UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One):
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 001 - 14097
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
| |
| | SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN |
| |
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
| |
| | Sauer-Danfoss Inc.
250 Parkway Drive, Suite 270
Lincolnshire, Illinois 60069 |
REQUIRED INFORMATION
The following plan financial statements, schedules, and reports have been prepared in accordance with the financial reporting requirements of ERISA.
1. Financial Statements:
Report of Independent Registered Public Accounting Firm, KPMG LLP
Statements of Net Assets Available for Benefits as of December 31, 2003 and 2002
Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2003 and 2002
Notes to Financial Statements
Supplemental Schedules:
Schedule H Line 4i - Schedule of Assets Held for Investment Purposes as of December 31, 2003
2. Exhibits:
23 Consent of KPMG LLP, Independent Registered Public Accounting Firm
32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized.
Dated: June 23, 2004
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
By: Sauer–Danfoss (US) Company,
Plan Administrator
By: Kenneth D. McCuskey
Kenneth D. McCuskey,Vice President
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Financial Statements and Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Table of Contents
| Page |
| Report of Independent Registered Public Accounting Firm | 1 |
| |
| Statements of Net Assets Available for Benefits | 2 |
| |
| Statements of Changes in Net Assets Available for Benefits | 3 |
| |
| Notes to Financial Statements | 4 |
| |
| Schedule |
| |
| 1 Schedule H Line 4i - Schedule of Assets Held for Investment Purposes | 11 |
Report of Independent Registered Public Accounting Firm
Employee Benefit Committee
Sauer-Danfoss Employees' Savings Plan:
We have audited the accompanying statements of net assets available for benefits of the Sauer-Danfoss Employees' Savings Plan as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Sauer-Danfoss Employee Savings Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedule of assets held for investment purposes is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. This supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
KPMG LLP
May 14, 2004
Des Moines, Iowa
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
| | | 2003 | | 2002 |
| Assets: | | | | |
| | Investments | $ | 74,434,564 | | 59,095,999 |
| | Employer contributions receivable | | 69,064 | | --- |
| | Employee contributions receivable | | 250,274 | | --- |
| | | Net assets available for benefits | $ | 74,754,002 | | 59,095,999 |
See accompanying notes to financial statements. |
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
| | | 2003 | | 2002 |
| Additions to net assets attributed to: |
| | Contributions: |
| | | Employees | $ | 5,435,587 | | 4,964,860 |
| | | Employer | | 1,924,525 | | 1,734,456 |
| | Rollovers | | 310,130 | | 213,278 |
| | Investment income | | 1,785,107 | | 1,820,663 |
| | Net realized and unrealized gains on plan investments | | 9,683,016 | | --- |
| | | Total additions | | 19,138,365 | | 8,733,257 |
| |
| Deductions from net assets attributed to: |
| | Net realized and unrealized losses on plan investments | | --- | | 8,983,813 |
| | Benefits paid | | 3,325,356 | | 3,320,421 |
| | Fees | | 147,237 | | 132,495 |
| | Premiums | | 29,628 | | 35,167 |
| | Other Deductions | | 1,075 | | 178,769 |
| | | Total deductions | | 3,503,296 | | 12,650,665 |
| |
| Transfers from other plans, net | | 22,934 | | 2,464,531 |
| | Net increase (decrease) in net assets available for benefits | | 15,658,003 | | (1,452,877) |
| |
| Net assets available for benefits: | |
| | Beginning of year | | 59,095,999 | | 60,548,876 |
| | End of year | $ | 74,754,002 | | 59,095,999 |
See accompanying notes to financial statements. |
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
Years ended December 31, 2003 and 2002
(1) Description of the Plan
The following description of Sauer-Danfoss Employees' Savings Plan (the Plan) provides only general information. Participants should refer to the Plan's agreement for a more complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan which generally covers person regularly employed by Sauer Danfoss (US) Company and its affiliates (collectively, the "Company") in the US.
Excluded from coverage are persons covered by a collective bargaining agreement between employee representatives and the Company where retirement benefits are subject of the good faith bargaining between the parties. Also excluded from coverage are persons regularly employed on a temporary or irregular basis for fewer than 1,000 hours per year, until the time that such person completes 1,000 hours of service in a consecutive twelve month period.
Effective January 1, 2002, the Compact Controls, Inc. 401(k) Profit Sharing Plan (the CCI Plan) was merged with and into Plan. The transfer of the accounts of all participants in the CCI Plan into the Plan was completed on January 2, 2002. Transfers in the amount of $1,800,560, which are included in "transfers from other plans, net," were made to the Plan on that date.
(b) Administration
The Plan is administered by the Employee Benefit Committee of the Company (the Plan Administrator).
(c) Trustee
AMVESCAP National Trust Company has been designated as trustee of the Plan.
(d) Contributions
The Plan is funded primarily by employee contributions. Participating employees may contribute a percentage of their eligible compensation ranging from 1% to 21%. Annual contributions, including life insurance purchased, may not exceed $12,000 and $11,000 in 2003 and 2002, respectively as indexed by the Internal Revenue Service. The Plan also places certain restrictions on contributions from those employees defined as highly compensated.
Participating employees are generally entitled to receive employer contributions into the Plan on their behalf. Employees that continue to accrue a benefit under the final average pay formula in the Sauer-Danfoss Employees' Retirement Plan, a separate defined benefit pension plan maintained by the Company, are ineligible to receive employer contributions into the Plan.
For employees receiving such contributions, the employer contributions consist of two components:
- A base contribution equal to 2% of the employee's eligible compensation; and
- A matching contribution equal to 50% of the employee's contribution, subject to a maximum matching contribution of 2% of eligible compensation.
(e) Participant Accounts
Participants have the option to invest contributions in the following funds:
- INVESCO Stable Value Trust Fund
- INVESCO Structured Small Cap Value Equity Trust Fund
- INVESCO Total Return Fund
- INVESCO 500 Index Trust Fund
- INVESCO Dynamics Fund
- INVESCO Small Company Growth Fund
- INVESCO International Equity Trust Fund
- Fidelity Equity Income Fund
- AIM Blue Chip Fund
- PIMCO Total Return Fund
- Lord Abbett Mid Cap Value Fund
Participants can also invest in the Sauer-Danfoss Inc. Stock Fund, which invests in the common stock of Sauer-Danfoss Inc., the Company's parent.
Participant accounts are credited for contributions and allocations of Plan earnings or loss. Plan earnings or losses are allocated to participants based upon their relative percentages of each fund's investment account balance.
In addition, prior to August 30, 1998, participants were able to elect to invest in a life insurance fund which purchased coverage for the participant and/or their families. Life insurance policies purchased prior to August 30, 1998 continue to be maintained under the Plan but new investments in the life insurance fund are no longer permitted. Assets invested in participant life insurance coverage are excluded from Plan assets.
Participants may also elect to borrow up to amounts defined in the Plan. Participant loans amounting to $2,449,112 and $2,381,846 at December 31, 2003 and 2002, respectively, are included in investments. Interest rates ranged from 5.50% to 11.00% at December 31, 2003 and 5.75% to 11.00% at December 31, 2002.
(f) Vesting
Participants are immediately vested in their own voluntary contributions and earnings thereon.
The interests of participants in the employer contributions and earnings thereon vest as follows:
- Upon termination of employment at or after age sixty-five - 100%.
- Upon death or disability - 100%.
- Upon any other termination of employment, the following vesting schedule is applicable:
| Years of service | | Vesting percentage | |
| Less than 3 | | --- | % |
| 3 or more | | 100 | % |
(g) Payment of Benefits
While still employed, a participant may, for certain documented hardship reasons, make a withdrawal from his or her Participant's Contribution Account at any time. While still employed, a participant may also withdraw all or any portion of his or her vested Plan benefit upon attaining age 59 1/2 or becoming disabled.
On termination of service for any reason other than death, a participant may elect to receive an amount equal to the value of the participant's vested interest in his or her account in either a lump-sum payment or in quarterly, semi-annual or annual installments over a fixed period of time that is not less than two years and not more than the joint life expectancy of the participant and his or her beneficiary. On termination of service by reason of death, the participant's beneficiary(ies) may elect to receive an amount equal to the value of the participant's vested interest in his or her account in either a lump-sum payment or in quarterly, semi-annual or annual installments over a fixed period of time that is not less than two years and not more than five years.
Distributions are generally payable in cash. A participant may elect to receive amounts distributed from the Sauer-Danfoss Inc. Stock Fund in whole shares, with any fractional shares paid in cash.
(h) Plan Expenses
Administrative expenses of the Plan are paid by the Company, except for mutual fund investment fees which are paid by the Plan.
(i) Forfeitures
Forfeited nonvested accounts will be used to reduce future employer contributions. Employer contributions were reduced by $330 and $65,923 from forfeited nonvested accounts in 2003 and 2002, respectively.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements of the Plan have been prepared on an accrual basis and present the net assets available for benefits and changes in those assets. The Plan's assets consist of the assets of the Sauer-Danfoss Employees' Savings Plan Trust (the Trust).
The Plan Administrator has made certain estimates and assumptions relating to the reporting of assets, and changes thereto in preparing these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.
(b) Valuation of Investments
Investments in mutual funds are valued at quoted market prices, if available. Investments not having an established market are valued at fair value, as determined by the trustee.
Investments in participant loans are valued at their unpaid balance.
Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses from security transactions are reported on the average cost method.
(c) Federal Income Taxes
The Internal Revenue Service has determined and informed the Company by a letter dated February 22, 2001 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Continued qualification of the Plan will depend on the operation of the Plan in compliance with the IRC.
(3) The Trust
The fair value of investments of the Trust at December 31, 2003 and 2002 were as follows:
| | | 2003 | | 2002 |
| INVESCO Stable Value Trust Fund (1) (2) | $ | 21,882,610 | | 21,393,224 |
| INVESCO Select Income Fund (1) | | --- | | 906,018 |
| INVESCO Structured Small Cap Value Equity Trust Fund (1) | | 381,864 | | --- |
| INVESCO Total Return Fund (1) (2) | | 7,373,830 | | 5,728,290 |
| INVESCO 500 Index Trust Fund (1) (2) | | 5,273,785 | | 3,587,275 |
| INVESCO Dynamics Fund (1) | | 3,163,985 | | 1,941,774 |
| INVESCO Small Company Growth Fund (1) | | 3,695,681 | | 2,337,652 |
| INVESCO International Equity Trust Fund (1) | | 2,993,651 | | 2,045,385 |
| Fidelity Equity Income Fund (2) | | 15,917,489 | | 12,271,881 |
| AIM Blue Chip Fund (1) (2) | | 8,115,448 | | 5,802,387 |
| PIMCO Total Return Fund | | 1,635,567 | | --- |
| Lord Abbett Mid Cap Value Fund | | 452,775 | | --- |
| Sauer-Danfoss Inc. Stock Fund (1) | | 1,098,767 | | 700,267 |
| Participant loans | | 2,449,112 | | 2,381,846 |
| | $ | 74,434,564 | | 59,095,999 |
(1) Party-in-interest of the Plan.
(2) Investments comprising more than 5% of net assets available for benefits.
Investment income and net realized and unrealized appreciation (depreciation) in the fair value of investments for 2003 and 2002 were as follows:
| | | 2003 | | 2002 |
| Interest | $ | 171,727 | | 200,039 |
| Dividends | | 1,613,380 | | 1,620,624 |
| Net realized and unrealized appreciation (depreciation): |
| | INVESCO Select Income Fund (1) | | 18,733 | | (27,286) |
| | INVESCO Structured Small Cap Value Equity Trust Fund (1) | | 67,820 | | --- |
| | INVESCO Total Return Fund (1) | | 902,405 | | (1,071,434) |
| | INVESCO 500 Index Trust Fund (1) | | 1,123,856 | | (941,224) |
| | INVESCO Dynamics Fund (1) | | 795,588 | | (824,437) |
| | INVESCO Small Company Growth Fund (1) | | 865,918 | | (1,035,495) |
| | INVESCO International Equity Trust Fund (1) | | 701,987 | | (232,469) |
| | Fidelity Equity Income Fund | | 3,003,805 | | (2,852,617) |
| | AIM Blue Chip Fund (1) | | 1,541,807 | | (2,026,593) |
| | PIMCO Total Return Fund | | (16,482) | | --- |
| | Lord Abbett Mid Cap Value Fund | | 52,733 | | --- |
| | Sauer-Danfoss Inc. Stock Fund (1) | | 624,846 | | 27,742 |
| | $ | 11,468,123 | | (7,163,150) |
(1) Party-in-interest of the Plan.
(4) Plan Termination
While the Company has not expressed any intent to terminate the Plan, it is free to do so at any time. Upon termination of the Plan, each participant's account shall be fully vested and nonforfeitable.
Schedule 1
SAUER-DANFOSS EMPLOYEES' SAVINGS PLAN
Schedule H Line 4i - Schedule of Assets Held for Investment Purposes
December 31, 2003| Identity of party and description of investment | | Units | | Cost | | Current value |
| INVESCO Stable Value Trust Fund (1) | | 21,882,610 | $ | 21,882,610 | $ | 21,882,610 |
| INVESCO Structured Small Cap Value Equity Trust Fund (1) | | 4,631 | | 325,836 | | 381,864 |
| INVESCO Total Return Fund (1) | | 308,013 | | 7,802,326 | | 7,373,830 |
| INVESCO 500 Index Trust Fund (1) | | 188,484 | | 5,362,842 | | 5,273,785 |
| INVESCO Dynamics Fund (1) | | 214,653 | | 3,749,852 | | 3,163,985 |
| INVESCO Small Company Growth Fund (1) | | 332,345 | | 4,207,129 | | 3,695,681 |
| INVESCO International Equity Trust (1) | | 141,477 | | 2,628,861 | | 2,993,651 |
| Fidelity Equity Income Fund | | 319,950 | | 15,422,919 | | 15,917,489 |
| AIM Blue Chip Fund (1) | | 724,594 | | 8,660,460 | | 8,115,448 |
| PIMCO Total Return Fund | | 152,714 | | 1,654,136 | | 1,635,567 |
| Lord Abbett Mid Cap Value Fund | | 24,045 | | 401,193 | | 452,775 |
| Sauer-Danfoss Inc. Stock Fund (1) | | 71,721 | | 670,653 | | 1,098,767 |
| Participant loans - interest rates ranged |
| | from 5.50% to 11.00% | | N/A | | 2,449,112 | | 2,449,112 |
| | $ | 75,217,929 | $ | 74,434,564 |
| (1)Party-in-interest |
| See accompanying report of independent registered public accounting firm. |
Exhibit 23
Consent of Independent Registered Public Accounting Firm
Employee Benefit Committee Sauer-Danfoss
Employees' Savings Plan
Ames, Iowa:
We consent to incorporation by reference in the Registration Statement No. 333-93745 on Form S-8 of Sauer-Danfoss Inc. of our report dated May 14, 2004, with respect to the statements of net assets available for benefits of the Sauer-Danfoss Employees' Savings Plan as of December 31, 2003 and 2002, the related statements of changes in net assets available for benefits for the years then ended, and the related supplementary schedule of assets held for investment purposes at December 31, 2003, which report appears in the December 31, 2003 Annual Report on Form 11-K of the Sauer-Danfoss Employees' Savings Plan.
KPMG LLP
Des Moines, Iowa
June 23, 2004
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of the Sauer-Danfoss Employees' Savings Plan (the "Plan") on Form 11-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission (the "SEC") on the date hereof (the "Report"), each of the undersigned, David J. Anderson, Chief Executive Officer of Sauer-Danfoss Inc. (the "Company"), and Karl J. Schmidt, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
- The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); and
- The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Plan.
| Dated: June 23, 2004 | David J. Anderson |
| | David J. Anderson |
| | President and Chief Executive Officer |
| |
| Dated: June 23, 2004 | Karl J. Schmidt |
| | Karl J. Schmidt |
| | Executive Vice President and
Chief Financial Officer |
This certification is being furnished to the SEC as an exhibit to the Report and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise to be subject to the liabilities of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
