Compressed Air Best Practices - April 2008 - (Page 48)

| 04/08 Compressed Air Industry PLASTICS BLOW-MOLDING | WALL STREET WATCH “The fourth quarter of 2007 included several significant actions, which taken together will complete our portfolio transformation,” said Herbert L. Henkel, chairman, president and chief executive officer. “In the fourth quarter, we generated solid revenue growth, demonstrating operational focus and discipline while executing a significant portfolio change.” The company reported full-year 2007 EPS of $13.43 ($3,966.7 million). Earnings per share from discontinued operations were $10.95 ($3,233.6 million). Discontinued operations include gains on the sale of discontinued construction machinery businesses equal to EPS of $11.04, a charge of -$0.94 per share related to increasing asbestos reserves for the fourth quarter and earnings equal to approximately $0.85 per share from the earnings and retained costs from discontinued businesses. EPS from continuing operations were $2.48 ($733.1 million). Full-year results also include restructuring costs equal to EPS of -$0.06. The company reported 2006 EPS of $3.20 ($1,032.5 million), including EPS of $0.83 ($267.5 million) from discontinued operations and EPS of $2.37 ($765.0 million) from continuing operations. The company continued to be a strong cash generator with full-year available cash flow in 2007 of $714 million. Full-year available cash flow also includes a $217 million tax payment. The company classifies its businesses into three reportable segments based on industry and market focus: Climate Control Technologies, Industrial Technologies and Security Technologies. Industrial Technologies is focused on providing solutions to enhance customers’ industrial and energy efficiency and provides equipment and services for compressed air systems, tools, fluid power production and energy generation systems. This segment includes Club Car® golf cars and utility vehicles. Total revenues in the fourth quarter increased by approximately 10% to $758 million. Air Solutions revenues increased by 12% with improved activity in industrial and process markets for complete air compressor units and increased revenues from the aftermarket business. Productivity Solutions revenues increased by 6%, as expanding activity in material handling and industrial markets outside North America offset sluggish domestic markets, particularly for tools. Club Car® revenues increased by 7% compared with the fourth quarter of 2006, primarily reflecting increased parts and rental revenues, higher sales of utility and off-road vehicles and market share gains in a soft golf market. The fourth-quarter operating margin for Industrial Technologies of 12.9%, compared with 13.7% last year, reflected higher volumes, improved pricing and productivity savings, which were more than offset by material inflation, restructuring and the cost of growth investments. Additional Highlights for the 2007 Fourth Quarter Revenues: The company's revenues increased by approximately 8% to $2,323 million, compared with revenues of $2,143 million for the 2006 fourth quarter. Approximately 4 percentage points of the revenue increase was attributable to currency. Recurring revenues, which are comprised of parts, service, rental and used equipment, increased by 11% compared with the fourth quarter of 2006 and accounted for 18% of total revenues. Operating Income and Margin: Operating income of $298.8 million for the fourth quarter of 2007 increased by 7%, compared with $279.1 million for the fourth quarter of 2006, as higher volumes, improved pricing and productivity gains were offset by year-over-year material inflation, restructuring costs and unfavorable product mix. Fourth-quarter 2007 operating margin was 12.9% compared with 13% in 2006. Excluding restructuring costs, fourth-quarter 2007 operating margin was 13.4%. Interest and Other Income/Expense: Interest expense was $36.4 million for the 2007 fourth quarter compared with $36.0 million in the 2006 fourth quarter. Other income totaled $15.0 million for the fourth quarter, compared with $4.9 million in other expense for the fourth quarter of 2006. The year-over-year difference is primarily related to higher interest income from increased cash balances from the sale of businesses and lower foreign exchange losses and minority interest charges in 2007 compared with the fourth quarter of 2006. Full-Year 2007 Results Full-year 2007 net revenues were $8,763 million, a 9% increase compared with net revenues of $8,034 million in 2006. Excluding acquisitions and currency, revenues increased by 6%. Operating income for 2007 totaled $1,057.8 million compared with $998.5 million in 2006. Operating margin for 2007 was 12.1%, compared with 12.4% in the prior year. Higher revenues and productivity improvements were partially offset by cost inflation, unfavorable product mix and restructuring costs. Excluding restructuring costs, the 2007 operating margin was 12.4%, equal to 2006. 48 www.airbestpractices.com http://www.airbestpractices.com

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Compressed Air Best Practices - April 2008 Contents From the Editor Utility-Air News The Compressed Air Audit of the Month: Minimizing Blow-Molding Pressure Fluctuations AF Compressors: Focused on 40 Bar, Oil-Free Air for the PET Industry Real World Best Practices: PET Plants Using Boosters for High-Pressure Air Guaranteeing Audit ROI for Blow-Molders Managing Vacuum Pressure Differential Are You Taking Full Advantage of Pneumatic Valve Technology? Are You Strategic? Resources for Energy Engineers: Training Calendar & Product Picks Wall Street Watch Advertiser Index Job Market

Compressed Air Best Practices - April 2008

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