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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2003
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934: For the transition period from ___________
to ___________
Commission file number 1-13215
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GARDNER DENVER, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 76-0419383
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1800 Gardner Expressway, Quincy, IL 62301
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(Address of Principal Executive Offices) (Zip Code)
(217) 222-5400
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value
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(Title of Class)
Rights to Purchase Preferred Stock
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(Title of Class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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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 Exchange Act Rule 12b-2). Yes X No
--- ---
The aggregate market value of the registrant's voting stock held by
non-affiliates as of June 30, 2003 was $328.7 million.
The number of shares outstanding of the registrant's Common Stock, as of
March 8, 2004 was 16,251,601.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Gardner Denver, Inc. Proxy Statement, dated March 8,
2004 (incorporated into Part III of this Annual Report on Form 10-K).
Portions of the 2003 Annual Report to Stockholders (incorporated into
Parts I and II of this Annual Report on Form 10-K).
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PART I
ITEM 1. BUSINESS
Other than under "Recent Developments," the following business discussion
does not reflect Gardner Denver's acquisition of Syltone plc ("Syltone") in
January 2004. 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 compressed air products and pump 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, 2003, the Company's revenues were $439.5
million, of which approximately 84% were derived from sales of compressed
air products while approximately 16% were from sales of pump products.
Approximately 58% of the Company's total revenues for the year ended
December 31, 2003 were derived from sales in the United States and
approximately 42% were from sales to customers in various countries outside
the United States. Of the total non-U.S. sales, 52% were to Europe, 21% to
Asia, 15% to Canada, 9% to Latin America and 3% 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
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"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 fifteen 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 designs, manufactures and sells
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 designs and manufactures 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 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, is a leading
manufacturer of 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.
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In April 1999, the Company acquired Allen-Stuart Equipment Company, Inc.
("Allen-Stuart"), located in Houston, Texas. Allen-Stuart, which also
conducts business as the Gardner Denver Engineered Packaging Center,
designs, fabricates and services 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 customer-engineered packages was
transferred 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 manufacture 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 were 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, manufactures and distributes 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
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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 provides opportunities to strengthen
relationships with existing customers and expand its share of aftermarket
business in this key geographic region.
On January 2, 2004, the Company effectively acquired all of the outstanding
shares of Syltone plc ("Syltone"), previously a publicly traded company
listed on the London Stock Exchange. See "Recent Development" section below
for further information on the Syltone acquisition.
MARKETS AND PRODUCTS
A description of the particular products manufactured and sold by Gardner
Denver in its two reportable segments as of December 31, 2003, is set forth
below. Other than under "Recent Developments," the following discussion does
not reflect our acquisition of Syltone in January 2004.
Compressed Air Products Segment
In the Compressed Air 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 and
centrifugal blowers. The Company's sales of compressed air products for the
year ended December 31, 2003 were $369.0 million, of which approximately 57%
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. The Company's centrifugal compressors
range from 400 to 1,500 horsepower and are sold under the GD Turbo name.
Blowers are used to produce a high volume of air at low pressure and to
produce vacuum. Positive displacement blowers provide a constant volume of
airflow at varying levels of pressure. Centrifugal blowers produce a
constant level of pressure and varying volumes of airflow. 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 Lamson and Hoffman and range from 0.5
to 25 PSIG pressure and 0-18" Hg vacuum and 100 to 50,000 CFM.
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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 trademark Wittig. The
Company's engineered vacuum systems are used in industrial cleaning and
maintenance and are sold under the Invincible and Cat Vac trademarks.
Almost all domestic 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 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
numerous chemical process applications.
The Compressed Air Products segment operates production facilities around
the world including seven plants (including two remanufacturing facilities)
in the U.S., two in the U.K. and one each in Finland, Germany and Canada.
The most significant facilities include owned properties in Sedalia,
Missouri; Gloucester, U.K.; Princeton, Illinois; and Schopfheim, Germany and
leased properties in Peachtree City, Georgia and Tampere, Finland.
Pump 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. Sales of the Company's pump products for the year
ended December 31, 2003 were $70.5 million, of which approximately 64% 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
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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.
The Pump Products segment operates six production facilities (including one
remanufacturing facility) in the U.S. The most significant facilities
include owned properties in Quincy, Illinois and Tulsa, Oklahoma and a
leased property in Houston, Texas.
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 15 of the Notes to Consolidated Financial Statements included in
Gardner Denver's 2003 Annual Report to Stockholders 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
several 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 a distribution center in Memphis, Tennessee that stocks parts,
accessories, blowers and small compressor products in order to provide
adequate and timely availability. Gardner Denver also 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 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 our
remanufacturing facilities in Indianapolis, Indiana; Fort Worth, Texas; and
Mayfield, Kentucky. The Indianapolis operation remanufactures and repairs
air ends for rotary screw compressors, blowers and reciprocating
compressors. The Fort
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Worth facility repairs and remanufactures well servicing pumps, while the
Mayfield operation provides aftermarket parts and repairs for centrifugal
compressors. Outside the United States, Gardner Denver markets its products
through a network of sales representatives, as well as distributors and
direct sales persons.
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 compressed air 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 compressed air products include
Ingersoll-Rand, Sullair (owned by United Technologies Corporation), Atlas
Copco, Quincy Compressor (owned by EnPro Industries), CompAir and Roots. The
marketplace for pumps, 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, well servicing and well drilling, it does
not typically compete directly with the major full-line 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.
RESEARCH AND DEVELOPMENT
Compressed air and pump products are best characterized as mature, with
evolutionary technological advances. Technological trends in compressed air
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 compressed air 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 pump products include development of larger horsepower
and lighter weight pumps.
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.
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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 $2.8 million in 2003, $2.4
million in 2002, and $2.5 million in 2001.
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 eighteen manufacturing 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 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.
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
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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. The
changes related to the LaGrange Foundry closure have been completed and the
Company expects to benefit going forward from reduced material costs from
alternate suppliers. At the same time, the Company anticipates that it will
need to address some residual problems in 2004 as it re-balances its casting
supply chain while dealing with suppliers that are experiencing lower
volumes, high fixed cost structures and increased competitive pressures.
Historically, the Company has not experienced any significant supply
problems in its operations other than the LaGrange Foundry closure noted
above; however, there can be no assurance that this will be the case in the
future.
BACKLOG
The Company's backlog was approximately $58.4 million at December 31, 2003
as compared to approximately $65.3 million at December 31, 2002. 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.
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 our 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 DuroFlow, Sutorbilt, CycloBlower, Wittig, Lamson,
Tamrotor, OPI, Champion, Geoquip, Belliss & Morcom and Hoffman. 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.
We also rely upon trade secret protection for our confidential and
proprietary information. We routinely enter into confidentiality agreements
with our employees. There can be no assurance, however, that others will not
independently obtain similar information and techniques or otherwise gain
access to our trade secrets or that we can effectively protect our trade
secrets.
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EMPLOYEES
At December 31, 2003, the Company had approximately 1,900 full-time
employees, of which approximately 650, including most of the employees in
Finland, Germany and the U.K., were represented by labor unions. 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 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.
RECENT DEVELOPMENTS
On January 2, 2004, the Company effectively acquired all of the outstanding
shares of Syltone plc ("Syltone"), previously a publicly traded company
listed on the London Stock Exchange. The purchase price of (pound)61.2
million (approximately $109.2 million), including assumed bank debt (net of
cash acquired), was paid in the form of cash ((pound)43.1 million), new loan
notes ((pound)5.2 million) and the assumption of Syltone's existing bank
debt, net of cash ((pound)12.9 million). Syltone is headquartered in
Bradford, United Kingdom ("U.K.") and manufactures products in the U.K.,
Germany, France, Canada, Denmark and the U.S. The company also operates
fitting shops
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around the world, which assemble its manufactured components and other parts
on commercial vehicles and provides aftermarket support.
Syltone's principal activity is the design, manufacture, sale and service of
equipment for the international transportation and fluid transfer
industries. They are one of the world's largest manufacturers of equipment
for handling dry bulk or liquid product on commercial vehicles and loading
arms for rail, truck and marine applications. 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))
for the twelve months ended September 30, 2003.
Syltone's largest markets are Europe and North America, which represent
approximately 67% and 20% of its revenues, respectively. Of the total sales
to Europe, approximately 38% are to the U.K., 18% to France, 11% to Germany
and 33% to other European countries. Approximately 70% of Syltone's revenues
are generated through transportation-related activities while the remaining
30% are derived from fluid transfer-related activities.
Syltone's Transportation-Related Activities
Syltone's transportation-related activities include the design and
manufacture of equipment for handling dry bulk or liquid product on
commercial vehicles, access platforms, axles and gearboxes for commercial
and military applications, power take-offs and valves. This part of
Syltone's business serves tank truck carriers and highway and utility
applications.
Syltone designs and installs loading and unloading systems, which often
include blowers, compressors, pumps, valves and filters, to serve the tank
truck sector. The product being handled by the tank trucks can be in a
liquid, dry or gaseous state, thereby dictating the system required.
Carriers of petroleum-based products and other fuels, which are potentially
dangerous and polluting products, are highly regulated by various
governmental authorities around the world. Syltone provides these carriers
with bottom loading vapor recovery systems and other ancillary and safety
equipment.
Highway and utility applications include vans and trucks fitted with access
platforms and systems, which include compressors, generators, hydraulics and
pumps to drive a wide range of equipment. 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
access platforms 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.
Syltone's transportation-related products are sold under the Drum, Emco
Wheaton, Perolo, Priestman, Sam System, Webster and AirDrive names. Primary
competitors serving the tank truck market include GHH (owned by
Ingersoll-Rand), Civacon and Blackmer Mouvex (both owned by Dover
Corporation) and Sening. Mellow Flowtrans, Winton Engineering and Versalift
are the primary competitors serving highway and utility applications.
12
Syltone's Fluid Transfer-Related Activities
Syltone's fluid transfer-related activities include the design and
manufacture of arms, swivel joints and related systems for loading and
offloading liquids from ships, railcars and road vehicles, as well as
dry-break couplers and valves. These loading arms and systems are used in
distribution and marine applications. This part of Syltone's business serves
a variety of markets including the petroleum, chemical, food, liquefied gas
and marine industries and the military.
Syltone's fluid transfer products are sold primarily under the Emco Wheaton
and Perolo names. Competitors in this sector include 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 applications.
Syltone's Customer Service
One of Syltone's strengths is its global sales, service and vehicle fitting
facility network. Syltone currently has sales offices in fifteen countries,
which are reinforced by an expanding network of distributors and agents.
Syltone also has fourteen vehicle fitting facilities in eleven countries
worldwide.
Syltone has a highly skilled workforce. In-house engineering can customize a
system installation and offer preventive maintenance, repairs,
refurbishment, upgrades and spare parts for all equipment to optimize
product lifecycle cost. In addition, many of Syltone's products operate in
critical health and safety environments and therefore changes in legislation
frequently drive requirements for product enhancements and innovations.
The acquisition of Syltone strengthens Gardner Denver's position,
particularly in Europe, as the leading global provider of bulk handling
solutions for the commercial transportation industry. Syltone's emphasis on
systems-oriented handling solutions expands the Company's product offering
and manufacturing capabilities and provides incremental growth
opportunities. In addition, Syltone's installation and aftermarket
capabilities are expected to strengthen the Company's distribution and
service networks, as well. Through the acquisition of Syltone, the Company
expanded its product lines to include loading arms. The Company views
loading arms as an attractive market segment given its stability in
developed regions where product demand is driven primarily by replacement
activity, and its growth potential in emerging economies that are expanding
their transportation infrastructure.
Syltone's Production Facilities and Employees
Syltone operates production facilities around the world including three
plants in the U.K., two in the U.S. and one each in France, Germany, Canada
and Denmark. The most significant facilities are located in Bradford and
Margate in the U.K.; Kirchhain, Germany; Louisville, Kentucky; and Blaye,
France. As of January 31, 2004, Syltone had approximately 900 full-time
employees of which approximately 400 were represented by labor unions. The
Company believes its current relations with employees are satisfactory.
13
AVAILABLE INFORMATION
Our Internet website address is http://www.gardnerdenver.com. We provide
copies of the following reports available free of charge through our
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: our 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 our 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 2004.
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 various U.S.
locations and foreign countries.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions. The information regarding these proceedings and actions under
"Contingencies" contained on pages 19 and under Note 13 contained on page 40
of Gardner Denver's 2003 Annual Report to Stockholders, is hereby
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matters were submitted to a vote of the stockholders.
14
EXECUTIVE OFFICERS OF REGISTRANT
The executive officers of the Company, their positions with the Company,
business history and certain other information, as of March 10, 2004, are
set forth below. These officers serve at the pleasure of the Board of
Directors.
Name Office Age
---- ------ ---
Ross J. Centanni Chairman, President and Chief Executive Officer 58
Michael S. Carney Vice President and General Manager,
Blower Division 46
Helen W. Cornell Vice President and General Manager,
Fluid Transfer Division and Operations Support 45
Tracy D. Pagliara Vice President, Administration, General Counsel
and Secretary 41
Philip R. Roth Vice President, Finance and Chief Financial Officer 52
J. Dennis Shull Vice President and General Manager,
Compressor Division 55
Richard C. Steber Vice President and General Manager,
Pump Division 53
ROSS J. CENTANNI, age 58, 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 Industries, Inc.
("Cooper") in April 1994, he was Vice President and General Manager of
Gardner Denver's predecessor, the Gardner-Denver Industrial Machinery
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 46, 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 45, was appointed Vice President and General Manager,
Fluid Transfer Division and Operations Support of Gardner Denver in March
2004. She previously served as Vice President, Strategic Planning and
Operations Support from August 2001 until her promotion. She served as Vice
President, Compressor Operations for the Compressor and Pump Division from
April 2000 until August 2001. From November 1993 until accepting her
15
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 41, 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.
PHILIP R. ROTH, age 52, joined the Company as Vice President, Finance and
Chief Financial Officer in May 1996. Prior to joining Gardner Denver, Mr.
Roth was employed by Emerson Electric Co. for fifteen years, most recently
as the Vice President, Finance and Chief Financial Officer of the Wiegand
Industrial Division. Mr. Roth, a Certified Public Accountant, received his
B.S. degree in business administration from the University of Missouri and
an M.B.A. from the Olin School of Business at Washington University.
J. DENNIS SHULL, age 55, 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 Gardner-Denver Industrial
Machinery 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 53, joined the Company as Vice President and General
Manager of the Gardner Denver Pump Division in January 2002. 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 of 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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under "Stock Information" and "Dividends," contained on page
44 of Gardner Denver's 2003 Annual Report to Stockholders, is hereby
incorporated herein by reference.
16
ITEM 6. SELECTED FINANCIAL DATA
The information under "Financial History," contained on page 12 of Gardner
Denver's 2003 Annual Report to Stockholders, is hereby incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under "Management's Discussion and Analysis," contained on
pages 13 through 21 of Gardner Denver's 2003 Annual Report to Stockholders,
is hereby incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under "Management's Discussion and Analysis - Market Risk,"
contained on page 19 of Gardner Denver's 2003 Annual Report to Stockholders,
is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information under "Reports of Independent Public Accountants" and
"Consolidated Financial Statements and Notes," contained on pages 23 through
43 of Gardner Denver's 2003 Annual Report to Stockholders, is hereby
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 26, 2002, the Board of Directors of Gardner Denver, based on the
recommendation of its Audit Committee, dismissed Arthur Andersen LLP
("Andersen") as Gardner Denver's independent public accountants and engaged
KPMG LLP ("KPMG") to serve as Gardner Denver's independent public
accountants for the fiscal year 2002, effective immediately.
Andersen's audit reports on Gardner Denver's consolidated financial
statements for each of the fiscal years ended December 31, 2001 and 2000 did
not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended December 31, 2001 and 2000 and through June
26, 2002, there were no disagreements with Andersen on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Andersen's
satisfaction, would have caused them to make reference to the subject matter
in connection with their report on Gardner Denver's consolidated financial
statements for such years; and there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.
17
Gardner Denver requested Andersen to furnish a letter addressed to the
Securities and Exchange Commission stating whether Andersen agreed with the
statements made above by Gardner Denver. A copy of that letter addressed to
the Securities and Exchange Commission, dated June 28, 2002, was included as
Exhibit 16 to Gardner Denver Inc.'s Form 8-K, filed July 1, 2002.
During the years ended December 31, 2001 and 2000 and through June 26, 2002,
Gardner Denver did not consult KPMG with respect to the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on Gardner
Denver's consolidated financial statements, or any other matters or
reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation
S-K.
ITEM 9a. CONTROLS AND PROCEDURES
As required by Rule 13a-15 of the Exchange Act, the Company has carried out
an evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of December 31, 2003. This
evaluation was carried out under the supervision and with the participation
of the Company's management, including the Chairman, President and Chief
Executive Officer and the Vice President, Finance and Chief Financial
Officer. Based upon that evaluation, the Chairman, President and Chief
Executive Officer and Vice President, Finance and Chief Financial Officer
concluded that the Company's controls and procedures were effective to
provide reasonable assurance that information required to be disclosed in
the Company's periodic SEC reports is recorded, processed, summarized, and
reported as and when required. In addition, they concluded that there were
no changes in the Company's internal control over financial reporting that
occurred during fourth quarter of fiscal 2003 that have materially affected,
or that are reasonably likely to materially affect the Company's internal
control over financial reporting.
In designing and evaluating the disclosure controls and procedures, the
Company's management recognized that any controls and procedures, no matter
how well designed, can provide only reasonable assurances of achieving the
desired control objectives and management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
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 10, 2004, is hereby
incorporated herein by reference. Printed copies of the Company's policy
regarding Corporate Governance and its Code of Ethics and Business Conduct
for directors, executive officers and employees are available to any
stockholder who requests it. Information concerning the Company's executive
officers is contained in Part I of this Annual Report on Form 10-K.
18
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 10, 2004, 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" and "Equity Compensation Plan Information" of the
Gardner Denver Proxy Statement, dated March 10, 2004, is hereby incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is contained in the Gardner Denver Proxy
Statement under "Accounting Fees" and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Annual Report
---------------------------------------------
1. Financial Statements and the related report of independent public
accountants are incorporated by reference to the pages shown below in
Gardner Denver's 2003 Annual Report to Stockholders. Pursuant to Rule
2-02(e) of Regulation S-X, our 2003 Annual Report includes a copy of a prior
year's Report of Independent Public Accountants from the prior independent
public accountants, Arthur Andersen LLP ("Andersen"). The report was
previously issued by Andersen, for our Annual Report for fiscal year 2001
and incorporated by reference into our annual report on Form 10-K for the
year ended December 31, 2001, and has not been reissued by Andersen. The
report refers to previous consolidated financial statements that are not
included in the 2003 Annual Report or this filing (consisting of the
consolidated balance sheet as of December 31, 2000 and the consolidated
statements of operations, stockholders' equity and cash flows for the year
ended December 31, 1999). After reasonable efforts, and due to the fact that
Andersen has ceased operations, we were unable to obtain a reissued report
and Andersen did not consent to the inclusion of its previously issued
report in our 2003 Annual Report or this filing. Because Andersen did not
consent to the inclusion of its report in our 2003 Annual Report or this
filing, it may be difficult to seek remedies against Andersen and the
ability to seek relief against
19
Andersen may be impaired. See Exhibit 23.2 to this annual report on Form
10-K for further discussion.
Page No.
--------
Reports of Independent Public Accountants 23
Consolidated Statements of Operations for Each of
the Three Years in the Period Ended December 31, 2003 24
Consolidated Balance Sheets as of
December 31, 2003 and December 31, 2002 25
Consolidated Statements of Stockholders' Equity for
Each of the Three Years in the Period Ended
December 31, 2003 26
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 2003 27
Notes to Consolidated Financial Statements 28-43
The financial statement schedules listed below should be read in
conjunction with the financial statements listed above. Financial statement
schedules not included in this Annual Report on Form 10-K have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes hereto.
2. Schedules
---------
Report of KPMG S-1
Schedule II - Valuation and Qualifying Accounts S-2
3. Exhibits
--------
2.1 Recommended Cash Offer by UBS Investment Bank on behalf
of GD First (UK) plc for Syltone plc filed as exhibit
99.2 to Gardner Denver, Inc.'s Current Report on Form
8-K, dated January 13, 2004, and incorporated herein by
reference.
2.2 Form of Acceptance, Authority and Election for
Recommended Cash Offer filed as exhibit 99.3 to Gardner
Denver, Inc.'s Current Report on Form 8-K, dated January
13, 2004, 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.
20
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 Rights Agreement dated as of January 18, 1995, between
Gardner Denver Machinery Inc. and First Chicago Trust
Company of New York as Rights Agent, filed as Exhibit 4.0
to Gardner Denver Machinery Inc.'s Current Report on Form
8-K, dated January 18, 1995, (File No. 001-13215) 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 March 6,
2002, among Bank One, NA (formerly known as The First
National Bank of Chicago) and the lenders named therein,
filed as Exhibit 10.0 to Gardner Denver, Inc.'s Form
10-K, dated March 28, 2002, and incorporated herein by
reference.
10.1* Gardner Denver, Inc. Long-Term Incentive Plan, as amended
May 6, 2003 filed as Exhibit 10.1 to Gardner Denver,
Inc.'s Quarterly Report on Form 10-Q dated August 8, 2003
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
entered into 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, 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.
21
10.8* Gardner Denver, Inc. Incentive Stock Option Agreement, as
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,
as 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 Amendment and Consent No. 1 to Amended and Restated
Credit Agreement, dated November 6, 2003.
12 Calculation of Ratio of Earnings to Fixed Charges.
22
13.0 The following portions of the Gardner Denver, Inc. 2003
Annual Report to Stockholders.
Page No.
--------
Financial History 12
Management's Discussion and Analysis 13-21
Reports of Independent Public Accountants 23
Consolidated Statements of Operations 24
Consolidated Balance Sheets 25
Consolidated Statements of Stockholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 28-43
Stock Information 44
Dividends 44
21.0 Subsidiaries of Gardner Denver, Inc.
23.1 Consent of KPMG.
23.2 Information Regarding Consent of Arthur Andersen LLP.
24.0 Powers of Attorney from members of the Gardner Denver
Inc. Board of Directors.
31.1 Certification of Principal Executive Officer Pursuant to
Rule 13a-15(e) or 15d-15(e) 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-15(e) or 15d-15(e) 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.
+ The registrant hereby agrees to furnish supplementally a copy of
any omitted schedules to this agreement to the SEC upon request.
* Indicates management contract or compensatory plan or arrangement.
23
(b) Reports on Form 8-K.
-------------------
The Company filed a Current Report on Form 8-K, dated October 20, 2003,
relating to a press release issued on that date announcing the
Company's earnings for the third quarter and nine months ended
September 30, 2003, certain recent activities, and guidance as to
certain future results.
The Company filed a Current Report on Form 8-K, dated November 13,
2003, relating to a press release which announced the Company's
agreement with the Board of Directors of Syltone plc to recommend an
offer to acquire the outstanding share capital of Syltone plc.
The Company filed a Current Report on Form 8-K/A, dated November 21,
2003, to correct certain previously announced results of Syltone plc
for the six-month period ended September 30, 2003 which were included
in its press release and Form 8-K dated November 13, 2004.
24
SIGNATURES
Pursuant to the requirements of Section 13 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
----------------------------------
Name: Ross J. Centanni
Title: Chairman, President and CEO
Date: March 10, 2004
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/Ross J. Centanni Chairman, President and CEO March 10, 2004
- ------------------------------- (Principal Executive Officer)
(Ross J. Centanni) and Director
/s/Philip R. Roth Vice President, Finance and CFO March 10, 2004
- ------------------------------- (Principal Financial Officer)
(Philip R. Roth)
/s/Daniel C. Rizzo, Jr. Vice President and Corporate March 10, 2004
- ------------------------------- Controller (Chief Accounting
(Daniel C. Rizzo, Jr.) Officer)
*Donald G. Barger, Jr. Director March 10, 2004
(Donald G. Barger, Jr.)
*Frank J. Hansen Director March 10, 2004
(Frank J. Hansen)
*Raymond R. Hipp Director March 10, 2004
(Raymond R. Hipp)
*Thomas M. McKenna Director March 10, 2004
(Thomas M. McKenna)
*Diane K. Schumacher Director March 10, 2004
(Diane K. Schumacher)
*Richard L. Thompson Director March 10, 2004
(Richard L. Thompson)
*By /s/Tracy D. Pagliara
--------------------
(Tracy D. Pagliara, as Attorney-In-Fact
for each of the persons indicated)
25
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Gardner Denver, Inc.:
Under date of January 30, 2004, we reported on the consolidated balance
sheet of Gardner Denver, Inc. and subsidiaries (the Company) as of December
31, 2003 and 2002 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the two-year
period ended December 31, 2003, which are included in the 2003 annual report
on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule included in the 2003 annual report on Form
10-K. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. The consolidated financial
statements and the related financial statement schedule of Gardner Denver,
Inc. for the year ended December 31, 2001 were audited by other auditors who
have ceased operations. In their report dated February 6, 2002, except with
respect to the matter discussed in Note 9, as to which the date is March 6,
2002, those auditors stated that the supplementary information for the year
ended December 31, 2001, included in the consolidated financial statement
schedule was subjected to auditing procedures applied in their audit of the
2001 basic financial statements and, in their opinion, fairly stated in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements for the year ended December 31,
2001, taken as a whole.
In our opinion, such financial statement schedule for the years ended
December 31, 2003 and 2002, 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.
Our report refers to a change in accounting for goodwill and other intangible
assets for the year ended December 31, 2002.
/s/ KPMG LLP
St. Louis, Missouri
January 30, 2004
S-1
26
PREVIOUS INDEPENDENT AUDITORS' REPORT
-------------------------------------
Pursuant to Rule 2-02(e) of Regulation S-X, below is a copy of a prior
year's Report of Independent Public Accountants from the prior independent
public accountants, Arthur Andersen LLP ("Andersen"). This report was
previously issued by Andersen, for filing with our annual report on Form
10-K for fiscal year 2001. This report refers to previous consolidated
financial statements that are not included in the 2003 annual report on Form
10-K (consisting of the consolidated balance sheet as of December 31, 2000
and the consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1999). After reasonable efforts, and
due to the fact that Andersen has ceased operations, we have been unable to
obtain a reissued report and Andersen has not consented to the inclusion of
its previously issued report in this 2003 annual report on Form 10-K.
Because Andersen has not consented to the inclusion of its report in this
annual report on Form 10-K, it may be difficult to seek remedies against
Andersen and the ability to seek relief against Andersen may be impaired.
See Exhibit 23.2 to this annual report on Form 10-K for further discussion.
To Gardner Denver, Inc.
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements included in Gardner
Denver, Inc.'s. 2001 Annual Report to Stockholders incorporated by reference
in this Form 10-K, and have issued our report thereon dated February 6, 2002
(except with respect to the matter discussed in Note 9, as to which the date
is March 6, 2002). Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. Schedule II included in this Form 10-K
is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
February 6, 2002
(except with respect to the matter discussed in
Note 9, as to which the date is March 6, 2002)
27
GARDNER DENVER, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31,
(dollars in thousands)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION YEAR EXPENSES ACCOUNTS (1) DEDUCTIONS YEAR
----------- ------------ ---------- ------------ ---------- ----------
2003
- ----
Allowance for doubtful accounts $5,279 $ 795 $ 170 $(1,710) $4,534
2002
- ----
Allowance for doubtful accounts $5,229 $1,905 $ 303 $(2,158) $5,279
2001
- ----
Allowance for doubtful accounts $5,169 $ 708 $ 454 $(1,102) $5,229
(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.
S-2
28
GARDNER DENVER, INC.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
2.1 Recommended Cash Offer by UBS Investment Bank on behalf of GD First
(UK) plc for Syltone plc filed as exhibit 99.2 to Gardner Denver,
Inc.'s Current Report on Form 8-K, dated January 13, 2004, and
incorporated herein by reference.
2.2 Form of Acceptance, Authority and Election for Recommended Cash
Offer filed as exhibit 99.3 to Gardner Denver, Inc.'s Current
Report on Form 8-K, dated January 13, 2004, 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 Rights Agreement dated as of January 18, 1995, between Gardner
Denver Machinery Inc. and First Chicago Trust Company of New York
as Rights Agent, filed as Exhibit 4.0 to Gardner Denver Machinery
Inc.'s Current Report on Form 8-K, dated January 18, 1995, (File
No. 001-13215) 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 March 6, 2002, among
Bank One, NA (formerly known as The First National Bank of Chicago)
and the lenders named therein, filed as Exhibit 10.0 to Gardner
Denver, Inc.'s Form 10-K, dated March 28, 2002, and incorporated
herein by reference.
10.1* Gardner Denver, Inc. Long-Term Incentive Plan, as amended May 6,
2003 filed as Exhibit 10.1 to Gardner Denver, Inc.'s Quarterly
Report on Form 10-Q dated August 8, 2003 and incorporated herein by
reference.
29
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, 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-K 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.
30
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 Amendment and Consent No. 1 to Amended and Restated Credit
Agreement, dated November 6, 2003.
12 Calculation of Ratio of Earnings to Fixed Charges.
13.0 The following portions of the Gardner Denver, Inc. 2003 Annual
Report to Stockholders.
Page No.
--------
Financial History 12
Management's Discussion and Analysis 13-21
Reports of Independent Public Accountants 23
Consolidated Statements of Operations 24
Consolidated Balance Sheets 25
Consolidated Statements of Stockholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 28-43
Stock Information 44
Dividends 44
21.0 Subsidiaries of Gardner Denver, Inc.
23.1 Consent of KPMG.
23.2 Information Regarding Consent of Arthur Andersen, LLP.
24.0 Powers of Attorney from members of the Gardner Denver, Inc. Board
of Directors.
31.1 Certification of Principal Executive Officer Pursuant to Rule
13a-15(e) or 15d-15(e) 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-15(e) or 15d-15(e) 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.
31
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.
+ The registrant hereby agrees to furnish supplementally a copy of any
omitted schedules to this Agreement to the SEC upon request.
* Indicates management contract or compensatory plan or arrangement.
32