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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended July 2, 1994
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Commission File Number 1-7724
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SNAP-ON INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 39-0622040
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 - 80TH STREET, KENOSHA, WISCONSIN 53141-1410
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (414) 656-5200
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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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT JULY 29, 1994
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Common Stock, $1.00 par value 42,848,383 Shares
Page 1 of 11 Pages
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SNAP-ON INCORPORATED
INDEX
PAGE NO.
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Part I. Financial Information:
Consolidated Balance Sheets -
July 2, 1994 and January 1, 1994 3-4
Consolidated Statements of Earnings -
Thirteen Weeks and Twenty-Six Weeks
Ended July 2, 1994 and July 3, 1993 5
Consolidated Statements of Cash Flows -
Twenty-Six Weeks Ended July 2, 1994 and
July 3, 1993 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II. Other Information 10
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PART I. FINANCIAL INFORMATION
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 2, JANUARY 1,
1994 1994
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 19,102 $ 6,729
Receivables Less Allowances 541,416 539,949
Inventories:
Finished Stock 195,862 185,260
Work-in-Process 15,899 19,292
Raw Materials 38,430 44,550
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Total Inventories 250,191 249,102
Prepaid Expenses 58,566 58,818
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Total Current Assets 869,275 854,598
PROPERTY AND EQUIPMENT - AT COST
Land 25,233 27,209
Buildings and Improvements 143,853 142,438
Machinery and Equipment 289,753 282,222
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458,839 451,869
Less Accumulated Depreciation (235,728) (227,059)
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Total Property and Equipment 223,111 224,810
Deferred Income Tax Benefit 55,357 53,819
Intangible and Other Assets 94,792 85,706
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TOTAL ASSETS $1,242,535 $1,218,933
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</TABLE>
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SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 2, JANUARY 1,
1994 1994
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<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 60,862 $ 66,288
Accounts Payable 39,353 57,280
Dividends Payable 11,565 -
Accrued Compensation 28,703 33,515
Accrued Retirement Plans, Insurance and Other 86,415 80,327
Accrued Income Taxes 15,389 8,474
Dealer Deposits 62,161 62,153
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Total Current Liabilities 304,448 308,037
Long-Term Debt, Less Current Maturities 99,555 99,683
Deferred Income Taxes 4,491 7,413
Retiree Health Care Benefits - Long-Term 72,557 70,791
Pension - Long-Term 36,033 31,346
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TOTAL LIABILITIES 517,084 517,270
SHAREHOLDERS' EQUITY
Preferred Stock - Authorized 15,000,000 shares
of $1 par value; none outstanding - -
Common Stock - Authorized 125,000,000 shares
of $1 par value; issued -
July 2, 1994, 43,080,988 shares;
January 1, 1994, 42,818,696 shares 43,081 42,819
Additional Contributed Capital 60,217 52,153
Retained Earnings 646,339 632,022
Foreign Currency Translation Adjustment (14,874) (16,019)
Less Treasury Stock (250,000 shares) (9,312) (9,312)
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TOTAL SHAREHOLDERS' EQUITY 725,451 701,663
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TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $1,242,535 $1,218,933
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</TABLE>
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SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
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JULY 2, JULY 3, JULY 2, JULY 3,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Net Sales $298,752 $272,718 $597,529 $543,392
Cost of Goods Sold 142,665 125,879 287,972 257,615
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Gross Profit 156,087 146,839 309,557 285,777
Operating Expenses 113,375 109,796 227,242 218,088
Other Income (Expense) - Net (2,368) (2,592) (4,728) (4,133)
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Earnings Before Income Taxes 40,344 34,451 77,587 63,556
Income Taxes 14,245 12,089 28,654 22,690
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Net Earnings $ 26,099 $ 22,362 $ 48,933 $ 40,866
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Earnings Per Weighted
Average Common Share $ .61 $ .52 $ 1.15 $ .96
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Dividends Declared Per
Common Share (Note 1) $ .54 $ .54 $ .81 $ .81
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Weighted Average Common
Shares Outstanding 42,719 42,475 42,719 42,475
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</TABLE>
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SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
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JULY 2, JULY 3,
1994 1993
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<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $48,933 $40,866
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation 14,498 15,118
Amortization 1,936 1,357
Deferred Income Taxes (5,153) (2,828)
Gain on Sale of Assets (49) (194)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Receivables (1,468) 25,775
(Increase) Decrease in Inventories (1,089) (30,442)
(Increase) Decrease in Prepaid Expenses (1,773) (177)
Increase (Decrease) in Accounts Payable (17,927) (8,911)
Increase (Decrease) in Accruals, Deposits
and Other Long-Term Liabilities 15,291 (4,581)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 53,199 35,983
INVESTING ACTIVITIES
Capital Expenditures (19,909) (16,544)
Disposal of Property and Equipment 7,159 1,689
(Increase) Decrease in Other Noncurrent Assets (8,995) (937)
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NET CASH USED IN INVESTING ACTIVITIES (21,745) (15,792)
FINANCING ACTIVITIES
Increase (Decrease) in Long-Term Debt (75) 5,495
Increase (Decrease) in Notes Payable (5,426) (42,797)
Proceeds from Stock Plans 8,326 4,258
Cash Dividends Paid (23,052) (22,927)
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NET CASH USED IN FINANCING ACTIVITIES (20,227) (55,971)
EFFECT OF EXCHANGE RATE CHANGES 1,146 (3,380)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,373 (39,160)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 6,729 58,973
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $19,102 $19,813
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</TABLE>
Interest paid during the first six months was approximately $6.1 million
compared with $6.0 million for the first six months of 1993. Income tax
payments for the first six months, 1994 were approximately $28.8 million
compared with $34.2 million for the same period last year.
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SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. Snap-on Incorporated normally declares and pays in cash four regular,
quarterly dividends. However, the third quarter dividend in each year is
declared in June, giving rise to two regular quarterly dividends appearing
in the second quarter statements and correspondingly, three regular
quarterly dividends appearing in the first twenty-six weeks' statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary to a fair statement of results of operations
for the twenty-six weeks ended July 2, 1994 have been made. Management also
believes that the results of operations for the twenty-six weeks ended July 2,
1994 are not necessarily indicative of the results to be expected for the full
year.
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This report should be read in conjunction with the consolidated financial
statements and related notes included in Snap-on Incorporated's Annual Report
for the year ended January 1, 1994.
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SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW: Consolidated net sales for the second quarter 1994 increased 9.5%,
while net earnings increased 16.7% from the second quarter last year. Six month
consolidated net sales rose 10.0% while net earnings increased 19.7% from a year
ago. The results reflected continued sales improvement from the Corporation's
Sun Electric subsidiary, higher sales to U.S. dealers, a continued strong gross
profit margin, and improved operating expenses as a percentage of sales.
SALES: Net sales for the second quarter were $298.8 million compared with
$272.7 million for the second quarter last year. Six month consolidated net
sales were $597.5 million, up from $543.4 million for the same period in 1993.
North American sales for the second quarter 1994 increased 6.8% to $235.4
million from the $220.5 million reported during the second quarter last year.
Six month North American sales were $452.7 million, or about 5.0% increase over
the same period last year.
Sales outside of North America increased 21.4% to $63.4 million in the second
quarter 1994 from $52.2 million a year ago. Sales for the first six months of
1994 were $144.8 million, a 29.0% improvement from the $112.2 million reported
in 1993. European sales for the second quarter were up 23.0% and continued to
benefit from sales related to the German emissions program which is now
substantially complete. As planned, a lower level of emissions equipment sales
were realized in the second quarter 1994 when compared with the first quarter
1994.
EARNINGS: On a per share basis, second quarter earnings increased to $.61, up
from $.52 in the same period last year. Earnings per share for the first six
months of 1994 were $1.15 compared to $.96 for the first six months in 1993.
OPERATING EXPENSES: Operating expenses in the second quarter 1994 were $113.4
million versus $109.8 million in the second quarter 1993. As a percentage of
net sales, operating expenses dropped to 38.0% from 40.3% in the second quarter
of 1993 including reduced legal expense for the quarter. Operating expenses for
the first six months were $227.2 versus $218.1 million for the same period last
year. As a percentage of net sales, operating expenses decreased to 38.0% from
40.1% for the first six months of 1993.
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FINANCIAL CONDITION
OVERVIEW: Snap-on Incorporated finished the second quarter in strong
financial condition. The Corporation continues to generate positive cash flow,
reduce short-term debt, and increase working capital.
LIQUIDITY: Working capital increased to $564.8 million during the quarter
from $546.6 million at the end of 1993. The ratio of current assets to current
liabilities was 2.9 to 1 at the end of the quarter compared with 2.8 to 1 at the
end of 1993. Cash and short-term investments increased to $19.1 million at the
end of the second quarter 1994 from $6.7 million at the end of 1993. At the end
of the quarter, the Corporation had bank lines of credit totaling $170.0 million
that required compensating balances, of which $34.1 million was unused and
available for short-term borrowings. Cash from operations, coupled with these
sources of borrowing, are sufficient to support current and future working
capital requirements, finance capital expenditures, and pay dividends.
ACCOUNTS RECEIVABLE: Accounts receivable increased slightly in the second
quarter to $541.4 million compared to $539.9 million at the end of 1993. Most
receivables involved customers' extended credit purchases of higher-value
products. Remaining receivables included those from dealers, industrial and
international customers, and government.
INVENTORIES: Inventories increased slightly during the first six months to
$250.2 million, up from $249.1 million at the end of 1993. The increase was
mainly due to expansion in our international and equipment markets.
LIABILITIES: Short-term debt at the end of the second quarter was $60.9
million compared with $66.3 million at the end of 1993. Long-term debt as a
percentage of shareholders' equity was 13.7% compared with 14.2% at the end of
1993. Total long-term debt stands at $99.6 million down from $99.7 million at
year-end 1993. The Corporation has no plans for additional long-term debt at
this time.
INTEREST EXPENSE: Interest expense for the second quarter 1994 was $3.2
million compared with $2.6 million for the same period last year. For the first
six months, interest expense was $6.2 million compared with $5.4 million last
year. The reason for the increase is due to the rise in short-term interest
rates.
EFFECTIVE TAX RATE: The effective tax rate was 35.3% for the quarter and
36.9% year-to-date, compared with 35.1% and 35.7% for the same periods last
year.
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PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6(A): EXHIBITS
None.
ITEM 6(B): REPORTS ON FORM 8-K
No reports on Form 8-K for the three months ended July 2, 1994 were
required to be filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Snap-on Incorporated has duly caused this report to be signed on its behalf by
the undersigned duly authorized persons.
SNAP-ON INCORPORATED
Date: 8-15-94 /s/ R. A. CORNOG
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R. A. CORNOG
(Chairman, President and Chief Executive Officer)
Date: 8-15-94 /s/ G. D. JOHNSON
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G. D. JOHNSON
(Principal Accounting Officer and Controller)
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