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                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D.C. 20549

                                  FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                            EXCHANGE ACT OF 1934

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                     OR

   [ ] 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 1-3215   [Gardner Denver logo]

                            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, IL                                      62301
 (Address of principal executive offices)                    (Zip Code)

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

         Securities registered pursuant to Section 12(b) of the Act:

                                                    NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS                                 WHICH REGISTERED
Common Stock of $0.01 par value per share           New York Stock Exchange
Rights to Purchase Preferred Stock                  New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

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, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act.) Yes [X] No [ ]

Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of close of business on June 30, 2004: $552.0 million.

Common stock outstanding at February 28, 2005: 20,038,100 shares.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of Gardner Denver, Inc. Proxy Statement, dated March 15, 2005
(Part III).
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                             Table of Contents

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          PART I

          Item 1.     Business                                              2
          Item 2.     Properties                                            8
          Item 3.     Legal Proceedings                                     8
          Item 4.     Submission of Matters to a Vote of Security Holders   8

          PART II

          Item 5.     Market for Registrant's Common Equity, Related
                      Stockholder Matters and Issuer Purchases of Equity
                      Securities                                            8
          Item 6.     Selected Financial Data                               9
          Item 7.     Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                   9
          Item 7A.    Quantitative and Qualitative Disclosures about
                      Market Risk                                          19
          Item 8.     Financial Statements and Supplementary Data          20
          Item 9.     Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure                  42
          Item 9A.    Controls and Procedures                              42
          Item 9B.    Other Information                                    42

          PART III

          Item 10.    Directors and Executive Officers of the Registrant   42
          Item 11.    Executive Compensation                               43
          Item 12.    Security Ownership of Certain Beneficial Owners and
                      Management                                           43
          Item 13.    Certain Relationships and Related Transactions       44
          Item 14.    Principal Accounting Fees and Services               44

          PART IV

          Item 15.    Exhibits and Financial Statement Schedules           44

          SIGNATURES                                                       47

          INDEX TO EXHIBITS                                                48

          EX-12 (Computation of Ratios of Earnings to Fixed Charges)

          EX-21 (Subsidiaries of the Registrant)

          EX-23 (Consent)

          EX-24 (Power of Attorney)

          EX-31 (Certifications Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002)

          EX-32 (Certifications Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002)

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                                   PART I

ITEM 1. BUSINESS
----------------

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

Gardner Denver, Inc. ("Gardner Denver" or the "Company") designs,
manufactures and markets compressor and vacuum products and fluid transfer
products. The Company believes it is one of the leading manufacturers of
highly engineered stationary air compressors and blowers for industrial
applications in the United States. 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 and engineered vacuum systems. The Company also believes
that it is one of the leading manufacturers of reciprocating pumps used in
oil and natural gas well drilling, servicing and production and in water
jetting systems.

For the year ended December 31, 2004, the Company's revenues were $739.5
million, of which 80% were derived from sales of compressor and vacuum
products while 20% were from sales of fluid transfer products. Approximately
44% of the Company's total revenues for the year ended December 31, 2004
were derived from sales in the United States and approximately 56% were from
sales to customers in various countries outside the United States. Of the
total non-U.S. sales, 58% were to Europe, 23% to Asia, 9% to Canada, 8% to
Latin America and 2% to other regions.

The Company's international operations and United States export sales are
exposed to such risks as risk of nationalization of private enterprises,
risk of political or economic instability in certain countries, differences
in foreign laws, including increased difficulties in protecting intellectual
property and uncertainty in enforcement of contract rights, changes in the
legal and regulatory policies of foreign jurisdictions, credit risks,
currency fluctuations, exchange controls, changes in tariff restrictions,
royalty and tax increases, export and import restrictions and restrictive
regulations of foreign governments, potential problems obtaining supply of
raw materials and shipping products during times of crisis or war, as well
as other factors inherent in foreign operations.

HISTORY

The Company's business of manufacturing industrial and petroleum equipment
began in 1859 when Robert W. Gardner redesigned the fly-ball governor to
provide speed control for steam engines. By 1900, the then Gardner Company
had expanded its product line to include steam pumps and vertical high-speed
air compressors. In 1927, the Gardner Company merged with Denver Rock Drill,
a manufacturer of equipment for oil wells and mining and construction, and
became the Gardner-Denver Company. In 1979, the Gardner-Denver Company was
acquired by Cooper Industries, Inc. ("Cooper") and operated as 10
unincorporated divisions. Two of these divisions, the Gardner-Denver Air
Compressor Division and the Petroleum Equipment Division, were combined in
1985 to form the Gardner-Denver Industrial Machinery Division (the
"Division"). The OPI pump product line was purchased in 1985 and added to
the Division. In 1987, Cooper acquired the Sutorbilt and DuroFlow blower
product lines and the Joy industrial compressor product line, which were
also consolidated into the Division. Effective December 31, 1993, the assets
and liabilities of the Division were transferred by Cooper to the Company,
which had been formed as a wholly-owned subsidiary of Cooper. On April 15,
1994, the Company was spun-off as an independent company to the shareholders
of Cooper.

Gardner Denver has completed seventeen acquisitions since becoming an
independent company. In 1996, Gardner Denver acquired NORAMPTCO, Inc.,
renamed Gardner Denver Holdings Inc., and its primary operating subsidiary
Lamson Corporation ("Lamson"). Lamson designed, manufactured and sold
multistage centrifugal blowers and exhausters used in various industrial and
wastewater applications. Lamson's products complemented the Company's
product offering by enabling it to expand its participation in environmental
and industrial segments requiring air and gas management.

Also in 1996, the Company acquired TCM Investments, Inc., an oilfield pump
manufacturer based in Tulsa, Oklahoma. This acquisition extended the
Company's well stimulation pump product line, provided a physical presence
in the oilfield market and allowed Gardner Denver to become a major supplier
of repair parts and remanufacturing services to some of the Company's
customers.

In 1997, the Company acquired Oy Tamrotor Ab ("Tamrotor"), located in
Tampere, Finland. Tamrotor designed and manufactured lubricated rotary screw
compressor air ends and packages. The addition of Tamrotor provided the
Company with a manufacturing base in Europe and growth opportunities through
complementary product lines and international market penetration. In 1999,
the Company liquidated Tamrotor and now conducts business in Finland as
Gardner Denver OY.

In January 1998, the Company purchased Champion Pneumatic Machinery Company,
Inc. ("Champion"). Champion, located in Princeton, Illinois, is a leading
manufacturer of low horsepower reciprocating compressors. Champion opened
new market

                                     2


opportunities for Gardner Denver products through the Champion distribution
network and expanded the range of reciprocating compressors available to
existing distributors of Gardner Denver branded products.

In January 1998, the Company also acquired Geological Equipment Corporation
("Geoquip"), a leading manufacturer of pumps, ranging from 350 to 2,400
horsepower, in Fort Worth, Texas. The operation also remanufactures pumps
and provides repair services. The addition of Geoquip enhanced the Gardner
Denver well servicing product line, expanded the Company's presence in
remanufacturing and repair services and introduced the Company to the water
jetting market.

The Company purchased the Wittig Division of Mannesmann Demag AG ("Wittig")
in March 1998. Wittig, located in Schopfheim, Germany, manufactures rotary
sliding vane compressors and vacuum pumps. Wittig's products primarily serve
the truck blower market for liquid and dry bulk conveyance, as well as other
industrial applications. The acquisition of Wittig expanded the Company's
manufacturing presence in Europe and provided distribution channels for its
blower products, which are produced in the United States.

In April 1999, the Company acquired Allen-Stuart Equipment Company, Inc.
("Allen-Stuart"), located in Houston, Texas. Allen-Stuart designed,
fabricated and serviced custom-engineered packages for blower and compressor
equipment in air and gas applications. This entity also distributes Gardner
Denver blowers in Texas. The addition of Allen-Stuart enhanced the Company's
ability to supply engineered packages, incorporating the wide range of
compressor and blower products manufactured by Gardner Denver. During 2003,
the fabrication of custom-engineered packages was transferred from Houston
to the Company's existing facility in Quincy, Illinois.

In April 1999, the Company also purchased Butterworth Jetting Systems, Inc.,
a manufacturer of water jetting pumps and systems serving the industrial
cleaning and maintenance market, located in Houston, Texas. This operation,
which was renamed Gardner Denver Water Jetting Systems, Inc., expanded the
Company's position in the rapidly growing water jetting market.

In October 1999, the Company acquired Air Relief, Inc. ("Air Relief"),
located in Mayfield, Kentucky. Air Relief is an independent provider of
replacement parts and service for centrifugal compressors. This operation
enhanced the Company's ability to penetrate the centrifugal compressor
market by adding key engineering, assembly, sales and service capabilities.

In January 2000, the Company acquired Invincible Airflow Systems, Co.
("Invincible"). Invincible, located in Baltic, Ohio, manufactured single and
fabricated multistage centrifugal blowers and engineered vacuum systems.
Invincible extended Gardner Denver's product offering for the industrial
cleaning market and introduced the Company's centrifugal blowers to new
markets. During 2003, manufacturing of Invincible products was transferred
to the Company's existing centrifugal blower facility in Peachtree City,
Georgia.

The Company acquired Jetting Systems & Accessories, Inc. ("JSA") in April
2000 and CRS Power Flow, Inc. ("CRS") in July 2000. JSA and CRS were located
in Houston, Texas, and both manufactured aftermarket products for the water
jetting industry. These two acquisitions complemented the Company's product
offering for the water jetting market and further leveraged Gardner Denver's
commitment to being a full service provider in the water jetting industry.
Manufacturing of JSA and CRS products was subsequently transferred to the
Company's existing water jetting facility in Houston, Texas in 2000 and
2001, respectively.

In September 2001, the Company acquired Hamworthy Belliss & Morcom ("Belliss
& Morcom") headquartered in Gloucester, United Kingdom ("U.K."). Belliss &
Morcom manufactures and distributes reciprocating air compressors used for a
variety of niche applications, such as polyethylene terephthalate ("PET")
bottle blowing, breathing air equipment and compressed natural gas. The
acquisition of Belliss & Morcom broadened the Company's range of product
offerings, strengthened its distribution and service networks and increased
its participation in sales of products with applications that have the
potential to grow faster than the overall industrial economy.

In September 2001, the Company also acquired Hoffman Air and Filtration
Systems ("Hoffman"). Hoffman, previously headquartered in Syracuse, New
York, manufactured and distributed multistage centrifugal blowers and vacuum
systems, primarily for wastewater treatment and industrial applications. The
acquisition of Hoffman expanded Gardner Denver's product offering and
distribution capabilities and enhanced its position as a leading
international supplier of centrifugal products to the air and gas handling
industry. During 2002, manufacturing of Hoffman products was transferred to
the Company's existing centrifugal blower facility in Peachtree City,
Georgia.

In August 2003, the Company acquired a small machine shop operation in
Odessa, Texas to service and repair well stimulation and drilling pumps
serving the Permian Basin. This business also has a line of pumps and
uniquely designed fluid cylinders, which enhances the Company's existing
product offering. This acquisition provided opportunities to strengthen
relationships with existing

                                     3


customers and expand the Company's share of aftermarket business in this key
geographic region.

In January 2004, the Company acquired all of the outstanding shares of
Syltone plc ("Syltone"), previously a publicly traded company listed on the
London Stock Exchange. Syltone, previously headquartered in Bradford, United
Kingdom ("U.K."), is one of the world's largest manufacturers of equipment
used for loading and unloading liquid and dry bulk products on commercial
transportation vehicles. This equipment includes compressors, blowers and
other ancillary products that are complementary to the Company's product
lines. Syltone is also one of the world's largest manufacturers of fluid
transfer equipment (including loading arms, swivel joints, couplers and
valves) used to load and unload ships, tank trucks and rail cars. This
acquisition strengthens the Company's position, particularly in Europe, as
the leading global provider of bulk handling solutions for the commercial
transportation industry. The acquisition also expands the Company's product
lines to include loading arms.

In September 2004, the Company acquired nash_elmo Holdings, LLC ("Nash
Elmo"). Nash Elmo, previously headquartered in Trumbull, CT, is a global
manufacturer of industrial vacuum pumps and is primarily split between two
businesses, liquid ring pumps and side channel blowers. Both businesses'
products are complementary to the Company's Compressor and Vacuum Products
segment's existing product portfolio.

MARKETS AND PRODUCTS

A description of the particular products manufactured and sold by Gardner
Denver in its two reportable segments as of December 31, 2004 is set forth
below.

Compressor and Vacuum Products Segment

In the Compressor and Vacuum Products segment, the Company designs,
manufactures, markets and services the following products and related
aftermarket parts for industrial and commercial applications: rotary screw,
reciprocating, sliding vane and centrifugal air compressors; positive
displacement, centrifugal and side channel blowers; and liquid ring pumps
and engineered systems. The Company also designs, manufactures, markets and
services complementary ancillary products (access platforms, axles and gear
boxes, power take-offs and valves) as a result of the Syltone acquisition.
The Company's sales of compressor and vacuum products for the year ended
December 31, 2004 were $589.4 million, of which approximately 42% were to
customers in the United States.

Compressors are used to increase the pressure of gas, including air, by
mechanically decreasing its volume. The Company's reciprocating compressors
range from 0.5 to 1,500 horsepower and are sold under the Gardner Denver,
Champion, Commandair and Belliss & Morcom trademarks. The Company's rotary
screw compressors range from 5 to 680 horsepower and are sold under the
Gardner Denver, Electra-Screw, Electra-Saver, Enduro, RotorChamp, Twistair,
Tamrotor, and Tempest trademarks.

Blowers and liquid ring pumps are used to produce a high volume of air at
low pressure and to produce vacuum. The Company's positive displacement
blowers range from 0 to 36 pounds per square inch gauge (PSIG) pressure and
0-28 inches of mercury (Hg) vacuum and 0 to 43,000 cubic feet per minute
(CFM) and are sold under the trademarks Sutorbilt, DuroFlow, CycloBlower and
TurboTron. The Company's multistage centrifugal blowers are sold under the
trademarks Gardner Denver, Lamson and Hoffman and range from 0.5 to 25 PSIG
pressure and 0-18" Hg vacuum and 100 to 50,000 CFM. The Company's side
channel blowers range from 0 to 15 PSIG pressure and 0 to 1,800 CFM and are
sold under the trademark Elmo Technology. The Company's rotary sliding vane
compressors and vacuum pumps range from 0 to 150 PSIG and 0 to 3,000 CFM and
are sold under the trademarks Gardner Denver and Wittig. The Company's
engineered vacuum systems are used in industrial cleaning and maintenance
and are sold under the Gardner Denver, Invincible and Cat Vac trademarks.
The Company's liquid ring pumps and engineered systems range from 0 to 150
PSIG and 1,000 to 3,000 CFM and are sold under the Nash trademark.

Almost all manufacturing plants and industrial facilities, as well as many
service industries, utilize air compressors or blowers. The largest
customers for our compressor products are durable and non-durable goods
manufacturers; process industries (petroleum, primary metals,
pharmaceutical, food and paper); original equipment manufacturers ("OEMs");
manufacturers of carpet cleaning equipment, pneumatic conveying equipment,
and dry and liquid bulk transports; wastewater treatment facilities; and
automotive service centers and niche applications such as PET bottle
blowing, breathing air equipment and compressed natural gas. Manufacturers
of machinery and related equipment use stationary compressors for automated
systems, controls, materials handling and special machinery requirements.
The petroleum, primary metals, pharmaceutical, food and paper industries
require compressed air and vacuums for process, instrumentation and control,
packaging and pneumatic conveying. Blowers are instrumental to local
utilities for aeration in treating industrial and municipal waste. Blowers
are also used in service industries, for example, residential carpet
cleaning to vacuum moisture from carpets during the shampooing and cleaning
process. Blowers and rotary vane compressors are used on trucks to vacuum
leaves and debris from street sewers and to unload liquid and dry bulk and
powder materials such as cement, grain and plastic pellets. Additionally,
blowers are used in packaging technologies, medical applications, printing
and paper processing and numerous chemical process applications. Liquid ring
pumps are used in many different vacuum applications and engineered systems,
such as water removal, distilling, reacting, efficiency improvement, lifting
and handling, and filtering, principally in the pulp and paper, industrial
manufacturing, chemical and power industries.

As a result of the Syltone acquisition, the Company has 14 vehicle fitting
facilities in 11 countries worldwide. These fitting facilities offer
customized vehicle installations of systems, which include compressors,
generators, hydraulics, pumps and oil and fuel systems.

                                     4


Typical uses for such systems include road demolition equipment,
tire removal, electrical tools and lighting, hydraulic hand tools and
high-pressure water jetting pumps. The fitting facility in the U.K. also
manufactures access platforms which are hydraulically powered and are
typically used for overhead service applications. The diverse range of
customers for these products include local government authorities, utility
companies (electricity, water, gas, telecommunications) and tire and road
service providers.

The Compressor and Vacuum Products segment operates production facilities
around the world including nine plants (including two remanufacturing
facilities) in the U.S., five in the U.K., three in Germany, two in China,
and one each in Finland, Brazil, Canada and Denmark. The most significant
facilities include owned properties in Sedalia, Missouri; Gloucester, U.K.;
Princeton, Illinois; and Bad Neustadt and Schopfheim, Germany and leased
properties in Peachtree City, Georgia; Tampere, Finland; and Nuremburg,
Germany.

Fluid Transfer Products Segment

Gardner Denver designs, manufactures, markets and services a diverse group
of pumps, water jetting systems and related aftermarket parts used in oil
and natural gas well drilling, servicing and production and in industrial
cleaning and maintenance. This segment also designs, manufactures, markets
and services other fluid transfer components and equipment for the chemical,
petroleum and food industries. Sales of the Company's fluid transfer
products for the year ended December 31, 2004 were $150.2 million, of which
approximately 52% were to customers in the United States.

Positive displacement reciprocating pumps are marketed under the Gardner
Denver, Geoquip, Ajax and OPI trademarks. Typical applications of Gardner
Denver pumps in oil and natural gas production include oil transfer, water
flooding, salt water disposal, pipeline testing, ammine pumping for gas
processing, re-pressurizing, enhanced oil recovery, hydraulic power and
other liquid transfer applications. The Company's production pumps range
from 16 to 600 horsepower and consist of horizontal and vertical designed
pumps. The Company markets one of the most complete product lines of well
servicing pumps. Well servicing operations include general workover service,
completions (bringing wells into production after drilling), and plugging
and abandonment of wells. The Company's well servicing products consist of
high-pressure plunger pumps ranging from 165 to 400 horsepower. Gardner
Denver also manufactures intermittent duty triplex and quintuplex plunger
pumps ranging from 250 to 3,000 horsepower for well cementing and
stimulation, including reservoir fracturing or acidizing. Duplex pumps,
ranging from 16 to 135 horsepower, are produced for shallow drilling, which
includes water well drilling, seismic drilling and mineral exploration.
Continuous duty triplex mud pumps for oil and natural gas drilling rigs
range from 275 to 2,000 horsepower. A small portion of Gardner Denver and
Ajax pumps are sold for use in industrial applications.

Gardner Denver water jetting pumps and systems are used in industrial
cleaning and maintenance and are sold under the Partek, Liqua-Blaster and
American Water Blaster trademarks. Applications in this market segment
include runway and shiphull cleaning, concrete demolition and metal surface
preparation.

Gardner Denver's other fluid transfer components and equipment include
loading arms, swivel joints, couplers and valves used to load and unload
ships, tank trucks and rail cars. These products are sold primarily under
the Emco Wheaton and Perolo trademarks.

The Fluid Transfer Products segment operates seven production facilities
(including one remanufacturing facility) in the U.S and one each in Germany
and Canada. The most significant facilities include owned properties in
Quincy, Illinois; Tulsa, Oklahoma and Kirchhain, Germany and two leased
properties in Houston, Texas and one in Oakville, Ontario.

For financial information over the past three years on the Company's
performance by industry segment and the Company's international sales, refer
to Note 14 of the Notes to Consolidated Financial Statements included in
"Item 8. Financial Statements and Supplementary Data," and incorporated
herein by reference.

CUSTOMERS AND CUSTOMER SERVICE

Gardner Denver sells its products through independent distributors and sales
representatives and directly to OEMs, engineering firms and end-users. The
Company has been able to establish strong customer relationships with
numerous key OEMs and exclusive supply arrangements with many of our
distributors. The Company uses a direct sales force to service OEM and
engineering firm accounts because these customers typically require higher
levels of technical assistance, more coordinated shipment scheduling and
more complex product service than customers of our less specialized
products. As a majority of its products are marketed through independent
distribution, the Company is committed to developing and supporting its
distribution network of over 1,000 distributors and representatives. The
Company has distribution centers in Memphis, Tennessee and St. Peters,
Missouri that stock parts, accessories and small compressor and vacuum
products in order to provide adequate and timely availability. The Company
also leases sales office and warehouse space in various U.S. locations and
foreign countries. Gardner Denver provides its distributors with sales and
product literature, technical assistance and training programs, advertising
and sales promotions, order-entry and tracking systems and an annual
restocking program. Furthermore, the Company participates in major trade
shows and has a telemarketing department to generate sales leads and support
the distributors' sales staffs.

Gardner Denver's distributors maintain an inventory of complete units and
parts and provide aftermarket service to end-users. There are several
hundred field service representatives for Gardner Denver products in the
distributor network. The Company's service

                                     5


personnel and product engineers provide the distributors' service
representatives with technical assistance and field training, particularly
with respect to installation and repair of equipment. The Company also
provides aftermarket support through its remanufacturing facilities in
Indianapolis, Indiana; Fort Worth, Texas; and Mayfield, Kentucky and its 14
vehicle fitting facilities. The Indianapolis operation remanufactures and
repairs air ends for rotary screw compressors, blowers and reciprocating
compressors. The Fort Worth facility repairs and remanufactures well
servicing pumps, while the Mayfield operation provides aftermarket parts and
repairs for centrifugal compressors. The vehicle fitting facilities provide
preventative maintenance programs, repairs, refurbishment, upgrades and
spare parts for access platforms and vehicle systems.

COMPETITION

Competition in the Company's markets is generally robust and is based on
product quality, performance, price and availability. The relative
importance of each of these factors varies depending on the specific type of
product. Given the potential for equipment failures to cause expensive
operational disruption, the Company's customers generally view quality and
reliability as critical factors in their equipment purchasing decision. The
required frequency of maintenance is highly variable based on the type of
equipment and application.

Although there are a few large manufacturers of compressor and vacuum
products, the marketplace for these products remains highly fragmented due
to the wide variety of product technologies, applications and selling
channels. Gardner Denver's principal competitors in sales of compressor and
vacuum products include Ingersoll-Rand, Sullair (owned by United
Technologies Corporation), Atlas Copco, Quincy Compressor (owned by EnPro
Industries), CompAir, Roots, Busch, SiHi, Thomas Rietschle, GHH (owned by
Ingersoll Rand), Civacon and Blackmer Mouvex (both owned by Dover
Corporation) and Sening. Gardner Denver's primary competitors in sales of
access platforms and vehicle systems include Mellow Flowtrans, Winton
Engineering and Versalift.

The marketplace for fluid transfer products, although dominated by a few
multinational manufacturers with a broad product offering, is still highly
fragmented, as the ten largest pump manufacturers account for only
approximately 40% of annual sales. Because Gardner Denver is currently
focused on pumps used in oil and natural gas production and well servicing
and well drilling, it does not typically compete directly with the major
full-line pump manufacturers. The Company's principal competitors in sales
of petroleum pump products include National-Oilwell and SPM Flow Control,
Inc. The Company's principal competitors in sales of water jetting systems
include NLB Corp., WOMA Apparatebau GmbH and Hammelmann Maschinenfabrik
GmbH. The Company's principal competitors in sales of other fluid transfer
components and equipment are OPW Engineered Systems (owned by Dover
Corporation) and Kanon in distribution applications; and FMC Technologies
and Schwelm Verladetechnik GmbH (SVT) in both marine and distribution
technolgies.

RESEARCH AND DEVELOPMENT

Compressor and vacuum and fluid transfer products are best characterized as
mature, with evolutionary technological advances. Technological trends in
compressor and vacuum products include development of oil-free air
compressors, increased product efficiency, reduction of noise levels and
advanced control systems to upgrade the flexibility and precision of
regulating pressure and capacity. Emerging compressor and vacuum market
niches result from new technologies in plastics extrusion, oil and natural
gas well drilling, field gas gathering, mobile and stationary vacuum
applications, utility and fiber optic installation and environmental impact
minimization, as well as other factors. Trends in fluid transfer products
include development of larger horsepower and lighter weight pumps and
loading arms to convey natural gas.

The Company actively engages in a continuing research and development
program. The Gardner Denver research and development centers are dedicated
to various activities, including new product development, product
performance improvement and new product applications.

Gardner Denver's products are designed to satisfy the safety and performance
standards set by various industry groups and testing laboratories. Care is
exercised throughout the manufacturing and final testing process to ensure
that products conform to industry, government and customer specifications.

Expenditures for research and development were $6.2 million in 2004, $2.8
million in 2003 and $2.4 million in 2002.

MANUFACTURING

In general, the Company's manufacturing processes involve machining castings
and forgings, which are assembled into finished components. These components
are sold as finished products or packaged with purchased components into
complete systems. Gardner Denver operates thirty-two manufacturing
facilities (including remanufacturing facilities) that utilize a broad
variety of processes. At the Company's manufacturing locations, it maintains
advanced manufacturing, quality assurance and testing equipment geared to
the specific products that it manufactures, and uses extensive process
automation in its manufacturing operations. Most of the Company's
manufacturing facilities utilize computer aided numerical control tools and
manufacturing techniques that concentrate the equipment necessary to produce
similar products in one area of the plant (cell manufacturing). One operator
using cell

                                     6


manufacturing can monitor and operate several machines, as well as assemble
and test products made by such machines, thereby improving operating
efficiency and product quality while reducing the amount of work-in-process
and finished product inventories.

Gardner Denver has representatives on the American Petroleum Institute's
working committee and has relationships with standard enforcement
organizations such as Underwriters Laboratories, Det Norske Veritas and the
Canadian Standard Association. The Company maintains ISO 9001-2000
certification on the quality systems at a majority of its manufacturing and
design locations.

RAW MATERIALS

The primary raw materials used by Gardner Denver are cast iron and steel.
Such materials are generally available from a number of suppliers. The
Company does not currently have long-term contracts with its suppliers of
raw materials, but it believes that its sources of raw materials are
reliable and adequate for its needs. Gardner Denver utilizes single sources
of supply for certain iron castings and other selected components. A
disruption in deliveries from a given supplier could therefore have an
adverse effect on its ability to meet its commitments to customers.
Nevertheless, the Company believes that it has appropriately balanced this
risk against the cost of sustaining a greater number of suppliers. Moreover,
the Company has sought, and will continue to seek, cost reductions in our
purchases of materials and supplies by consolidating purchases, pursuing
alternate sources of supply and using online bidding competitions among
potential suppliers.

BACKLOG

Backlog consists of orders believed to be firm for which a customer purchase
order has been received or communicated. Since orders may be rescheduled or
canceled, backlog does not necessarily reflect future sales levels. For
further discussion of backlog levels, see the information included under
"Outlook" contained in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY

The Company believes that the success of its business depends more on the
technical competence, creativity and marketing abilities of its employees
than on any individual patent, trademark or copyright. Nevertheless, as part
of its ongoing research, development and manufacturing activities, Gardner
Denver has a policy of seeking to protect its proprietary products, product
enhancements and processes with appropriate intellectual property
protections.

In the aggregate, patents and trademarks are of considerable importance to
the manufacturing and marketing of many of Gardner Denver's products.
However, the Company does not consider any single patent or trademark, or
group of patents or trademarks, to be material to its business as a whole,
except for the Gardner Denver trademark. Other important trademarks the
Company uses include Nash, Elmo Technology, DuroFlow, Sutorbilt,
CycloBlower, Wittig, Lamson, Tamrotor, OPI, Champion, Geoquip, Belliss &
Morcom, Hoffman, Emco Wheaton, Drum, AirDrive, Webster and Perolo. Joy is a
registered trademark of Joy Technologies, Inc. The Company has the right to
use the Joy trademark on aftermarket parts until November 2027. Its right to
use this trademark on air compressors expired in November 1995. Pursuant to
trademark license agreements, Cooper Industries has rights to use the
Gardner Denver trademark for certain power tools and the Company has rights
to use the Ajax trademark for petroleum pump products. Gardner Denver has
registered its trademarks in the countries where it is deemed necessary.

The Company also relies upon trade secret protection for its confidential
and proprietary information and routinely enters into confidentiality
agreements with its employees. There can be no assurance, however, that
others will not independently obtain similar information and techniques or
otherwise gain access to the Company's trade secrets or that they can
effectively be protected.

EMPLOYEES

As of January 2005, the Company had approximately 3,800 full-time employees.
The Company believes that its current relations with employees are
satisfactory.

ENVIRONMENTAL MATTERS

The Company is subject to numerous federal, state, local and foreign laws
and regulations relating to the storage, handling, emission, disposal and
discharge of materials into the environment. The Company believes that its
existing environmental control procedures are adequate and it has no current
plans for substantial capital expenditures in this area. Gardner Denver has
an environmental policy that confirms its commitment to a clean environment
and to compliance with environmental laws. Gardner Denver has an active
environmental management program aimed at compliance with existing
environmental regulations and developing methods to eliminate or
significantly reduce the generation of pollutants in the manufacturing
processes.

The Company has been identified as a potentially responsible party ("PRP")
with respect to several sites designated for cleanup under federal
"Superfund" or similar state laws, which 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

                                     7


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, Gardner Denver was only a small contributor to the substantial
majority of 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.

Gardner Denver has an accrued liability on its balance sheet to the extent
costs are known or can be estimated for its remaining financial obligations
for these matters. Based upon consideration of currently available
information, the Company does not anticipate any materially adverse effect
on our 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.

AVAILABLE INFORMATION

The Company's Internet website address is http://www.gardnerdenver.com.
Copies of the following reports are available free of charge through the
Internet website, as soon as reasonably practicable after they have been
filed with or furnished to the Securities Exchange Commission pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934: the annual
report on Form 10-K; quarterly reports on Form 10-Q; current reports on Form
8-K; and amendments to those reports. Information on the website does not
constitute part of this annual report on Form 10-K.

ITEM 2. PROPERTIES
------------------

See "Item 1. Business" for information on Gardner Denver's manufacturing,
distribution and fitting facilities and sales offices. Generally, the
Company's plants are suitable and adequate for the purposes for which they
are intended, and overall have sufficient capacity to conduct business in
2005. The Peachtree City, Georgia facility is currently leased from the
Fayette County Development Authority in connection with industrial revenue
bond financing. The Company has an option to purchase the property at a
nominal price when the bonds are repaid in 2018. The Company leases sales
office and warehouse space in numerous locations worldwide.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

The Company is a party to various legal proceedings and administrative
actions. The information regarding these proceedings and actions is included
under "Contingencies" contained in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

There were no matters submitted to a vote of security holders during the
quarter ended December 31, 2004.

------------------------------------------------------------------------------


                                   PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
------------------------------------------------------------------------------
        ISSUER PURCHASES OF EQUITY SECURITIES
        -------------------------------------

The information regarding the market for the Company's common stock and
quarterly market price ranges set forth in Note 15 of the Consolidated
Financial Statements included in "Item 8. Financial Statements and
Supplementary Data," is hereby incorporated by reference. There were
approximately 7,734 stockholders of record at December 31, 2004.

Repurchases of equity securities during the fourth quarter of 2004 are
listed in the following table.

<TABLE>
<CAPTION>
                                                                                   (c) TOTAL NUMBER OF
                                                                                     SHARES PURCHASED       (d) MAXIMUM NUMBER OF
                                      (a) TOTAL NUMBER                              AS PART OF PUBLICLY     SHARES THAT MAY YET BE
                                         OF SHARES          (b) AVERAGE PRICE       ANNOUNCED PLANS OR      PURCHASED UNDER THE
PERIOD                                  PURCHASED(1)          PAID PER SHARE            PROGRAMS(2)          PLANS OR PROGRAMS
----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                     <C>                     <C>                    <C>
October 2004                                --                      n/a                     --                     210,300

November 2004                               --                      n/a                     --                     210,300

December 2004                               --                      n/a                     --                     210,300

Total                                       --                      n/a                     --                     210,300

<FN>
(1)  The shares purchased do not include shares acquired by the Company in
     conjunction with the exercise of stock options via a stock swap.

(2)  In October 1998, Gardner Denver's Board of Directors authorized the
     repurchase of up to 1,600,000 shares of the Company's common stock to
     be used for general corporate purposes.
</TABLE>

                                     8


ITEM 6. SELECTED FINANCIAL DATA
-------------------------------

<TABLE>
<CAPTION>
Years ended December 31
(Dollars in thousands except per share amounts)

                                                         2004(1)           2003           2002(2)         2001(3)         2000
                                                      ----------------------------------------------------------------------------

<S>                                                    <C>                <C>             <C>             <C>            <C>
Revenues                                               $  739,539         439,530         418,158         419,770        379,358

Net income                                             $   37,123          20,643          19,602          22,024         18,684

Basic earnings per share                               $     1.96            1.29            1.24            1.42           1.22

Diluted earnings per share                             $     1.92            1.27            1.22            1.40           1.21

Long-term debt (excluding current maturities)          $  280,256         165,756         112,663         160,230        115,808

Total assets                                           $1,028,609         589,733         478,730         488,688        403,881

<FN>
(1)  The Company acquired the outstanding shares of Syltone, plc and
     nash_elmo Holdings LLC during January 2004 and September 2004, respectively.
(2)  As a result of adopting SFAS No. 142 "Goodwill and Other Intangible
     Assets," periodic amortization ceased effective January 1, 2002.
(3)  During September 2001, the Company acquired certain assets and stock of
     Hoffman Air and Filtration Systems and Hamworthy, Bellis and Morcom
     compressor business.
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
        RESULTS OF OPERATIONS
        ---------------------

NON-GAAP FINANCIAL MEASURES
---------------------------

To supplement Gardner Denver's financial information presented in accordance
with generally accepted accounting principles (GAAP), management 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 items (acquisitions, one-time gains and losses) or items
outside of management's control (foreign currency exchange rates).

Gross margin (defined as revenues less cost of sales), gross margin
percentage (defined as gross margin divided by revenues) and operating
earnings (defined as revenues less cost of sales, depreciation and
amortization, and selling and administrative expenses) are indicative of
short-term operational performance and ongoing profitability. Management
closely monitors operating earnings and operating margin of each business
segment to evaluate past performance and actions required to improve
profitability.

MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------

The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto.

OVERVIEW

The Company believes it is one of the leading designers, manufacturers and
marketers of engineered stationary air compressors, liquid ring pumps and
blowers for various industrial and transportation applications and of pumps
used in the petroleum and industrial markets and other fluid transfer
equipment serving chemical, petroleum and food industries.

Since its spin-off from Cooper Industries, Inc. in 1994, the Company has
completed 17 acquisitions, growing its revenues from approximately $176
million to $740 million in 2004. Of the 17 acquisitions, the two largest
were completed in 2004 with the purchase of nash_elmo Holdings, LLC ("Nash
Elmo") and Syltone plc ("Syltone").

On September 1, 2004, the Company acquired Nash Elmo, a leading global
manufacturer of industrial vacuum pumps. Nash Elmo is primarily split
between two businesses, liquid ring pumps and side channel blowers. Both
businesses' products are complementary to the Compressor and Vacuum Products
segment's existing product portfolio. Nash Elmo, previously headquartered in
Trumbull, CT, has primary manufacturing facilities located in Bad Neustadt
and Nuremberg, Germany; Zibo, China; and Campinas, Brazil. For the year
ended December 31, 2003, Nash Elmo's revenues and earnings before income
taxes were $212.4 million and $7.8 million, respectively. Nash Elmo's
largest markets are in Europe, Asia, North America and South America.
Approximately 70% of Nash Elmo's revenues are generated from liquid ring
pump products (including related engineered systems and aftermarket
services), while the remaining 30% are derived from side channel blower
products (including aftermarket services).

                                     9

On January 2, 2004, the Company acquired the outstanding shares of Syltone,
previously a publicly traded company listed on the London Stock Exchange.
Syltone, previously headquartered in Bradford, United Kingdom ("U.K."), is
one of the world's largest manufacturers of equipment used for loading and
unloading liquid and dry bulk products on commercial transportation
vehicles. This equipment includes compressors, blowers and other ancillary
products that are complementary to the Company's existing product lines.
Syltone is also one of the world's largest manufacturers of fluid transfer
equipment (including loading arms, swivel joints, couplers and valves) used
to load and unload ships, tank trucks and rail cars. For the twelve months
ended September 30, 2003, Syltone generated revenues and operating profit
(in accordance with accounting principles generally accepted in the U.K.) of
(pound)84.4 million and (pound)6.3 million, respectively (approximately
$151.1 million and $11.3 million, respectively as calculated using the
December 31, 2003 exchange rate of $1.79/(pound)). Syltone's largest markets
are Europe and North America, which represent approximately 67% and 20% of
its revenues, respectively. Approximately 70% of Syltone's revenues are
generated through transportation-related activities while the remaining 30%
are derived from fluid transfer-related activities.

Subsequent to the acquisition of Nash Elmo and Syltone, the Company
continues to be organized based upon the products and services it offers and
has four operating divisions: Compressor, Blower, Liquid Ring Pump and Fluid
Transfer. These divisions comprise two reportable segments, Compressor and
Vacuum Products (formerly Compressed Air Products) and Fluid Transfer
Products. The Compressor, Blower (which now includes the Syltone
transportation-related activities and Nash Elmo's side channel blower
business) and Liquid Ring Pump (consisting of Nash Elmo's liquid ring pump
business) Divisions are aggregated into one reportable segment (Compressor
and Vacuum Products) since the long-term financial performance of these
businesses are affected by similar economic conditions, coupled with the
similar nature of their products, manufacturing processes and other business
characteristics. During the third quarter of 2004, the Company's former Pump
and Fluid Transfer (which consisted of the Syltone fluid transfer-related
activities) Divisions were combined into one division, Fluid Transfer. These
two divisions were previously aggregated into one reportable segment (Fluid
Transfer Products) primarily due to the same factors as noted above, and
thus, there has been no change to the Fluid Transfer Products segment.

In the Compressor and Vacuum Products segment, the Company designs,
manufactures, markets and services the following products and related
aftermarket parts for industrial and commercial applications: rotary screw,
reciprocating, sliding vane and centrifugal compressors; positive
displacement, centrifugal and side channel blowers; and liquid ring pumps
and engineered systems. 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. Liquid ring pumps are used in many different
vacuum applications and engineered systems, such as water removal,
distilling, reacting, efficiency improvement, lifting and handling, and
filtering, principally in the pulp and paper, industrial manufacturing,
chemical and power industries. Revenues of the Compressor and Vacuum
Products segment constituted 80% of total revenues in 2004.

In the Fluid Transfer Products segment, the Company designs, manufactures,
markets and services a diverse group of pumps, water jetting systems and
related aftermarket parts used in oil and natural gas production, well
servicing and drilling and industrial cleaning and maintenance. This segment
also designs, manufactures, markets and services other fluid transfer
components and equipment for the chemical, petroleum and food industries.
Revenues of the Fluid Transfer Products segment constituted 20% of total
revenues in 2004.

The Company sells its products through independent distributors and sales
representatives, and directly to original equipment manufacturers,
engineering firms, packagers and end users.

The following table sets forth percentage relationships to revenues of
certain income statement items for the years presented.

<TABLE>
<CAPTION>
                                                2004       2003       2002
---------------------------------------------------------------------------
<S>                                            <C>        <C>        <C>
Revenues                                       100.0%     100.0      100.0
Costs and expenses
   Cost of sales                                67.4       70.0       69.3
   Depreciation and amortization                 2.9        3.3        3.3
   Selling and administrative expenses          21.3       19.4       19.0
   Interest expense                              1.4        1.1        1.5
   Other income, net                            (0.1)      (0.7)        --
---------------------------------------------------------------------------
Total costs and expenses                        92.9       93.1       93.1
---------------------------------------------------------------------------
Income before income taxes                       7.1        6.9        6.9
Provision for income taxes                       2.1        2.2        2.2
---------------------------------------------------------------------------
Net income                                       5.0%       4.7        4.7
---------------------------------------------------------------------------
</TABLE>

RECENT DEVELOPMENTS

On March 8, 2005, the Company signed a definitive agreement to acquire
Thomas Industries Inc. ("Thomas"), a New York Stock Exchange listed company
trading under the ticker symbol "TII." Thomas is a worldwide leader in the
design, manufacture and marketing of precision engineered pumps, compressors
and blowers. The agreed-upon purchase price is $40.00 per share for all
outstanding shares and share equivalents (approximately $734 million) and
the assumption of $9.5 million of long-term capitalized lease obligations.
As of December 31, 2004, Thomas had $267 million in cash, cash equivalents
and short-term investments. The net transaction value, including assumed
debt and net of cash, is approximately $476 million.

                                     10


Thomas is a leading supplier of pumps, compressors and blowers to the
original equipment manufacturer (OEM) market in such applications as medical
equipment, gasoline vapor and refrigerant recovery, automotive and
transportation applications, printing, packaging, tape drives and laboratory
equipment. Thomas designs, manufacturers, markets, sells and services these
products through worldwide operations with regional headquarters as
follows: North American Group - Sheboygan, Wisconsin; European Group -
Puchheim, Germany; and Asia Pacific Group - Hong Kong, China.

Thomas has wholly-owned operations in 21 countries on five continents. Its
primary manufacturing facilities are located in Sheboygan, Wisconsin,
Monroe, Louisiana, Skokie, Illinois and Syracuse, New York; Schopfheim,
Fahrnau, Puchheim and Memmingen, Germany; and Wuxi, China. The manufacturing
operations in the United States produce rotary vane, linear, piston and
diaphragm pumps and compressors, and various liquid pumps. These products
are directly sold worldwide to OEM's, as well as through fluid power and
industrial distributors. The German operations manufacture a complementary
line of rotary vane, linear, diaphragm, gear, side channel, radial, claw,
screw and rotary lobe pumps, compressors and blowers, as well as various
liquid pumps, air-centers and centralized systems. These products are also
distributed worldwide. The manufacturing facility in China was constructed
during late 2004 and will begin production in mid 2005.

Thomas' largest markets are Europe and the United States, which represent
approximately 52% and 38% of its revenues, respectively. Of the total
European sales, approximately 61% are within Germany and 39% are within
other European countries. Approximately 10% of Thomas' revenues are
generated in Asia Pacific. At December 31, 2004, Thomas employed
approximately 2,200 people.

For the year ended December 31, 2004, Thomas' revenues and operating income
were $410 million and $209 million, respectively. Operating income for this
period included $19 million from Thomas' 32% interest in the Genlyte Thomas
Group LLC (GTG), a joint venture formed with The Genlyte Group Incorporated
(Genlyte) in 1998, and a $160 million nonrecurring gain on the sale of this
joint venture in July 2004. For the twelve-month period of 2004, operating
income from Thomas' Pumps and Compressors segment, net of corporate
expenses, was $30 million.

Gardner Denver has received a debt commitment to fully finance the
acquisition of Thomas. However, Gardner Denver intends to finance the
acquisition through an amended and expanded senior secured bank facility and
a public offering of approximately $200 million of its common stock. In
addition, the Company may choose to access the debt capital markets. The
acquisition is not conditioned upon completion of any of these financings
and the size and timing of the equity and any debt financings are subject to
prevailing market conditions.

The acquisition is expected to close in 2005 and is subject to the approval
of Thomas' stockholders and other customary closing conditions, including
the receipt of applicable regulatory approvals.

  YEAR ENDED DECEMBER 31, 2004, COMPARED WITH YEAR ENDED DECEMBER 31, 2003

REVENUES

Revenues increased $300.0 million (68%) to $739.5 million in 2004, compared
to $439.5 million in 2003. This increase was primarily due to acquisitions
in 2004, which contributed $247.3 million in revenues. Increased shipments
of well stimulation pumps, pump parts, compressors and blowers, combined
with changes in currency exchange rates and price increases, also
contributed to this increase. Revenues outside the United States, as a
percentage of total revenues, increased to 56% in 2004, compared to 42% in
2003, primarily due to acquisitions and volume increases in Europe, China
and South Africa.

Revenues for the Compressor and Vacuum Products segment increased $220.4
million (60%) to $589.4 million in 2004, compared to $369.0 million in 2003.
This increase is primarily due to acquisitions in 2004 (52%), increased
volume of compressor and blower shipments in the U.S., Europe, China and
South Africa (3%), changes in currency exchange rates (3%) and price
increases (2%).

Fluid Transfer Products segment revenues increased $79.7 million to $150.2
million in 2004, compared to $70.5 million in 2003. This 113% increase is
primarily due to the acquisition of Syltone (78%), increased shipments of
well stimulation pumps, water jetting systems and related aftermarket (34%)
and price increases (4%). These positive factors were partially offset by a
decreased volume of drilling pump shipments (3%).

COSTS AND EXPENSES

Gross margin increased $109.3 million (83%) to $241.1 million in 2004,
compared to $131.8 million in 2003. Gross margin percentage increased to
32.6% in 2004, compared to 30.0% in 2003. This increase in gross margin
percentage was principally attributable to the increased volume in both
segments and the related positive impact of increased leverage of fixed and
semi-fixed costs over a higher revenue base. Acquisitions completed in 2004
also positively impacted gross margin percentage, as their gross margin
percentage (35.1%) was higher than the Company's

                                     11

previously existing businesses despite a non-recurring negative impact of
approximately $3.7 million stemming from recording their inventory at fair
value on the respective acquisition dates. Finally, favorable sales mix also
contributed to the increased gross margin as 2004 included a higher
percentage of aftermarket sales compared to the prior year. These positive
factors were partially offset by higher material costs due to surcharges on
castings and other components stemming from increases in scrap iron and
other metal prices. Higher warranty costs and some supply chain
inefficiencies that affected material availability also negatively impacted
gross margin.

Depreciation and amortization increased $7.3 million to $21.9 million in
2004, compared to $14.6 million in 2003, primarily due to the Syltone and
Nash Elmo acquisitions.

Selling and administrative expenses increased $72.1 million (85%) to $157.5
million in 2004, compared to $85.3 million in 2003, primarily due to
acquisitions in 2004 ($61.9 million). Higher compensation and fringe benefit
costs, professional fees and changes in currency exchange rates also
contributed to this increase. As a percentage of revenues, selling and
administrative expenses increased to 21.3% for 2004 from 19.4% in the prior
year, primarily due to the 2004 acquisitions.

Other income, net decreased $2.6 million in 2004 to $0.6 million, compared
to $3.2 million in 2003. This change was primarily due to higher foreign
currency transaction gains recorded in 2003. Prior year results included a
$3.2 million gain in the fourth quarter related to the appreciation of U.S.
dollar borrowings, which were converted to British pounds prior to being
used to consummate the Syltone acquisition. An additional $1.2 million gain
was recorded related to these borrowings in the first quarter of 2004. Prior
year results also included a $0.4 million pretax gain on the sale of an idle
manufacturing facility in Syracuse, New York.

The Compressor and Vacuum Products segment generated operating earnings as a
percentage of revenues of 7.9% in 2004, compared to 7.5% in 2003. This
increase was primarily attributable to the positive impact of increased
leverage of the segment's fixed and semi-fixed costs over a higher revenue
base, favorable sales mix and restructuring programs initiated in the fourth
quarter of 2003. These positive factors were partially offset by higher
material, compensation and fringe benefit and warranty costs. Operating
earnings as a percentage of revenues from Compressor and Vacuum Products
segment businesses that existed prior to the Nash Elmo and Syltone
acquisitions were 7.9% for 2004.

The Fluid Transfer Products segment generated operating earnings as a
percentage of revenues of 10.0% in 2004, compared to 5.8% in 2003. This
improvement was primarily attributable to the positive impact of increased
leverage of the segment's fixed and semi-fixed costs over a higher revenue
base, operational improvements and price increases. These positive factors
were partially offset by the impact of the Syltone business included in this
segment which had lower operating earnings as a percentage of revenues than
the segment's previously existing businesses. Operating earnings as a
percentage of revenues from Fluid Transfer Products segment businesses that
existed prior to the Syltone acquisition were 13.6% in 2004.

Interest expense increased $5.4 million (113%) to $10.1 million in 2004,
compared to $4.7 million in 2003, due to higher average borrowings stemming
from the Syltone and Nash Elmo acquisitions and higher average interest
rates. The average interest rate was 5.0% in 2004, compared to 3.9% in 2003.
See Note 7 to the Consolidated Financial Statements for further information
on the Company's borrowing arrangements.

Income before income taxes increased $21.9 million (72%) to $52.3 million in
2004, compared to $30.4 million in 2003. Acquisitions in 2004 contributed
$10.6 million to this increase. The balance of the increase is primarily due
to the increased volume in both segments and the related positive impact of
increased leverage of fixed and semi-fixed costs over a higher revenue base.
These positive factors were partially offset by higher material,
compensation and fringe benefit and warranty costs.

The provision for income taxes increased by $5.4 million to $15.2 million in
2004, compared to $9.7 million in 2003, as a result of the incremental
income before taxes partially offset by a lower overall effective tax rate.
The Company's effective tax rate was lowered to 29.0% in 2004 compared to
32.0% in 2003. The lower rate is principally due to favorable tax audit
settlements in Finland and the U.S. of $1.4 million and $0.2 million,
respectively. A higher proportion of earnings derived from lower taxed
non-U.S. jurisdictions also contributed to the lower effective tax rate.
These positive factors were partially offset by incremental taxes accrued in
the amount of $0.9 million for the planned repatriation of certain non-U.S.
earnings in 2005 at a reduced income tax rate pursuant to the American Jobs
Creation Act of 2004.

Net income increased $16.5 million (80%) to $37.1 million ($1.92 diluted
earnings per share) in 2004, compared to $20.6 million ($1.27 diluted
earnings per share) in 2003. The increase in net income is primarily
attributable to the same factors that resulted in increased income before
taxes and the lower effective tax rate as noted above. Changes in currency
exchange rates also contributed favorably by increasing net income by
approximately $0.8 million. Net income included $0.1 million ($0.01 diluted
earnings per share) and $0.2 million ($0.02 diluted earnings per share) in
after-tax LIFO income in 2004 and 2003, respectively. The estimated
incremental impact on diluted earnings per share from acquisitions was $0.33
in 2004, which was partially offset by a $0.23 dilutive impact from a stock
offering completed in the first quarter of 2004.

                                     12


  YEAR ENDED DECEMBER 31, 2003, COMPARED WITH YEAR ENDED DECEMBER 31, 2002

REVENUES

Revenues increased $21.3 million to $439.5 million in 2003, compared to
$418.2 million in 2002, primarily due to changes in currency exchange rates.
Revenues outside the United States, as a percentage of total revenues,
increased to 42% in 2003, compared to 37% in 2002. This increase is due to
changes in currency exchange rates (primarily the euro and British pound)
and volume increases in Asia and Canada.

Revenues for the Compressor and Vacuum Products segment increased $19.0
million (5%) to $369.0 million in 2003, compared to $350.0 million in 2002.
Revenues in this segment increased approximately $17.3 million due to
changes in currency exchange rates. Increased prices contributed
approximately $2.6 million but were partially offset by lower centrifugal
blower volume.

Revenues in the Fluid Transfer Products segment increased $2.4 million (4%)
to $70.5 million in 2003, compared to $68.1 million in 2002. Volume
increases contributed approximately 3 percentage points of the change,
primarily due to increased shipments of well stimulation pumps and petroleum
pump parts which was partially offset by lower drilling pump shipments.
Increased prices contributed the remaining 1 percentage point increase. In
2002, Fluid Transfer Products segment revenues were supported by drilling
pump backlog carried over from 2001 orders.

COSTS AND EXPENSES

During the fourth quarter of 2003, the Company announced and initiated
restructuring plans to eliminate redundant manufacturing capacity,
streamline operations and reduce costs. These activities represent further
integration of previously completed acquisitions, which the Company expects
will better leverage existing manufacturing facilities. As a result of the
restructuring, the Company expects to realize a net reduction in headcount
of approximately 80 personnel (approximately 4% of its workforce as of
September 30, 2003) by the end of 2005. The substantial majority of this
headcount reduction was realized during the fourth quarter of 2003. As part
of the restructuring program, the Company refocused the marketing strategies
of its German blower business to place more emphasis on the truck blower
market rather than industrial applications for its products. In addition,
the Company exited the marketing and manufacturing of certain highly
engineered compressor packages in the U.K. and U.S. The Company also
announced its plan to implement new manufacturing processes and systems
improvements to reduce inventory and its intent to establish a compressor
packaging and assembly operation in China. The aggregate financial impact of
these profitability improvement programs (restructuring plans, inventory
reduction plan and establishment of China operations) resulted in a
reduction in diluted earnings per share of approximately $0.12 in the fourth
quarter of 2003.

Atchison Casting Corporation, the Company's largest supplier of iron
castings in 2002, downsized and subsequently closed its LaGrange, Missouri
foundry ("LaGrange Foundry") in the second half of 2002. As a result, the
Company implemented its previously developed contingency plan to secure
alternate supply sources. There was a negative impact on the Company's
financial performance (estimated at $0.04-$0.05 and $0.01-$0.03 diluted
earnings per share in 2003 and 2002, respectively) as additional costs were
incurred to expedite delivery of castings from new suppliers and accelerate
depreciation expense of pattern modification charges from alternate casting
suppliers who are no longer servicing the Company.

Gross margin increased $3.3 million (3%) in 2003 to $131.8 million, compared
to $128.5 million in 2002. Gross margin percentage of revenues decreased to
30.0% in 2003 from 30.7% in 2002. This decrease in the gross margin
percentage was principally attributable to charges to cost of sales of $2.1
million incurred in conjunction with implementing the profitability
improvement programs discussed above. This factor contributed 0.5 percentage
points of the 0.7 percentage point decrease in gross margin as a percentage
of revenues. Unfavorable sales mix (including a lower proportion of drilling
pump and centrifugal blower sales which generate higher gross margins, and a
higher proportion of compressor package sales, which generate lower gross
margins), and incremental costs associated with the disruption in the
Company's casting supply chain also contributed to this decrease. These
negative factors were partially offset by cost reduction efforts, including
continued acquisition integration.

Selling and administrative expenses increased by 7% to $85.3 million in 2003
from $79.4 million in 2002, primarily due to changes in currency exchange
rates. Selling and administrative expenses increased 4% due to changes in
currency exchange rates and 1% due to expenses associated with the
profitability improvement programs. The remaining increase of 2% was
primarily attributable to higher compensation and postretirement expenses,
which were partially offset by lower medical costs and other cost reduction
efforts, including continued acquisition integration. As a percentage of
revenues, selling and administrative expenses were 19.4% in 2003, compared
to 19.0% in 2002. The increase in this ratio was primarily attributable to
the factors discussed above, partially offset by the impact of higher
revenues.

Operating earnings for the Compressor and Vacuum Products segment decreased
$2.0 million (7%) to $27.8 million, compared to $29.8 million in 2002. This
decrease was primarily attributable to $2.7 million of charges incurred in
the fourth quarter of 2003 for the profitability improvement programs.
Higher compensation, postretirement and warranty expenses combined with
costs associated with the disruption within the Company's casting supply
chain also contributed to this decrease. These negative factors were
partially offset by changes in currency exchange rates, lower medical costs
and cost reductions efforts, including continued acquisition

                                     13


integration. As a percentage of revenues, operating earnings decreased to
7.5% in 2003, compared to 8.5% in 2002, as a result of the factors noted
above. The expenses incurred in the fourth quarter of 2003 related to
implementing the profitability improvement programs contributed 0.8
percentage points of this 1.0 percentage point decrease in operating
earnings as a percentage of revenues.

Operating earnings for the Fluid Transfer Products segment decreased $1.1
million to $4.1 million in 2003, a 21% decrease from $5.2 million in 2002.
This decrease was primarily attributable to a less favorable sales mix due
to a lower proportion of revenues from drilling pumps, which generate higher
margins than other pump products. Higher compensation and postretirement
expenses also contributed to this decrease. As a percentage of revenues,
operating earnings for this segment decreased to 5.8% in 2003, compared to
7.6% in 2002, as a result of the factors noted above.

Interest expense decreased $1.6 million (25%) to $4.7 million for 2003,
compared to $6.4 million in 2002, due to lower average borrowings and
interest rates. The average interest rate for 2003 was 3.9% compared to 4.4%
in 2002.

Other income, net increased $3.0 million to $3.2 million in 2003 compared to
$0.2 million in 2002, due to an unrealized currency transaction gain of $3.2
million recorded in the fourth quarter of 2003. This gain related to the
appreciation of U.S. dollar borrowings, which were converted to British
pounds in November 2003 prior to being used to consummate the Syltone
acquisition in January 2004.

Income before income taxes increased $1.5 million (5%) to $30.4 million in
2003 from $28.8 million in 2002. This increase was primarily the result of
the unrealized currency transaction gain, lower interest expense and changes
in currency exchange rates discussed above. These positive factors were
partially offset by the lower operating earnings in each segment.

The provision for income taxes increased by $0.5 million (5%) to $9.7
million in 2003, compared to $9.2 million in 2002, as a result of the higher
income before taxes. The Company's effective tax rate was 32% in both years.

Net income increased $1.0 million (5%) to $20.6 million ($1.27 diluted
earnings per share) in 2003, compared to $19.6 million ($1.22 diluted
earnings per share) in 2002. Net income included $0.2 million ($0.02 diluted
earnings per share) and $0.3 million ($0.02 diluted earnings per share) in
after-tax LIFO income in 2003 and 2002, respectively. The increase in net
income was primarily attributable to the same factors that resulted in
increased income before taxes discussed above. Changes in currency exchange
rates also contributed favorably by increasing net income by approximately
$0.8 million in 2003.

OUTLOOK

In 2004, orders for compressor and vacuum products were $611.3 million,
compared to $352.7 million in 2003. Order backlog for the Compressor and
Vacuum Products segment was $169.9 million as of December 31, 2004, compared
to $48.7 million as of December 31, 2003. The favorable impact from 2004
acquisitions for this segment was approximately $193.9 million and $99.4
million for orders and backlog, respectively, for the year ended and as of
December 31, 2004. Excluding this impact, the increase in orders and backlog
compared to the prior year was primarily due to improvement in industrial
demand in the U.S. and Europe combined with incremental market share gains
in Europe, China and South Africa and favorable changes in currency exchange
rates. The Company also experienced an increase in demand for positive
displacement blowers and locomotive compressors due to an improved
transportation market in the U.S. These positive factors were partially
offset by the Company's exit from the marketing and manufacture of certain
highly engineered compressor packages in the U.K. and U.S. in fourth quarter
of 2003.

Because air is often used as a fourth utility in the manufacturing process,
demand for compressor and vacuum products is generally correlated to
manufacturing capacity utilization rates and the rate of change of
industrial equipment production. Over longer time periods, demand also
follows the economic growth patterns indicated by the rates of change in the
Gross Domestic Product. These indicators have been relatively weak in both
2004 and 2003 but did improve gradually during 2004. As a result, orders for
compressor and vacuum products are anticipated to improve modestly in 2005
as the U.S. and European industrial economies continue to recover.

Demand for fluid transfer products, which are primarily petroleum related,
has historically corresponded to market conditions and expectations for oil
and natural gas prices. Orders for fluid transfer products were $175.7
million in 2004, an increase of $102.8 million (141%) compared to $72.9
million in 2003. Order backlog for the Fluid Transfer Products segment was
$52.3 million at December 31, 2004, compared to $9.7 million as of December
31, 2003, representing a 442% increase. The increase in orders and backlog
for this segment due to 2004 acquisitions is $55.5 million and $17.7
million, respectively. Increased demand for well stimulation pumps, drilling
pumps and petroleum pump parts also contributed to the increase as a result
of elevated prices for oil and natural gas. Future increases in demand for
these products will likely be dependent upon rig counts and oil and natural
gas prices, which the Company cannot predict.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING WORKING CAPITAL

During 2004, operating working capital (defined as receivables plus
inventories, less accounts payable and accrued liabilities) increased $34.6
million to $96.2 million compared to $61.6 million in the prior year
primarily due to the 2004 acquisitions. Inventory

                                     14


turnover decreased to 4.6 at December 31, 2004, compared to 4.9 at December
31, 2003. Days sales outstanding improved to 61 days at December 31, 2004,
compared to 63 days at December 31, 2003, due to increased use of progress
billings and improved collections.

CASH FLOWS

During 2004, the Company generated cash flows from operations totaling $76.8
million, an increase of $30.5 million (66%) compared to 2003. This increase
was primarily the result of acquisitions ($22.8 million) and higher net
income from previously existing businesses. Net of cash acquired, $295.3
million was used to fund the Nash Elmo and Syltone acquisitions (including
direct acquisition costs) in 2004. This use of cash was primarily funded by
net borrowings of $84.7 million, the common stock offering in March 2004
that generated $79.6 million and excess cash reserves. The effect of
exchange rate changes on cash and cash equivalents was $3.8 million in 2004
compared to $10.7 million in 2003. This decrease is primarily due to a
significant strengthening of the British pound against the U.S. dollar
during 2003 combined with the fact that the Company had significant British
pound denominated cash and cash equivalents on hand during the fourth
quarter of 2003 to fund the Syltone acquisition in January 2004. The cash
flows provided by operating and financing activities and used in investing
activities, combined with the effect of exchange rate changes, resulted in a
net cash decrease of $68.2 million during 2004.

CAPITAL EXPENDITURES AND COMMITMENTS

Capital projects designed to increase operating efficiency and flexibility,
expand production capacity and increase product quality resulted in
expenditures of $19.6 million in 2004, compared to $12.0 million in 2003.
This increase was primarily due to 2004 acquisitions, the completion of a
new assembly and packaging facility in China and the integration of certain
businesses onto the Company's common enterprise resource planning system.
Commitments for capital expenditures at December 31, 2004 are approximately
$10 million. Capital expenditures related to environmental projects have not
been significant in the past and are not expected to be significant in the
foreseeable future.

In October 1998, Gardner Denver's Board of Directors authorized the
repurchase of up to 1,600,000 shares of the Company's common stock to be
used for general corporate purposes. Approximately 200,000 shares remain
available for repurchase under this program. The Company has also
established a Stock Repurchase Program for its executive officers to provide
a means for them to sell Gardner Denver common stock and obtain sufficient
funds to meet income tax obligations which arise from the exercise or
vesting of incentive stock options, restricted stock or performance shares.
The Gardner Denver Board has authorized up to 400,000 shares for repurchase
under this program, and of this amount, approximately 200,000 shares remain
available for repurchase. During 2004, no shares were repurchased under
these repurchase programs. As of December 31, 2004, a total of 1,572,542
shares have been repurchased at a cost of $22.8 million under both
repurchase programs. In 2004, the Company also acquired 17,799 shares of its
common stock, valued at $0.5 million, which were tendered for the exercise
of stock options.

LIQUIDITY

On March 6, 2002, the Company amended and restated its then existing
Revolving Line of Credit Agreement (the "Credit Agreement"), increasing the
aggregate borrowing capacity to $150.0 million and extending the maturity
date to March 6, 2005. On September 1, 2004, the Company amended and
restated the Credit Agreement once again, increasing the borrowing capacity
to $375.0 million. This latter amended and restated Credit Agreement
provided the Company with access to senior secured credit facilities
including a $150.0 million five-year Term Loan and a $225.0 million
five-year Revolving Line of Credit (the "Credit Line"). Proceeds from the
Credit Agreement were used to fund the Nash Elmo acquisition and retire debt
outstanding under its previously existing Credit Line and Term Loan.

The Credit Line matures on September 1, 2009. On December 31, 2004, the
Credit Line had an outstanding principal balance of $113.6 million, leaving
$111.4 million available for letters of credit or future use, subject to the
terms of the Credit Line.

The $150.0 million Term Loan has a final maturity of September 1, 2009. The
Term Loan requires principal payments totaling $7.5 million, $15.0 million,
$22.5 million, $37.5 million and $67.5 million in years one through five,
respectively. Other terms and conditions of the Term Loan are similar to
those of the Credit Line.

The Company's borrowing arrangements permit certain investments and dividend
payments and are generally unsecured with the exception of the Credit
Agreement, which requires the pledge of the stock of certain wholly-owned
subsidiaries, and a security interest in the Company's manufacturing
facility in Bad Neustadt, Germany. There are no material restrictions on the
Company as a result of its credit arrangements, other than customary
covenants regarding certain earnings, liquidity and capital ratios.

On September 24, 2003, the Company filed with the Securities and Exchange
Commission ("SEC") a shelf registration statement regarding $150 million of
its securities. In March 2004, the Company sold 3.45 million shares of
common stock lowering the amount of securities available on the shelf to
$65.5 million. On January 31, 2005, the Company filed a second shelf
registration statement regarding $184.5 million of its securities, bringing
the total securities currently available to $250.0 million. The registration
statement has since been declared effective by the SEC and allows the
Company to complete one or more offerings of its common stock,

                                     15


preferred stock, debt securities or warrants. The Company intends to use the
net proceeds from any offerings for acquisitions, capital expenditures,
repayment of borrowings, working capital and other general corporate
purposes.

As discussed under the Recent Development section above, on March 8, 2005,
the Company executed an agreement and plan of merger ("Merger Agreement")
through which it expects to effectively acquire all the outstanding shares
of Thomas. The Company's acquisition of Thomas through the Merger Agreement
is not contingent on the Company's ability to finance the transaction.

Simultaneously with the execution of the Merger Agreement, the Company
executed a Commitment Letter with Bear Stearns & Co., Inc. and JP Morgan
Chase Bank, NA and affiliated parties (together, the "Commitment Parties").
This Commitment Letter obligates the Commitment Parties, subject to limited
conditions, to provide senior secured credit facilities to the Company in
the aggregate amount of $930.0 million if the Company's acquisition of
Thomas is consummated. These credit facilities could be used by the Company
to finance the acquisition of Thomas, pay related fees and expenses,
refinance the existing indebtedness of the Company, and finance the
Company's continuing operations after the acquisition of Thomas.

Although these credit facilities are available to the Company through the
Commitment Letter, the Company currently plans to finance the Thomas
acquisition through the amendment and expansion of its existing Credit
Agreement, and the issuance of approximately $200 million of its common
stock. In addition, the Company may choose to access the debt capital
markets. The size and timing of the common stock offering and any debt
financings are subject to prevailing market conditions.

Management currently expects the Company's cash flows in 2005 to be
sufficient to fund its scheduled debt service and provide required resources
for working capital and capital investments.

CONTRACTUAL OBLIGATIONS

At December 31, 2004, certain of the Company's contractual obligations,
including estimated payments due by period, are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                       PAYMENTS DUE BY PERIOD
                                               ------------------------------------------------------------------
                                                    LESS THAN                                         MORE THAN
   CONTRACTUAL OBLIGATIONS           TOTAL           1 YEAR        1 - 3 YEARS      3 - 5 YEARS        5 YEARS
 ----------------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>              <C>             <C>               <C>
   Debt                            $313,571         $ 32,949         $54,090         $210,496          $16,036
   Operating leases                  38,233            9,608          12,661            6,305            9,659
   Purchase obligations              73,339           73,231             108               --               --
 ----------------------------------------------------------------------------------------------------------------
   Total                           $425,143         $115,788         $66,859         $216,801          $25,695
 ----------------------------------------------------------------------------------------------------------------
</TABLE>

Purchase obligations consist primarily of inventory purchases made in the
normal course of business to meet operational requirements. The above table
excludes $103.9 million of other non-current liabilities recorded in the
balance sheet, which primarily consist of pension and other postretirement
liabilities and deferred income taxes, because the timing of payments
related to such liabilities is uncertain. The table also excludes interest
payments on existing debt arrangements. For further information regarding
the Company's debt arrangements and related interest rates, see Note 7 to
the Consolidated Financial Statements.

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, 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 manufactured, distributed and sold products
allegedly at issue in the pending asbestos and silicosis litigation lawsuits
(the "Products"). The Company has potential responsibility for certain of
these Products, namely: (a) air compressors which used asbestos containing
components manufactured and supplied by third parties; and (b) portable air
compressors used in sandblasting operations as a component of sandblasting
equipment manufactured and sold by others. The sandblasting equipment is
alleged to have caused the silicosis disease plaintiffs claim in these
cases.

Neither the Company nor its predecessors ever mined, manufactured, mixed,
produced or distributed asbestos fiber. The asbestos-containing components
used in the Products were completely encapsulated in a protective
non-asbestos binder and enclosed within the subject Products. Furthermore,
the Company has never manufactured or distributed portable air compressors.

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.

                                     16


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;
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
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 own any of these sites. 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.

NEW ACCOUNTING STANDARDS

In May 2004, the FASB issued Staff Position No. FAS 106-2, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003," ("FAS 106-2"). FAS 106-2
supersedes Staff Position No. FAS 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003," and provides guidance on the accounting,
disclosure, effective date and transition related to the Prescription Drug
Act. FAS 106-2 was effective for the third quarter of 2004. According to an
actuarial assessment, the Company currently provides prescription drug
benefits, which are actuarially equivalent to the Medicare prescription drug
benefit, to certain retired and other employees and will therefore qualify
for the subsidy. As a result, the Company accounted for the federal subsidy
attributable to past services as an actuarial gain, which reduced the
accumulated post-retirement benefit obligation. This actuarial gain is then
amortized in future periods in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The federal subsidy
attributable to employee service rendered in current and future periods will
reduce future net periodic postretirement benefit cost as those employees
provide service. The Company has adopted FAS 106-2, resulting in a favorable
impact to diluted earnings per share of $0.01 in 2004. The favorable impact
to diluted earnings per share in 2005 is expected to be $0.02.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an
amendment to ARB No. 43, Chapter 4." This statement amends previous guidance
and requires expensing for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). In addition, the
statement requires that allocation of fixed production overheads to
inventory be based on the normal capacity of production facilities. SFAS No.
151 is effective for inventory costs incurred during annual periods
beginning after June 15, 2005. The Company is currently evaluating the
impact of SFAS No. 151 on its future consolidated financial statements.

In December 2004, the FASB issued a revision to SFAS No. 123, "Accounting
for Stock-Based Compensation," SFAS No. 123-R, "Share-Based Payment." SFAS
No. 123-R focuses primarily on transactions in which an entity exchanges its
equity instruments for employee services and generally establishes standards
for the accounting for transactions in which an entity obtains goods or
services in share-based payment transactions. The Company will adopt SFAS
No. 123-R in the third quarter of 2005 and currently expects an unfavorable
impact on diluted earnings per share of approximately $0.03 to $0.05, in the
second half of 2005.

In December 2004, the FASB issued Staff Position No. FAS 109-1, "Application
of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction
on Qualified Production Activities Provided by the American Jobs Creation
Act of 2004," ("FAS 109-1"), and Staff Position No. FAS 109-2, "Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Jobs Creation Act of 2004," ("FAS 109-2"). FAS 109-1
requires that companies who qualify for the recent tax law's deduction for
domestic production activities to account for it as a special deduction
under Statement No. 109 and reduce their tax expense in the period or
periods the amounts are deductible on the tax return. FAS 109-2 allows
companies additional time to evaluate whether foreign earnings will be
repatriated under the repatriation provisions of the new tax law and
requires specific disclosures for companies needing additional time to
complete the evaluation. Both staff positions are effective immediately.
During 2004, the Company determined that approximately $16.6 million of
existing foreign earnings should meet the requirements of the American Jobs
Creation Act of 2004 (the "AJCA"). The Company intends to repatriate these
earnings during calendar 2005, as soon as the qualifying requirements are
met. Since these earnings are no longer consider indefinitely reinvested,
the Company accrued $0.9 million of income tax expense in 2004. In addition,
the Company is evaluating the potential to repatriate other foreign earnings
pursuant to the AJCA. Whether the Company repatriates their foreign earnings
is dependent upon the Company's ability to meet the requirements of the AJCA
with respect to these earnings. Until that determination is made, the
Company will make no change in its current intention to indefinitely
reinvest accumulated earnings of its foreign subsidiaries except with
respect to the $16.6 million noted above. The range of additional amounts
that the Company is considering for repatriation under the AJCA is between
zero and $40 million. The potential range of income tax is between zero and
$2.1 million.

                                     17


CRITICAL ACCOUNTING POLICIES

Management has evaluated the accounting policies used in the preparation of
the Company's 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 the 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 are described below. Management
believes that the amounts recorded in the Company's financial statements
related to these areas are based on their best judgments and estimates,
although actual results could differ materially under different assumptions
or conditions.

INVENTORIES

Inventories, which consist of materials, labor and manufacturing overhead,
are carried at the lower of cost or market value. As of December 31, 2004,
$97.5 million (70%) of the Company's inventory is accounted for on a
first-in, first-out (FIFO) basis with the remaining $40.9 million (30%)
accounted for on a last-in, first-out (LIFO) basis. Management regularly
reviews inventory for obsolescence to determine whether a write-down is
necessary. Various factors are considered in making this determination,
including recent sales history and predicted trends, industry market
conditions and general economic conditions.

GOODWILL AND OTHER INTANGIBLES

The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 141 "Business Combinations." Among other things, this standard requires
that intangible assets acquired in a business combination be recognized (at
fair value) apart from goodwill if they meet one of two criteria - the
contractual-legal criterion or the separability criterion. The Company has
also adopted SFAS No. 142 "Goodwill and Other Intangible Assets." Under the
provisions of this standard, intangible assets deemed to have indefinite
lives and goodwill are not subject to amortization. All other intangible
assets are amortized over their estimated useful lives. Goodwill and other
intangible assets not subject to amortization are tested for impairment
annually, or more frequently if events or changes in circumstances indicate
that the asset might be impaired. This testing requires comparison of
carrying values to fair values, and when appropriate, the carrying value of
impaired assets is reduced to fair value. During the second quarter of 2004,
the Company completed its annual impairment test and determined that no
impairment existed. While management believes that its estimates of fair
value are reasonable, different assumptions regarding such factors as
product volumes, selling price changes, labor and material cost changes,
productivity, interest rates and foreign exchange rates could affect such
valuations.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension and other postretirement benefit obligations and expense (or income)
are dependent on assumptions used in calculating such amounts. These
assumptions include discount rate, rate of compensation increases, expected
rates of return on plan assets and expected healthcare trend rates. In
accordance with GAAP, actual results that differ from the assumptions are
accumulated and amortized over future periods. While management believes
that the assumptions are appropriate, differences in actual experience or
changes in assumptions may affect the Company's pension and other
postretirement benefit obligations and future expense (or income). In
addition, due to the significant declines in the financial markets in recent
years, the fair value of the plan assets of certain of the Company's funded
defined benefit pension plans was less than their accumulated benefit
obligation at December 31, 2004. As a result, the Company has recorded a
cumulative reduction to stockholders' equity (accumulated other
comprehensive income) in the amount of $5.6 million (after tax) as of
December 31, 2004. This non-cash reduction in stockholders' equity did not
impact the Company's compliance with its existing debt covenants and could
be reversed in future periods if a combination of factors, including
interest rate increases, improved investment results and contributions,
cause the pension plans to return to or exceed fully funded status. However,
depending upon the performance of the equity and bond markets in 2005 and
beyond, the Company could also be required to record additional charges to
stockholders' equity in the future.

CONTINGENCIES

Contingencies, by their nature, relate to uncertainties that require
management to exercise judgement both in assessing the likelihood that a
liability has been incurred as well as in estimating the amount of the
potential loss. The most significant contingencies impacting the Company's
financial statements are those related to product warranty, personal injury
lawsuits, environmental remediation and the resolution of matters related to
open tax years. For additional information on these matters, see Note 1,
Note 10 and Note 13 to the Consolidated Financial Statements.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

All of the statements in this Annual Report on Form 10-K, other than
historical facts, are forward looking statements made in reliance upon the
safe harbor of the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements made in Management's Discussion
and Analysis, particularly under the caption "Outlook." As a general matter,
forward-looking statements are those focused upon anticipated events or
trends and expectations and beliefs relating to matters that are not
historical in nature.

                                     18


Such forward-looking statements are subject to uncertainties and 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 uncertainties and factors could cause actual results to
differ materially from those matters expressed in or implied by such
forward-looking statements.

The following uncertainties and factors, among others, could affect future
performance and cause actual results to differ materially from those
expressed in or implied by forward-looking statements: (1) the ability to
complete the Thomas acquisition and identify, negotiate and complete future
acquisitions; (2) the speed with which the Company is able to integrate
acquisitions and realize the related financial benefits; (3) the ability to
maintain and to enter into key purchasing, supply and outsourcing
relationships; (4) purchased material cost changes, including surcharges;
(5) the ability to effectively manage the transition of iron casting supply
to alternate sources and the skill, commitment and availability of such
alternate sources; (6) the successful implementation of other strategic
initiatives, including, without limitation, restructuring plans, inventory
reduction programs and other cost reduction efforts; (7) the domestic and/or
worldwide level of oil and natural gas prices and oil and gas drilling and
production, which affect demand for the Company's petroleum products; (8)
changes in domestic and/or worldwide industrial production and industrial
capacity utilization rates, which affect demand for the Company's compressor
and vacuum products; (9) pricing of the Company's products; (10) the degree
to which the Company is able to penetrate niche and international markets;
(11) changes in currency exchange rates (primarily between the U.S. dollar,
the euro and the British pound); (12) changes in interest rates; (13) the
ability to attract and retain quality management personnel; (14) market
performance of pension plan assets and changes in discount rates used for
actuarial assumptions in pension and other postretirement obligation and
expense calculations; (15) the continued ability to effectively manage and
defend litigation matters pending, or asserted in the future, against the
Company; (16) the development and acceptance of the Company's new product
offerings; (17) the continued successful implementation and utilization of
the Company's electronic services; and (18) changes in laws and regulations,
including accounting standards, tax requirements and interpretations or
guidance related to the American Jobs Creation Act of 2004.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

The Company is exposed to market risk related to changes in interest rates,
as well as European and other foreign currency exchange rates, and
selectively uses derivative financial instruments, including forwards and
swaps, to manage these risks. The Company does not hold derivatives for
trading purposes. The value of market-risk sensitive derivatives and other
financial instruments is subject to change as a result of movements in
market rates and prices. Sensitivity analysis is one technique used to
evaluate these impacts. Based on a hypothetical ten percent change in
interest rates or ten percent weakening in the U.S. dollar across relevant
foreign currencies, principally the euro, British pound and Chinese Yuan (if
permitted to float independently of the U.S. dollar), the potential losses
in future earnings, fair value and cash flows are not material to the
Company.

All derivative instruments are reported on the balance sheet at fair value.
For each derivative instrument designated as a cash flow hedge, the gain or
loss on the derivative is deferred in accumulated other comprehensive income
until recognized in earnings with the underlying hedged item. For each
derivative instrument designated as a fair value hedge, the gain or loss on
the derivative instrument and the offsetting gain or loss on the hedged item
are recognized immediately in earnings. Currency fluctuations on non-U.S.
dollar borrowings that have been designated as hedges on the Company's
investment in a foreign subsidiary are included in other comprehensive
income.

To effectively manage interest costs, the Company utilizes interest rate
swaps as cash flow hedges of variable rate debt. Including the impact of
interest rate swaps outstanding, the interest rate on approximately 50% of
the Company's total borrowings were effectively fixed as of December 31,
2004. Also as part of its hedging strategy, the Company utilizes purchased
option and forward exchange contracts as cash flow hedges to minimize the
impact of currency fluctuations on transactions, cash flows and firm
commitments. These contracts for the sale or purchase of European and other
currencies generally mature within one year.

Notional transaction amounts and fair values for the Company's outstanding
derivatives, by risk category and instrument type, as of December 31, 2004
and 2003, are summarized in Note 12, "Off-Balance Sheet Risk, Concentrations
of Credit Risk and Fair Value of Financial Instruments," contained in "Item 8.
Financial Statements and Supplementary Data," of this Form 10-K.

                                     19


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

REPORT ON MANAGEMENT'S ASSESSMENT OF
INTERNAL CONTROL OVER FINANCIAL REPORTING

Gardner Denver management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined
in Exchange Act Rules 13a-15(f). Any system of internal control, no matter
how well designed, has inherent limitations, including the possibility that
a control can be circumvented or overridden and misstatements due to error
or fraud may occur and not be detected. Also, because of changes in
conditions, internal control effectiveness may vary over time. Accordingly,
even an effective system of internal control over financial reporting will
provide only reasonable assurance with respect to financial statement
preparation.

Under the supervision and with the participation of management, including
the chief executive officer and chief financial officer, the Company
conducted an evaluation of the effectiveness of its internal control over
financial reporting based on the framework in "Internal Control - Integrated
Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on its evaluation under the framework in
"Internal Control - Integrated Framework," management concluded that
internal control over financial reporting was effective as of December 31,
2004, subject to the scope limitation with respect to Nash Elmo as discussed
in the paragraph below.

Gardner Denver acquired Nash Elmo on September 1, 2004. As permitted by SEC
guidance, management excluded from its assessment of the effectiveness of
Gardner Denver's internal control over financial reporting as of December
31, 2004, Nash Elmo's internal control over financial reporting. Total
assets related to Nash Elmo as of December 31, 2004 were $331 million and
revenues for the four-month period subsequent to the acquisition (September
1 - December 31, 2004) were $84 million.

Management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report
which is included herein.

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Gardner Denver, Inc.:

We have audited the accompanying consolidated balance sheets of Gardner
Denver, Inc. and subsidiaries (the Company) as of December 31, 2004 and
2003, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2004. In connection with our audits of the consolidated
financial statements, we also have audited financial statement schedule II.
These consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gardner
Denver, Inc. and subsidiaries as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Gardner
Denver, Inc.'s internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated March 11, 2005 expressed an
unqualified opinion on management's assessment of, and the effective
operation of, internal control over financial reporting.

KPMG LLP
St. Louis, Missouri
March 11, 2005

                                     20


REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Gardner Denver, Inc.:

We have audited management's assessment, included in the accompanying Report
on Management's Assessment of Internal Control Over Financial Reporting,
that Gardner Denver, Inc. (the Company) maintained effective internal
control over financial reporting as of December 31, 2004, based on criteria
established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Gardner Denver, Inc.'s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating management's
assessment, testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that Gardner Denver, Inc. maintained
effective internal control over financial reporting as of December 31, 2004,
is fairly stated, in all material respects, based on criteria established in
Internal Control - Integrated Framework issued by COSO. Also, in our opinion,
the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004, based on criteria
established in Internal Control - Integrated Framework issued by COSO.

The Company acquired Nash Elmo on September 1, 2004, and management excluded
from its assessment of the effectiveness of Gardner Denver, Inc.'s internal
control over financial reporting as of December 31, 2004, Nash Elmo's
internal control over financial reporting. Total assets related to Nash Elmo
at December 31, 2004 of $331 million and revenues for the four-month period
subsequent to the acquisition (September 1 - December 31, 2004) of $84
million were included in the consolidated financial statements of Gardner
Denver, Inc. and subsidiaries as of and for the year ended December 31,
2004. Our audit of internal control over financial reporting of Gardner
Denver, Inc. also excluded an evaluation of the internal control over
financial reporting of Nash Elmo.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets
of Gardner Denver, Inc. and subsidiaries as of December 31, 2004 and 2003,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 2004, and our report dated March 11, 2005 expressed an unqualified
opinion on those consolidated financial statements.

KPMG LLP
St. Louis, Missouri
March 11, 2005

                                     21


<TABLE>
                                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                              GARDNER DENVER, INC.

                                             YEARS ENDED DECEMBER 31
                                (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



<CAPTION>
                                                                            2004         2003         2002
-----------------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>          <C>
REVENUES                                                                $739,539      439,530      418,158
COSTS AND EXPENSES:

    Cost of sales                                                        498,435      307,753      289,631
    Depreciation and amortization                                         21,901       14,566       14,139
    Selling and administrative expenses                                  157,453       85,326       79,400
    Interest expense                                                      10,102        4,748        6,365
    Other income, net                                                       (638)      (3,221)        (204)
-----------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES                                                 687,253      409,172      389,331
-----------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                                52,286       30,358       28,827
PROVISION FOR INCOME TAXES                                                15,163        9,715        9,225
-----------------------------------------------------------------------------------------------------------

NET INCOME                                                              $ 37,123       20,643       19,602
-----------------------------------------------------------------------------------------------------------

BASIC EARNINGS PER SHARE                                                $   1.96         1.29         1.24
-----------------------------------------------------------------------------------------------------------

DILUTED EARNINGS PER SHARE                                              $   1.92         1.27         1.22
-----------------------------------------------------------------------------------------------------------


The accompanying notes are an integral part of these statements.
-----------------------------------------------------------------------------------------------------------
</TABLE>

                                     22


<TABLE>
                                                CONSOLIDATED BALANCE SHEETS

                                                   GARDNER DENVER, INC.

                                                        DECEMBER 31
                                     (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



<CAPTION>
                                                                                                      2004         2003
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>             <C>
ASSETS
Current assets:
    Cash and equivalents                                                                        $   64,601      132,803
    Receivables, (net of allowances of $7,543 in 2004 and $4,534 in 2003)                          163,927       81,345
    Inventories, net                                                                               138,386       64,327
    Deferred income taxes                                                                            9,465        3,652
    Other current assets                                                                             9,143        5,682
------------------------------------------------------------------------------------------------------------------------
         Total current assets                                                                      385,522      287,809
------------------------------------------------------------------------------------------------------------------------

Property, plant and equipment, net                                                                 148,819       75,428
Goodwill                                                                                           374,159      205,488
Other intangibles, net                                                                             110,173       10,341
Deferred income taxes                                                                                   --        5,374
Other assets                                                                                         9,936        5,293
------------------------------------------------------------------------------------------------------------------------
         Total assets                                                                           $1,028,609      589,733
------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings and current maturities of long-term debt                              $   32,949       16,875
    Accounts payable and accrued liabilities                                                       206,069       84,081
------------------------------------------------------------------------------------------------------------------------
         Total current liabilities                                                                 239,018      100,956
------------------------------------------------------------------------------------------------------------------------

Long-term debt, less current maturities                                                            280,256      165,756
Postretirement benefits other than pensions                                                         30,503       32,110
Deferred income taxes                                                                               21,324           --
Other liabilities                                                                                   52,032       25,006
------------------------------------------------------------------------------------------------------------------------
         Total liabilities                                                                      $  623,133      323,828

Stockholders' equity:
    Common stock, $0.01 par value; 50,000,000 shares authorized; 19,947,570 and
      16,117,026 shares outstanding in 2004 and 2003, respectively                                     217          178
    Capital in excess of par value                                                                 262,091      174,474
    Retained earnings                                                                              139,430      102,307
    Accumulated other comprehensive income                                                          30,185       14,893
    Treasury stock at cost, 1,739,661 and 1,721,862 shares in 2004 and 2003, respectively          (26,447)     (25,947)
------------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity                                                                405,476      265,905
------------------------------------------------------------------------------------------------------------------------
         Total liabilities and stockholders' equity                                             $1,028,609      589,733
------------------------------------------------------------------------------------------------------------------------




The accompanying notes are an integral part of these statements.
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     23


<TABLE>
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                       GARDNER DENVER, INC.

                                                     YEARS ENDED DECEMBER 31
                                                     (DOLLARS IN THOUSANDS)

<CAPTION>

                                                  Capital                           Accumulated
                                                 in Excess                             Other          Total
                                       Common     of Par      Treasury  Retained   Comprehensive   Stockholders'    Comprehensive
                                        Stock      Value        Stock   Earnings   Income (Loss)      Equity            Income
----------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>      <C>         <C>       <C>          <C>              <C>               <C>
Balance January 1, 2002                  $ 174    166,262     (25,602)   62,062       (4,168)         198,728
                                     ----------------------------------------------------------------------------

Stock issued for benefit plans and
  options                                    3      4,785                                               4,788
Treasury stock                                                   (217)                                   (217)
Net income                                                               19,602                        19,602           19,602
Foreign currency translation
  adjustments                                                                          8,482            8,482            8,482
Minimum pension liability
  adjustments, net of tax
  of $4,976                                                                           (8,460)          (8,460)          (8,460)
                                                                                                                   ---------------
                                                                                                                        19,624
                                     ----------------------------------------------------------------------------  ---------------
Balance December 31, 2002                $ 177    171,047     (25,819)   81,664       (4,146)         222,923
                                     ----------------------------------------------------------------------------

Stock issued for benefit plans and
  options                                    1      3,427                                               3,428
Treasury stock                                                   (128)                                   (128)
Net income                                                               20,643                        20,643           20,643
Foreign currency translation
  adjustments                                                                         15,734           15,734           15,734
Minimum pension liability
  adjustments, net of tax
  of $(1,678)                                                                          3,305            3,305            3,305
                                                                                                                   ---------------
                                                                                                                        39,682
                                     ----------------------------------------------------------------------------  ---------------
Balance December 31, 2003                $ 178    174,474     (25,947)  102,307       14,893          265,905
                                     ----------------------------------------------------------------------------

Stock offering                              35     79,522                                              79,557
Stock issued for benefit plans
  and options                                4      8,095                                               8,099
Treasury stock                                                   (500)                                   (500)
Net income                                                               37,123                        37,123           37,123
Foreign currency translation
  adjustments                                                                         15,712           15,712           15,712
Minimum pension liability
  adjustments, net of tax
  of $140
                                                                                        (420)            (420)            (420)
                                                                                                                   ---------------
                                                                                                                        52,415
                                     ----------------------------------------------------------------------------  ---------------
Balance December 31, 2004                $ 217    262,091     (26,447)  139,430       30,185          405,476
                                     ----------------------------------------------------------------------------


The accompanying notes are an integral part of these statements.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     24



<TABLE>
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                GARDNER DENVER, INC.

                                              YEARS ENDED DECEMBER 31
                                              (DOLLARS IN THOUSANDS)


<CAPTION>
                                                                              2004           2003            2002
-------------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>            <C>
  Cash flows from operating activities:
      Net income                                                          $  37,123         20,643          19,602
      Adjustments to reconcile net income to net cash provided by
       operating activities:
         Depreciation and amortization                                       21,901         14,566          14,139
         Unrealized foreign currency transaction gain, net                     (980)        (3,212)             --
         Net gain on asset dispositions                                         (40)          (370)            (20)
         LIFO liquidation income                                               (132)          (367)           (394)
         Stock issued for employee benefit plans                              3,239          2,434           2,342
         Deferred income taxes                                                  537          5,724           2,455
         Changes in assets and liabilities:
              Receivables                                                    (6,011)        (3,568)         13,321
              Inventories                                                    (1,745)         7,270          11,254
              Accounts payable and accrued liabilities                       20,526          4,095          (9,313)
              Other assets and liabilities, net                               2,334           (932)           (905)
-------------------------------------------------------------------------------------------------------------------
                 Net cash provided by operating activities                   76,752         46,283          52,481
-------------------------------------------------------------------------------------------------------------------

  Cash flows from investing activities:
        Business acquisitions, net of cash acquired                        (295,313)        (2,402)             --
        Capital expenditures                                                (19,550)       (11,950)        (13,641)
        Disposals of property, plant and equipment                              557          1,959             200
        Foreign currency hedging transactions                                (1,258)            --              (5)
        Other                                                                    --           (516)             --
-------------------------------------------------------------------------------------------------------------------
                 Net cash used in investing activities                     (315,564)       (12,909)        (13,446)
-------------------------------------------------------------------------------------------------------------------

  Cash flows from financing activities:
        Principal payments on short-term borrowings                          (3,648)            --              --
        Proceeds from short-term borrowings                                     327             --              --
        Principal payments on long-term debt                               (274,470)       (59,532)       (109,442)
        Proceeds from long-term debt                                        362,533        122,000          62,000
        Proceeds from issuance of common stock                               79,557             --              --
        Proceeds from stock options                                           4,860            993           2,446
        Purchase of treasury stock                                             (500)          (128)           (217)
        Debt issuance costs                                                  (1,847)          (302)           (754)
-------------------------------------------------------------------------------------------------------------------
                 Net cash provided by (used in) financing activities        166,812         63,031         (45,967)
-------------------------------------------------------------------------------------------------------------------

  Effect of exchange rate changes on cash and equivalents                     3,798         10,731           2,619
-------------------------------------------------------------------------------------------------------------------

  (Decrease) increase in cash and equivalents                               (68,202)       107,136          (4,313)
  Cash and equivalents, beginning of year                                   132,803         25,667          29,980
-------------------------------------------------------------------------------------------------------------------
  Cash and equivalents, end of year                                       $  64,601        132,803          25,667
-------------------------------------------------------------------------------------------------------------------


  The accompanying notes are an integral part of these statements.
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     25


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GARDNER DENVER, INC.
(Dollars in thousands except per share amounts or amounts described in millions)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements reflect the operations of
Gardner Denver, Inc. ("Gardner Denver" or the "Company") and its
subsidiaries. Certain prior year amounts have been reclassified to conform
with current year presentation.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States ("GAAP") requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from these estimates.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the Company's foreign operations are translated at
the exchange rate in effect at the balance sheet date, while revenues and
expenses are translated at average rates prevailing during the year.
Translation adjustments are reported in accumulated other comprehensive
income, a separate component of stockholders' equity.

REVENUE RECOGNITION

The Company recognizes product revenue when the products are shipped and
title passes to the customer and collection is reasonably assured. Service
revenue is recognized when services are performed and earned and collection
is reasonably assured.

CASH EQUIVALENTS

Cash equivalents are highly liquid investments (valued at cost, which
approximates fair value) acquired with an original maturity of three months
or less. As of December 31, 2003, (pound)62.4 million ($111.4 million) in
cash was deposited on account to acquire the shares of Syltone (See Note 2).
These funds were restricted for such use until the acquisition was
consummated. As of December 31, 2004, cash of $5.3 million was pledged to
financial institutions as collateral to support the issuance of standby
letters of credit and similar instruments on behalf of the Company and its
subsidiaries.

INVENTORIES

Inventories, which consist of materials, labor and manufacturing overhead,
are carried at the lower of cost or market value. As of December 31, 2004,
$97.5 million (70%) of the Company's inventory is accounted for on a
first-in, first-out (FIFO) basis, with the remaining $40.9 million (30%)
accounted for on a last-in, first-out (LIFO) basis.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
assets: buildings - 10 to 45 years; machinery and equipment - 10 to 12
years; office furniture and equipment - 3 to 10 years; and tooling, dies,
patterns, etc. - 3 to 7 years.

GOODWILL AND OTHER INTANGIBLES

The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 141 "Business Combinations." Among other things, this standard requires
that intangible assets acquired in a business combination be recognized (at
fair value) apart from goodwill if they meet one of two criteria - the
contractual-legal criterion or the separability criterion. The Company has
also adopted SFAS No. 142 "Goodwill and Other Intangible Assets." Under the
provisions of this standard, intangible assets deemed to have indefinite
lives and goodwill are not subject to amortization. All other intangible
assets are amortized over their estimated useful

                                     26


lives. Goodwill and other intangible assets not subject to amortization are
tested for impairment annually, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. This testing
requires comparison of carrying values to fair values, and when appropriate,
the carrying value of impaired assets is reduced to fair value.

The Company uses the straight-line method to amortize intangible assets
(subject to amortization) over their estimated useful lives, generally 5 to
20 years. During the second quarter of 2004, the Company completed its
annual impairment test and determined that no impairment existed.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED

Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net undiscounted cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed are reported at the lower of the carrying amount or
fair value, less costs to dispose.

PRODUCT WARRANTY

The Company's product warranty liability is calculated based primarily upon
historical warranty claims experience. Management also factors into the
product warranty accrual any specific warranty issues identified during the
period which are expected to impact future periods and may not be consistent
with historical claims experience. Product warranty accruals are reviewed
regularly by management and adjusted from time to time when actual warranty
claims experience differs from that estimated.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension and other postretirement benefit obligations and expense (or income)
are dependent on assumptions used in calculating such amounts. These
assumptions include the discount rate, rate of compensation increases,
expected return on plan assets and expected healthcare trend rates. In
accordance with GAAP, actual results that differ from the assumptions are
accumulated and amortized over future periods.

INCOME TAXES

The Company has determined tax expense and other deferred tax information
based on the liability method. Deferred income taxes are provided to reflect
temporary differences between financial and tax reporting.

RESEARCH AND DEVELOPMENT

Costs for research and development are expensed as incurred and were $6,186,
$2,808 and $2,398 for the years ended December 31, 2004, 2003 and 2002,
respectively.

FINANCIAL INSTRUMENTS

All derivative instruments are reported on the balance sheet at fair value.
For each derivative instrument designated as a cash flow hedge, the gain or
loss on the derivative is deferred in accumulated other comprehensive income
until recognized in earnings with the underlying hedged item. For each
derivative instrument designated as a fair value hedge, the gain or loss on
the derivative instrument and the offsetting gain or loss on the hedged item
are recognized immediately in earnings. Currency fluctuations on non-U.S.
dollar borrowings that have been designated as hedges on the Company's
investment in a foreign subsidiary are included in other comprehensive
income.

STOCK-BASED COMPENSATION

As allowed under SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company measures its compensation cost of equity instruments issued
under employee compensation plans using the intrinsic value method in
accordance with Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees," and related interpretations. In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation Transition and Disclosure, an Amendment to SFAS No. 123," to
require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Under
APB No. 25, no compensation cost was recognized for the Company's stock
option plans. Had compensation cost for the Company's stock option plans
been determined based

                                     27


on the fair value at the grant date for awards outstanding during 2004, 2003
and 2002 consistent with the provisions of this Statement, the Company's net
income and earnings per share would have been as shown in the table below:

<TABLE>
<CAPTION>
                                                                            2004       2003        2002
--------------------------------------------------------------------------------------------------------
<S>                                                                      <C>         <C>         <C>
Net income, as reported                                                  $37,123     20,643      19,602
Less: Total stock-based employee compensation expense determined
  under fair value method, net of related tax effects                     (1,359)    (1,252)     (1,274)
--------------------------------------------------------------------------------------------------------
Pro forma net income                                                     $35,764     19,391      18,328
--------------------------------------------------------------------------------------------------------

Earnings per share:
Basic earnings per share, as reported                                    $  1.96       1.29        1.24
Basic earnings per share, pro forma                                      $  1.89       1.21        1.16

Diluted earnings per share, as reported                                  $  1.92       1.27        1.22
Diluted earnings per share, pro forma                                    $  1.85       1.19        1.14
--------------------------------------------------------------------------------------------------------
</TABLE>

Compensation costs charged against income (net of tax) for restricted stock
issued under the Company's Incentive Plan totaled $0.2 million in 2003.
There were no restricted stock awards in 2004 or in 2002.

COMPREHENSIVE INCOME

Items impacting the Company's comprehensive income, but not included in net
income, consist of translation adjustments, including realized and
unrealized gains and losses (net of income taxes) on the foreign currency
hedge of the Company's investment in a foreign subsidiary, fair market value
adjustments of interest rate swaps and additional minimum pension liability
(net of income taxes). See Note 8 for further discussion of additional
minimum pension liability adjustments.

NEW ACCOUNTING STANDARDS

In May 2004, the FASB issued Staff Position No. FAS 106-2, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003," ("FAS 106-2"). FAS 106-2
supersedes Staff Position No. FAS 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003," and provides guidance on the accounting,
disclosure, effective date and transition related to the Prescription Drug
Act. FAS 106-2 was effective for the third quarter of 2004. According to an
actuarial assessment, the Company currently provides prescription drug
benefits, which are actuarially equivalent to the Medicare prescription drug
benefit, to certain retired and other employees and will therefore qualify
for the subsidy. As a result, the Company accounted for the federal subsidy
attributable to past services as an actuarial gain, which reduced the
accumulated post-retirement benefit obligation. This actuarial gain is then
amortized in future periods in accordance with SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The federal
subsidy attributable to employee service rendered in current and future
periods will reduce future net periodic postretirement benefit cost as those
employees provide service. The Company has adopted FAS 106-2 resulting in a
favorable impact to diluted earnings per share of $0.01 in 2004. The
favorable impact to diluted earnings per share in 2005 is expected to be
$0.02.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an
amendment to ARB No. 43, Chapter 4." This statement amends previous guidance
and requires expensing for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). In addition, the
statement requires that allocation of fixed production overheads to
inventory be based on the normal capacity of production facilities. SFAS No.
151 is effective for inventory costs incurred during annual periods
beginning after June 15, 2005. The Company is currently evaluating the
impact of SFAS No. 151 on its future consolidated financial statements.

In December 2004, the FASB issued a revision to SFAS No. 123, "Accounting
for Stock-Based Compensation," SFAS No. 123-R, "Share-Based Payment." SFAS
No. 123-R focuses primarily on transactions in which an entity exchanges its
equity instruments for employee services and generally establishes standards
for the accounting for transactions in which an entity obtains goods or
services in share-based payment transactions. The Company will adopt SFAS
No. 123-R in the third quarter of fiscal 2005 and currently expects an
unfavorable impact on diluted earnings per share of approximately $0.03 to
$0.05, in the second half of 2005.

In December 2004, the FASB issued Staff Position No. FAS 109-1, "Application
of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction
on Qualified Production Activities Provided by the American Jobs Creation
Act of 2004," ("FAS 109-1"), and Staff Position No. FAS 109-2, "Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Jobs Creation Act of 2004," ("FAS 109-2"). FAS 109-1
requires that companies who qualify for the recent tax law's deduction for
domestic production activities to account for it as a special deduction
under Statement No. 109 and reduce their tax expense in the period or
periods the amounts are deductible on the tax return. FAS 109-2 allows
companies additional time to evaluate whether foreign earnings will be
repatriated under the repatriation provisions of the new tax law and
requires specific disclosures for companies needing additional time to
complete the evaluation. Both staff positions are effective immediately and
the required income tax disclosures have been included in Note 10.

                                     28


NOTE 2:  ACQUISITIONS

On September 1, 2004, the Company acquired nash_elmo Holdings, LLC ("Nash
Elmo"). Nash Elmo is a leading global manufacturer of industrial vacuum
pumps and is primarily split between two businesses, liquid ring pumps and
side channel blowers. Both businesses' products are complementary to the
Compressor and Vacuum Products segment's existing product portfolio. The
purchase price of $224.6 million, including assumed bank debt (net of cash
acquired) and direct acquisition costs, was paid in cash and the assumption
of certain of Nash Elmo's debt ($10.4 million). There are no additional
contingent payments or commitments related to this acquisition.

This acquisition has been accounted for by the purchase method and,
accordingly, its results are included in the Company's consolidated
financial statements from the date of acquisition. The purchase price
(including direct acquisition costs) has been allocated primarily to
receivables ($35,629); inventory ($47,749); property, plant and equipment
($34,461); intangible assets ($170,893); other assets ($6,880); accounts
payable and accrued liabilities ($48,985); net deferred income tax
liabilities ($18,515) and other long-term liabilities ($3,547), based on
their estimated fair values on the date of acquisition. This allocation
reflects the Company's preliminary estimates of the purchase price
allocation and is subject to change upon completion of appraisals in 2005.
Further, other assets and liabilities may be identified to which a portion
of the purchase price could be allocated.

The following table summarizes the preliminary fair values of the intangible
assets acquired in the Nash Elmo acquisition:

------------------------------------------------------------------------
Amortized intangible assets:
           Customer lists and relationships                    $ 44,000
           Other                                                  7,245
Unamortized intangible assets:
           Goodwill                                              91,648
           Tradenames                                            28,000
------------------------------------------------------------------------
Total intangible assets                                        $170,893
------------------------------------------------------------------------

The preliminary weighted average amortization period for customer lists and
relationships and other amortized intangible assets is 20 years and 5 years,
respectively. The total amount of goodwill that is expected to be deductible
for tax purposes is approximately $10 to $15 million. The assignment of
goodwill has been allocated to the Compressor and Vacuum Products segment.

On January 2, 2004, the Company acquired the outstanding shares of Syltone
plc ("Syltone"), previously a publicly traded company listed on the London
Stock Exchange. Syltone, previously headquartered in Bradford, United
Kingdom ("U.K."), is one of the world's largest manufacturers of equipment
used for loading and unloading liquid and dry bulk products on commercial
transportation vehicles. This equipment includes compressors, blowers and
other ancillary products that are complementary to the Company's product
lines. Syltone is also one of the world's largest manufacturers of fluid
transfer equipment (including loading arms, swivel joints, couplers and
valves) used to load and unload ships, tank trucks and rail cars. The
purchase price of (pound)63.0 million (or approximately $112.5 million),
including assumed bank debt (net of cash acquired) and direct acquisition
costs, was paid in the form of cash ((pound)46.3 million), new loan notes
((pound)5.2 million) and the assumption of Syltone's existing bank debt, net
of cash acquired ((pound)11.5 million). There are no additional contingent
payments or commitments related to this acquisition.

This acquisition has been accounted for by the purchase method, and
accordingly, its results are included in the Company's consolidated
financial statements from the date of acquisition. The purchase price has
been allocated primarily to receivables ($30,382); inventory ($20,554);
property, plant and equipment ($33,488); intangible assets ($90,160);
accounts payable and accrued liabilities ($40,581); net deferred income tax
liabilities ($1,796) and other long-term liabilities ($19,658), based on
their estimated fair values on the date of acquisition.

The following table summarizes the fair values of the intangible assets
acquired in the Syltone acquisition:

-----------------------------------------------------------------------
Amortized intangible assets:
      Customer lists and relationships                         $ 8,000
      Other                                                      4,867
Unamortized intangible assets:
      Goodwill                                                  68,803
      Tradenames                                                 8,490
-----------------------------------------------------------------------
Total intangible assets                                        $90,160
-----------------------------------------------------------------------

The weighted average amortization period for customer lists and
relationships and other amortized intangible assets is 20 years and 5 years,
respectively. The total amount of goodwill that is expected to be deductible
for tax purposes is not anticipated to be significant, given the stock
nature of the acquisition. The assignment of goodwill has been allocated to
the Compressor and Vacuum Products segment ($57,194) and the Fluid Transfer
Products segment ($11,609). See Note 14 for additional segment information.

                                     29


The following table summarizes the unaudited supplemental pro forma
information as if the Nash Elmo and Syltone acquisitions had been completed
on January 1, 2003 (this unaudited information is subject to change upon
finalization of the purchase price allocation of Nash Elmo):

<TABLE>
<CAPTION>
                                                                Unaudited
------------------------------------------------------------------------------------
                                                             2004             2003
------------------------------------------------------------------------------------

<S>                                                      <C>               <C>
Revenues                                                 $895,856          790,696
Net Income                                                 43,043           20,356
Diluted earnings per share                               $   2.22             1.25
------------------------------------------------------------------------------------
</TABLE>

The 2003 pro forma net income reflects the negative impact of a one-time
adjustment on cost of sales of approximately $3.6 million stemming from
recording Syltone's and Nash Elmo's inventory at fair value.

In August 2003, the Company paid $2.4 million to acquire certain assets and
assume certain liabilities of a small machine shop operation in Odessa,
Texas. This operation services and repairs well stimulation and drilling
pumps serving the Permian Basin and thus, its financial results were
included in the Fluid Transfer Products segment from the date of
acquisition. There are no additional contingent payments or commitments
related to this acquisition. The amounts assigned to goodwill and other
intangible assets were inconsequential.

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.

NOTE 3: INVENTORIES

<TABLE>
<CAPTION>
                                                                  2004            2003
---------------------------------------------------------------------------------------
<S>                                                           <C>               <C>
Raw materials, including parts and subassemblies              $ 62,477          34,992
Work-in-process                                                 23,405           8,506
Finished goods                                                  57,321          25,362
---------------------------------------------------------------------------------------
                                                               143,203          68,860
Excess of FIFO costs over LIFO costs                            (4,817)         (4,533)
---------------------------------------------------------------------------------------
   Inventories, net                                           $138,386          64,327
---------------------------------------------------------------------------------------
</TABLE>

During 2004, 2003 and 2002, reductions in inventory quantities (net of
acquisitions) resulted in liquidations of LIFO inventory layers carried at
lower costs prevailing in prior years. The effect was to increase net income
in 2004, 2003 and 2002 by $94, $249 and $268, respectively. It is the
Company's policy to record the earnings effect of LIFO inventory
liquidations in the quarter which a decrease for the entire year becomes
certain. In each of the years 2002 through 2004, the LIFO liquidation income
was recorded in the fourth quarter. The Company believes that FIFO costs in
the aggregate approximates replacement or current cost and thus the excess
of replacement or current cost over LIFO value was $4.8 million and $4.5
million as of December 31, 2004 and 2003, respectively.

NOTE 4:  PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                   2004           2003
---------------------------------------------------------------------------------------
<S>                                                            <C>            <C>
Land and land improvements                                     $ 15,304          8,710
Buildings                                                        75,482         41,727
Machinery and equipment                                         141,130        114,594
Tooling, dies, patterns, etc.                                    23,516         13,884
Office furniture and equipment                                   22,715         14,574
Other                                                            10,242          6,780
Construction in progress                                          4,664          2,612
---------------------------------------------------------------------------------------
                                                                293,053        202,881
Accumulated depreciation                                       (144,234)      (127,453)
---------------------------------------------------------------------------------------
   Property, plant and equipment, net                          $148,819         75,428
---------------------------------------------------------------------------------------
</TABLE>

NOTE 5:  GOODWILL AND OTHER INTANGIBLE ASSETS

As discussed in Note 1, the Company has adopted SFAS No. 142. This statement
required, among other things, the discontinuation of goodwill amortization,
assignment of goodwill to reporting units, and completion of a transitional
goodwill impairment test. Substantially all goodwill was assigned to the
reporting unit that acquired the business. Under the impairment test, if a
reporting unit's carrying amount exceeds its estimated fair value, a
goodwill impairment is recognized to the extent that the reporting unit's
carrying amount of goodwill exceeds the implied fair value of the goodwill.
The fair value of each reporting unit was estimated using discounted cash
flows and market multiples. During the second quarter of 2004, the Company
completed its annual impairment test and determined that no impairment
existed.

                                     30

The changes in the carrying amount of goodwill attributable to each business
segment for the years ended December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                            Fluid
                                                    Compressor &         Transfer
                                                 Vacuum Products         Products           Total
--------------------------------------------------------------------------------------------------
<S>                                                     <C>                <C>            <C>
Balance as of January 1, 2003                           $176,230           25,531         201,761
Acquisitions                                                  --              103             103
Foreign currency translation                               3,624               --           3,624
--------------------------------------------------------------------------------------------------
Balance as of December 31, 2003                          179,854           25,634         205,488
Acquisitions                                             148,842           11,609         160,451
Foreign currency translation                               7,379              841           8,220
--------------------------------------------------------------------------------------------------
Balance as of December 31, 2004                         $336,075           38,084         374,159
--------------------------------------------------------------------------------------------------
</TABLE>

Other intangible assets at December 31, 2004 and 2003 consisted of the
following:

<TABLE>
<CAPTION>
                                                     December 31, 2004                 December 31, 2003
                                              -------------------------------------------------------------------
                                               Gross Carrying    Accumulated    Gross Carrying      Accumulated
                                                       Amount   Amortization            Amount     Amortization
-----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>                <C>             <C>
Amortized intangible assets:
   Customer lists and relationships                  $ 53,855         (2,153)            1,295             (927)
   Acquired technology                                 19,218         (9,732)           13,312           (8,002)
   Other                                               11,352         (2,508)            2,943           (1,337)
Unamortized intangible assets:
   Trademarks                                          40,141             --             3,057               --
-----------------------------------------------------------------------------------------------------------------
      Total other intangible assets                  $124,566        (14,393)           20,607          (10,266)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Amortization of intangible assets was $4.4 million and $1.4 million in 2004
and 2003, respectively. Amortization of intangible assets is anticipated to
be approximately $7.0 million per year for 2005 through 2009 based upon
intangible assets with finite useful lives included in the balance sheet as
of December 31, 2004.

NOTE 6:  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                                            2004          2003
-----------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>
Accounts payable-trade                                                  $ 81,977        39,691
Salaries, wages and related fringe benefits                               39,251        14,661
Taxes                                                                     12,860         3,422
Advance payments on sales contracts                                       11,600         1,000
Product warranty                                                          10,671         6,635
Product liability, workers' compensation and insurance                     8,030         5,046
Other                                                                     41,680        13,626
-----------------------------------------------------------------------------------------------
   Total accounts payable and accrued liabilities                       $206,069        84,081
-----------------------------------------------------------------------------------------------
</TABLE>

A reconciliation of the changes in the accrued product warranty liability for
the years ended December 31, 2004, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                                       2004          2003        2002
-------------------------------------------------------------------------------------------------------
<S>                                                                 <C>            <C>         <C>
Balance as of January 1                                             $ 6,635         7,060       7,578
Product warranty accruals                                             7,476         5,420       5,281
Settlements                                                          (7,611)       (6,171)     (6,126)
Other (primarily acquisitions and foreign currency translation)       4,171           326         327
-------------------------------------------------------------------------------------------------------
Balance as of December 31                                           $10,671         6,635       7,060
-------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 7: DEBT

<TABLE>
<CAPTION>
                                                                       2004          2003
--------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>
SHORT-TERM DEBT:
  Revolving Loans, due 2005 (1)                                    $ 10,898            --
  Other                                                               1,729            --
--------------------------------------------------------------------------------------------
Total short-term debt                                              $ 12,627            --
--------------------------------------------------------------------------------------------

LONG-TERM DEBT:
  Credit Line, due 2009 (2)                                        $113,635       114,000
  Term Loan, due 2009 (3)                                           148,125        45,625
  Secured Mortgages at 4.6%, due 2022 (4)                            10,362            --
  Unsecured Senior Note at 7.3%, due 2006                            10,000        15,000
  Variable Rate Industrial Revenue Bonds, due 2018 (5)                8,000         8,000
  Term Loans, due 2007 (6)                                            6,001            --
  Other                                                               4,455             6
--------------------------------------------------------------------------------------------
Total long-term debt including current maturities                   300,578       182,631
Current maturities of long-term debt                                 20,322        16,875
--------------------------------------------------------------------------------------------
Long-term debt, less current maturities                            $280,256       165,756
--------------------------------------------------------------------------------------------

                                     31


<FN>
(1)  This amount consists of three loan agreements with similar terms
     assumed in the 2004 acquisition of Syltone. The loans are Euro
     denominated and had an outstanding balance of (euro)8,046 at
     December 31, 2004. At December 31, 2004 the rate on this debt was
     2.9% and averaged 3.0% for the year ended December 31, 2004.

(2)  The loans under this facility may be denominated in U.S. dollars or
     several foreign currencies. At December 31, 2004, the outstanding
     balance consisted of U.S. dollar borrowings of $73,000 and Euro
     borrowings of (euro)30,000. The interest rates under the facility
     are based on prime, federal funds and/or LIBOR for the applicable
     currency and were 4.2% and 4.0% as of December 31, 2004 for the
     U.S. dollar and Euro loans, respectively. The rates averaged 3.6%
     and 4.0% for the year ended December 31, 2004 for the U.S. dollar
     and Euro loans, respectively.

(3)  The interest rate varies with prime, federal funds and/or LIBOR. As
     of December 31, 2004, this rate was 4.1% and averaged 3.5% for the
     year ended December 31, 2004.

(4)  This amount consists of two commercial bank loans assumed in the
     2004 acquisition of Nash Elmo with an outstanding balance of
     (euro)7,650 at December 31, 2004. The loans are secured by the
     Company's facility in Bad Neustadt, Germany and are net of
     unamortized discount of (euro)270.

(5)  The interest rate varies with market rates for tax-exempt
     industrial revenue bonds. As of December 31, 2004, this rate was
     2.1% and averaged 1.3% for the year ended December 31, 2004.

(6)  This amount consists of two loan agreements with similar terms
     assumed in the 2004 acquisition of Syltone. The loans are
     denominated in British pounds and had an outstanding balance of
     (pound)3,133 at December 31, 2004. At December 31, 2004 the rate on
     this debt was 3.1% and averaged 3.1% for the year ended December 31,
     2004.
</TABLE>

On January 20, 1998, the Company entered into a Revolving Line of Credit
Agreement (the "Credit Agreement") with an aggregate $125,000 borrowing
capacity and terminated a previous agreement. On March 6, 2002, the Company
amended and restated its Credit Agreement, increasing the aggregate
borrowing capacity to $150,000 and extending the maturity date to March 6,
2005. On September 1, 2004, the Company amended and restated the Credit
Agreement once again, increasing the borrowing capacity to $375,000. This
latter amended and restated Credit Agreement provided the Company with
access to senior secured credit facilities including a $150,000 five-year
Term Loan and a $225,000 five-year Revolving Line of Credit (the "Credit
Line"). Proceeds from the Credit Agreement were used to fund the Nash Elmo
acquisition and retire debt outstanding under its previously existing Credit
Line and Term Loan.

The Credit Line has a borrowing capacity of $225,000 and the total debt
balance is due upon final maturity on September 1, 2009. On December 31,
2004, the Credit Line had an outstanding principal balance of $113,635,
leaving $111,365 available for letters of credit or future use, subject to
the terms of the Credit Line.

The $150,000 Term Loan has a final maturity of September 1, 2009. The Term
Loan requires principal payments totaling $7,500, $15,000, $22,500, $37,500
and $67,500 in years one through five, respectively. Other terms and
conditions of the Term Loan are similar to those of the Credit Line.

In September 1996, the Company obtained fixed rate financing by entering
into an unsecured senior note agreement for $35,000. This note has a
ten-year final, seven-year average maturity, with principal payments that
began in 2000.

On April 23, 1998, the Fayette County Development Authority issued $9,500 in
industrial revenue bonds, on behalf of the Company, to finance the cost of
constructing and equipping a new manufacturing facility in Peachtree City,
Georgia. On July 2, 2001, the Company prepaid $1,500 of principal from
unused funds. The remaining principal for these industrial revenue bonds is
to be repaid in full on March 1, 2018. These industrial revenue bonds are
secured by an $8,100 letter of credit.

The Company's borrowing arrangements permit certain investments and dividend
payments and are generally unsecured with the exception of the Credit
Agreement, which requires the pledge of the stock of certain wholly-owned
subsidiaries, and a security interest in the Company's manufacturing
facility in Bad Neustadt, Germany. There are no material restrictions on the
Company as a result of its credit arrangements, other than customary
covenants regarding certain earnings, liquidity and capital ratios.

Debt maturities for the five years subsequent to December 31, 2004 and
thereafter, are $32,949, $26,022, $28,068, $45,618, $164,878 and $16,036,
respectively.

Cash paid for interest in 2004, 2003 and 2002 was $7,817, $4,498 and $6,263,
respectively.

The rentals for all operating leases were $7,814, $3,818, and $3,357 in
2004, 2003 and 2002, respectively. Future minimum rental payments for
operating leases for the five years subsequent to December 31, 2004 and
thereafter are $9,608, $7,252, $5,409, $4,305, $2,000 and $9,659,
respectively.

NOTE 8:  PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors retirement plans covering substantially all worldwide
employees. Benefits are provided to employees under defined benefit
pay-related and service-related plans, which are generally noncontributory
in the U.S. and Germany and are generally contributory in the U.K. Annual
Company contributions to U.S. retirement plans equal or exceed the minimum
funding requirements of the Employee Retirement Income Security Act of 1974.
The retirement plans covering the employees of the Company's operation in
Schopfheim, Germany are unfunded and the full amount of the pension benefit
obligation is included as an accrued benefit liability on the Consolidated
Balance Sheets.

                                     32


With regard to the 2001 Belliss & Morcom acquisition, the majority of the
employees are based in the U.K. and are provided retirement benefits under a
contributory defined benefit pay and service-related plan. Under the
Company's purchase agreement, these employees were allowed to continue to
participate in the seller's benefit plan for a period of up to one year from
the acquisition date. Within this one-year timeframe, the Company
established a similar retirement plan arrangement allowing employees the
option of transferring their accumulated benefit. The purchase agreement
also required the transfer from the seller's plan of plan assets in excess
of the transferred accumulated benefit obligation. As of December 31, 2002,
the Company had not received this transfer and thus an estimate of this
receivable was included in the reconciliation of fair value of plan assets
table presented below. During 2003, the Company settled this receivable
resulting in adjustments to the benefit obligation and fair value of plan
assets for non-U.S. pension plans. These adjustments are included on the
"acquisitions" line in the reconciliation table below. Participation in this
plan was frozen as of January 1, 2004. Employees hired after that date
participate in a contributory defined contribution plan.

With regard to the 2004 Syltone acquisition, the majority of the employees
are based in the U.K. and Germany. In the U.K., the majority of these
employees are provided benefits under a contributory defined benefit pay and
service-related plan. Participation in this plan was frozen as of July 1,
2003. Employees hired after that date participate in a contributory defined
contribution plan. In Germany, with regard to employees of the Syltone
acquisition, employees are provided benefits under either a non-contributory
defined benefit pay and service-related plan or under a contributory defined
contribution plan.

With regard to the Nash Elmo 2004 acquisition, the majority of the employees
are based in the U.S. and Germany. In the U.S., employees are provided
benefits under both a non-contributory defined contribution plan and under
another defined contribution plan with no Company contributions. In Germany,
certain employees are covered by a non-contributory defined benefit pay and
service related plan. Employees hired after October 2000, are covered by a
non-contributory defined contribution plan.

Due to the significant declines in the financial markets, the fair value of
the plan assets of certain of the Company's funded defined benefit pension
plans was less than their accumulated benefit obligation at December 31,
2002. As a result, the Company recorded a non-cash charge to stockholders'
equity (accumulated other comprehensive loss) in the amount of $8.5 million
(net of income taxes of $5.0 million) in the fourth quarter of 2002. During
2003, the financial markets and the assets of the Company's funded benefit
pension plans experienced significant gains. As a result, the Company
recorded a credit to accumulated other comprehensive income of $3.3 million
(net of income taxes of $1.7 million) to reduce its additional minimum
pension liability. During 2004, the Company's recorded an additional
non-cash charge to accumulated other comprehensive income of $0.4 million
(net of income taxes of $0.1 million) to increase the additional minimum
pension liability.

The Company also sponsors defined contribution plans. Benefits are
determined and funded annually based on terms of the plans or as stipulated
in a collective bargaining agreement. Certain of the Company's full-time
salaried and nonunion hourly employees in the U.S. are eligible to
participate in Company-sponsored defined contribution savings plans, which
are qualified plans under the requirements of Section 401(k) of the Internal
Revenue Code. The Company's matching contributions to the savings plans are
in the form of the Company's common stock.

The full-time salaried and hourly employees of the Company's operations in
Finland have pension benefits, which are guaranteed by the Finnish
government. Although the plans are similar to defined benefit plans, the
guarantee feature of the government causes the substance of the plans to be
defined contribution. Therefore, the discounted future liability of these
plans is not included in the liability for defined benefit plans, but the
expense for the Company's contribution is included in the pension benefit
cost for defined contribution plans.

Certain salaried employees in the U.S. who retired prior to 1989, as well as
certain other employees who were near retirement and elected to receive
certain benefits and certain Nash Elmo employees, have retiree medical,
prescription and life insurance benefits. In most cases, the Nash Elmo
retirees pay the entire cost of their coverage. No other active salaried
employees have postretirement medical benefits. The hourly employees have
separate plans with varying benefit formulas. In all cases, however, no
currently active hourly employee, except for certain employees who are near
retirement, will receive healthcare benefits after retirement. All of the
Company's postretirement medical plans are unfunded.

                                     33


The following tables provide a reconciliation of the changes in both the
pension and other postretirement plans benefit obligations and fair value of
assets over the two-year period ended December 31, 2004, and a statement of
the funded status as of December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                               Pension Benefits
                                                     ----------------------------------------              Other
                                                         U.S. Plans          Non-U.S. Plans        Postretirement Benefits
                                                     -------------------   ------------------      -----------------------
                                                         2004     2003         2004     2003           2004         2003
  -------------------------------------------------------------------------------------------      -----------------------
<S>                                                  <C>       <C>         <C>       <C>           <C>           <C>
  RECONCILIATION OF BENEFIT OBLIGATION
  Obligation as of January 1                         $ 58,531   55,633     $ 33,388   26,541       $ 27,664       28,391
  Service cost                                          2,119    1,988        4,187    1,528             16           12
  Interest cost                                         3,356    3,430        6,413    1,416          1,649        1,685
  Actuarial loss (gain)                                 1,129    2,156        1,248    3,617         (1,804)         139
  Employee contributions                                   --       --        1,065      415             --           --
  Benefit payments                                     (4,466)  (4,676)      (2,464)    (920)        (2,617)      (2,563)
  Acquisitions                                             --       --       98,652   (2,667)           585           --
  Effect of foreign currency exchange rate changes         --       --        7,994    3,458             --           --
  -------------------------------------------------------------------------------------------     ------------------------
       Obligation as of December 31                  $ 60,669   58,531     $150,483   33,388       $ 25,493       27,664
  -------------------------------------------------------------------------------------------     ------------------------

  RECONCILIATION OF FAIR VALUE OF PLAN ASSETS
  Fair value of plan assets as of January 1          $ 44,305   40,539     $ 23,059   18,358
  Actual return on plan assets                          4,733    7,304        8,270    3,891
  Acquisitions                                             --       --       76,015     (996)
  Employer contributions                                3,201    1,138        3,394      102
  Employee contributions                                   --       --        1,065      415
  Benefit payments                                     (4,466)  (4,676)      (3,403)    (920)

  Effect of foreign currency exchange rate changes         --       --        5,994    2,209
  -------------------------------------------------------------------------------------------
       Fair value of plan assets as of December 31   $ 47,773   44,305     $114,394   23,059
  -------------------------------------------------------------------------------------------

  FUNDED STATUS
  Funded status as of December 31                    $(12,896) (14,226)    $(36,089) (10,329)      $(25,493)     (27,664)
  Unrecognized transition liability                         4        9           --       --            742           --
  Unrecognized prior-service cost                        (451)    (537)          --       --           (730)        (744)

  Unrecognized loss (gain)                              8,911    9,069        7,343    6,249         (7,723)      (6,082)
  -------------------------------------------------------------------------------------------     ------------------------
       Accrued benefit liability                     $ (4,432)  (5,685)    $(28,746)  (4,080)      $(33,204)     (34,490)
  -------------------------------------------------------------------------------------------     ------------------------
</TABLE>

The total pension and other postretirement accrued benefit liability is
included in the balance sheets in the following captions:

<TABLE>
<CAPTION>
                                                                                   2004               2003
-----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                 <C>
Deferred income taxes                                                          $  3,438              3,298
Accounts payable and accrued liabilities                                         (2,966)            (2,380)
Postretirement benefits other than pensions                                     (30,503)           (32,110)
Other liabilities                                                               (41,926)           (18,218)
Accumulated other comprehensive income                                            5,575              5,155
-----------------------------------------------------------------------------------------------------------
     Total pension and other postretirement accrued benefit liability          $(66,382)           (44,255)
-----------------------------------------------------------------------------------------------------------
</TABLE>

The aggregate accumulated benefit obligation and fair value of plan assets
for pension plans with accumulated benefit obligations in excess of plan
assets at December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                               ---------------------------------------
                                                  U.S. Plans         Non-U.S. Plans
                                               -----------------   -------------------
                                                  2004     2003        2004     2003
--------------------------------------------------------------------------------------
<S>                                            <C>       <C>       <C>         <C>
Accumulated benefit obligation                 $60,562   58,412    $119,094    4,360
Fair value of plan assets                      $47,773   44,305    $104,629       --
--------------------------------------------------------------------------------------
</TABLE>

The following table provides the components of net periodic benefit expense
(income) for the plans for the years ended December 31, 2004, 2003 and 2002:

<TABLE>
<CAPTION>
                                                           Pension Benefits
                                           --------------------------------------------------              Other
                                                   U.S. Plans             Non-U.S. Plans           Postretirement Benefits
                                           ------------------------ --------------------------   --------------------------
                                             2004     2003    2002     2004     2003     2002      2004      2003     2002
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>      <C>     <C>     <C>       <C>      <C>       <C>        <C>     <C>
Service cost                               $2,119    1,988   2,200  $ 4,187    1,529    1,288    $   16        12       17
Interest cost                               3,356    3,430   3,658    6,413    1,416    1,302     1,649     1,685    1,939
Expected return on plan assets             (3,701)  (3,269) (4,180)  (6,853)  (1,474)  (1,717)       --        --       --
Amortization of transition liability            5        5       8       --       --       --        25        --       --
Amortization of prior-service cost            (86)     (86)    (86)      --       --       --      (156)     (606)  (1,206)
Amortization of net loss (gain)               255      439       2      211      211        2      (559)     (958)    (829)
---------------------------------------------------------------------------------------------------------------------------
   Net periodic benefit expense (income)    1,948    2,507   1,602    3,958    1,682      875    $  975       133      (79)
---------------------------------------------------------------------------------------------------------------------------
Defined contribution plans                  3,021    2,548   2,576    1,677    1,378    1,281
-----------------------------------------------------------------------------------------------
   Total retirement expense                $4,969    5,055   4,178  $ 5,635    3,060    2,156
-----------------------------------------------------------------------------------------------
</TABLE>

                                     34

The following weighted average assumptions were used to determine the
benefit obligations and net periodic benefit expense (income) for pension
and other postretirement plans:

<TABLE>
<CAPTION>
                                                              Pension and Other Postretirement Benefits
                                                 --------------------------------------------------------------------
                                                             U.S. Plans                        Non-U.S. Plans
                                                 -------------------------------         ----------------------------
                                                     2004       2003        2002         2004         2003      2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>         <C>         <C>           <C>       <C>
Discount rate (1)                                    6.0%        6.3         6.8         5.4%          5.5       5.6
Rate of increase in compensation levels (2)          5.0%        5.0         5.0         3.4%          3.5       3.3
Expected long-term rate of return on assets (2)      9.0%        9.0         9.0         7.6%          8.3       8.0
---------------------------------------------------------------------------------------------------------------------

<FN>
   (1) Net periodic benefit expense (income) is determined by the previous
       year's discount rate
   (2) Applies only to pension plans
</TABLE>

For measurement purposes, the annual rate of increase in the per capita cost
of covered healthcare benefits assumed for 2004 was 8.4% for all
participants. The rates were assumed to decrease gradually each year to a
rate of 5.0% for 2010 and remain at that level thereafter.

Assumed healthcare cost trend rates have a significant effect on the amounts
reported for the postretirement medical plans. A one-percentage point change
in assumed healthcare cost trend rates would have the following effects:

<TABLE>
<CAPTION>
                                                                                  One-Percentage Point
                                                                                 Increase       Decrease
---------------------------------------------------------------------------------------------------------
<S>                                                                                <C>          <C>
Effect on total of service and interest cost components of net
  periodic other postretirement benefit cost - increase (decrease)                 9.1%         (8.0%)
Effect on the postretirement benefit obligation - increase (decrease)              8.5%         (7.5%)
---------------------------------------------------------------------------------------------------------
</TABLE>

The primary objectives for the investment of pension plan assets is to
secure participant retirement benefits and to minimize reliance on
contributions as a source of benefit security. Plan assets are invested
consistent with the provisions of prudence and diversification rules of
ERISA and with a long-term investment horizon. The expected return on plan
assets assumption is determined by reviewing the investment return of the
plans since inception and evaluating those returns in relation to
expectations of various investment organizations to determine whether
long-term future returns are expected to differ significantly from the past.
The Company's pension plan asset allocations at December 31, 2004 and 2003,
and target weighted-average allocations are as follows:


<TABLE>
<CAPTION>
                                        U.S. Plans                Non-U.S. Plans
                                 ------------------------  ---------------------------
                                                 Current                      Current
                                     2004   2003  Target       2004     2003   Target
--------------------------------------------------------------------------------------
<S>                                  <C>    <C>     <C>        <C>      <C>      <C>
Asset category:
Equity securities                     70%    69%     70%        65%      81%      73%
Debt securities                       28%    29%     30%        26%       9%      25%
Other                                  2%     2%      -          9%      10%       2%
--------------------------------------------------------------------------------------
 Total                               100%   100%    100%       100%     100%     100%
--------------------------------------------------------------------------------------
</TABLE>

The Company estimates that future benefit payments for the U.S. pension
plans will be as follows: $4,360 in 2005, $5,154 in 2006, $4,483 in 2007,
$4,778 in 2008, $4,848 in 2009 and $26,594 in total over the five years 2010
through 2014. Using foreign exchange rates as of December 31, 2004, the
Company estimates that future benefit payments for the non-U.S. pension
plans will be as follows: $2,845 in 2005, $3,103 in 2006, $3,530 in 2007,
$3,578 in 2008, $3,984 in 2009 and $27,215 in total over the five years 2010
through 2014. In 2005, the Company expects to contribute $2,436 to U.S.
pension plans and $5,050 to non-U.S. pension plans.

NOTE 9:  STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

At December 31, 2004 and 2003, 50,000,000 shares of $0.01 par value common
stock and 10,000,000 shares of $0.01 par value preferred stock were
authorized. Shares of common stock outstanding at December 31, 2004 and 2003
were 19,947,570 and 16,117,026, respectively. No shares of preferred stock
were issued or outstanding at December 31, 2004 or 2003. The shares of
preferred stock, which may be issued without further stockholder approval
(except as may be required by applicable law or stock exchange rules), may
be issued in one or more series, with the number of shares of each series
and the rights, preferences and limitations of each series to be determined
by the Board of Directors. The Company has a Stockholder's Rights Plan,
under which each share of Gardner Denver's outstanding common stock has an
associated preferred share purchase right. The rights are exercisable only
under certain circumstances and allow holders of such rights to purchase
common stock of Gardner Denver or an acquiring company at a discounted
price, which generally would be 50% of the respective stock's current fair
market value.

                                     35


The following table details the calculation of basic and diluted earnings
per share for the year ended December 31, 2004, 2003 and 2002:

<TABLE>
<CAPTION>
                                                  2004                           2003                           2002
                                      ----------------------------   ---------------------------    ---------------------------
                                                             Amt.                          Amt.                           Amt.
                                      Net       Wtd. Avg.    Per     Net       Wtd. Avg.   Per      Net       Wtd. Avg.   Per
                                      Income    Shares       Share   Income    Shares      Share    Income    Shares      Share
                                      -------   ----------   -----   -------   ----------  -----    -------   ----------  -----
<S>                                   <C>       <C>          <C>     <C>       <C>         <C>      <C>       <C>         <C>
BASIC EARNINGS PER SHARE:
  Income available to common
    stockholders                      $37,123   18,954,841   $1.96   $20,643   16,060,979  $1.29    $19,602   15,854,239  $1.24

DILUTED EARNINGS PER SHARE:
  Effect of dilutive securities:
    Stock options granted and
      outstanding                                  422,639                        251,189                        187,356
--------------------------------------------------------------------------------------------------------------------------------
    Income available to common
      stockholders and assumed
      conversions                     $37,123   19,377,480   $1.92   $20,643   16,312,168  $1.27    $19,602   16,041,595  $1.22
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 10:  INCOME TAXES

Income before income taxes consist of the following:

<TABLE>
<CAPTION>
                                                   2004        2003        2002
--------------------------------------------------------------------------------
<S>                                             <C>          <C>         <C>
U.S.                                            $26,934      23,913      22,216
Non-U.S.                                         25,352       6,445       6,611
--------------------------------------------------------------------------------
Income before income taxes                      $52,286      30,358      28,827
--------------------------------------------------------------------------------
</TABLE>

The following table details the components of the provision for income
taxes. A portion of these income taxes will be payable within one year and
are therefore classified as current, while the remaining balance is
deferred:

<TABLE>
<CAPTION>
                                                   2004        2003        2002
--------------------------------------------------------------------------------
<S>                                             <C>           <C>         <C>
Current:
  U.S. federal                                  $ 8,458       2,977       4,944
  U.S. state and local                              692         340         542
  Non-U.S.                                        6,584         611       1,229

Deferred:
  U.S. federal                                     (513)      4,753       2,253
  U.S. state and local                              (44)        543         257
  Non-U.S.                                          (14)        491          --
--------------------------------------------------------------------------------
Provision for income taxes                      $15,163       9,715       9,225
--------------------------------------------------------------------------------
</TABLE>

The U.S. federal corporate statutory rate is reconciled to the Company's
effective income tax rate as follows:

<TABLE>
<CAPTION>
                                                             2004        2003       2002
------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>        <C>
U.S. federal corporate statutory rate                        35.0%       35.0%      35.0%
State and local taxes, less federal tax benefit               1.2         2.6        2.5
Foreign income taxes                                         (4.4)         --         --
Export benefit                                               (2.5)       (3.0)      (2.8)
Other, net                                                   (0.3)       (2.6)      (2.7)
------------------------------------------------------------------------------------------
Effective income tax rate                                    29.0%       32.0%      32.0%
------------------------------------------------------------------------------------------
</TABLE>

The principal items that gave rise to deferred income tax assets and
liabilities follow:

<TABLE>
<CAPTION>
                                                                      2004           2003
------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>
Deferred tax assets:
  Reserves and accruals                                           $ 31,971         14,506
  Postretirement benefits other than pensions                       12,491         13,446
  Tax loss carryforwards                                             7,123             --
  Foreign tax credit carryforwards                                     852             --
  Other                                                              4,729          3,014
------------------------------------------------------------------------------------------
Total deferred tax assets                                         $ 57,166         30,966

Valuation allowance                                               $ (4,705)            --
------------------------------------------------------------------------------------------

Deferred tax liabilities:
  LIFO inventory                                                  $ (3,766)        (3,493)
  Property, plant and equipment                                    (10,395)        (7,763)
  Intangibles                                                      (42,248)        (7,698)
  Other                                                             (7,911)        (2,986)
------------------------------------------------------------------------------------------
Total deferred tax liabilities                                    $(64,320)       (21,940)
------------------------------------------------------------------------------------------
Net deferred income tax (liability) asset                         $(11,859)         9,026
------------------------------------------------------------------------------------------
</TABLE>
                                     36

As of December 31, 2004, Gardner Denver has net operating loss carry-
forwards from various jurisdictions of $24.7 million that result in a
deferred tax asset of $7.1 million. It is more likely than not that a
portion of these tax loss carry-forwards will not produce future benefits
and a valuation allowance of $4.7 million has been established with respect
to these losses. The expected expiration dates of the tax loss carryforwards
are as follows; < 5 years, $5.6 million, 5 to 10 years, $0, 10 to 20 years,
$4.6 million and $14.5 million have no expiration date. The reversal of the
valuation allowance will reduce goodwill. In addition, the Company has a
U.S. foreign tax credit carryforward of $0.9 million that expires in 5 to 10
years.

U.S. deferred income taxes are not provided on certain undistributed
earnings of non-U.S. subsidiaries (approximately $54 million at December 31,
2004) because the Company intends to reinvest such earnings indefinitely or
distribute them only when available foreign tax credits could significantly
reduce the amount of U.S. taxes due on such distributions.

During the year, the Company recorded an income tax benefit related to
favorable audit settlements in Finland and the U.S. of $1.4 million and $0.2
million, respectively.

On October 22, 2004, the American Jobs Creation Act (the "AJCA") was signed
into law. The AJCA includes a deduction of 85% of certain foreign earnings
that are repatriated, as defined in the AJCA. The Company may elect to apply
this provision to qualifying earnings repatriations made either after the
date of enactment in calendar year 2004 or throughout calendar year 2005.
During calendar 2004, the Company did not repatriate any qualified earnings
pursuant to the AJCA. However, the Company determined that approximately
$16.6 million of existing foreign earnings will meet the requirements of the
AJCA. The Company has determined that it will repatriate these earnings
during calendar 2005, as soon as the AJCA's qualifying requirements are met.
Since these earnings are no longer considered indefinitely reinvested, the
Company accrued $0.9 million of income tax expense in 2004. In addition, the
Company is evaluating the potential to repatriate other foreign earnings
pursuant to the AJCA. Whether the Company repatriates their foreign earnings
is dependent upon the Company's ability to meet the requirements of the AJCA
with respect to these earnings. Until that determination is made, the
Company will make no change in its current intention to indefinitely
reinvest accumulated earnings of its foreign subsidiaries except with
respect to the $16.6 million noted above. The range of additional amounts
that the Company is considering for repatriation under the AJCA is between
zero and $40 million. The related potential range of income tax is between
zero and $2.1 million.

Cash paid for income taxes in 2004, 2003 and 2002 was $8,031, $5,220 and
$6,512, respectively.

NOTE 11:  STOCK-BASED COMPENSATION PLANS

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 grants or performance
shares, as determined by the Management Development and Compensation
Committee of the Board of Directors. An aggregate of 4,250,000 shares of
common stock has been authorized for issuance under the Incentive Plan.
Through December 31, 2004, the Company has granted options on 3,622,909
shares. Under the Incentive Plan, the option exercise price equals the fair
market value of the common stock on the date of grant. 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.
The options granted to employees in 2002 and 2003 expire ten years after the
date of grant. The options granted to employees in 2004 expire seven years
after the date of grant.

Pursuant to the Incentive Plan, each nonemployee director was granted an
option to purchase 4,500 shares of common stock on the day after the 2004,
2003 and 2002 annual meeting of stockholders. These options were granted at
the fair market value 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 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 1,150,000 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. In November 2000, the Stock Purchase Plan was amended to permit
eligible employees to purchase shares at the lesser of 85% of the fair
market price of the common stock on either the offering date or the exercise
date. The exercise date for the 2000 offering was January 2, 2002, at which
time employees elected to purchase 68,323 shares at an offering price of
$15.36 per share, 85% of the fair market price on the offering date.

In November 2001, the Stock Purchase Plan was offered to eligible employees
under the same provisions as the 2000 offering. The exercise date for the
2001 offering was January 2, 2003, at which time employees elected to
purchase 46,460 shares at an offering price of $17.08 per share, 85% of the
fair market price on the exercise date.

In November 2002, the Stock Purchase Plan was offered to eligible employees
under the same provisions as the 2001 offering. The exercise date for the
2002 offering was January 2, 2004, at which time employees elected to
purchase 94,965 shares at an offering price of $12.72 per share, 85% of the
fair market price on the offering date.

In November 2003, the Stock Purchase Plan was offered to eligible employees
under the same provisions as the 2002 offering. The exercise date for the
2003 offering is January 3, 2005, at which time employees elected to
purchase 69,548 shares at an offering price of $18.19 per share, 85% of the
fair market price on the offering date.

                                     37


No additional options were offered to employees under the Stock Purchase
Plan in 2004.

A summary of the status of the Company's Incentive Plan at December 31,
2004, 2003 and 2002, and changes during the years then ended, is presented
in the table and narrative below (underlying shares in thousands):

<TABLE>
<CAPTION>
                                                       2004                  2003                 2002
                                               --------------------------------------------------------------
                                                Average               Average              Average
                                                  Price    Shares       Price    Shares      Price   Shares
-------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>        <C>        <C>       <C>       <C>
Options outstanding, beginning of year           $17.54     1,367      $17.56     1,144     $17.26    1,106
Options granted                                  $28.46       263      $17.89       264     $20.35      221
Options exercised                                $29.61      (217)     $15.25       (13)    $16.37      (85)
Options canceled                                 $20.94       (10)     $23.20       (28)    $21.45      (98)
-------------------------------------------------------------------------------------------------------------
Options outstanding, end of year                 $19.67     1,403      $17.54     1,367     $17.56    1,144
-------------------------------------------------------------------------------------------------------------
Options exercisable, end of year                 $17.55       934      $17.07       940     $16.54      776
-------------------------------------------------------------------------------------------------------------
</TABLE>

The following table summarizes information about fixed-price stock options
outstanding at December 31, 2004 (underlying shares in thousands):

<TABLE>
<CAPTION>
                                                      Outstanding                 Exercisable
                                         -----------------------------------   -----------------
                                                          Average
Range of                                                Remaining    Average            Average
Exercise Prices                          Shares  Contractual Life      Price    Shares    Price
------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>     <C>          <C>   <C>
$5.00 to $10.00                             161               1.4     $ 8.71       161   $ 8.71
$10.01 to $15.00                            137               4.4     $12.83       137   $12.83
$15.01 to $20.00                            665               6.5     $18.50       456   $18.64
$20.01 to $30.00                            440               4.9     $27.57       180   $26.30
------------------------------------------------------------------------------------------------
Total                                     1,403               5.2     $19.67       934   $17.55
------------------------------------------------------------------------------------------------
</TABLE>

The fair value of each option granted under the Incentive Plan and the Stock
Purchase Plan is estimated on the date of grant using the Black-Scholes
option pricing model. The following weighted average assumptions were used
for grants in 2004, 2003 and 2002, respectively: risk-free interest rates of
3.1%, 2.4% and 3.0%; expected volatility of 34%, 35% and 35%; and expected
lives of 4.5, 3.8 and 3.3 years. The valuations assume no dividends are
paid. The weighted average fair values of options granted in 2004, 2003 and
2002 were $9.45, $5.77 and $5.84, respectively.

NOTE 12:  OFF-BALANCE SHEET RISK, CONCENTRATIONS OF CREDIT RISK AND FAIR
VALUE OF FINANCIAL INSTRUMENTS

OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

There were no off-balance sheet derivative financial instruments as of
December 31, 2004 or 2003.

Concentrations of credit risk with respect to trade receivables are limited
due to the wide variety of customers and industries to which the Company's
products are sold, as well as their dispersion across many different
geographic areas. As a result, the Company does not consider itself to have
any significant concentrations of credit risk as of December 31, 2004.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash and
equivalents, trade receivables, trade payables and debt instruments. The
book values of these instruments are not materially different from their
respective fair values.

The Company selectively uses derivative financial instruments to manage
interest costs and currency exchange risks. The Company does not hold
derivatives for trading purposes. No credit loss is anticipated, as the
counterparties to these agreements are major financial institutions with
high credit ratings.


To effectively manage interest costs, the Company utilizes interest rate
swaps as cash flow hedges of variable rate debt. Also as part of its hedging
strategy, the Company utilizes purchased option and forward exchange
contracts as cash flow hedges to minimize the impact of currency
fluctuations on transactions, cash flows and firm commitments. These
contracts for the sale or purchase of European and other currencies
generally mature within one year.

                                     38


Notional transaction amounts and fair values for the Company's outstanding
derivatives, by risk category and instrument type, as of December 31, 2004
and 2003, are summarized as follows. Fair values of the derivatives do not
consider the offsetting underlying hedged item.

<TABLE>
<CAPTION>
                                                 2004                   2003
                                       ----------------------  ----------------------
                                         Notional       Fair     Notional       Fair
                                           Amount      Value       Amount      Value

--------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>        <C>
Foreign currency forwards                $  6,129       (479)          --         --
Interest rate swaps                      $125,317        304           --         --
--------------------------------------------------------------------------------------
</TABLE>

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, 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 manufactured, distributed and sold products
allegedly at issue in the pending asbestos and silicosis litigation lawsuits
(the "Products"). The Company has potential responsibility for certain of
these Products, namely: (a) air compressors which used asbestos containing
components manufactured and supplied by third parties; and (b) portable air
compressors used in sandblasting operations as a component of sandblasting
equipment manufactured and sold by others. The sandblasting equipment is
alleged to have caused the silicosis disease plaintiffs claim in these
cases.

Neither the Company nor its predecessors ever mined, manufactured, mixed,
produced or distributed asbestos fiber. The asbestos-containing components
used in the Products were completely encapsulated in a protective
non-asbestos binder and enclosed within the subject Products. Furthermore,
the Company has never manufactured or distributed portable air compressors.

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;
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
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 own any of these sites. 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 INFORMATION

Subsequent to the acquisition of Nash Elmo and Syltone, the Company
continues to be organized based upon the products and services it offers and
has four operating divisions: Compressor, Blower, Liquid Ring Pump and Fluid
Transfer. These divisions comprise two reportable segments, Compressor and
Vacuum Products (formerly Compressed Air Products) and Fluid Transfer
Products. The Compressor, Blower (which now includes the Syltone
transportation-related activities and Nash Elmo's side channel blower
business) and Liquid Ring Pump (consisting of Nash Elmo's liquid ring pump
business) Divisions are aggregated into one reportable segment (Compressor
and Vacuum Products) since the long-term financial performance of these
businesses are affected by similar economic conditions, coupled with the
similar nature of their products, manufacturing processes and other business
characteristics. During the third quarter of 2004, the Company's former Pump
and Fluid Transfer (which consisted of the Syltone fluid transfer-related
activities) Divisions were combined into one division, Fluid Transfer. These
two divisions were previously aggregated into one reportable segment (Fluid
Transfer Products) primarily due to the same factors as noted above, and
thus, there has been no change to the Fluid Transfer Products segment.

                                     39


In the Compressor and Vacuum Products segment, the Company designs,
manufactures, markets and services the following products and related
aftermarket parts for industrial and commercial applications: rotary screw,
reciprocating, sliding vane and centrifugal air compressors; positive
displacement, centrifugal and side channel blowers; and liquid ring pumps
and engineered systems. The markets served are primarily in the United
States, Europe and Asia.

The Fluid Transfer Products segment designs, manufactures, markets and
services a diverse group of pumps, water jetting systems and related
aftermarket products used in oil and natural gas production, well servicing
and drilling and industrial cleaning and maintenance. 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 the United States, Europe, Canada and Asia.

The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates the performance of its segments based on
income before interest expense, other income, net and income taxes. Certain
assets attributable to corporate activity are not allocated to the segments.
General corporate assets (unallocated assets) consist of cash and
equivalents and deferred tax assets. Intersegment sales and transfers are
not significant.

Summarized information about the Company's operations by business segment
and by geographic area follows:

<TABLE>
<CAPTION>
                                              Revenues                    Operating Earnings              Identifiable Assets
                                  -------------------------------  -------------------------------  ------------------------------
                                       2004      2003       2002       2004       2003       2002        2004      2003      2002
----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>        <C>       <C>          <C>        <C>     <C>          <C>       <C>
Compressor and Vacuum Products     $589,382   369,023    350,036   $ 46,681     27,792     29,795  $  848,470   375,376   368,761
Fluid Transfer Products             150,157    70,507     68,122     15,069      4,093      5,193     106,073    72,528    68,240
                                  ------------------------------------------------------------------------------------------------
Total                              $739,539   439,530    418,158     61,750     31,885     34,988     954,543   447,904   437,001
                                  -------------------------------
Interest expense                                                    (10,102)    (4,748)    (6,365)
Other income, net                                                       638      3,221        204
----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                         $ 52,286     30,358     28,827
                                                                   -------------------------------
General corporate (unallocated)                                                                        74,066   141,829    41,729
                                                                                                   -------------------------------
Total assets                                                                                       $1,028,609   589,733   478,730
                                                                                                   -------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                LIFO Liquidation            Depreciation and
                                                     Income               Amortization Expense             Capital Expenditures
                                          ---------------------------  ----------------------------  -----------------------------
                                           2004       2003      2002      2004      2003      2002         2004     2003     2002
----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>       <C>   <C>        <C>       <C>         <C>       <C>      <C>
Compressor and Vacuum Products             $132        316       161   $17,902    11,739    11,517      $16,367    8,864    9,856
Fluid Transfer Products                      --         50       233     3,999     2,827     2,622        3,183    3,086    3,785
----------------------------------------------------------------------------------------------------------------------------------
Total                                      $132        366       394   $21,901    14,566    14,139      $19,550   11,950   13,641
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                               Revenues                      Property, Plant and Equipment
                                              ---------------------------------------    --------------------------------------
                                                   2004          2003           2002          2004         2003          2002
-------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>            <C>          <C>            <C>           <C>
United States                                  $327,551       253,592        264,536      $ 71,026       58,581        61,372
Europe                                          237,775        97,198         85,735        70,055       16,686        14,672
Asia                                             93,150        39,963         25,999         5,834           --            --
Canada                                           37,564        26,972         18,597           263           90            70
Latin America                                    32,227        17,401         17,773         1,532           71            48
Other                                            11,272         4,404          5,518           109           --            --
-------------------------------------------------------------------------------------------------------------------------------
Total                                          $739,539       439,530        418,158      $148,819       75,428        76,162
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 15:  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


<TABLE>
<CAPTION>
                                        First                Second                 Third                 Fourth
                                       Quarter               Quarter               Quarter               Quarter
                               ---------------------  -------------------   --------------------   --------------------
                                    2004       2003       2004      2003        2004       2003        2004       2003
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>        <C>       <C>         <C>        <C>         <C>        <C>
Revenues                        $154,428    101,491    161,297   109,388     182,616    112,061     241,198    116,590
Gross margin (1)                $ 49,917     30,717     52,647    33,237      59,320     33,863      79,220     33,960
Net income (2), (3), (4)        $  6,557      3,520      8,276     5,346       8,654      5,277      13,636      6,500
Basic earnings per share        $   0.40       0.22       0.42      0.33        0.44       0.33        0.69       0.40
Diluted earnings per share      $   0.39       0.22       0.41      0.33        0.43       0.32        0.67       0.40

Common stock prices:
High                            $  30.30      20.44      28.96     20.80       28.53      25.10       37.95      24.99
Low                             $  23.75      16.35      24.55     18.10       25.36      20.05       27.15      19.95
-----------------------------------------------------------------------------------------------------------------------

<FN>
(1)  Gross margin equals revenues less cost of sales.

(2)  The quarter ended December 31, 2003 includes $2,184 from an unrealized
     foreign currency transaction gain and $1,946 in charges related to
     profitability improvement programs.

(3)  The quarter ended March 31, 2004 includes $846 from an unrealized
     foreign currency transaction gain.

(4)  The quarter ended December 31, 2004 includes the favorable impact of
     $939 stemming from an adjustment to depreciation and amortization expense
     due to finalizing the purchase price allocation for the Syltone
     acquisition. In addition, the effective income tax rate for the quarter
     ended December 31, 2004 was 18.3% due to net favorable income tax
     reductions that lowered the effective rate for the full year to 29.0%,
     compared to 32.0% for the prior year quarter and full year.
</TABLE>

                                     40


Gardner Denver, Inc. common stock (symbol GDI) has traded on the New York
Stock Exchange since August 14, 1997, under the ticker symbol GDI. Prior to
this date, the Company's common stock traded on the Nasdaq National Market
tier of the Nasdaq Stock Market under the symbol GDMI.

NOTE 16:  SUBSEQUENT EVENT (UNAUDITED)

On March 8, 2005, the Company signed a definitive agreement to acquire
Thomas Industries Inc. ("Thomas"), a New York Stock Exchange listed company
trading under the ticker symbol "TII." Thomas is a worldwide leader in the
design, manufacture and marketing of precision engineered pumps, compressors
and blowers. The agreed-upon purchase price is $40.00 per share for all
outstanding shares and share equivalents (approximately $734 million) and
the assumption of $9.5 million of long-term capitalized lease obligations.
As of December 31, 2004, Thomas had $267 million in cash, cash equivalents
and short-term investments. The net transaction value, including assumed
debt and net of cash, is approximately $476 million.

Thomas is a leading supplier of pumps, compressors and blowers to the
original equipment manufacturer (OEM) market in such applications as medical
equipment, gasoline vapor and refrigerant recovery, automotive and
transportation applications, printing, packaging, tape drives and laboratory
equipment. Thomas designs, manufacturers, markets, sells and services these
products through worldwide operations with regional headquarters as
follows: North American Group - Sheboygan, Wisconsin; European Group -
Puchheim, Germany; and Asia Pacific Group - Hong Kong, China.

Thomas has wholly-owned operations in 21 countries on five continents. Its
primary manufacturing facilities are located in Sheboygan, Wisconsin,
Monroe, Louisiana, Skokie, Illinois and Syracuse, New York; Schopfheim,
Fahrnau, Puchheim and Memmingen, Germany; and Wuxi, China. The manufacturing
operations in the United States produce rotary vane, linear, piston and
diaphragm pumps and compressors, and various liquid pump technologies. These
products are directly sold worldwide to OEM's, as well as through fluid
power and industrial distributors. The German operations manufacture a
complementary line of rotary vane, linear, diaphragm, gear, side channel,
radial, claw, screw and rotary lobe pumps, compressors and blowers, as well
as various liquid pump technologies, air-centers and centralized systems.
These products are also distributed worldwide. The manufacturing facility in
China was constructed during late 2004 and will begin production in mid
2005.

Thomas' largest markets are Europe and the United States, which represent
approximately 52% and 38% of its revenues, respectively. Of the total sales
to Europe, approximately 61% are to Germany and 39% to other European
countries. Approximately 10% of Thomas' revenues are generated in Asia
Pacific. At December 31, 2004, Thomas employed approximately 2,200 people.

For the year ended December 31, 2004, Thomas' revenues and operating income
were $410 million and $209 million, respectively. Operating income for this
period included $19 million from Thomas' 32% interest in the Genlyte Thomas
Group LLC (GTG), a joint venture formed with The Genlyte Group Incorporated
(Genlyte) in 1998, and a $160 million nonrecurring gain on the sale of this
joint venture in July 2004. For the twelve-month period of 2004, operating
income from Thomas' Pumps and Compressors segment, net of corporate
expenses, was $30 million.

Gardner Denver has received a debt commitment to fully finance the
acquisition of Thomas. However, Gardner Denver intends to finance the
acquisition through an amended and expanded senior secured bank facility and
a public offering of approximately $200 million of its common stock. In
addition, the Company may choose to access the debt capital markets. The
acquisition is not conditioned upon completion of any of these financings
and the size and timing of the equity and any debt financings are subject to
prevailing market conditions.

The acquisition is expected to close in 2005 and is subject to the approval
of Thomas' stockholders and other customary closing conditions, including
the receipt of applicable regulatory approvals.

------------------------------------------------------------------------------

                                     41


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------

DISCLOSURE CONTROLS AND PROCEDURES

The Company's management, under the supervision and with the participation
of the Company's Chief Executive Officer and Chief Financial officer,
carried out an evaluation of the effectiveness of the design and operation
of the Company's disclosure controls and procedures as of December 31, 2004
(the "Evaluation"). Based upon the Evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are
effective in ensuring that material information relating to the Company,
including its consolidated subsidiaries, is made known to them by others
within those entities as appropriate to allow timely decisions regarding
required disclosure, particularly during the period in which this annual
report was being prepared.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management's Report on Internal Control over Financial Reporting and the
Report of Independent Registered Public Accounting Firm contained in "Item
8. Financial Statements and Supplementary Data," is hereby incorporated
herein by reference.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company's internal control over financial
reporting that occurred during the quarter ended December 31, 2004, that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION
--------------------------

None.

------------------------------------------------------------------------------

                                  PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

The information concerning the Company's directors contained under "Election
of Directors," "Nominees for Election," and "Directors Whose Terms of Office
Will Continue After the Meeting," and the information contained in the first
and third paragraphs under "Corporate Governance," the first, second and
third sentences under "Board of Directors Committees - The Audit and Finance
Committee," and "Section 16(a) Beneficial Ownership Reporting Compliance" of
the Gardner Denver Proxy Statement, dated March 15, 2005, is hereby
incorporated herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information with respect to Gardner
Denver's executive officers as of March 10, 2005. These officers serve at
the pleasure of the Board of Directors.

<TABLE>
<CAPTION>
NAME                    POSITION                                                              AGE
----                    --------                                                              ---
<S>                     <C>                                                                    <C>
Ross J. Centanni        Chairman, President and Chief Executive Officer                        59

Michael S. Carney       Vice President and General Manager, Blower Division                    47

Helen W. Cornell        Vice President, Finance and Chief Financial Officer                    46

Tracy D. Pagliara       Vice President, Administration, General Counsel and Secretary          42

J. Dennis Shull         Vice President and General Manager, Compressor Division                56

Richard C. Steber       Vice President and General Manager, Liquid Ring Pump Division          54
</TABLE>

                                     42


ROSS J. CENTANNI, age 59, has been President and Chief Executive Officer and
a director of Gardner Denver since its incorporation in November 1993. He
has been Chairman of Gardner Denver's Board of Directors since November
1998. Prior to Gardner Denver's spin-off from Cooper in April 1994, he was
Vice President and General Manager of the Division, where he also served as
Director of Marketing from August 1985 to June 1990. He has a B.S. degree in
industrial technology and an M.B.A. degree from Louisiana State University.
Mr. Centanni is a director of Esterline Technologies, a publicly held
manufacturer of components for avionics, propulsion and guidance systems,
and Denman Services, Inc., a privately held supplier of medical products. He
is also a member of the Petroleum Equipment Suppliers Association Board of
Directors and a member of the Executive Committee of the International
Compressed Air and Allied Machinery Committee.

MICHAEL S. CARNEY, age 47, joined the Company as Vice President and General
Manager, Gardner Denver Blower Division in November 2001. Prior to joining
Gardner Denver, Mr. Carney worked for Woods Equipment Company from 1995 to
May 2001. The last position he held with Woods was Vice President,
Construction Business. From 1979 to 1995, Mr. Carney worked for General
Electric Company in various management positions. Mr. Carney has a B.S.M.E.
degree from the University of Notre Dame, an M.S.E.E. degree from the
University of Cincinnati and an M.S.I.A. degree from Purdue University.

HELEN W. CORNELL, age 46, was appointed Vice President, Finance and Chief
Financial Officer in August 2004. She served as Vice President and General
Manager, Fluid Transfer Division and Operations Support of Gardner Denver
from March 2004 until her promotion. She served as Vice President, Strategic
Planning and Operations Support from August 2001 until March 2004 and Vice
President, Compressor Operations for the Compressor and Pump Division from
April 2000 until August 2001. From November 1993 until accepting her
operations role, Ms. Cornell held positions of increasing responsibility as
the Corporate Secretary and Treasurer of the Company, serving in the role of
Vice President, Corporate Secretary and Treasurer from April 1996 until
April 2000. She holds a B.S. degree in accounting from the University of
Kentucky and an M.B.A. from Vanderbilt University. She is a Certified Public
Accountant and a Certified Management Accountant.

TRACY D. PAGLIARA, age 42, was appointed Vice President, Administration,
General Counsel and Secretary of Gardner Denver in March 2004. He previously
served as Vice President, General Counsel and Secretary of Gardner Denver
from August 2000 until his promotion. Prior to joining Gardner Denver, Mr.
Pagliara held positions of increasing responsibility in the legal
departments of Verizon Communications/GTE Corporation from August 1996 to
August 2000 and Kellwood Company from May 1993 to August 1996, ultimately
serving in the role of Assistant General Counsel for each company. Mr.
Pagliara, a Certified Public Accountant, has a B.S. degree in accounting and
a J.D. degree from the University of Illinois.

J. DENNIS SHULL, age 56, has been the Vice President and General Manager,
Gardner Denver Compressor Division since January 2002. He previously served
the Company as Vice President and General Manager, Gardner Denver Compressor
and Pump Division since its organization in August 1997. Prior to August
1997, he served as Vice President, Sales and Marketing since the Company's
incorporation in November 1993. From August 1990 until November 1993, Mr.
Shull was the Director of Marketing for the Division. Mr. Shull has a B.S.
degree in business from Northeast Missouri State University and an M.A. in
business from Webster University.

RICHARD C. STEBER, age 54, has been the Vice President and General Manager,
Gardner Denver Liquid Ring Pump Division since January 2005. He previously
served the Company as Vice President and General Manager of the Gardner
Denver Fluid Transfer Division (formerly the Gardner Denver Pump Division)
from January 2002 until his promotion. Prior to joining Gardner Denver, he
was employed by Goulds Pumps, a division of ITT Industries, for twenty-five
years, most recently as the President and General Manager for Europe, Middle
East and Africa. He previously held positions as Vice President for both the
sales and marketing organizations at Goulds Pumps, with domestic and
international responsibility. Mr. Steber has a B.S. degree in engineering
from the State University of New York College of Environmental Science and
Forestry at Syracuse University.

The Company's policy regarding Corporate Governance and its Code of Ethics
and Business Conduct (the "Code") promotes the highest ethical standards in
all of the Company's business dealings. The Code satisfies the SEC's
requirements for a Code of Ethics for senior financial officers and applies
to all Company employees, including the Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, and also the Company's
Directors. The Code is available on the Company's Internet website at
www.gardnerdenver.com. Any amendment to the Code will promptly be posted on
the Company's website.

ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

The information related to executive compensation contained under
"Compensation of Directors," "Executive Management Compensation" and
"Employee and Executive Benefit Plans" of the Gardner Denver Proxy
Statement, dated March 15, 2005, is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

The information contained under "Security Ownership of Management and
Certain Beneficial Owners" of the Gardner Denver Proxy Statement, dated
March 15, 2005, is hereby incorporated herein by reference.

                                     43


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

Information appearing under "Certain Relationships and Related Transactions"
of the Gardner Denver Proxy Statement, dated March 15, 2005, is hereby
incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
-----------------------------------------------

Information appearing under "Accounting Fees" of the Gardner Denver Proxy
Statement, dated March 15, 2005, is hereby incorporated herein by reference.

------------------------------------------------------------------------------

                                   PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------

a)   Documents filed as a part of this report:

     The following information is filed as part of this Form 10-K:

<TABLE>
<CAPTION>
                                                                                                                           Page No.
                                                                                                                           --------
<S>                                                                                                                         <C>
     Internal Controls - Report of Management's Assessment of Internal Control Over Financial Reporting                       20
     Internal Controls - Report of Independent Registered Public Accounting Firm                                              20
     Financial Statements - Report of Independent Registered Public Accounting Firm                                           21
     Consolidated Statements of Operations for Each of the Three Years in the Period Ended December 31, 2004                  22
     Consolidated Balance Sheets as of December 31, 2004 and December 31, 2003                                                23
     Consolidated Statements of Stockholders' Equity for Each of the Three Years in the Period Ended December 31, 2004        24
     Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 2004                  25
     Notes to the Consolidated Financial Statements                                                                         26-41
</TABLE>

b)   Schedules

     The following financial statement schedule for the years ended December
     31, 2004, 2003 and 2002 should be read in conjunction with the
     previously referenced financial statements:

<TABLE>
<CAPTION>
     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
     FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
     (DOLLARS IN THOUSANDS)
     ----------------------------------------------------------------------------------------------------------------------------
                                            Balance at         Charged to         Charged to                            Balance
                                            Beginning           Costs and           Other                               At End
                                             Of Year            Expenses         Accounts (1)       Deductions          Of Year
                                        -----------------------------------------------------------------------------------------
     Allowance for Doubtful Accounts:

<S>                                           <C>                <C>               <C>               <C>                 <C>
     2004                                     $4,534             $  918            $4,007            $(1,916)             7,543
                                        -----------------------------------------------------------------------------------------

     2003                                     $5,279             $  795            $  170            $(1,710)            $4,534
                                        -----------------------------------------------------------------------------------------

     2002                                     $5,229             $1,905            $  303            $(2,158)            $5,279
     ----------------------------------------------------------------------------------------------------------------------------

<FN>
     (1) Includes the allowance for doubtful accounts of acquired businesses
         at the dates of acquisition and the effect of foreign currency
         translation adjustments for those companies whose functional currency
         is not the U.S. dollar.
</TABLE>

c)   Exhibits

     2.1    Agreement and Plan of Merger dated July 28, 2004 by and among
            Gardner Denver, Inc., Neptune Holdings I, Inc, nash_elmo Holdings
            LLC and Audax Vacuum Corp, filed as Exhibit 2.1 to Gardner Denver,
            Inc.'s Current Report on Form 8-K, dated September 2, 2004, and
            incorporated herein by reference.

     2.2    Form of Amendment to Agreement and Plan of Merger dated September
            1, 2004 by and among Gardner Denver, Inc., Neptune Holdings I,
            Inc, nash_elmo Holdings LLC and Audax Vacuum Corp, filed as
            Exhibit 2.2 to Gardner Denver, Inc.'s Current Report on Form 8-K,
            dated September 2, 2004, and incorporated herein by reference.

                                     44


     2.3    Agreement and Plan of Merger dated July 28, 2004 by and among
            Gardner Denver, Inc., Neptune Holdings II, Inc. and nash_elmo
            Corp., filed as Exhibit 2.3 to Gardner Denver, Inc.'s Current
            Report on Form 8-K, dated September 2, 2004, and incorporated
            herein by reference.

     2.4    Amendment to Agreement and Plan of Merger dated July 28, 2004 by
            and among Gardner Denver, Inc., Neptune Holdings II, Inc. and
            nash_elmo Corp., filed as Exhibit 2.4 to Gardner Denver, Inc.'s
            Current Report on Form 8-K, dated September 2, 2004, and
            incorporated herein by reference.

     2.5    Escrow Agreement dated September 1, 2004 by and among Gardner
            Denver, Inc., Wells Fargo Bank, National Association, as escrow
            agent, and Audax Vacuum Corp., filed as Exhibit 2.5 to Gardner
            Denver, Inc.'s Current Report on Form 8-K, dated September 2,
            2004, and incorporated herein by reference.

     2.6    Agreement and Plan of Merger dated March 8, 2005 among Gardner
            Denver, Inc., PT Acquisition Corporation and Thomas Industries
            Inc., filed as Exhibit 2.1 to Gardner Denver, Inc.'s Current
            Report on Form 8-K, dated March 9, 2005, and incorporated herein
            by reference.

     3.1    Certificate of Incorporation of Gardner Denver, Inc., as amended
            on May 5, 1998, filed as Exhibit 3.1 to Gardner Denver, Inc.'s
            Quarterly Report on Form 10-Q, dated August 13, 1998, and
            incorporated herein by reference.

     3.2    ByLaws of Gardner Denver, Inc., as amended on July 31 2001, filed
            as Exhibit 3.2 to Gardner Denver, Inc.'s Quarterly Report on Form
            10-Q, dated August 13, 2001, 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, dated January 21, 2005, and
            incorporated herein by reference.

     4.2    Note Purchase Agreement, dated as of September 26, 1996, filed as
            Exhibit 4.0 to Gardner Denver Machinery Inc.'s Quarterly Report
            on Form 10-Q, dated November 14, 1996, and incorporated herein by
            reference.

     4.2.1  Second Amendment dated August 31, 2001, to the Note Purchase
            Agreement dated as of September 26, 1996 filed as Exhibit 4.2.1
            on Form 10-Q, dated November 13, 2001, and incorporated herein by
            reference.

     10.0+  Amended and Restated Credit Agreement dated September 1, 2004 by
            and among Gardner Denver, Inc., J.P. Morgan Securities, Inc., as
            lead arranger, and the other lenders named therein filed as
            Exhibit 10.1 to Gardner Denver, Inc.'s Current Report on Form 8-K,
            dated September 2, 2004, and incorporated herein by reference.

     10.1*  Gardner Denver, Inc. Long-Term Incentive Plan, as amended May 4,
            2004, filed as Exhibit 10.1 to Gardner Denver, Inc.'s Quarterly
            Report on Form 10-Q dated May 10, 2004 and incorporated herein by
            reference.

     10.2*  Gardner Denver Machinery Inc. Supplemental Excess Defined Benefit
            Plan filed as Exhibit 10.9 to Gardner Denver Machinery Inc.'s
            Registration Statement on Form 10, effective on March 31, 1994,
            and incorporated herein by reference.

     10.3*  Gardner Denver Machinery Inc. Supplemental Excess Defined
            Contribution Plan, filed as Exhibit 10.10 to Gardner Denver
            Machinery Inc.'s Registration Statement on Form 10, effective on
            March 31, 1994, and incorporated herein by reference.

     10.4*  Amended and Restated Form of Indemnification Agreements between
            Gardner Denver, Inc. and its directors, officers or
            representatives, filed as Exhibit 10.4 to Gardner Denver, Inc.'s
            Form 10-K, dated March 28, 2002, and incorporated herein by
            reference.

     10.6*  Gardner Denver, Inc. Phantom Stock Plan for Outside Directors,
            as amended May 4, 1998 and March 7, 2000, with an effective date
            of April 1, 2000, filed as Exhibit 10.6 to Gardner Denver,
            Inc.'s Form 10-K, dated March 28, 2001, and incorporated herein
            by reference.

     10.7*  Gardner Denver, Inc. Executive Stock Repurchase Program, as
            amended May 6, 2003 filed as Exhibit 10.7 to Gardner Denver,
            Inc.'s Quarterly Report on Form 10-Q dated May 8, 2003, and
            incorporated herein by reference.

     10.8*  Gardner Denver, Inc. Incentive Stock Option Agreement, filed as
            Exhibit 10.8 to Gardner Denver, Inc.'s Form 10-K dated March 22,
            2001, and incorporated herein by reference.

     10.9*  Gardner Denver, Inc. Nonstatutory Stock Option Agreement, filed
            as Exhibit 10.9 to Gardner Denver, Inc.'s Form 10-K dated March
            22, 2001, and incorporated herein by reference.

                                     45


     10.10* Form of Gardner Denver, Inc. Nonemployee Director Stock Option
            Agreement, as amended July 29, 2003 filed as Exhibit 10.10 to
            Gardner Denver, Inc.'s Quarterly Report on Form 10-Q dated
            November 12, 2003 and incorporated herein by reference.

     10.11* Gardner Denver, Inc. Management Annual Incentive Plan dated
            January 2, 2001, filed as Exhibit 10.11 to Gardner Denver,
            Inc.'s Quarterly Report on Form 10-Q, dated May 14, 2001, and
            incorporated herein by reference.

     10.12* Form of Gardner Denver, Inc. Long-Term Cash Bonus Agreement
            between Gardner Denver, Inc. and executive bonus award
            participants, filed as Exhibit 10.12 to Gardner Denver, Inc.'s
            Form 10-K, dated March 28, 2002, and incorporated herein by
            reference.

     10.13* Change in Control Agreement dated August 1, 2002, entered into
            between Gardner Denver, Inc. and its Chief Executive Officer,
            filed as Exhibit 10.13 to Gardner Denver, Inc.'s Quarterly Report
            on 10-Q, dated August 13, 2002, and incorporated herein by
            reference.

     10.14* Form of Change in Control Agreement dated August 1, 2002,
            entered into between Gardner Denver, Inc. and its executive
            officers, filed as Exhibit 10.14 to Gardner Denver, Inc.'s
            Quarterly Report on 10-Q, dated August 13, 2002, and incorporated
            herein by reference.

     10.15* Gardner Denver, Inc. Executive Retirement Planning Program
            Services, dated May 5, 2003, filed as Exhibit 10.15 to Gardner
            Denver, Inc.'s Quarterly Report on Form 10-Q dated August 8, 2003
            and incorporated herein by reference.

     10.16* Salary Continuation Agreement dated August 16, 2004 between
            Gardner Denver, Inc. and Philip R. Roth, filed as Exhibit 10.1 to
            Gardner Denver, Inc.'s Quarterly Report on Form 10-Q dated
            November 9, 2004 and incorporated herein by reference.

     12     Ratio of Earnings to Fixed Charges.

     21     Subsidiaries of Gardner Denver, Inc.

     23     Consent of Independent Registered Public Accounting Firm.

     24     Power of Attorney.

     31.1   Certification of Principal 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 Principal 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.

<FN>
     +      The registrant hereby agrees to furnish supplementally a copy of
            any omitted schedules to this agreement to the SEC upon request.

     *      Management contract or compensatory plan.

                                     46


                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                      By /s/ Ross J. Centanni
                                        ------------------------
                                         Ross J. Centanni
                                         Chairman, President and CEO


Date: March 15, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 15, 2005, by the following persons on
behalf of the registrant and in the capacities indicated.

          SIGNATURE                TITLE
----------------------------------------------------------------------------

   /s/ Ross J. Centanni            Chairman, President and CEO (Principal
-------------------------------    Executive Officer) and Director
       Ross J. Centanni


   /s/ Helen W. Cornell            Vice President, Finance and CFO
-------------------------------    (Principal Financial Officer)
       Helen W. Cornell


   /s/ Daniel C. Rizzo, Jr.        Vice President and Corporate Controller
-------------------------------    (Chief Accounting Officer)
       Daniel C. Rizzo, Jr.


              *                    Director
-------------------------------
       Donald G. Barger, Jr.


              *                    Director
-------------------------------
       Frank J. Hansen


              *                    Director
-------------------------------
       Raymond R. Hipp


              *                    Director
-------------------------------
       Thomas M. McKenna


              *                    Director
-------------------------------
       David D. Petratis


              *                    Director
-------------------------------
       Diane K. Schumacher


              *                    Director
-------------------------------
       Richard L. Thompson


              * By /s/ Tracy D. Pagliara
                   -------------------------
                       Tracy D. Pagliara
                       Attorney-in-fact

                                     47


                            GARDNER DENVER, INC.
                              INDEX TO EXHIBITS


EXHIBIT NO. DESCRIPTION

     2.1    Agreement and Plan of Merger dated July 28, 2004 by and among
            Gardner Denver, Inc., Neptune Holdings I, Inc, nash_elmo Holdings
            LLC and Audax Vacuum Corp, filed as Exhibit 2.1 to Gardner Denver,
            Inc.'s Current Report on Form 8-K, dated September 2, 2004, and
            incorporated herein by reference.

     2.2    Form of Amendment to Agreement and Plan of Merger dated September
            1, 2004 by and among Gardner Denver, Inc., Neptune Holdings I,
            Inc, nash_elmo Holdings LLC and Audax Vacuum Corp, filed as
            Exhibit 2.2 to Gardner Denver, Inc.'s Current Report on Form 8-K,
            dated September 2, 2004, and incorporated herein by reference.

     2.3    Agreement and Plan of Merger dated July 28, 2004 by and among
            Gardner Denver, Inc., Neptune Holdings II, Inc. and nash_elmo
            Corp., filed as Exhibit 2.3 to Gardner Denver, Inc.'s Current
            Report on Form 8-K, dated September 2, 2004, and incorporated
            herein by reference.

     2.4    Amendment to Agreement and Plan of Merger dated July 28, 2004 by
            and among Gardner Denver, Inc., Neptune Holdings II, Inc. and
            nash_elmo Corp., filed as Exhibit 2.4 to Gardner Denver, Inc.'s
            Current Report on Form 8-K, dated September 2, 2004, and
            incorporated herein by reference.

     2.5    Escrow Agreement dated September 1, 2004 by and among Gardner
            Denver, Inc., Wells Fargo Bank, National Association, as escrow
            agent, and Audax Vacuum Corp., filed as Exhibit 2.5 to Gardner
            Denver, Inc.'s Current Report on Form 8-K, dated September 2,
            2004, and incorporated herein by reference.

     2.6    Agreement and Plan of Merger dated March 8, 2005 among Gardner
            Denver, Inc., PT Acquisition Corporation and Thomas Industries
            Inc., filed as Exhibit 2.1 to Gardner Denver, Inc.'s Current
            Report on Form 8-K, dated March 9, 2005, and incorporated herein
            by reference.

     3.1    Certificate of Incorporation of Gardner Denver, Inc., as amended
            on May 5, 1998, filed as Exhibit 3.1 to Gardner Denver, Inc.'s
            Quarterly Report on Form 10-Q, dated August 13, 1998, and
            incorporated herein by reference.

     3.2    ByLaws of Gardner Denver, Inc., as amended on July 31 2001, filed
            as Exhibit 3.2 to Gardner Denver, Inc.'s Quarterly Report on Form
            10-Q, dated August 13, 2001, 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, dated January 21, 2005, and
            incorporated herein by reference.

     4.2    Note Purchase Agreement, dated as of September 26, 1996, filed as
            Exhibit 4.0 to Gardner Denver Machinery Inc.'s Quarterly Report
            on Form 10-Q, dated November 14, 1996, and incorporated herein by
            reference.

     4.2.1  Second Amendment dated August 31, 2001, to the Note Purchase
            Agreement dated as of September 26, 1996 filed as Exhibit 4.2.1
            on Form 10-Q, dated November 13, 2001, and incorporated herein by
            reference.

     10.0+  Amended and Restated Credit Agreement dated September 1, 2004 by
            and among Gardner Denver, Inc., J.P. Morgan Securities, Inc., as
            lead arranger, and the other lenders named therein filed as
            Exhibit 10.1 to Gardner Denver, Inc.'s Current Report on Form 8-K,
            dated September 2, 2004, and incorporated herein by reference.

     10.1*  Gardner Denver, Inc. Long-Term Incentive Plan, as amended May 4,
            2004 filed as Exhibit 10.1 to Gardner Denver, Inc.'s Quarterly
            Report on Form 10-Q dated May 10, 2004, and incorporated herein by
            reference.

     10.2*  Gardner Denver Machinery Inc. Supplemental Excess Defined Benefit
            Plan filed as Exhibit 10.9 to Gardner Denver Machinery Inc.'s
            Registration Statement on Form 10, effective on March 31, 1994,
            and incorporated herein by reference.

     10.3*  Gardner Denver Machinery Inc. Supplemental Excess Defined
            Contribution Plan, filed as Exhibit 10.10 to Gardner Denver
            Machinery Inc.'s Registration Statement on Form 10, effective on
            March 31, 1994, and incorporated herein by reference.

     10.4*  Amended and Restated Form of Indemnification Agreements between
            Gardner Denver, Inc. and its directors, officers or
            representatives, filed as Exhibit 10.4 to Gardner Denver, Inc.'s
            Form 10-K, dated March 28, 2002, and incorporated herein by
            reference.

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     10.6*  Gardner Denver, Inc. Phantom Stock Plan for Outside Directors,
            as amended May 4, 1998 and March 7, 2000, with an effective date
            of April 1, 2000, filed as Exhibit 10.6 to Gardner Denver,
            Inc.'s Form 10-K, dated March 28, 2001, and incorporated herein
            by reference.

     10.7*  Gardner Denver, Inc. Executive Stock Repurchase Program, as
            amended May 6, 2003 filed as Exhibit 10.7 to Gardner Denver,
            Inc.'s Quarterly Report on Form 10-Q dated May 8, 2003, and
            incorporated herein by reference.

     10.8*  Gardner Denver, Inc. Incentive Stock Option Agreement, filed as
            Exhibit 10.8 to Gardner Denver, Inc.'s Form 10-K dated March 22,
            2001, and incorporated herein by reference.

     10.9*  Gardner Denver, Inc. Nonstatutory Stock Option Agreement, filed
            as Exhibit 10.9 to Gardner Denver, Inc.'s Form 10-K dated March
            22, 2001, and incorporated herein by reference.

     10.10* Form of Gardner Denver, Inc. Nonemployee Director Stock Option
            Agreement, as amended July 29, 2003 filed as Exhibit 10.10 to
            Gardner Denver, Inc.'s Quarterly Report on Form 10-Q dated
            November 12, 2003 and incorporated herein by reference.

     10.11* Gardner Denver, Inc. Management Annual Incentive Plan dated
            January 2, 2001, filed as Exhibit 10.11 to Gardner Denver,
            Inc.'s Quarterly Report on Form 10-Q, dated May 14, 2001, and
            incorporated herein by reference.

     10.12* Form of Gardner Denver, Inc. Long-Term Cash Bonus Agreement
            between Gardner Denver, Inc. and executive bonus award
            participants, filed as Exhibit 10.12 to Gardner Denver, Inc.'s
            Form 10-K, dated March 28, 2002, and incorporated herein by
            reference.

     10.13* Change in Control Agreement dated August 1, 2002, entered into
            between Gardner Denver, Inc. and its Chief Executive Officer,
            filed as Exhibit 10.13 to Gardner Denver, Inc.'s Quarterly Report
            on 10-Q, dated August 13, 2002, and incorporated herein by
            reference.

     10.14* Form of Change in Control Agreement dated August 1, 2002,
            entered into between Gardner Denver, Inc. and its executive
            officers, filed as Exhibit 10.14 to Gardner Denver, Inc.'s
            Quarterly Report on 10-Q, dated August 13, 2002, and incorporated
            herein by reference.

     10.15* Gardner Denver, Inc. Executive Retirement Planning Program
            Services, dated May 5, 2003, filed as Exhibit 10.15 to Gardner
            Denver, Inc.'s Quarterly Report on Form 10-Q dated August 8, 2003
            and incorporated herein by reference.

     10.16* Salary Continuation Agreement dated August 16, 2004 between
            Gardner Denver, Inc. and Philip R. Roth, filed as Exhibit 10.1 to
            Gardner Denver, Inc.'s Quarterly Report on Form 10-Q dated
            November 9, 2004 and incorporated herein by reference.

     12     Ratio of Earnings to Fixed Charges.

     21     Subsidiaries of Gardner Denver, Inc.

     23     Consent of Independent Registered Public Accounting Firm.

     24     Power of Attorney.

     31.1   Certification of Principal 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 Principal 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.

<FN>
     +      The registrant hereby agrees to furnish supplementally a copy of
            any omitted schedules to this agreement to the SEC upon request.

     *      Management contract or compensatory plan.

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