracts carry fixed rates ranging from 1.8% to 2.2% and have expiration dates ranging from 2012 to 2013. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted LIBOR-based interest payments. Based on LIBOR-based swap yield curves as of March 31, 2011, the Company expects to reclassify losses of $1.2 million out of AOCI into earnings during the next 12 months. The Company’s LIBOR-based variable rate borrowings outstanding at March 31, 2011 were $71.5 million and €46.5 million.
     There were 48 foreign currency forward contracts outstanding as of March 31, 2011 with notional amounts ranging from $0.1 million to $9.7 million. The Company has not designated any forward contracts as hedging instruments. The majority of these contracts are used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in foreign currency exchange rates. The changes in the fair value of these contracts generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included in the other operating expense (income), net, line on the face of the Condensed Consolidated Statements of Operations. The Company recorded net losses of $0.4 million and net gains of $3.2 million during the three-month periods ended March 31, 2011 and 2010, respectively, relating to foreign currency forward contracts outstanding during all or part of each period. Total net foreign currency gains or losses reported in other operating expense were losses of $1.2 million and gains of $1.0 million for the three-month periods ended March 31, 2011 and 2010, respectively.
     As of March 31, 2010, the Company had designated approximately €14.0 million of its term loan denominated in EUR as a hedge of its net investment in subsidiaries with EUR functional currencies. Accordingly, changes in the fair value of this debt due to changes in the USD to EUR exchange rate have been recorded through other comprehensive income. The portion of the EUR term loan designated as a net investment hedge as of March 31, 2011 and December 31, 2010 was €0. During the three-month periods ended March 31, 2011 and 2010, the Company recorded gains of zero and $1.0 million, net of tax, respectively, through other comprehensive income. As of March 31, 2011 and December 31, 2010, the net balances of such gains and losses included in accumulated other comprehensive income were losses of $5.1 million, net of tax.

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Fair Value Measurements
     The Company’s financial instruments consist primarily of cash equivalents, trade receivables, trade payables, deferred compensation assets and obligations, derivatives and debt instruments. The book values of these instruments, other than the Senior Subordinated Notes, are a reasonable estimate of their respective fair values.
     The Senior Subordinated Notes outstanding are carried at cost. Their estimated fair value was approximately $125.9 million as of March 31, 2011 based upon non-binding market quotations that were corroborated by observable market data (Level 2). See Note 17 “Subsequent Events.”
     The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2011:
                                 
    Level 1     Level 2     Level 3     Total  
Financial Assets
                               
Foreign currency forwards (1)
  $     $ 770     $     $ 770  
Trading securities held in deferred compensation plan (2)
    8,722                   8,722  
 
                       
Total
  $ 8,722     $ 770     $     $ 9,492  
 
                       
 
                               
Financial Liabilities
                               
Foreign currency forwards (1)
  $     $ 1,798     $     $ 1,798  
Interest rate swaps (3)
          1,157             1,157  
Phantom stock plan (4)
          5,515             5,515  
Deferred compensation plan (5)
    8,722                   8,722  
 
                       
Total
  $ 8,722     $ 8,470     $     $ 17,192  
 
                       
 
(1)   Based on internally-developed models that use as their basis readily observable market parameters such as current spot and forward rates, and the LIBOR index.
 
(2)   Based on the observable price of publicly traded mutual funds which, in accordance with FASB ASC 710, Compensation – General, are classified as “Trading” securities and accounted for using the mark-to-market method.
 
(3)   Measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of March 31, 2011. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties.
 
(4)   Based on the price of the Company’s common stock.
 
(5)   Based on the fair value of the investments in the deferred compensation plan.
Note 12. Income Taxes
     As of March 31, 2011, the total balance of unrecognized tax benefits was $3.9 million compared with $4.5 million at December 31, 2010. The decrease in the balance was primarily due to a settlement of the 2003, 2004, and most of the tax items in the 2005 tax audits in Germany, and the reversal of a German and United Kingdom reserve due to the statute expiring. The unrecognized tax benefits at March 31, 2011 include $4.9 million of

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uncertain tax positions that would affect the Company’s effective tax rate if recognized, of which $2.0 million would be offset by a reduction of a corresponding deferred tax asset. The Company does not expect any significant changes to its unrecognized tax benefits within the next twelve months.
     The Company’s accounting policy with respect to interest expense on underpayments of income tax and related penalties is to recognize such interest expense and penalties as part of the provision for income taxes. The Company’s income tax liabilities at March 31, 2011 include approximately $0.7 million of accrued interest and $0.3 million of penalties.
     The Company’s U.S. federal income tax returns for the tax years 2008 and 2009 are under examination by the Internal Revenue Service. The examination was initiated during the quarter ending September 30, 2010. As of the date of this report, the examination has not identified any material changes. The statutes of limitations for the U.S. state tax returns are open beginning with the 2006 tax year, except for three states for which the statutes have been extended, beginning with the 2003 tax year for one state and the 2006 tax year for two states.
     The Company is subject to income tax in approximately 30 jurisdictions outside the U.S. The statute of limitations varies by jurisdiction. The Company’s significant operations outside the U.S. are located in China, the United Kingdom and Germany. In Germany, the Company is finalizing the remaining tax audit for the 2005 tax year. Tax years 2006 and beyond remain subject to potential examination. As of the date of this report, the examinations have not identified any material changes. In China and the United Kingdom, tax years prior to 2006 are closed. In addition, audits are being conducted in other various countries. To date, no material adjustments have been proposed as a result of these audits.
     The provision for income taxes was $22.5 million and the effective tax rate was 27.3% in the first quarter of 2011, compared to $9.7 million and 23.2%, respectively, in the first quarter of 2010. The year over year increase in the effective tax rate reflects a higher proportion of taxable income in the U.S. in 2011 compared to 2010.
Note 13. Supplemental Information
     The components of other operating expense (income), net, and supplemental cash flow information are as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Other Operating Expense (Income), Net
               
Foreign currency losses (gains), net
  $ 1,245     $ (1,001 )
Restructuring charges, net (1)
    980       1,354  
Other, net
    (613 )     (1,704 )
 
           
Total other operating expense (income), net
  $ 1,612     $ (1,351 )
 
           
 
               
Supplemental Cash Flow Information
               
Cash taxes paid
  $ 13,979     $ 8,512  
Interest paid
    2,009       3,435  
 
(1)   See Note 2 “Restructuring.”

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Note 14. Contingencies
     The Company is a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of its size and sector. In addition, due to the bankruptcies of several asbestos manufacturers and other primary defendants, among other things, the Company has been named as a defendant in a number of asbestos personal injury lawsuits. The Company has also been named as a defendant in a number of silica personal injury lawsuits. The plaintiffs in these suits allege exposure to asbestos or silica from multiple sources and typically the Company is one of approximately 25 or more named defendants. In the Company’s experience to date, the substantial majority of the plaintiffs have not suffered an injury for which the Company bears responsibility.
     Predecessors to the Company sometimes manufactured, distributed and/or sold products allegedly at issue in the pending asbestos and silica litigation lawsuits (the “Products”). However, neither the Company nor its predecessors ever mined, manufactured, mixed, produced or distributed asbestos fiber or silica sand, the materials that allegedly caused the injury underlying the lawsuits. Moreover, the asbestos-containing components of the Products, if any, were enclosed within the subject Products.
     The Company has entered into a series of agreements with certain of its or its predecessors’ legacy insurers and certain potential indemnitors to secure insurance coverage and/or reimbursement for the costs associated with the asbestos and silica lawsuits filed against the Company. The Company has also pursued litigation against certain insurers or indemnitors where necessary. The latest of these actions, Gardner Denver, Inc. v. Certain Underwriters at Lloyd’s, London, et al., was filed on July 9, 2010, in the Eighth Judicial District, Adams County, Illinois, as case number 10-L-48 (the “Adams County Case”). In the lawsuit, the Company seeks, among other things, to require certain excess insurer defendants to honor their insurance policy obligations to the Company, including payment in whole or in part of the costs associated with the asbestos lawsuits filed against the Company.
     The Company believes that the pending and future asbestos and silica lawsuits are not likely to, in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or liquidity, based on: the Company’s anticipated insurance and indemnification rights to address the risks of such matters; the limited potential asbestos exposure from the Products described above; the Company’s experience that the vast majority of plaintiffs are not impaired with a disease attributable to alleged exposure to asbestos or silica from or relating to the Products or for which the Company otherwise bears responsibility; various potential defenses available to the Company with respect to such matters; and the Company’s prior disposition of comparable matters. However, due to inherent uncertainties of litigation and because future developments, including, without limitation, potential insolvencies of insurance companies or other defendants, an adverse determination in the Adams County Case, or other inability to collect from the Company’s historical insurers or indemnitors could cause a different outcome. While the outcome of legal proceedings is inherently uncertain, based on presently known facts, experience, and circumstances, the Company believes that the amounts accrued on its balance sheet are adequate and that the liabilities arising from the asbestos and silica personal injury lawsuits will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity. In the event of unexpected future developments, it is possible that the ultimate resolution of these matters may be material to the Company’s consolidated financial position, results of operations or liquidity. However, at this time, based on presently available information, the Company views this possibility as remote.

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     The Company has been identified as a potentially responsible party (“PRP”) with respect to several sites designated for cleanup under U.S. federal “Superfund” or similar state laws that impose liability for cleanup of certain waste sites and for related natural resource damages. Persons potentially liable for such costs and damages generally include the site owner or operator and persons that disposed or arranged for the disposal of hazardous substances found at those sites. Although these laws impose joint and several liability, in application, the PRPs typically allocate the investigation and cleanup costs based upon the volume of waste contributed by each PRP. Based on currently available information, the Company was only a small contributor to these waste sites, and the Company has, or is attempting to negotiate, de minimis settlements for their cleanup. The cleanup of the remaining sites is substantially complete and the Company’s future obligations entail a share of the sites’ ongoing operating and maintenance expense.
     The Company is also addressing three on-site cleanups for which it is the primary responsible party. Two of these cleanup sites are in the operation and maintenance stage and the third is in the implementation stage. Based on currently available information, the Company does not anticipate that any of these sites will result in material additional costs beyond those already accrued on its balance sheet.
     The Company has an accrued liability on its balance sheet to the extent costs are known or can be reasonably estimated for its remaining financial obligations for these matters. Based on currently available information, the Company does not anticipate any material adverse effect on its results of operations, financial condition, liquidity or competitive position as a result of compliance with federal, state, local or foreign environmental laws or regulations, or cleanup costs relating to the sites discussed above.
Note 15. Guarantor Subsidiaries
     The Company’s obligations under its 8% Senior Subordinated Notes due 2013 (the “Notes”) are jointly and severally, fully and unconditionally guaranteed by certain wholly-owned domestic subsidiaries of the Company (the “Guarantor Subsidiaries”). The Company’s subsidiaries that do not guarantee the Notes are referred to as the “Non-Guarantor Subsidiaries.” The guarantor condensed consolidating financial data below presents the statements of operations, balance sheets and statements of cash flows data (i) for Gardner Denver, Inc. (the “Parent Company”), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis (which is derived from Gardner Denver’s historical reported financial information); (ii) for the Parent Company alone (accounting for its Guarantor Subsidiaries and Non-Guarantor Subsidiaries on a cost basis under which the investments are recorded by each entity owning a portion of another entity at historical cost); (iii) for the Guarantor Subsidiaries alone; and (iv) for the Non-Guarantor Subsidiaries alone.
     On March 23, 2011, the Company announced that it had issued a notice to redeem all $125.0 million in aggregate principal amount outstanding of the Notes. The Notes were redeemed on May 2, 2011 for a total of $125.0 million, consisting of the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of redemption. See Note 17 “Subsequent Events.”

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Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2011
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Revenues
  $ 111,991     $ 127,131     $ 389,580     $ (96,849 )   $ 531,853  
Cost of sales
    75,806       87,365       279,153       (94,927 )     347,397  
 
                             
Gross profit
    36,185       39,766       110,427       (1,922 )     184,456  
Selling and administrative expenses
    23,980       10,407       61,634             96,021  
Other operating expense (income), net
    4,052       (5,511 )     3,071             1,612  
 
                             
Operating income
    8,153       34,870       45,722       (1,922 )     86,823  
Interest expense (income)
    5,637       (3,767 )     3,477             5,347  
Other income, net
    (290 )     (2 )     (670 )           (962 )
 
                             
Income before income taxes
    2,806       38,639       42,915       (1,922 )     82,438  
Provision for income taxes
    1,116       14,760       7,392       (729 )     22,539  
 
                             
Net income
    1,690       23,879       35,523       (1,193 )     59,899  
Less: Net income attributable to noncontrolling interests
                421             421  
 
                             
Net income attributable to Gardner Denver
  $ 1,690     $ 23,879     $ 35,102     $ (1,193 )   $ 59,478  
 
                             
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2010
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Revenues
  $ 74,452     $ 98,070     $ 328,343     $ (78,701 )   $ 422,164  
Cost of sales
    54,804       73,446       238,147       (78,040 )     288,357  
 
                             
Gross profit
    19,648       24,624       90,196       (661 )     133,807  
Selling and administrative expenses
    19,749       10,014       57,931             87,694  
Other operating (income) expense, net
    (2,328 )     2,225       (1,248 )           (1,351 )
 
                             
Operating income
    2,227       12,385       33,513       (661 )     47,464  
Interest expense (income)
    5,880       (3,770 )     4,006             6,116  
Other income, net
    (405 )     (4 )     (226 )           (635 )
 
                             
(Loss) income before income taxes
    (3,248 )     16,159       29,733       (661 )     41,983  
Provision for income taxes
    (744 )     5,527       5,169       (222 )     9,730  
 
                             
Net (loss) income
    (2,504 )     10,632       24,564       (439 )     32,253  
Less: Net income attributable to noncontrolling interests
                295             295  
 
                             
Net (loss) income attributable to Gardner Denver
  $ (2,504 )   $ 10,632     $ 24,269     $ (439 )   $ 31,958  
 
                             

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Condensed Consolidating Balance Sheet
March 31, 2011
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Current assets:
                                       
Cash and cash equivalents
  $ 64,603     $     $ 120,702     $     $ 185,305  
Accounts receivable, net
    64,072       70,208       264,456             398,736  
Inventories, net
    37,886       73,760       202,427       (18,487 )     295,586  
Deferred income taxes
    20,287             6,568       4,026       30,881  
Other current assets
    3,054       3,891       24,232             31,177  
 
                             
Total current assets
    189,902       147,859       618,385       (14,461 )     941,685  
 
                             
Intercompany receivable (payable)
    13,371       (3,971 )     (9,400 )            
Investments in affiliates
    830,658       186,313       41,297       (1,058,268 )      
Property, plant and equipment, net
    51,525       47,586       188,772             287,883  
Goodwill
    76,680       190,722       318,754             586,156  
Other intangibles, net
    8,056       43,143       245,892             297,091  
Other assets
    49,903       340       6,447       (5,352 )     51,338  
 
                             
Total assets
  $ 1,220,095     $ 611,992     $ 1,410,147     $ (1,078,081 )   $ 2,164,153  
 
                             
 
                                       
Liabilities and Stockholders’ Equity
                                       
Current liabilities:
                                       
Short-term borrowings and current maturities of long-term debt
  $ 31,964     $     $ 5,658     $     $ 37,622  
Accounts payable and accrued liabilities
    94,035       85,452       199,296       (1,270 )     377,513  
 
                             
Total current liabilities
    125,999       85,452       204,954       (1,270 )     415,135  
 
                             
Long-term intercompany payable (receivable)
    260,941       (322,642 )     61,701              
Long-term debt, less current maturities
    231,464       75       14,182             245,721  
Deferred income taxes
          23,819       45,908       (5,352 )     64,375  
Other liabilities
    83,431       789       76,641             160,861  
 
                             
Total liabilities
    701,835       (212,507 )     403,386       (6,622 )     886,092  
 
                             
Stockholders’ equity:
                                       
Common stock
    596                         596  
Capital in excess of par value
    598,117       500,824       558,689       (1,058,268 )     599,362  
Retained earnings
    133,129       298,217       343,070       (11,859 )     762,557  
Accumulated other comprehensive (loss) income
    (24,853 )     25,458       92,904       (1,332 )     92,177  
Treasury stock, at cost
    (188,729 )                       (188,729 )
 
                             
Total Gardner Denver stockholders’ equity
    518,260       824,499       994,663       (1,071,459 )     1,265,963  
Noncontrolling interests
                12,098             12,098  
 
                             
Total stockholders’ equity
    518,260       824,499       1,006,761       (1,071,459 )     1,278,061  
 
                             
Total liabilities and stockholders’ equity
  $ 1,220,095     $ 611,992     $ 1,410,147     $ (1,078,081 )   $ 2,164,153  
 
                             

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Condensed Consolidating Balance Sheet
December 31, 2010
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Current assets:
                                       
Cash and cash equivalents
  $ 27,725     $     $ 129,304     $     $ 157,029  
Accounts receivable, net
    56,129       66,819       246,912             369,860  
Inventories, net
    31,233       59,552       166,982       (16,282 )     241,485  
Deferred income taxes
    21,888       62       8,191       4,487       34,628  
Other current assets
    3,589       3,967       17,979             25,535  
 
                             
Total current assets
    140,564       130,400       569,368       (11,795 )     828,537  
 
                             
Intercompany receivable (payable)
    65,596       (55,402 )     (10,194 )            
Investments in affiliates
    839,218       186,314       41,297       (1,066,829 )      
Property, plant and equipment, net
    51,786       47,156       187,621             286,563  
Goodwill
    76,680       190,722       304,394             571,796  
Other intangibles, net
    8,081       43,469       238,038             289,588  
Other assets
    51,373       172       5,903       (6,834 )     50,614  
 
                             
Total assets
  $ 1,233,298     $ 542,831     $ 1,336,427     $ (1,085,458 )   $ 2,027,098  
 
                             
 
                                       
Liabilities and Stockholders’ Equity
                                       
Current liabilities:
                                       
Short-term borrowings and current maturities of long-term debt
  $ 29,845     $     $ 7,383     $     $ 37,228  
Accounts payable and accrued liabilities
    91,781       57,748       172,843             322,372  
 
                             
Total current liabilities
    121,626       57,748       180,226             359,600  
 
                             
Long-term intercompany payable (receivable)
    256,407       (340,249 )     83,842              
Long-term debt, less current maturities
    237,200       75       13,407             250,682  
Deferred income taxes
          23,865       45,126       (6,834 )     62,157  
Other liabilities
    89,480       772       74,734             164,986  
 
                             
Total liabilities
    704,713       (257,789 )     397,335       (6,834 )     837,425  
 
                             
Stockholders’ equity:
                                       
Common stock
    595                         595  
Capital in excess of par value
    590,743       509,385       558,689       (1,066,829 )     591,988  
Retained earnings
    134,061       274,337       307,967       (10,666 )     705,699  
Accumulated other comprehensive (loss) income
    (14,270 )     16,898       59,926       (1,129 )     61,425  
Treasury stock, at cost
    (182,544 )                       (182,544 )
 
                             
Total Gardner Denver stockholders’ equity
    528,585       800,620       926,582       (1,078,624 )     1,177,163  
Noncontrolling interests
                12,510             12,510  
 
                             
Total stockholders’ equity
    528,585       800,620       939,092       (1,078,624 )     1,189,673  
 
                             
Total liabilities and stockholders’ equity
  $ 1,233,298     $ 542,831     $ 1,336,427     $ (1,085,458 )   $ 2,027,098  
 
                             

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Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2011
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net Cash Provided by (Used In) Operating Activities
  $ 43,158     $ (18,705 )   $ 23,392     $     $ 47,845  
 
                             
 
                                       
Cash Flows From Investing Activities
                                       
Capital expenditures
    (2,145 )     (2,569 )     (3,316 )           (8,030 )
Net cash paid in business combinations
    (21 )                       (21 )
Disposals of property, plant and equipment
    9       267       216             492  
 
                             
Net cash used in investing activities
    (2,157 )     (2,302 )     (3,100 )           (7,559 )
 
                             
 
                                       
Cash Flows From Financing Activities
                                       
Net change in long-term intercompany receivables/payables
    7,546       21,013       (28,559 )            
Principal payments on short-term borrowings
    (883 )           (5,712 )           (6,595 )
Proceeds from short-term borrowings
                3,646             3,646  
Principal payments on long-term debt
    (6,578 )                       (6,578 )
Proceeds from long-term debt
                10             10  
Proceeds from stock option exercises
    3,037                         3,037  
Excess tax benefits from stock-based compensation
    1,513                         1,513  
Purchase of treasury stock
    (6,169 )                       (6,169 )
Cash dividends paid
    (2,622 )                       (2,622 )
Other
                (1,024 )           (1,024 )
 
                             
Net cash (used in) provided by financing activities
    (4,156 )     21,013       (31,639 )           (14,782 )
 
                             
 
                                       
Effect of exchange rate changes on cash and cash equivalents
    33       (6 )     2,745             2,772  
 
                             
 
                                       
Net increase (decrease) in cash and cash equivalents
    36,878             (8,602 )           28,276  
Cash and cash equivalents, beginning of year
    27,725             129,304             157,029  
 
                             
 
                                       
Cash and cash equivalents, end of period
  $ 64,603     $     $ 120,702     $     $ 185,305  
 
                             

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Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2010
                                         
                    Non-              
    Parent     Guarantor     Guarantor              
    Company     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net Cash Provided by (Used In) Operating Activities
  $ 21,612     $ (9,628 )   $ 14,704     $     $ 26,688  
 
                             
 
                                       
Cash Flows From Investing Activities
                                       
Capital expenditures
    (881 )     (614 )     (3,264 )           (4,759 )
Disposals of property, plant and equipment
    29       12       146             187  
Other
    170       (170 )                  
 
                             
Net cash used in investing activities
    (682 )     (772 )     (3,118 )           (4,572 )
 
                             
 
                                       
Cash Flows From Financing Activities
                                       
Net change in long-term intercompany receivables/payables
    3,082       10,350       (13,432 )            
Principal payments on short-term borrowings
    (633 )           (2,872 )           (3,505 )
Proceeds from short-term borrowings
                7,307             7,307  
Principal payments on long-term debt
    (24,362 )           (349 )           (24,711 )
Proceeds from long-term debt
    8,000             10             8,010  
Proceeds from stock option exercises
    7,339                         7,339  
Excess tax benefits from stock-based compensation
    1,463             26             1,489  
Purchase of treasury stock
    (8,841 )                       (8,841 )
Cash dividends paid
    (2,624 )                       (2,624 )
Other
                (1,001 )           (1,001 )
 
                             
Net cash (used in) provided by financing activities
    (16,576 )     10,350       (10,311 )           (16,537 )
 
                             
 
                                       
Effect of exchange rate changes on cash and cash equivalents
    42             (2,534 )           (2,492 )
 
                             
 
                                       
Net increase (decrease) in cash and cash equivalents
    4,396       (50 )     (1,259 )           3,087  
Cash and cash equivalents, beginning of year
    3,404       54       106,278             109,736  
 
                             
 
                                       
Cash and cash equivalents, end of period
  $ 7,800     $ 4     $ 105,019     $     $ 112,823  
 
                             

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Note 16. Segment Results
     The Company has determined its reportable segments in accordance with FASB ASC 280 Segment Reporting (“FASB ASC 280”) and evaluates the performance of its reportable segments based on, among other measures, operating income, which is defined as income before interest expense, other income, net, and income taxes. Reportable segment operating income and segment operating margin (defined as segment operating income divided by segment revenues) are indicative of short-term operating performance and ongoing profitability. Management closely monitors the operating income and operating margin of each reportable segment to evaluate past performance and actions required to improve profitability.
     In the Industrial Products Group, the Company designs, manufactures, markets and services the following products and related aftermarket parts for industrial and commercial applications: rotary screw, reciprocating, and sliding vane air and gas compressors; positive displacement, centrifugal and side channel blowers; and vacuum pumps primarily serving manufacturing, transportation and general industry and selected OEM and engineered system applications. The Company also markets and services complementary ancillary products. Stationary air compressors are used in manufacturing, process applications and materials handling, and to power air tools and equipment. Blowers are used primarily in pneumatic conveying, wastewater aeration, numerous applications in industrial manufacturing and engineered vacuum systems. The markets served are primarily in Europe, the U.S. and Asia.
     In the Engineered Products Group, the Company designs, manufactures, markets and services a diverse group of pumps, compressors, liquid ring vacuum pumps, water jetting and loading arm systems and related aftermarket parts. These products are used in well drilling, well servicing and production of oil and natural gas; industrial, commercial and transportation applications; and in industrial cleaning and maintenance. Liquid ring pumps are used in many different applications such as water removal, distilling, reacting, flare gas recovery, efficiency improvement, lifting and handling, and filtering, principally in the pulp and paper, industrial manufacturing, petrochemical and power industries. This segment also designs, manufactures, markets and services other engineered products and components and equipment for the chemical, petroleum and food industries. The markets served are primarily in the U.S., Europe, Canada and Asia.

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     The following table provides financial information by business segment for the three-months ended March 31, 2011 and 2010:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
Industrial Products Group
               
Revenues
  $ 286,210     $ 246,394  
Operating income
    30,802       19,553  
Operating income as a percentage of revenues
    10.8 %     7.9 %
 
               
Engineered Products Group
               
Revenues
  $ 245,643     $ 175,770  
Operating income
    56,021       27,911  
Operating income as a percentage of revenues
    22.8 %     15.9 %
 
               
Reconciliation of Segment Results to Consolidated Results
               
Total segment operating income
  $ 86,823     $ 47,464  
Interest expense
    5,347       6,116  
Other income, net
    (962 )     (635 )
 
           
Consolidated income before income taxes
  $ 82,438     $ 41,983  
 
           
Note 17. Subsequent Events
     On March 23, 2011, the Company announced that it had issued a notice to redeem all $125.0 million in aggregate principal amount of its outstanding Senior Subordinated Notes at 8% due 2013 (the “Notes”). The Notes were redeemed on May 2, 2011 for a total of $125.0 million, consisting of the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of redemption. The Company financed the redemption using available cash and borrowings under its revolving credit facility. In the second quarter of 2011, the Company will recognize a loss of approximately $0.8 million (consisting of unamortized debt issuance costs) on the early extinguishment of this debt.
     On April 20, 2011, the Company announced that it had reached an agreement with the minority shareholders of its two joint ventures in China, Shanghai CompAir Compressor Co. Ltd. and Shanghai CompAir-Dalong High Pressure Equipment Co. Ltd., to acquire all of their equity interests in these entities, representing 49 percent and 40 percent of the two entities, respectively. The purchase price is RMB 122.0 million (approximately $18.7 million based on exchange rates at the date of the agreement). The transaction is currently expected to close during the third quarter of 2011 and will be accounted for by the Company as an equity transaction.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, including the financial statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations, and the interim condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q.

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Operating Segments
     In the Industrial Products Group, the Company designs, manufactures, markets and services the following products and related aftermarket parts for industrial and commercial applications: rotary screw, reciprocating, and sliding vane air compressors; and positive displacement, centrifugal and side channel blowers; primarily serving general industrial and OEM applications. This segment also markets and services complementary ancillary products. Stationary air compressors are used in manufacturing, process applications and materials handling, and to power air tools and equipment. Blowers are used primarily in pneumatic conveying, wastewater aeration, numerous applications in industrial manufacturing and engineered vacuum systems. The markets served are primarily in Europe, the U.S. and Asia.
     In the Engineered Products Group, the Company designs, manufactures, markets and services a diverse group of products for industrial, commercial and OEM applications, engineered systems and general industry. Products include reciprocating pumps, liquid ring pumps, diaphragm vacuum pumps, water jetting systems and related aftermarket parts. These products are used in oil and natural gas well drilling, servicing and production; medical and laboratory; and in industrial cleaning and maintenance. Liquid ring pumps are used in many different applications such as water removal, distilling, reacting, flare gas recovery, efficiency improvement, lifting and handling, and filtering, principally in the pulp and paper, industrial manufacturing, petrochemical and power industries. This segment also designs, manufactures, markets and services other fluid transfer components and equipment for the chemical, petroleum and food industries. The markets served are primarily in the U.S., Europe, Canada and Asia.
     The Company has determined its reportable segments in accordance with FASB ASC 280 and evaluates the performance of its reportable segments based on, among other measures, operating income, which is defined as income before interest expense, other income, net, and income taxes. Reportable segment operating income and segment operating margin (defined as segment operating income divided by segment revenues) are indicative of short-term operating performance and ongoing profitability. Management closely monitors the operating income and operating margin of each business segment to evaluate past performance and identify actions required to improve profitability. See Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q.
Non-GAAP Financial Measures
     To supplement the Company’s financial information presented in accordance with GAAP, management, from time to time, uses additional measures to clarify and enhance understanding of past performance and prospects for the future. These measures may exclude, for example, the impact of unique and infrequent items or items outside of management’s control (e.g. foreign currency exchange rates). Such measures are provided in addition to and should not be considered to be a substitute for, or superior to, the comparable measure under GAAP.

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Results of Operations
Performance during the Quarter Ended March 31, 2011 Compared
with the Quarter Ended March 31, 2010
Revenues
     Revenues increased $109.7 million, or 26%, to $531.9 million in the three-month period ended March 31, 2011, compared to $422.2 million in the three-month period of 2010. This increase was attributable to higher volume in both segments ($89.5 million, or 21%), price increases ($9.1 million, or 2%), favorable changes in foreign currency exchange rates ($6.7 million, or 2%) and the acquisition of ILMVAC in the third quarter of 2010 ($4.4 million, or 1%).
     Revenues in the Industrial Products Group increased $39.8 million, or 16%, to $286.2 million in the first quarter of 2011, compared to $246.4 million in the first quarter of 2010. This increase reflects higher volume (12%), price increases (2%) and favorable changes in foreign currency exchange rates (2%). The volume increase was attributable to improvement in demand for OEM products, compressors and aftermarket parts and services on a global basis. Strong growth was experienced in all major geographic regions, particularly in the Americas and in Asia.
     Revenues in the Engineered Products Group increased $69.9 million, or 40%, to $245.7 million in the first quarter of 2011, compared to $175.8 million in the first quarter of 2010. This increase reflects higher volume (33%), price increases (3%), the acquisition of ILMVAC (3%) and favorable changes in foreign currency exchange rates (1%). The volume increase reflected strong demand for drilling and well servicing pumps, medical OEM products and loading arms.
Gross Profit
     Gross profit increased $50.7 million, or 38%, to $184.5 million in the three-month period ended March 31, 2011, compared to $133.8 million in the three-month period of 2010, and as a percentage of revenues was 34.7% in 2011, compared to 31.7% in 2010. The increase in gross profit primarily reflects the volume increases discussed above, favorable product mix, cost reductions and favorable changes in foreign currency exchange rates. The improvement in gross profit as a percentage of revenues was due primarily to the benefits of operational improvements, cost reductions, volume leverage and favorable product mix.
Selling and Administrative Expenses
     Selling and administrative expenses increased $8.3 million, or 9%, to $96.0 million in the first quarter of 2011, compared to $87.7 million in the first quarter of 2010. This increase reflects higher compensation and benefit expenses, unfavorable changes in foreign currency exchange rates ($1.2 million) and the acquisition of ILMVAC ($1.0 million), partially offset by cost reductions. As a percentage of revenues, selling and administrative expenses improved to 18.1% in the first quarter of 2011 compared to 20.8% in the first quarter of 2010, primarily as a result of cost reductions and leverage from higher revenues.

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Other Operating Expense (Income), Net
     Other operating expense, net, of $1.6 million in the first quarter of 2011 compares to other operating income, net, of $1.4 million in the first quarter of 2010. Net foreign currency losses of $1.2 million recorded in the first quarter of 2011 reflected the effect of the weakening of the USD against primarily the EUR and GBP on the Company’s financial instruments denominated in the EUR and GBP. Net foreign currency gains of $1.0 million recorded in the first quarter of 2010 reflected the effect of the strengthening of the USD against those currencies. Results in 2010 also reflected an insurance settlement received in the first quarter.
Operating Income
     Operating income of $86.8 million in the first quarter of 2011 increased $39.3 million, or 83%, compared to $47.5 million in the first quarter of 2010. Operating income as a percentage of revenues in the first quarter of 2011 was 16.3% compared to 11.2% in the first quarter of 2010. This improvement was due primarily to incremental profitability on revenue growth, favorable product mix and the benefits of operational improvements previously implemented. Charges associated with profit improvement initiatives and other items totaled $1.7 million, or 0.3% of revenues, in 2011 and $1.1 million, or 0.3% of revenues, in 2010.
     The Industrial Products Group generated segment operating income and segment operating margin of $30.8 million and 10.8%, respectively, in the first quarter of 2011, compared to $19.6 million and 7.9%, respectively, in the first quarter of 2010 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income to consolidated operating income). The year over year improvement in operating income and operating margin was primarily attributable to incremental profit on revenue growth and cost reductions. Charges associated with profit improvement initiatives and other items totaled $1.4 million, or 0.5% of revenues, in 2011 and $0.9 million, or 0.4% of revenues, in 2010.
     The Engineered Products Group generated segment operating income and segment operating margin of $56.0 million and 22.8%, respectively, in the first quarter of 2011, compared to $27.9 million and 15.9%, respectively, in the first quarter of 2010 (see Note 16 “Segment Results” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q for a reconciliation of segment operating income to consolidated operating income). The year over year improvement in operating income and operating margin was primarily attributable to incremental profit on revenue growth, favorable product mix and cost reductions. Charges associated with profit improvement initiatives and other items totaled $0.3 million, or 0.1% of revenues, in 2011 and $0.1 million, or 0.1% of revenues, in 2010.
Interest Expense
     Interest expense of $5.3 million in the first quarter of 2011 decreased $0.8 million from $6.1 million in the first quarter of 2010 due primarily to lower average borrowings in the first quarter of 2011 compared to the first quarter of 2010, partially offset by a higher weighted average interest rate in 2011. The weighted average interest rate, including the amortization of debt issuance costs, increased to 7.5% in the first quarter of 2011 compared to 6.9% in the first quarter of 2010 due primarily to the greater relative weight of the fixed interest rate on the Company’s 8% Senior Subordinated Notes.

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Provision for Income Taxes
     The provision for income taxes was $22.5 million and the effective tax rate was 27.3% in the first quarter of 2011, compared to $9.7 million and 23.2%, respectively, in the first quarter of 2010. The year over year increase in the provision reflects higher taxable income, and the increase in the effective tax rate reflects a higher proportion of taxable income in the U.S. in 2011 compared to 2010.
Net Income Attributable to Gardner Denver
     Net income attributable to Gardner Denver of $59.5 million and diluted earnings per share (“DEPS”) of $1.13 in the first quarter of 2011 compares with net income attributable to Gardner Denver and DEPS of $32.0 million and $0.61, respectively, in the first quarter of 2010. This improvement reflects the net effect of the operating income, interest expense and income tax factors discussed above. Results in the first quarter of 2011 included charges for profit improvement initiatives and other items totaling $1.2 million after income taxes, or $0.02 on a diluted per share basis. Results in the first quarter of 2010 included net charges for profit improvement initiatives and other items totaling $0.8 million after income taxes, or $0.01 on a diluted per share basis.
Outlook
     In general, the Company believes that demand for products in its Industrial Products Group tends to correlate with the rate of total industrial capacity utilization and the rate of change of industrial production because compressed air is often used as a fourth utility in the manufacturing process. Capacity utilization rates above 80% have historically indicated a good demand environment for industrial equipment such as compressor and vacuum products. Over longer time periods, the Company believes that demand also tends to follow economic growth patterns indicated by the rates of change in the gross domestic product around the world. The significant contraction in manufacturing capacity utilization in the U.S. and Europe, which began in 2008, has resulted in lower demand for capital equipment, such as compressor packages, as existing equipment remained idle. The Company believes there have been recent improvements in global capacity utilization rates, and that capacity utilization will continue to improve gradually.
     In the first quarter of 2011, orders in the Industrial Products Group increased $45.7 million, or 16%, to $323.5 million, compared to $277.8 million in the first quarter of 2010. This increase reflected on-going improvement in demand for OEM products, compressors and aftermarket parts and services, with growth realized in all major geographic regions ($41.3 million, or 14%), and the favorable effect of changes in foreign currency exchange rates ($4.4 million, or 2%). Order backlog for the Industrial Products Group increased 20% to $255.0 million as of March 31, 2011 from $211.7 million at December 31, 2010 due primarily to the growth in orders as discussed above ($36.5 million, or 17%) and the favorable effect of changes in foreign currency exchange rates ($6.8 million, or 3%). Order backlog for the Industrial Products Group as of March 31, 2011 increased 21% compared to $210.5 million as of March 31, 2010, due primarily to the growth in orders ($34.7 million, or 16%) and favorable changes in foreign currency exchange rates ($9.8 million, or 5%). The Company currently expects that continued gradual improvement in capacity utilization rates will result in higher demand for products and services in its Industrial Products Group, particularly for replacement opportunities and aftermarket parts and services. It also expects that marginal expansion of customer plants will drive demand for compressors and vacuum products.

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     Orders in the Engineered Products Group increased 39% to $288.4 million in the first quarter of 2011, compared to $207.5 million in the first quarter of 2010, due to strong demand for drilling and well servicing pumps and medical OEM products ($74.4 million, or 36%), the acquisition of ILMVAC ($3.8 million, or 2%) and the favorable effect of changes in foreign currency exchange rates ($2.7 million, or 1%). Order backlog for the Engineered Products Group increased 15% to $392.1 million as of March 31, 2011 from $341.8 million at December 31, 2010 due primarily to the growth in orders ($42.2 million, or 13%) and the favorable effect of changes in foreign currency exchange rates ($8.1 million, or 2%). Order backlog for the Engineered Products Group as of March 31, 2011 increased 71% compared to $229.3 million as of March 31, 2010, primarily as a result of the growth in orders ($150.3 million, or 65%), the favorable effect of changes in foreign currency exchange rates ($10.9 million, or 5%) and the acquisition of ILMVAC ($1.6 million, or 1%). Orders for products in the Engineered Products Group have historically corresponded to demand for petrochemical products and been influenced by prices for oil and natural gas, and rig count, among other factors, which the Company cannot predict. Revenues for Engineered Products depend more on existing backlog levels than revenues for Industrial Products. Many of these products are used in process applications, such as oil and gas refining and chemical processing, which are industries that typically experience increased demand very late in economic cycles. Improving backlog during the preceding six months has provided the Company with better visibility into the demand for the remainder of 2011. The Company currently anticipates that demand for well servicing pumps and aftermarket fluid ends will remain strong during 2011 compared to 2010. The Company also expects shipments of drilling pumps to remain steady based on its anticipation of a stable rig count for the remainder of the year.
     Order backlog consists of orders believed to be firm for which a customer purchase order has been received or communicated. However, since orders may be rescheduled or canceled, order backlog is not necessarily indicative of future revenue levels.
Liquidity and Capital Resources
Operating Working Capital
     During the three-month period ended March 31, 2011, net working capital (defined as total current assets less total current liabilities) increased to $526.6 million from $468.9 million at December 31, 2010. Operating working capital (defined as accounts receivable plus inventories, less accounts payable and accrued liabilities) increased $27.8 million to $316.8 million from $289.0 million at December 31, 2010 due to higher accounts receivable ($28.9 million) and inventory ($54.1 million), partially offset by higher accounts payable ($40.2 million) and accrued liabilities ($15.0 million). The increase in accounts receivable was due primarily to higher revenues, the timing of shipments within the first quarter and the effect of changes in foreign currency exchange rates ($9.0 million). Days sales in receivables increased to 67 at March 31, 2011 from 64 at December 31, 2010 due primarily to the timing of shipments within the first quarter, and were down from 71 days at March 31, 2010. The increase in inventory primarily reflects growth attributable to increases in both orders and backlog during the first three months of 2011 and the effect of changes in foreign currency exchange rates ($7.0 million). Inventory turns were 4.7 in the first quarter of 2011, compared with 5.8 in the fourth quarter of 2010 and 5.2 in the first quarter of 2010. The impact of growth in orders and backlog was partially offset by productivity improvements. The increase in accounts payable and accrued liabilities was due primarily to the timing of payments to vendors, higher accrued income taxes and product warranty, and higher customer advance payments.

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Cash Flows
     Cash provided by operating activities of $47.8 million in the three-month period of 2011 increased $21.1 million from $26.7 million in the comparable period of 2010. This improvement was primarily due to higher net income (excluding non-cash charges for depreciation and amortization and unrealized foreign currency transaction gains and losses) and lower cash used by operating working capital in 2011 compared to 2010. Operating working capital used cash of $19.3 million in 2011 and $25.9 million in 2010. Cash used in accounts receivable of $19.9 million and $14.8 million in 2011 and 2010, respectively, reflected increased sales and the timing of shipments within the quarter in both periods. Cash used in inventory of $47.1 million and $4.6 million in 2011 and 2010, respectively, reflected the growth in orders and backlog during the three-month period of each year. Accounts payable and accrued expenses generated cash of $47.7 million in 2011 and used cash of $6.5 million in 2010. The year over year improvement was due primarily to the timing of payments to vendors in 2011 and higher employee termination benefit payments in 2010.
     Net cash used in investing activities of $7.6 million and $4.6 million in the three-month periods of 2011 and 2010, respectively, consisted primarily of capital expenditures on assets intended to increase production output to meet improving demand and reduce costs. The Company currently expects capital expenditures to total approximately $45 million for the full year 2011. As a result of the Company’s application of lean principles, non-capital or less capital-intensive solutions are often utilized in process improvement initiatives and capital replacement. Capital expenditures related to environmental projects have not been significant in the past and are not expected to be significant in the foreseeable future.
     Net cash used in financing activities of $14.8 million in the three-month period of 2011 compares with $16.5 million used in the three-month period of 2010. Cash provided by operating activities was used for net repayments of short-term and long-term borrowings totaling $9.5 million in the three-month period of 2011 and $12.9 million in the three-month period of 2010. Cash used for the repurchase of shares of the Company’s common stock totaled $6.2 million and $8.8 million in 2011 and 2010, respectively, including shares exchanged or surrendered in connection with its stock option plans of $0.9 million in 2011 and $0.2 million in 2010. Cash dividends paid were $2.6 million ($0.05 per common share) in both years.
Share Repurchase Program
     In November 2008, the Company’s Board of Directors authorized a share repurchase program to acquire up to 3.0 million shares of the Company’s outstanding common stock, of which approximately 2.1 million shares remain available for repurchase as of March 31, 2011.
Liquidity
     The Company’s debt to total capital ratio (defined as total debt divided by the sum of total debt plus total stockholders’ equity) was 18.1% as of March 31, 2011 compared to 19.5% as of December 31, 2010. This decrease primarily reflects a $4.6 million net decrease in borrowings between these two dates.
     The Company’s primary cash requirements include working capital, capital expenditures, principal and interest payments on indebtedness, cash dividends on its common stock, selective acquisitions and any stock

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repurchases. The Company’s primary sources of funds are its ongoing net cash flows from operating activities and availability under its Revolving Line of Credit (as defined below). At March 31, 2011, the Company had cash and cash equivalents of $185.3 million, of which $2.9 million was pledged to financial institutions as collateral to support issued standby letters of credit and similar instruments. The Company also had $295.4 million of unused availability under its Revolving Line of Credit at March 31, 2011. Based on the Company’s financial position at March 31, 2011 and its pro-forma results of operations for the twelve months then ended, the unused availability under its Revolving Line of Credit would not have been limited by the financial ratio covenants in the 2008 Credit Agreement (as described below).
     On September 19, 2008, the Company entered into the 2008 Credit Agreement consisting of (i) a $310.0 million Revolving Line of Credit (the “Revolving Line of Credit”), (ii) a $180.0 million term loan (“U.S. Dollar Term Loan”) and (iii) a €120.0 million term loan (“Euro Term Loan”). In addition, the 2008 Credit Agreement provides for a possible increase in the Revolving Line of Credit of up to $200.0 million.
     On October 15 and 16, 2008, the Company borrowed $200.0 million and £40.0 million, respectively, pursuant to the Revolving Line of Credit. This amount was used by the Company, in part to retire the outstanding balances under its previous credit agreement, at which point it was terminated, and in part to pay a portion of the cash purchase price of the Company’s acquisition of CompAir. On October 17, 2008, the Company borrowed $180.0 million and €120.0 million pursuant to the U.S. Dollar Term Loan and the Euro Term Loan, respectively. These facilities, together with a portion of the borrowing under the Revolving Line of Credit and existing cash, were used to pay the cash portion of the CompAir acquisition.
     The interest rates per annum applicable to loans under the 2008 Credit Agreement are, at the Company’s option, either a base rate plus an applicable margin percentage or a Eurocurrency rate plus an applicable margin. The base rate is the greater of (i) the prime rate or (ii) one-half of 1% over the weighted average of rates on overnight federal funds as published by the Federal Reserve Bank of New York. The Eurocurrency rate is LIBOR.
     The initial applicable margin percentage over LIBOR under the 2008 Credit Agreement was 2.5% with respect to the term loans and 2.1% with respect to loans under the Revolving Line of Credit, and the initial applicable margin percentage over the base rate was 1.25% with respect to floating rate loans. After the Company’s delivery of its financial statements and compliance certificate for each fiscal quarter, the applicable margin percentages are subject to adjustments based upon the ratio of the Company’s consolidated total debt to consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (each as defined in the 2008 Credit Agreement) being within certain defined ranges. The applicable margin percentage over LIBOR was adjusted down during the third quarter of 2010. At March 31, 2011, the applicable margin percentage over LIBOR under the 2008 Credit Agreement was 2.0% with respect to the term loans and 1.65% with respect to loans under the Revolving Line of Credit, and the applicable margin percentage over the base rate was 0.75% with respect to floating rate loans.
     The obligations under the 2008 Credit Agreement are guaranteed by the Company’s existing and future domestic subsidiaries. The obligations under the 2008 Credit Agreement are also secured by a pledge of the capital stock of each of the Company’s existing and future material domestic subsidiaries, as well as 65% of the capital stock of each of the Company’s existing and future first-tier material foreign subsidiaries.
     The 2008 Credit Agreement includes customary covenants. Subject to certain exceptions, these covenants restrict or limit the ability of the Company and its subsidiaries to, among other things: incur liens; engage in

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mergers, consolidations and sales of assets; incur additional indebtedness; pay dividends and redeem stock; make investments (including loans and advances); enter into transactions with affiliates, make capital expenditures and incur rental obligations. In addition, the 2008 Credit Agreement requires the Company to maintain compliance with certain financial ratios on a quarterly basis, including a maximum total leverage ratio test and a minimum interest coverage ratio test. As of March 31, 2011, the Company was in compliance with each of the financial ratio covenants under the 2008 Credit Agreement.
     The 2008 Credit Agreement contains customary events of default, including upon a change of control. If an event of default occurs, the lenders under the 2008 Credit Agreement will be entitled to take various actions, including the acceleration of amounts due under the 2008 Credit Agreement.
     The U.S. Dollar and Euro Term Loans have a final maturity of October 15, 2013. The U.S. Dollar Term Loan requires quarterly principal payments aggregating approximately $11.5 million, $25.4 million and $34.6 million in fiscal years 2011 through 2013, respectively. The Euro Term Loan requires quarterly principal payments aggregating approximately €7.5 million, €16.5 million and €22.5 million in fiscal years 2011 through 2013, respectively.
     The Revolving Line of Credit also matures on October 15, 2013. Loans under this facility may be denominated in USD or several foreign currencies and may be borrowed by the Company or two of its foreign subsidiaries as outlined in the 2008 Credit Agreement.
     The Company issued $125.0 million of 8% Senior Subordinated Notes (the “Notes”) in 2005. The Notes had a fixed annual interest rate of 8% and were guaranteed by certain of the Company’s domestic subsidiaries (the “Guarantors”). On March 23, 2011, the Company announced that it had issued a notice to redeem all $125.0 million in aggregate principal amount of the Notes. The Notes were redeemed on May 2, 2011 for a total of $125.0 million, consisting of the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of redemption. The Company financed the redemption using $55.0 million of available cash and $70.0 million of borrowings under its Revolving Line of Credit. Availability under the Company’s Revolving Line of Credit on May 2, 2011, subsequent to the redemption, was $226.5 million. Management currently believes that the Company’s liquidity position, including available cash and availability under the Revolving Line of Credit, is adequate.
     Management currently expects that the Company’s cash on hand and future cash flows from operating activities will be sufficient to fund its working capital, capital expenditures, scheduled principal and interest payments on indebtedness, cash dividends on its common stock and any stock repurchases for at least the next twelve months. The Company continues to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. In the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.
Contractual Obligations and Commitments
     The following table and accompanying disclosures summarize the Company’s significant contractual obligations at March 31, 2011 and the effect such obligations are expected to have on its liquidity and cash flow in future periods:

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            Payments Due by Period  
            Balance                     After  
(Dollars in millions)   Total     of 2011     2012-2013     2014 2015     2015  
Contractual Cash Obligations
                                       
 
                                       
Debt (1)
  $ 275.5     $ 153.0     $ 118.8     $ 0.8     $ 2.9  
Estimated interest payments (1) (2)
    31.3       9.8       15.3       2.5       3.7  
Capital leases
    7.8       0.7       0.9       2.8       3.4  
Operating leases
    88.0       20.5       34.2       15.9       17.4  
Purchase obligations (3)
    307.7       298.6       9.1              
 
                             
Total
  $ 710.3     $ 482.6     $ 178.3     $ 22.0     $ 27.4  
 
                             
 
(1)   The redemption price, consisting of the principal and accrued and unpaid interest, totaling $125.0 million, of the 8% Senior Subordinated Notes is presented as a 2011 payment based on the Company’s redemption of these Notes on May 2, 2011.
 
(2)   Estimated interest payments for long-term debt were calculated as follows: for fixed-rate debt and term debt, interest was calculated based on applicable rates and payment dates; for variable-rate debt and/or non-term debt, interest rates and payment dates were estimated based on management’s determination of the most likely scenarios for each relevant debt instrument.
 
(3)   Purchase obligations consist primarily of agreements to purchase inventory or services made in the normal course of business to meet operational requirements. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which the Company is contractually obligated as of March 31, 2011. For this reason, these amounts will not provide a complete and reliable indicator of the Company’s expected future cash outflows.
     The above table does not include the Company’s total pension and other postretirement benefit liabilities and net deferred income tax liabilities recognized on the consolidated balance sheet as of March 31, 2011 because such liabilities, due to their nature, do not represent expected liquidity needs. There have not been material changes to such liabilities or the Company’s minimum pension funding obligations other than as disclosed in Note 6 “Pension and Other Postretirement Benefits” and Note 12 “Income Taxes” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q. Also please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
     In the normal course of business, the Company or its subsidiaries may sometimes be required to provide surety bonds, standby letters of credit or similar instruments to guarantee its performance of contractual or legal obligations. As of March 31, 2011, the Company had $73.3 million in such instruments outstanding and had pledged $2.9 million of cash to the issuing financial institutions as collateral for such instruments.
Contingencies
     Refer to Note 14 “Contingencies” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for a description of various legal proceedings, lawsuits and administrative actions.

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New Accounting Standards
     Refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for a description of new accounting pronouncements, including the expected impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.
Critical Accounting Policies and Estimates
     Management has evaluated the accounting policies used in the preparation of the Company’s condensed financial statements and related notes and believes those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving management judgments and estimates may be found in the Company’s 2010 Annual Report on Form 10-K, filed on February 28, 2011, in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis and in Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements.” There were no significant changes to the Company’s critical accounting polices during the quarter ended March 31, 2011.
Cautionary Statement Regarding Forward-Looking Statements
     All of the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” other than historical facts, are forward-looking statements, including, without limitation, the statements made under the caption “Outlook.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words “could,” “anticipate,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative thereof or variations thereon, and similar expressions identify forward-looking statements.
     The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other 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. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.
     These risks, uncertainties and other factors include, but are not limited to: (1) the Company’s exposure to the risks associated with future global economic down turns, which may negatively impact its revenues, liquidity, suppliers and customers; (2) exposure to cycles in specific markets, particularly the level of oil and natural gas prices and oil and natural gas drilling production, which affect demand for the Company’s petroleum products, and industrial production and manufacturing capacity utilization rates, which affect demand for the Company’s

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industrial products; (3) the risks associated with competition in the Company’s market segments, particularly the pricing of the Company’s products; (4) the risks of large or rapid increases in raw material costs or substantial decreases in their availability, and the Company’s dependence on particular suppliers, particularly copper, aluminum, iron casting and other metal suppliers; (5) economic, political and other risks associated with the Company’s international sales and operations, including changes in currency exchange rates (primarily between the USD, the EUR, the GBP and the CNY); (6) the risks associated with the potential loss of key customers for petroleum products and the potential resulting negative impact on the Company’s profitability and cash flows; (7) the risks associated with potential product liability and warranty claims due to the nature of the Company’s products; (8) the risks that the Company will not realize the expected financial benefits from potential future restructuring actions; (9) the ability to attract and retain quality executive management and other key personnel; (10) the risk that communication or information systems failure may disrupt the Company’s business and result in financial loss and liability to its customers; (11) the ability to avoid employee work stoppages and other labor difficulties; (12) the risks associated with potential changes in shale oil and gas regulation; (13) the risks associated with pending asbestos and silica personal injury lawsuits; (14) the risk of non-compliance with U.S. and foreign laws and regulations applicable to the Company’s international operations, including the U.S. Foreign Corrupt Practices Act and other similar laws; (15) the risks associated with environmental compliance costs and liabilities, including the compliance costs and liabilities of future climate change regulations; (16) the risks associated with enforcing the Company’s intellectual property rights and defending against potential intellectual property claims; (17) the risk of possible future charges if the Company determines that the value of goodwill and other intangible assets, representing a significant portion of the Company’s total assets, are impaired; (18) risks associated with the Company’s indebtedness and changes in the availability or costs of new financing to support the Company’s operations and future investments; (19) the ability to continue to identify and complete strategic acquisitions and effectively integrate such acquired companies to achieve desired financial benefits; and (20) changes in discount rates used for actuarial assumptions in pension and other postretirement obligation and expense calculations and market performance of pension plan assets. The foregoing factors should not be construed as exhaustive and should be read together with important information regarding risks and factors that may affect the Company’s future performance set forth under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
     These statements reflect the current views and assumptions of management with respect to future events. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     The Company is exposed to certain market risks during the normal course of business arising from adverse changes in commodity prices, interest rates, and currency exchange rates. The Company’s exposure to these risks is managed through a combination of operating and financing activities. The Company selectively uses derivative financial instruments (“derivatives”), including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in currency exchange rates and interest rates. The Company does not hold derivatives for trading or speculative purposes. Fluctuations in commodity prices, interest rates, and currency

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exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.
     Notional transaction amounts and fair values for the Company’s outstanding derivatives, by risk category and instrument type, as of March 31, 2011 and December 31, 2010, are summarized in Note 11 “Hedging Activities and Fair Value Measurements” in the “Notes to Consolidated Financial Statements.”
Commodity Price Risk
     The Company is a purchaser of certain commodities, principally aluminum. In addition, the Company is a purchaser of components and parts containing various commodities, including cast iron, aluminum, copper and steel. The Company generally buys these commodities and components based upon market prices that are established with the vendor as part of the purchase process. The Company does not use commodity financial instruments to hedge commodity prices.
     The Company has long-term contracts with some of its suppliers of key components. However, to the extent that commodity prices increase and the Company does not have firm pricing from its suppliers, or its suppliers are not able to honor such prices, then the Company may experience margin declines to the extent it is not able to increase selling prices of its products.
Interest Rate Risk
     The Company’s exposure to interest rate risk results primarily from its borrowings of $283.3 million at March 31, 2011. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by maintaining a mixture of fixed and variable rate debt and uses pay-fixed interest rate swaps as cash flow hedges of variable rate debt in order to adjust the relative proportions. The interest rates on approximately 75% of the Company’s borrowings were effectively fixed as of March 31, 2011. If the relevant LIBOR amounts for all of the Company’s borrowings had been 100 basis points higher than actual in the three-month period of 2011, the Company’s interest expense would have increased by $0.2 million.
Exchange Rate Risk
     A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the U.S. in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Other than the USD, the EUR, GBP, and CNY are the principal currencies in which the Company and its subsidiaries enter into transactions.
     The Company is exposed to the impacts of changes in currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities, and earnings into USD. The Company partially offsets these exposures by having certain of its non-U.S. subsidiaries act as the obligor on a portion of its borrowings and by denominating such borrowings, as well as a portion of the borrowings for which the Company is the obligor, in currencies other than the USD. Of the Company’s total net assets of $1,278.1 million at March 31, 2011, approximately $886.6 million was denominated in currencies other than the USD. Borrowings by the Company’s non-U.S. subsidiaries at March 31, 2011 totaled $19.8 million, and the Company’s consolidated borrowings

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denominated in currencies other than the USD totaled $85.8 million. Fluctuations due to changes in currency exchange rates in the value of non-USD borrowings that have been designated as hedges of the Company’s net investment in foreign operations are included in other comprehensive income.
     The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances monthly. The Company also selectively uses forward currency contracts to manage this risk. At March 31, 2011, the notional amount of open forward currency contracts was $118.0 million and their aggregate fair value was a liability of $1.0 million.
     To illustrate the impact of currency exchange rates on the Company’s financial results, the Company’s operating income for the three-month period of 2011 would have decreased by approximately $4.6 million if the USD had been 10% more valuable than actual relative to other currencies. This calculation assumes that all currencies change in the same direction and proportion to the USD and that there are no indirect effects of the change in the value of the USD such as changes in non-USD sales volumes or prices.
Item 4. Controls and Procedures
     The Company’s management carried out an evaluation (as required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), with the participation of the President and Chief Executive Officer and the Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, the President and Chief Executive Officer and Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to the Company and its consolidated subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
     In addition, the Company’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of the President and Chief Executive Officer and the Vice President and Chief Financial Officer, of changes in the Company’s internal control over financial reporting. Based on this evaluation, the President and Chief Executive Officer and the Vice President and Chief Financial Officer concluded that there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2011 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
     The Company is a party to various legal proceedings and administrative actions. The information regarding these proceedings and actions is included under Note 14 “Contingencies” to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
     For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see (i) the risk factors discussion provided under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and (ii) the “Cautionary Statement Regarding Forward-Looking Statements” included in Part I, Item 2 of this Quarterly Report on Form 10-Q, which are incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
     Repurchases of equity securities during the three months ended March 31, 2011 are listed in the following table.
                                 
                    Total Number of   Maximum Number
                    Shares Purchased   of Shares that May
    Total Number           as Part of Publicly   Yet Be Purchased
    of Shares   Average Price   Announced Plans   Under the Plans or
Period   Purchased(1)   Paid per Share(2)   or Programs(3)   Programs(3)
January 1, 2011 — January 31, 2011
                      2,176,987  
February 1, 2011 — February 28, 2011
    11,993       75.83             2,176,987  
March 1, 2011 — March 31, 2011
    72,000       73.04       72,000       2,104,987  
 
                               
Total
    83,993       73.44       72,000       2,104,987  
 
                               
 
(1)   Includes shares exchanged or surrendered in connection with the exercise or vesting of equity awards under Gardner Denver’s Amended and Restated Long-Term Incentive Plan.
 
(2)   Excludes commissions.
 
(3)   In November 2008, the Board of Directors authorized the Company to acquire up to 3.0 million shares of its common stock. As of March 31, 2011, 895,013 shares had been repurchased under this repurchase program.
Item 6. Exhibits
     See the list of exhibits in the Index to Exhibits to this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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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.

(Registrant)
 
 
Date: May 5, 2011  By:   /s/ Barry L. Pennypacker    
    Barry L. Pennypacker   
    President and Chief Executive Officer   
     
Date: May 5, 2011  By:   /s/ Michael M. Larsen    
    Michael M. Larsen   
    Vice President and Chief Financial Officer   
     
Date: May 5, 2011  By:   /s/ David J. Antoniuk    
    David J. Antoniuk   
    Vice President and Corporate Controller
(Principal Accounting Officer) 
 

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GARDNER DENVER, INC.
INDEX TO EXHIBITS
     
Exhibit    
No.   Description
3.1
  Certificate of Incorporation of Gardner Denver, Inc., as amended on May 3, 2006, filed as Exhibit 3.1 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed May 3, 2006, and incorporated herein by reference.
 
   
3.2
  Amended and Restated Bylaws of Gardner Denver, Inc., filed as Exhibit 3.2 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed August 4, 2008, and incorporated herein by reference.
 
   
4.1
  Amended and Restated Rights Agreement, dated as of January 17, 2005, between Gardner Denver, Inc. and National City Bank as Rights Agent, filed as Exhibit 4.1 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed January 21, 2005, and incorporated herein by reference.
 
   
4.2
  Amendment No. 1 to the Amended and Restated Rights Agreement, dated as of October 29, 2009, between Gardner Denver, Inc. and Wells Fargo Bank, National Association as Rights Agent, filed as Exhibit 4.2 to Gardner Denver, Inc.’s Current Report on Form 8-K, filed October 29, 2009, and incorporated herein by reference.
 
   
31.1*
  Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2*
  Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1**
  Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2**
  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
101.INS§
  XBRL Instance Document
 
   
101.SCH§
  XBRL Taxonomy Extension Schema Document
 
   
101.CAL§
  XBRL Taxonomy Extension Calculation Linkbase Document
 
   
101.LAB§
  XBRL Taxonomy Extension Label Linkbase Document
 
   
101.PRE§
  XBRL Taxonomy Extension Presentation Linkbase Document
 
*   Filed herewith.
 
**   This exhibit is furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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§   These exhibits are furnished herewith. In accordance with Rule 406T of Regulation S-T, these exhibits are not deemed to be filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are not deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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