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Gardner Denver Inc (GDI)

Gardner Denver Investor Day Conference Call

November 8, 2011 12:30 PM ET

Executives

Michael Larsen – VP and CFO

Barry Pennypacker – President and CEO

Chris Celtruda – VP, Gardner Denver and President Industrial Products Group

Duane Morgan – VP, Gardner Denver and President Engineered Products Group

Presentation

Michael Larsen

I’m Michael Larsen the CFO of the company and with me today from the management team is Barry Pennypacker, our President and CEO, Chris Celtruda President of the Industrial Products Group and Duane Morgan runs our Engineered Products Group and then Vik Kini, FP&A and Investor Relations. So thank you very much for coming today.

Before we get started I have to take you through the Safe Harbor statement here, so please bear with me. Just a reminder that all of the statements made by Gardner Denver during this meeting other than historical facts are forward-looking statements made in reliance upon the Safe Harbor of the Private Securities Litigation Reform Act of 1995.

As the general matter forward-looking statements are those focused upon anticipated events or trends and assumptions expectation and beliefs relating to matters that are not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to Gardner Denver operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These uncertainties and factors could cause actual results to differ materially from those matters expressed in or implied by such forward-looking statements.

Factors that could cause or contribute to such differences are set forth in our SEC filings including but not limited to our annual report on the Form 10-K for the fiscal year ending December 31, 2010 and our quarterly reports on Form 10-Q. Gardner Denver does not undertake or plan to update these forward-looking statements even though the company situation may change.

Therefore you should not rely on these forward-looking statements are represented the company’s or its management views as of any date subsequent to today. As a reminder this meeting is being broadcast and (Inaudible) to a live webcast. This free webcast will be available for replay through the investor relations page on the Gardner Denver website at gardnerdenver.com.

So with that we will start shortly here with an update on the company and our strategies by Barry Pennypacker and then I will give an update on the financials of the company for 2011 and going forward. We will then go through the Industrial Products Group with Chris Celtruda at around 2:30 followed by a break and then Duane Morgan on EPG at around 3:30 goes to wrap it up with closing remarks and Q&A somewhere around 4:30. I would like to ask you to hold your questions until the general Q&A section.

So now before I turn it over to Barry I would like to start with a video that we think illustrates the new Gardner Denver. Alright with that I will turn it over to Barry.

(Video Playing)

Barry Pennypacker

Thanks. That video really does give me Goosebumps because it truly is the indicative of the new Gardner Denver and some of the things that we are trying to do as a company. Try get into my presentation I just have a few things to bring you up to speed with one was recently I had a party at my house had the entire executive team there my wife bought this property and I told a couple of you that once there is a beautiful pump house that we found on there that we have it restored and it’s a great piece of property. But I was taking these guys around and got to the back of the property where I have a pool and that pool is still with alligators and I once in a while go out there and swim in that pool because I believe that in order to be in this position you got to have courage so I told these guys that in order for them to be executives at Gardner Denver they have to exhibit courage like I do and if in fact any of them were willing to jump into that pool swim the length of it and go out the other side they can have anything I have, they could have my house, they could have my kids not my wife I keep her but everything else they have.

So there were no takers of that but we started walking away and heading out towards the pump house and I heard a splash turn around and look there is Larsen in the pool swimming with three alligators. And actually he made it he got to the land but just bit off one of his shoes and he turn around and look so what the heck is going on and I walked up and I said Michael you know you really have made the transition to Gardner Denver you are a very courageous man and I told you that you know any of you who are able to swim the length of that pool and make it through without the alligator eating you, you can have anything what I have and anything that he wants. And so I’m going to grant you that and Larsen looked down he said just tell me who on the hell threw me in the pool.

The second thing I want to tell you is that we have this Internet here at Gardner Denver that we every morning when we start up our computer we get a different new story of some of the things that has happened throughout the company Jeff welcome. Some of the things that have happened throughout the company and today’s story I want to, it’s an interesting one its fun. We have a plant in Sedalia, very big plant where we manufacture (Inaudible) and the pressure packages for marine on particular. And the head of HR there is (Inaudible) found out that there is a national competition for rock bands of most companies and a good one so these guys formed this rock band, went to the competition and none of them never been on stage but for the one drummer.

They got on stage and they crashed through the competition and they made it to the finals and that’s through Nokia who are fulltime musicians ended up beating our guys out. But it’s just one of those things that we encourage and you see through our posters that we communicate these wonderful ideas and stories everyday and most of the time they are about the Gardner Denver way and interesting things that our employees have done. But sometimes they are just some great human interest story and that was one of them.

Alright, now back to business. So what is it, what is it we are about. Now in the shares we are going to be about 2.4 global as you know very first show in a few minutes very attractive end markets in some cases particularly as we standard today the gas business. We have leading brands and technologies in the areas that we currently serve and very good distribution channels particularly in the Industrial Products Group where we are continuing to proliferate our strategy as continuing to grow share. We are operationally focused I mean this is a company where I think if you are not operationally oriented whether you are the GC the CIO or my assistant you are probably not going to survive. This is a company that’s really driven on operating the business and not operating spreadsheets and I know that necessary evil and we do that a lot. However, I would much rather be down the business with the operating guys operating the business and not worrying about spreadsheets.

We continue to grow profitably in the aftermarket and Duane’s business in particular that (Inaudible) you see sitting there in front of you is really driving substantial amount of growth for us and will continue to drive us through the next four or five years with exceptional growth opportunities in the aftermarket, as a result of the strong prices that we are seeing in the shale plays around the world. We have a strong track record on analyzing and integrating acquisitions we will continue to be a acquisitive company you will see some of the acquisitions we’ve done in the past and we’ve announced the Robuschi one which I’m not going to talk to you much about because I asked Chris to you can’t certainly be all the time and I would rather have the operating guys talk to you a little bit about their businesses. The Robuschi acquisition is a great one for us, it’s going to be a big neighbor for us to do some things that we need to do in Europe and in more expeditious way.

And we are focused on cash and earnings growth I mean it’s, it drives every single metric we have here and it is at either provides earnings growth or a superior cash flow. These two guys you see sitting over here to my right are compensated on those two metrics and I think you will find that as we go forward, that is at the best we continue to evolve the company into one that’s operationally excellent that those numbers will continue to grow as we do. And I think the takeaway here is we are in this, we are in the early phase of this transformation, I mean we have a lot of, we have a lot of businesses that are not performing where they should be and we know that we recognize that we are transforming this business into one of high quality, high margin industrial company. With an extensional and continuing exposure to energy and with energy the way it’s going to play out over the course of the next five to seven years it’s the business that we want to continue to invest in. But the takeaway is that we are still in the early stages, we’ve got a long way to go, we have a lot of opportunity in front of us and that’s a good thing for all of us.

Global leader in vacuum and fluid transport technology so you see the types of industries that we serve energy of course that’s a great picture and we love it, continue to grow in our medical business, mining particularly in places like Brazil and Australia where we have strong presence through our Nash business continue to drive growth for us. Transportation there has been a number of you with actually how many more possible ways to get Gardner Denver to be exposed to tracking and within the transportation business we are seeing substantial growth in our blower operations it is because of the strong need for continued vastly increased and moving sand and profits and those types of things for the tracking operations around the U.S. Food and beverage Chris will talk a little bit about that in his presentation but it is a nice business where we feel, we believe that we are world leader in air for blowing bottles and hopefully as we continue to evolve the strategy with the augment of the Robuschi acquisition we continue to grow our presence in food.

You can see here that about 1.1 in engineering and 1.2 in industrial products. Lot of brands that we focused on and we continue to proliferate around the world it means we are very focused on taking these brands and pushing it against multiple channels and that’s on the right hand side of the chart is particularly important to us as we continue to take the CompAir products through GD channels then GD products through CompAir channels we are seeing substantial opportunities for internal growth.

Very diversified, as you can see we see a lot of different end markets, we touch them all globally in many different countries so we are able to see very early on where things are trending and I will talk a little bit about those trends for a few minutes. But as you can see our exposure outside of North America continues to be in excess of 60% and we are very pleased with that we want to see that Asia 16% continue to grow and I think as you will hear the operating guys talk today between Duane and Chris we’ve got I think a pretty good solid strategy and how we are going to take that 16% in excess of 25% going forward will continue to grow.

Well we are very we see a lot of different end markets across many different global economies and it gives us an opportunity to see where things are heading in a pretty quick way. This chart you’ve seen before it’s, it represents that we think that we are pretty much positioned in our product portfolio as a third to third to third between early cycle, mid cycle and late cycle. I could ask all the time for rattling this cycle and we are somewhere at leaving the second third into the third and final portion of this.

The Nash business in particular is late cycled and that is showing some (Inaudible) of some of the larger infrastructure projects that we participate in where clouting activity has done there in six months in advance of the shipment are starting to show us some promise. Some of the earlier cycle of business particularly in the Thomas area where we stroll back in 2008 the business turning off like light switch, which was an indication that you know things to come. That business continues to be strong globally, we saw it we get first in the U.S. and that business continues to just move right along without any near term signings of a light switch like we have back in ’08.

Little bit about the end markets. For us and I take a lot of industrial companies if you are not putting green up there I think you are in the U.S. but I think you have a little bit of an issue. We are seeing strong growth in the (Inaudible) product lines and it continues to be dependent upon the tax free utilization is a solid driver towards that. Europe continues to be stable for us and yeah well we are relying on IT, I guess you can’t be that so it might be until tomorrow as time waits for us. Europe continues to be quite for us I mean we have a strong presence in Germany but in Germany in particular we are very stable and continuing to grow. There is some caution in some of the markets that we serve the Euro zone uncertainty exists but we are not panicked about it but we are prepared should there be an issue to in fact the contingency plans we put in place in order to ensure that we are able to continue to grow through the cycle.

Oil and gas is green that is the matter for talking about Poland, talking about China, talking about the U.S., talking about Brazil, talking about Russia anywhere in the world that we are serious natural gas and oil and liquids that our business is extremely strong and will continue to be strong throughout the next four to five years. China, I talked with China in particular we are seeing some softening in China I mean it’s not a big portion of our revenues it’s not a big portion of our earnings but to the markets that we serve particularly in the Industrial Products Group, where we are putting in infrastructure with regards to compressed air we are seeing some slowing in China.

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