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 June 30th, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

GARDNER DENVER, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0419383
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1800 Gardner Expressway
Quincy, Illinois 62305
(Address of principal executive offices and Zip Code)

(217) 222-5400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ     Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 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: 52,494,052 shares of Common Stock, par value $0.01 per share, as of July 30, 2006.

 

 

GARDNER DENVER, INC.
Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Operations			3
Consolidated Balance Sheets			4
Consolidated Statements of Cash Flows			5
Notes to Consolidated Financial Statements			6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3 Quantitative and Qualitative Disclosures About Market Risk			40
Item 4 Controls and Procedures			41
PART II OTHER INFORMATION
Item 1 Legal Proceedings			42
Item 1A Risk Factors			42
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			42
Item 4 Submission of Matters to a Vote of Security Holders			43
Item 6 Exhibits			43
SIGNATURES			44
EXHIBIT INDEX			45
Statement Re: Computation of Ratio of Earnings to Fixed Charges
302 Certification of Chief Executive Officer
302 Certification of Chief Financial Officer
906 Certification of Chief Executive Officer
906 Certification of Chief Financial Officer

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

GARDNER DENVER, INC.

(Dollars in thousands, except per share amounts)

(Unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Revenues		$	416,312			$	250,346			$	815,606			$	489,170
Costs and expenses:
Cost of sales (excluding depreciation and amortization)			269,714				167,900				528,889				328,914
Depreciation and amortization			14,529				7,199				26,527				14,481
Selling and administrative expenses			73,043				51,739				146,748				104,163
Interest expense			9,580				5,251				19,812				9,284
Other income, net			(453	)			(2,690	)			(1,140	)			(3,322	)
Total costs and expenses			366,413				229,399				720,836				453,520
Income before income taxes			49,899				20,947				94,770				35,650
Provision for income taxes			16,915				6,284				31,274				10,695
Net income		$	32,984			$	14,663			$	63,496			$	24,955
Basic earnings per share		$	0.63			$	0.31			$	1.22			$	0.57
Diluted earnings per share		$	0.62			$	0.30			$	1.19			$	0.56

The accompanying notes are an integral part of these consolidated financial statements.

GARDNER DENVER, INC.

(Dollars in thousands, except per share amounts)

		June 30,				December 31,
		2006				2005
		(unaudited)
Assets
Current assets:
Cash and equivalents		$	88,600			$	110,906
Accounts receivable (net of allowances of $10,486 at June 30, 2006 and $9,605 at December 31, 2005)			266,959				229,467
Inventories, net			231,728				207,326
Deferred income taxes			22,628				25,754
Other current assets			16,144				12,814
Total current assets			626,059				586,267
Property, plant and equipment, net			274,758				282,591
Goodwill			666,181				620,244
Other intangibles, net			197,430				203,516
Other assets			28,861				22,442
Total assets		$	1,793,289			$	1,715,060
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt		$	33,983			$	26,081
Accounts payable			101,278				103,028
Accrued liabilities			185,176				184,735
Total current liabilities			320,437				313,844
Long-term debt, less current maturities			514,512				542,641
Postretirement benefits other than pensions			31,081				31,387
Deferred income taxes			77,968				86,171
Other liabilities			91,337				82,728
Total liabilities			1,035,335				1,056,771
Stockholders’ equity:
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,489,969 and 51,998,704 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively			562				278
Capital in excess of par value			483,995				472,825
Retained earnings			269,877				206,381
Accumulated other comprehensive income			34,062				8,124
Treasury stock at cost, 3,651,602 and 3,618,052 shares at June 30, 2006 and December 31, 2005, respectively			(30,542	)			(29,319	)
Total stockholders’ equity			757,954				658,289
Total liabilities and stockholders’ equity		$	1,793,289			$	1,715,060

The accompanying notes are an integral part of these consolidated financial statements.

GARDNER DENVER, INC.

(Dollars in thousands)

(Unaudited)

		Six Months Ended
		June 30,
		2006				2005
Cash Flows From Operating Activities
Net income		$	63,496			$	24,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			26,527				14,481
Unrealized foreign currency transaction (gain) loss, net			(79	)			496
Net loss on asset dispositions			91				9
Stock issued for employee benefit plans			1,869				1,676
Excess tax benefits from stock-based compensation			(2,282	)			—
Deferred income taxes			(3,737	)			1,449
Changes in assets and liabilities:
Receivables			(27,998	)			(4,023	)
Inventories			(17,905	)			(3,152	)
Accounts payable and accrued liabilities			(19,428	)			(16,135	)
Other assets and liabilities, net			2,722				(916	)
Net cash provided by operating activities			23,276				18,840
Cash Flows From Investing Activities
Net cash paid in business combinations			(19,471	)			(10,085	)
Capital expenditures			(16,133	)			(10,543	)
Disposals of property, plant and equipment			11,157				291
Other, net			—				(2,231	)
Net cash used in investing activities			(24,447	)			(22,568	)
Cash Flows From Financing Activities
Principal payments on short-term borrowings			(3,979	)			(3,118	)
Proceeds from short-term borrowings			4,557				6,371
Principal payments on long-term debt			(97,578	)			(258,001	)
Proceeds from long-term debt			64,500				242,654
Proceeds from issuance of common stock			—				199,400
Proceeds from stock options			3,945				3,257
Excess tax benefits from stock-based compensation			2,282				—
Purchase of treasury stock			(1,223	)			(835	)
Debt issuance costs			(95	)			—
Other			(154	)			(311	)
Net cash (used in) provided by financing activities			(27,745	)			189,417
Effect of exchange rate changes on cash and equivalents			6,610				(3,955	)
(Decrease) increase in cash and equivalents			(22,306	)			181,734
Cash and equivalents, beginning of year			110,906				64,601
Cash and equivalents, end of period		$	88,600			$	246,335

The accompanying notes are an integral part of these consolidated financial statements.

GARDNER DENVER, INC.

(Dollars in thousands, except per share amounts or amounts described in millions)

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying consolidated financial statements include the accounts of Gardner Denver, Inc. and those subsidiaries that are majority-owned or over which Gardner Denver, Inc. exercises control (referred to herein as “Gardner Denver” or the “Company”). In consolidation, all significant intercompany transactions and accounts have been eliminated. Current and prior year per share amounts in this report on Form 10-Q reflect the effect of a two-for-one stock split (in the form of a 100% stock dividend) that was completed on June 1, 2006 (see Note 3).

     The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of such financial statements, have been included.

     The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in Gardner Denver’s Annual Report on Form 10-K for the year ended December 31, 2005.

     The results of operations for the six months ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year. The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

     Other than as specifically indicated in the “Notes to 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, 2005.

     In the first quarter of 2006, the Company made certain organizational changes that resulted in a realignment of its reportable segments. The operations of the Company’s line of specialty bronze and high alloy pumps for the general industrial and marine markets (acquired in July 2005 as part of Thomas Industries Inc. (“Thomas”)) (see Note 2) and the operations of its line of self-sealing couplings (acquired in January 2004 as part of Syltone plc (“Syltone”)) were transferred from the Compressor and Vacuum Products segment to the Fluid Transfer Products segment. Accordingly, reportable segment information for these two operations has been included in the Fluid Transfer Products segment results. Results for the three and six months ended June 30, 2005 have been restated to reflect this realignment. In addition, operating results of the Todo Group (“Todo”), a manufacturer of self-sealing couplings that was acquired in January 2006 (see Note 2) have been included in the Fluid Transfer Products segment from the date of acquisition.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). SFAS No. 123(R) supersedes Accounting Principals Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and amends SFAS No. 95, “Statement of Cash Flows.” The Company adopted the provisions of SFAS No. 123(R) effective January 1, 2006. Disclosures related to the Company’s stock-based compensation plans are included in Note 9.

     In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140,” (“SFAS No. 155”) to permit fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation in accordance with the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company will adopt SFAS No. 155 effective January 1, 2007, and management does not believe the adoption will have a material effect on the Company’s consolidated results of operations or consolidated financial position.

     In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 in the first quarter of 2007. The cumulative effects, if any, of applying FIN 48 will be recorded as an adjustment to retained earnings as of the beginning of the period of adoption. Management has commenced the process of evaluating the expected effect of FIN 48 on the Company’s consolidated financial statements and related disclosure requirements.

     In June 2006, the Emerging Issues Task Force reached a consensus on the income statement presentation of various types of taxes. The new guidance, Emerging Issues Task Force Issue 06-3 “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”) applies to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and some excise taxes. The presentation of taxes within the scope of this issue on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to APB Opinion No. 22, “Disclosure of Accounting Policies.” The EITF’s decision on gross/net presentation requires that any such taxes reported on a gross basis be disclosed on an aggregate basis in interim and annual financial statements, for each period for which an income statement is presented, if those amounts are significant. EITF 06-3 is effective for fiscal years beginning after December 15, 2006. Management has commenced the process of evaluating the expected effect of EITF 06-3 on the Company’s disclosure requirements.

Note 2. Business Combinations

     Service marks, trademarks and/or tradenames and related designs or logotypes owned by Gardner Denver, Inc. or its subsidiaries are shown in italics.

     The following table presents summary information with respect to acquisitions completed by Gardner Denver during 2005:

Date of Acquisition		Acquired Entity		Net Transaction Value
June 1, 2005		Bottarini S.p.A.		€8.1 million (approximately $10.1 million)
July 1, 2005		Thomas Industries Inc.		$483.5 million

     During the six-month period ended June 30, 2006, the Company also made cash acquisition payments of approximately $3.4 million, primarily in connection with Thomas and consisting of payments to former stockholders and transaction-related costs.

     On January 9, 2006, the Company completed the acquisition of the Todo Group (“Todo”) for a purchase price of 126.2 million Swedish kronor (approximately $16.1 million), net of debt and cash acquired. Todo, with assembly operations in Sweden and the United Kingdom, and a central European sales and distribution operation in the Netherlands, has an extensive offering of dry-break couplers. Todo-Matic self-sealing couplings are used by oil, chemical and gas companies to transfer their products. The Todo acquisition extends the Company’s product line of Emco Wheaton couplers, added as part of the Syltone plc (“Syltone”) acquisition in 2004.

     All acquisitions have been accounted for by the purchase method and, accordingly, their results are included in the Company’s consolidated financial statements from the respective dates of acquisition. Under the purchase method, the purchase price is allocated based on the fair value of assets received and liabilities assumed as of the acquisition date.

Acquisition of Thomas Industries Inc.

     Under the purchase method of accounting, the assets and liabilities of Thomas were recorded at their estimated respective fair values as of July 1, 2005. The initial allocation of the purchase price was subsequently adjusted when preliminary valuation estimates were finalized. The following table summarizes the nature and amount of such adjustments recorded in 2006:

Thomas Industries Inc.
Purchase Price Allocation and Adjustments
June 30, 2006

Total intangible assets recorded as of December 31, 2005		$	360,373
Purchase accounting adjustments recorded in 2006:
Fair value of current assets and liabilities, net			8,441
Fair value of property, plant and equipment, net			963
Termination benefits and other related liabilities			(2,872	)
Income taxes, net			4,865
Other, net			2,733
Total intangible assets recorded as of June 30, 2006		$	374,503
Goodwill		$	275,158
Identifiable intangible assets			99,345
Total		$	374,503

     Finalization of the fair value of the Thomas tangible and amortizable intangible assets resulted in a cumulative $5,470 pre-tax charge to depreciation expense and a cumulative $3,153 pre-tax credit to amortization expense in the three-month period ended June 30, 2006.

     In connection with the acquisition of Thomas, the Company initiated plans to close and consolidate certain former Thomas facilities, primarily in the U.S. and Europe. These plans include various voluntary and involuntary employee termination and relocation programs affecting both salaried and hourly employees. The terminations and relocations are expected to be completed during the next twelve months. The plans also include exit costs associated with the sale, lease termination or sublease of certain manufacturing and administrative facilities. The Company expects to complete the exit from these facilities during the third and fourth quarters of 2006. A liability of $17,500 was included in the allocation of the Thomas purchase price for the estimated cost of these actions at July 1, 2005 in accordance with EITF No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” Based on finalization of these plans during the second quarter of 2006, an estimated total cost of $16,862 has been included in the allocation of the Thomas purchase price. The cost of these plans is comprised of the following:

Voluntary and involuntary employee termination and relocation		$	14,718
Lease termination and related costs			1,007
Other			1,137
Total		$	16,862

     The following table summarizes the activity in the liability. All additional amounts accrued, net, were recorded as adjustments to the cost of acquiring Thomas.

		Termination
		Benefits				Other				Total
Established at July 1, 2005		$	16,814			$	686			$	17,500
Amounts paid			(8,157	)			—				(8,157	)
Balance at December 31, 2005			8,657				686				9,343
Additional amounts accrued, net			(2,096	)			1,458				(638	)
Amounts paid			(1,466	)			(9	)			(1,475	)
Balance at June 30, 2006		$	5,095			$	2,135			$	7,230

Note 3. Stockholders’ Equity and Stock Split

     On May 2, 2006, the Company’s stockholders approved an increase in the number of authorized shares of common stock from 50 million to 100 million. This increase in shares allowed the Company to complete the previously announced two-for-one stock split in the form of a 100% stock dividend. Stockholders of record at the close of business on May 11, 2006 received a stock dividend of one share of the Company’s common stock for each share owned. The stock dividend was paid after the close of business on June 1, 2006. All shares reserved for issuance pursuant to the Company’s stock option and stock purchase plans were automatically increased by the same proportion pursuant to the Company’s Long-Term Incentive Plan. In addition, shares subject to outstanding options or other rights to acquire the Company’s stock and the exercise price for such shares were adjusted proportionately. The Company transferred $0.3 million to common stock from additional paid-in capital, representing the aggregate par value of the shares issued under the stock split. Current and prior year share and per share amounts in this report on Form 10-Q reflect the effect of the two-for-one stock split (in the form of a 100% stock dividend) that was completed on June 1, 2006.

Note 4. Inventories

		June 30,				December 31,
		2006				2005
Raw materials, including parts and subassemblies		$	108,015			$	95,855
Work-in-process			44,987				37,230
Finished goods			89,413				80,494
			242,415				213,579
Excess of FIFO costs over LIFO costs			(10,687	)			(6,253	)
Inventories, net		$	231,728			$	207,326

Note 5. Goodwill and Other Intangible Assets

     The changes in the carrying amount of goodwill attributable to each business segment for the six months ended June 30, 2006, and the year ended December 31, 2005, are presented in the table below. The adjustments to goodwill recorded in 2006 reflect the finalization of the purchase price allocations for the Thomas and Bottarini acquisitions during the second quarter of 2006.

		Compressor &				Fluid
		Vacuum				Transfer
		Products				Products				Total
Balance as of December 31, 2004		$	336,075			$	38,084			$	374,159
Acquisitions			256,942				—				256,942
Adjustments to goodwill			4,332				—				4,332
Foreign currency translation			(13,908	)			(1,281	)			(15,189	)
Balance as of December 31, 2005			583,441				36,803				620,244
Acquisitions			—				12,333				12,333
Adjustments to goodwill			19,614				—				19,614
Foreign currency translation			12,136				1,854				13,990
Balance as of June 30, 2006		$	615,191			$	50,990			$	666,181

     The following table presents the gross carrying amount and accumulated amortization of identifiable intangible assets at the dates presented:

		June 30, 2006								December 31, 2005
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Amortized intangible assets:
Customer lists and relationships		$	62,829			$	(6,938	)		$	105,896			$	(7,389	)
Acquired technology			37,103				(17,078	)			30,802				(13,164	)
Other			11,729				(4,012	)			13,453				(3,558	)
Unamortized intangible assets:
Trademarks			113,797				—				77,476				—
Total other intangible assets		$	225,458			$	(28,028	)		$	227,627			$	(24,111	)

     Amortization of intangible assets for the three and six months ended June 30, 2006, was $0.02 million and $3.3 million, respectively. Finalization of the fair value of the Thomas tangible and amortizable intangible assets resulted in a cumulative $3.2 million pre-tax credit to amortization expense in the three-month period ended June 30, 2006. Amortization of intangible assets for the three and six months ended June 30, 2005, was $1.8 million and $3.7 million, respectively. Amortization of intangible assets is anticipated to be approximately $10.1 million annually in 2006 through 2010, based upon existing intangible assets with finite useful lives as of June 30, 2006.

Note 6. Accrued Product Warranty

     The following table summarizes the activity in the Company’s product warranty accrual for the three and six months ended June 30, 2006 and 2005, respectively:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Balance at beginning of period		$	15,994			$	10,732			$	15,254			$	10,671
Product warranty accruals			4,067				1,726				7,884				3,911
Settlements			(3,497	)			(1,495	)			(6,748	)			(3,465	)
Other (acquisitions and foreign currency translation)			484				(102	)			658				(256	)
Balance at end of period		$	17,048			$	10,861			$	17,048			$	10,861

Note 7. 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 and six months ended June 30, 2006 and 2005, respectively:

		Three Months Ended June 30,
		Pension Benefits																Other
		U.S. Plans								Non-U.S. Plans								Postretirement Benefits
		2006				2005				2006				2005				2006				2005
Service cost		$	816			$	603			$	1,342			$	1,026			$	33			$	—
Interest cost			985				888				2,120				1,602				390				380
Expected return on plan assets			(1,097	)			(975	)			(2,367	)			(1,633	)			—				—
Amortization of prior-service cost			(15	)			(25	)			—				—				(27	)			(25	)
Amortization of net loss (gain)			122				110				122				39				(56	)			(150	)
Net periodic benefit expense		$	811			$	601			$	1,217			$	1,034			$	340			$	205

		Six Months Ended June 30,
		Pension Benefits																Other
		U.S. Plans								Non-U.S. Plans								Postretirement Benefits
		2006				2005				2006				2005				2006				2005
Service cost		$	1,714			$	1,206			$	2,684			$	2,473			$	66			$	—
Interest cost			1,986				1,776				4,240				3,940				780				760
Expected return on plan assets			(2,174	)			(1,950	)			(4,734	)			(4,034	)			—				—
Amortization of prior-service cost			(36	)			(50	)			—				—				(54	)			(50	)
Amortization of net loss (gain)			248				220				244				79				(112	)			(300	)
Net periodic benefit expense		$	1,738			$	1,202			$	2,434			$	2,458			$	680			$	410

Note 8. Debt

     The Company’s debt is summarized as follows:

		June 30,				December 31,
		2006				2005
Short-term debt		$	1,475			$	1,860
Long-term debt:
Credit Line, due 2009 (1)		$	142,822			$	158,900
Term Loan, due 2010 (2)			248,462				255,000
Senior Subordinated Notes at 8%, due 2013			125,000				125,000
Secured Mortgages (3)			9,345				8,892
Variable Rate Industrial Revenue Bonds, due 2018 (4)			8,000				8,000
Capitalized leases and other long-term debt			13,391				11,070
Total long-term debt, including current maturities			547,020				566,862
Current maturities of long-term-debt			32,508				24,221
Total long-term debt, less current maturities		$	514,512			$	542,641

Note 9. Stock-Based Compensation Plans

     On January 1, 2006, Gardner Denver adopted SFAS No. 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. SFAS No. 123(R) supersedes the Company’s previous accounting under APB 25, for periods beginning in fiscal 2006. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) to assist preparers with their implementation of SFAS No. 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

     The Company adopted SFAS No. 123(R) using the modified prospective transition method. Under this method, the Company’s consolidated financial statements as of and for the six months ended June 30, 2006, reflect the impact of SFAS No. 123(R), while the consolidated financial statements for periods prior to January 1, 2006 have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). Stock-based compensation expense recognized under SFAS No. 123(R) was $0.8 million and $3.6 million, respectively, for the second quarter and first six months of 2006, which consisted of: (1) compensation expense for all unvested share-based awards outstanding as of December 31, 2005, based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123, and

(2) compensation expense for share-based awards granted subsequent to adoption based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that are ultimately expected to vest. SFAS No. 123(R) amends SFAS No. 95 to require that excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid, which is included within operating cash flows. The following table shows the impact of the adoption of SFAS No. 123(R) on the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows.

		Three Months				Six Months
		Ended				Ended
		June 30, 2006				June 30, 2006
Selling and administrative expenses		$	776			$	3,606
Total stock-based compensation expense included in operating expenses			776				3,606
Income before income taxes			(776	)			(3,606	)
Provision for income taxes			(190	)			(1,051	)
Net income		$	(586	)		$	(2,555	)
Basic and diluted earnings per share		$	(0.01	)		$	(0.05	)
Net cash provided by operating activities		$	(1,269	)		$	(2,282	)
Net cash used in financing activities		$	1,269			$	2,282

Plan Descriptions

     Under the Company’s Long-Term Incentive Plan (the “Incentive Plan”), designated employees are eligible to receive awards in the form of stock options, stock appreciation rights, restricted stock awards or performance shares, as determined by the Management Development and Compensation Committee of the Board of Directors. The Company’s Incentive Plan is intended to assist the Company in recruiting and retaining employees and directors, and to associate the interests of eligible participants with those of the Company and its shareholders. An aggregate of 8,500,000 shares of common stock has been authorized for issuance under the Incentive Plan. Under the Incentive Plan, the grant price of an option is determined by the Management Development and Compensation Committee, but must not be less than the average of the high price and low price of the Company’s common stock on the date of grant. The Incentive Plan provides that the term of any option granted may not exceed ten years. Under the terms of existing awards, one-third of employee options granted become vested and exercisable on each of the first three anniversaries of the date of grant (or upon retirement, death or cessation of service due to disability, if earlier). The options granted to employees in 2006, 2005 and 2004 expire seven years after the date of grant.

     Pursuant to the Incentive Plan, the Company also issues share-based awards to directors who are not employees of Gardner Denver or its affiliates. Since 2002, each nonemployee director has been granted options to purchase 9,000 shares of common stock on the day after the annual meeting of stockholders. These options are granted at the fair market value (the average of the high and low price) of the common stock on the date of grant, become exercisable on the first anniversary of the date of grant (or upon retirement, death or cessation of service due to disability, if earlier) and expire five years

after the date of grant. The maximum allowable grant to a nonemployee director in any given year is an option to purchase 18,000 shares of common stock.

     The Company also has an employee stock purchase plan (the “Stock Purchase Plan”), a qualified plan under the requirements of Section 423 of the Internal Revenue Code, and has reserved 2,300,000 shares for issuance under this plan. The Stock Purchase Plan requires participants to have the purchase price of their options withheld from their pay over a one-year period. No additional options were offered to employees under the Stock Purchase Plan in 2006, 2005 or 2004.

Stock Option Awards

     The following summary presents information regarding outstanding stock options as of June 30, 2006 and changes during the six-month period then ended (underlying shares in thousands):

						Outstanding								Weighted-
						Weighted-				Aggregate				Average
						Average				Intrinsic				Remaining
		Shares				Exercise Price				Value				Contractual Life
Outstanding at December 31, 2005			2,665			$	12.39
Granted			362			$	31.98
Exercised			(416	)		$	9.49
Forfeited or canceled			(21	)		$	24.03
Outstanding at June 30, 2006			2,590			$	15.50			$	56,393			4.7 years
Exercisable at June 30, 2006			1,795			$	11.53			$	46,142			4.2 years

     The weighted-average estimated grant-date fair values of employee and director stock options granted during the three-month and six-month periods ending June 30, 2006 were $12.26 and $10.31, respectively.

     The total pre-tax intrinsic value of options exercised during the second quarter of 2006 and 2005, was $4.5 million and $0.3 million, respectively. The total pre-tax intrinsic value of options exercised during the first six months of 2006 and 2005, was $9.9 million and $3.3 million, respectively. Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $4.1 million as of June 30, 2006, and will be recognized as expense over a weighted-average period of 1.8 years.

Restricted Stock Awards

     The following summary presents information regarding outstanding restricted stock awards as of June 30, 2006 and changes during the six-month period then ended (underlying shares in thousands):

						Weighted-
		Shares				Average Price
Nonvested at December 31, 2005			36			$	8.85
Granted			50			$	30.58
Vested			(36	)		$	8.85
Forfeited			—			$	—
Nonvested at June 30, 2006			50			$	30.58

     The restricted stock awards granted during the first six months of 2006 cliff vest three years after the date of grant. The restricted share award grants were valued at the stock price on the date of grant. Pre-tax unrecognized compensation expense, net of estimated forfeitures, for nonvested restricted stock awards was $0.5 million as of June 30, 2006, which will be recognized as expense over a weighted-average period of 2.6 years. The total fair value of restricted stock awards that vested during the six months ended June 30, 2006 was $1.1 million. No restricted stock awards vested during the six months ended June 30, 2005.

Valuation Assumptions and Expense under SFAS No. 123(R)

     The fair value of each stock option grant under the Company’s Long-Term Incentive Plan was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions for the periods indicated are noted in the table below. Expected volatility is based on historical volatility of the Company’s common stock calculated over the expected term of the option. The expected term for the majority of the options granted in the first six months of 2006 was calculated in accordance with SAB 107 using the simplified method for “plain-vanilla” options. The expected terms for options granted to certain executives and non-employee directors that have similar historical exercise behavior were determined separately for valuation purposes. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

		For the Three								For the Six
		Months Ended								Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Assumptions:
Risk-free interest rate			5.0	%			3.8	%			4.7	%			3.9	%
Dividend yield			—				—				—				—
Volatility factor			28				27				27				33
Expected life (in years)			4.4				3.7				4.8				4.4

Pro Forma Net Earnings

     In accordance with the modified prospective transition method, the Company’s consolidated financial statements for prior periods have not been restated and do not include the impact of SFAS No. 123(R). Accordingly, no compensation expense related to stock option awards was recognized in the three and six-month periods ending June 30, 2005, as all stock options granted had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The following table

provides pro forma net income and earnings per share as if the fair-value-based method of accounting had been applied to all outstanding and unvested stock option awards prior to the adoption of SFAS 123(R). For purposes of this pro forma disclosure, the estimated fair value of an award is assumed to be expensed over the award’s vesting periods using the Black-Scholes model.

		Three Months				Six Months
		Ended				Ended
		June 30, 2005				June 30, 2005
Net income, as reported		$	14,663			$	24,955
Less: Total stock-based employee compensation expense determined under fair value method, net of related tax effects			(431	)			(779	)
Pro forma net income		$	14,232			$	24,176
Basic earnings per share, as reported		$	0.31			$	0.57
Basic earnings per share, pro forma		$	0.30			$	0.55
Diluted earnings per share, as reported		$	0.30			$	0.56
Diluted earnings per share, pro forma		$	0.29			$	0.54

     For stock option awards with accelerated vesting provisions that are granted to retirement-eligible employees and to employees that become eligible for retirement subsequent to the grant date, the Company previously followed the guidance of APB 25 and SFAS No. 123, which allowed compensation costs to be recognized ratably over the vesting period of the award. SFAS No. 123(R) requires compensation costs to be recognized over the requisite service period of the award instead of ratably over the vesting period stated in the grant. For awards granted prior to adoption, the Securities and Exchange Commission clarified that companies should continue to follow the vesting method they had previously been using. As a result, for awards granted prior to adoption, the Company will continue to recognize compensation costs ratably over the vesting period with accelerated recognition of the unvested portion upon actual retirement. The Company will follow the guidance of SFAS No. 123(R) for awards granted subsequent to the adoption date. Therefore, the pro-forma information presented in the above table is not comparable to the amounts recognized by the Company over the same respective periods of 2006.

     The Company’s income taxes currently payable have been reduced by the tax benefits from employee stock option exercises and the vesting of restricted stock awards. These benefits totaled $1.3 million and $0.1 million for the three months ended June 30, 2006 and 2005, respectively, and $2.3 million and $0.8 million for the first half of 2006 and 2005, respectively, and were recorded as an increase to additional paid-in capital.

Note 10. Earnings Per Share

     The following table details the calculation of basic and diluted earnings per share (shares in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Basic Earnings Per Share:
Net income		$	32,984			$	14,663			$	63,496			$	24,955
Shares:
Weighted average number of common shares outstanding			52,388				47,362				52,249				43,744
Basic earnings per common share		$	0.63			$	0.31			$	1.22			$	0.57
Diluted Earnings Per Share:
Net income		$	32,984			$	14,663			$	63,496			$	24,955
Shares:
Weighted average number of common shares outstanding			52,388				47,362				52,249				43,744
Assuming conversion of dilutive stock options issued and outstanding			1,191				1,082				1,171				1,122
Weighted average number of common shares outstanding, as adjusted			53,579				48,444				53,420				44,866
Diluted earnings per common share		$	0.62			$	0.30			$	1.19			$	0.56

     For the quarters ended June 30, 2006 and 2005, respectively, antidilutive options to purchase 210 thousand and 570 thousand weighted-average shares of common stock were outstanding. For the six months ended June 30, 2006 and 2005, respectively, antidilutive options to purchase 234 thousand and 398 thousand weighted-average shares of common stock were outstanding. Antidilutive options outstanding were not included in the computation of diluted earnings per share.

Note 11. Comprehensive Income

     For the three months ended June 30, 2006 and 2005, comprehensive income was $50.5 million and $3.0 million, respectively. For the six months ended June 30, 2006 and 2005, comprehensive income was $89.4 million and $9.9 million, respectively. Items impacting the Company’s comprehensive income, but not included in net income, consist of foreign currency translation adjustments, including realized and unrealized gains and losses (net of income taxes) on foreign currency hedges of the Company’s investment in foreign subsidiaries, fair market value adjustments of interest rate swaps and additional minimum pension liability (net of income taxes).

Note 12. Supplemental Cash Flow Information

     In the first six months of 2006 and 2005, the Company paid $42.5 million and $7.8 million, respectively, to various taxing authorities for income taxes. Interest paid for the first six months of 2006 and 2005, was $19.0 million and $7.8 million, respectively.

Note 13. Contingencies

     The Company is a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature. 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 an increasing number of asbestos personal injury lawsuits. The Company has also been named as a defendant in an increasing number of silicosis 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, the vast majority of the plaintiffs are not impaired with a disease for which the Company bears any responsibility.

     Predecessors to the Company sometimes manufactured, distributed and/or sold products allegedly at issue in the pending asbestos and silicosis 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 used in the Products were enclosed within the subject Products.

     The Company has entered into a series of cost-sharing agreements with multiple insurance companies to secure coverage for asbestos and silicosis lawsuits. The Company also believes some of the potential liabilities regarding these lawsuits are covered by indemnity agreements with other parties. The Company’s uninsured settlement payments for past asbestos and silicosis lawsuits have been immaterial.

     The Company believes that the pending and future asbestos and silicosis lawsuits will not, 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 components 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, could cause a different outcome, there can be no assurance that the resolution of pending or future lawsuits, whether by judgment, settlement or dismissal, will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.

     The Company has also been identified as a potentially responsible party with respect to several sites designated for environmental cleanup under various state and federal laws. The Company does not believe that the future potential costs related to these sites will have a material adverse effect on its consolidated financial position, results of operations or liquidity.

Note 14. Segment Results

     The Company’s organizational structure is based on the products and services it offers and consists of five operating divisions: Compressor, Blower, Liquid Ring Pump, Fluid Transfer and Thomas Products. These divisions comprise two reportable segments: Compressor and Vacuum Products and Fluid Transfer Products. The Compressor, Blower, Liquid Ring Pump and Thomas Products divisions are aggregated into the Compressor and Vacuum Products segment because the long-term financial performance of these businesses are affected by similar economic conditions and their products, manufacturing processes and other business characteristics are similar in nature.

     In the first quarter of 2006, the Company made certain organizational changes that resulted in a realignment of its reportable segments. The operations of the Company’s line of specialty bronze and high alloy pumps for the general industrial and marine markets (acquired in July 2005 as part of Thomas) and the operations of its line of self-sealing couplings (acquired in January 2004 as part of Syltone) were transferred from the Compressor and Vacuum Products segment to the Fluid Transfer Products segment. Accordingly, the results of these two operations have been included in the Fluid Transfer Products segment results. Results for the three and six months ended June 30, 2005 have been restated to reflect this realignment. In addition, operating results of Todo, a manufacturer of self-sealing couplings that was acquired in January 2006 (see Note 2) have been included in the Fluid Transfer Products segment from the date of acquisition.

     The following table provides financial information by business segment for the three and six-month periods ended June 30, 2006 and 2005:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Compressor and Vacuum Products
Revenues		$	325,402			$	197,325			$	643,835			$	386,498
Operating earnings			33,751				15,955				69,559				28,673
Operating earnings as a percentage of revenues			10.4	%			8.1	%			10.8	%			7.4	%
Fluid Transfer Products
Revenues		$	90,910			$	53,021			$	171,771			$	102,672
Operating earnings			25,275				7,553				43,883				12,939
Operating earnings as a percentage of revenues			27.8	%			14.2	%			25.5	%			12.6	%
Reconciliation of Segment Results to Consolidated Results
Total segment operating earnings		$	59,026			$	23,508			$	113,442			$	41,612
Interest expense			9,580				5,251				19,812				9,284
Other income, net			(453	)			(2,690	)			(1,140	)			(3,322	)
Consolidated income before income taxes		$	49,899			$	20,947			$	94,770			$	35,650

     The following table provides financial information by business segment for the years ended December 31, 2005, 2004 and 2003 reflecting the organizational change described above. Segment disclosures in 2003, which are included in the table for comparative purposes, were not affected by the reorganization because the relevant operations were acquired by the Company in 2004 and 2005:

		Year Ended December 31,
		2005				2004				2003
Compressor and Vacuum Products
Revenues		$	982,476			$	572,181			$	369,023
Operating earnings			83,093				42,398				27,792
Operating earnings as a percentage of revenues			8.5	%			7.4	%			7.5	%
Fluid Transfer Products
Revenues		$	232,076			$	167,358			$	70,507
Operating earnings			37,542				19,352				4,093
Operating earnings as a percentage of revenues			16.2	%			11.6	%			5.8	%
Reconciliation of Segment Results to Consolidated Results
Total segment operating earnings		$	120,635			$	61,750			$	31,885
Interest expense			30,433				10,102				4,748
Other income, net			(5,442	)			(638	)			(3,221	)
Consolidated income before income taxes		$	95,644			$	52,286			$	30,358
LIFO Liquidation Income
Compressor and Vacuum Products		$	—			$	132			$	316
Fluid Transfer Products			—				—				50
Total		$	—			$	132			$	366
Depreciation and Amortization Expense
Compressor and Vacuum Products		$	33,705			$	17,414			$	11,739
Fluid Transfer Products			4,617				4,487				2,827
Total		$	38,322			$	21,901			$	14,566
Capital Expenditures
Compressor and Vacuum Products		$	30,588			$	15,221			$	8,864
Fluid Transfer Products			4,930				4,329				3,086
Total		$	35,518			$	19,550			$	11,950
Identifiable Assets as of December 31
Compressor and Vacuum Products		$	1,422,119			$	811,290			$	375,376
Fluid Transfer Products			156,281				143,253				72,528
General corporate (unallocated)			136,660				74,066				141,829
Total assets		$	1,715,060			$	1,028,609			$	589,733

Note 15. Guarantor Subsidiaries

     The Company’s obligations under its 8% Senior Subordinated Notes due 2013 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 Senior Subordinated Notes are referred to as the “Non-Guarantor Subsidiaries”. The guarantor condensed consolidating financial data presented 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.

Consolidating Statement of Operations
Three Months Ended June 30, 2006

		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	110,240			$	107,036			$	242,730			$	(43,694	)		$	416,312
Costs and expenses:
Cost of sales (excluding depreciation and amortization)			70,812				74,966				168,027				(44,091	)			269,714
Depreciation and amortization			2,609				3,828				8,092				—				14,529
Selling and administrative expenses			18,928				13,263				40,852				—				73,043
Interest expense			9,175				(2,203	)			2,608				—				9,580
Other (income) expense, net			(747	)			(1,465	)			1,759				—				(453	)
Total costs and expenses			100,777				88,389				221,338				(44,091	)			366,413
Income before income taxes			9,463				18,647				21,392				397				49,899
Provision for income taxes			3,596				7,079				6,240				—				16,915
Net income		$	5,867			$	11,568			$	15,152			$	397			$	32,984

Consolidating Statement of Operations
Three Months Ended June 30, 2005

		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	83,887			$	47,358			$	125,564			$	(6,463	)		$	250,346
Costs and expenses:
Cost of sales (excluding depreciation and amortization)			57,486				34,998				81,425				(6,009	)			167,900
Depreciation and amortization			2,512				899				3,788				—				7,199
Selling and administrative expenses			17,524				7,538				26,677				—				51,739
Interest expense			4,818				—				433				—				5,251
Other (income) expense, net			(1,882	)			(915	)			(785	)			892				(2,690	)
Total costs and expenses			80,458				42,520				111,538				(5,117	)			229,399
Income (loss) before income taxes			3,429				4,838				14,026				(1,346	)			20,947
Provision for income taxes			1,251				1,766				3,267				—				6,284
Net income (loss)		$	2,178			$	3,072			$	10,759			$	(1,346	)		$	14,663

Consolidating Statement of Operations
Six Months Ended June 30, 2006

		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	219,385			$	213,291			$	467,026			$	(84,096	)		$	815,606
Costs and expenses:
Cost of sales (excluding depreciation and amortization)			143,585				148,320				320,425				(83,441	)			528,889
Depreciation and amortization			5,140				6,508				14,879				—				26,527
Selling and administrative expenses			40,179				26,656				79,913				—				146,748
Interest expense			18,942				(4,443	)			5,313				—				19,812
Other (income) expense, net			(1,403	)			(2,527	)			2,790				—				(1,140	)
Total costs and expenses			206,443				174,514				423,320				(83,441	)			720,836
Income (loss) before income taxes			12,942				38,777				43,706				(655	)			94,770
Provision for income taxes			4,918				14,761				11,595				—				31,274
Net income (loss)		$	8,024			$	24,016			$	32,111			$	(655	)		$	63,496

Consolidating Statement of Operations
Six Months Ended June 30, 2005

		Parent				Guarantor				Non-Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	163,250			$	91,040			$	249,436			$	(14,556	)		$	489,170
Costs and expenses:
Cost of sales (excluding depreciation and amortization)			113,423				67,015				163,888				(15,412	)			328,914
Depreciation and amortization			4,994				1,827				7,660				—				14,481
Selling and administrative expenses			35,453				15,708				53,002				—				104,163
Interest expense			8,451				—				833				—				9,284
Other (income) expense, net			(2,225	)			(2,095	)			106				892				(3,322	)
Total costs and expenses			160,096				82,455				225,489				(14,520	)			453,520
Income (loss) before income taxes			3,154				8,585				23,947				(36	)			35,650
Provision for income taxes			1,151				3,133				6,411				—				10,695
Net income (loss)		$	2,003			$	5,452			$	17,536			$	(36	)		$	24,955

Consolidating Balance Sheet
June 30, 2006

										Non-
		Parent				Guarantor				Guarantor
		Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and equivalents		$	5,657			$	743			$	82,200			$	—			$	88,600
Accounts receivable, net			83,808				49,608				133,543				—				266,959
Inventories, net			37,703				55,466				136,448				2,111				231,728
Deferred income taxes			5,707				15,013				11,754				(9,846	)			22,628
Other current assets			217				3,007				11,420				1,500				16,144
Total current assets			133,092				123,837				375,365				(6,235	)			626,059
Intercompany (payable) receivables			(78,437	)			74,472				7,676				(3,711	)			—
Investments in affiliates			671,146				28,959				28				(700,105	)			28
Property, plant and equipment, net			52,894				44,340				177,524				—				274,758
Goodwill			113,441				153,032				399,708				—				666,181
Other intangibles, net			8,549				25,787				163,094				—				197,430
Other assets			26,246				(2,816	)			15,804				(10,401	)			28,833
Total assets		$	926,931			$	447,611			$	1,139,199			$	(720,452	)		$	1,793,289
Liabilities and Stockholders’ Equity
Short-term borrowings and current maturities of long-term debt		$	26,154			$	—			$	7,829			$	—			$	33,983
Accounts payable and accrued liabilities			71,677				65,606				165,801				(16,630	)			286,454
Total current liabilities			97,831				65,606				173,630				(16,630	)			320,437
Long-term intercompany (receivable) payable			(205,382	)			(106,396	)			331,916				(20,138	)			—
Long-term debt, less current maturities			424,666				77				89,769				—				514,512
Deferred income taxes			—				28,315				65,144				(15,491	)			77,968
Other liabilities			46,263				10,266				50,371				15,518				122,418
Total liabilities			363,378				(2,132	)			710,830				(36,741	)			1,035,335
Stockholders’ equity:
Common stock			562				—				—				—				562
Capital in excess of par value			483,598				386,437				308,635				(694,675	)			483,995
Retained earnings			97,473				58,747				102,693				10,964				269,877
Accumulated other comprehensive income			12,462				4,559				17,041				—				34,062
Treasury stock, at cost			(30,542	)			—				—				—				(30,542	)
Total stockholders’ equity			563,553				449,743				428,369				(683,711	)			757,954
Total liabilities and stockholders’ equity		$	926,931			$	447,611			$	1,139,199			$	(720,452	)		$	1,793,289