<PAGE>
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 OCTOBER 1, 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
- - - - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 - 80th Street, Kenosha, Wisconsin 53141-1410
- - - - ------------------------------------------------------
(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
----- -----
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 October 28, 1994
- - - - ------------------------------------- --------------------------------
Common Stock, $1.00 par value 42,865,796 Shares
Page 1 of 11 Pages
<PAGE>
SNAP-ON INCORPORATED
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets -
October 1, 1994 and January 1, 1994 3-4
Consolidated Statements of Earnings -
Thirteen Weeks and Thirty-Nine Weeks
Ended October 1, 1994 and October 2, 1993 5
Consolidated Statements of Cash Flows -
Thirty-Nine Weeks Ended October 1, 1994
and October 2, 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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<PAGE>
PART I. FINANCIAL INFORMATION
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
October 1, January 1,
1994 1994
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 12,802 $ 6,729
Receivables Less Allowances 538,522 539,949
Inventories:
Finished Stock 195,200 185,260
Work-in-Process 18,214 19,292
Raw Materials 39,339 44,550
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Total Inventories 252,753 249,102
Prepaid Expenses and Other Assets 62,046 58,818
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Total Current Assets 866,123 854,598
PROPERTY AND EQUIPMENT - AT COST
Land 18,756 27,209
Buildings and Improvements 129,373 142,438
Machinery and Equipment 284,237 282,222
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432,366 451,869
Less Accumulated Depreciation (232,646) (227,059)
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Total Property and Equipment 199,720 224,810
Deferred Income Tax Benefit 58,011 53,819
Intangible and Other Assets 87,381 85,706
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TOTAL ASSETS $1,211,235 $1,218,933
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---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
October 1, January 1,
1994 1994
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<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 25,131 $ 66,288
Accounts Payable 37,231 57,280
Accrued Compensation 32,965 33,515
Accrued Retirement Plans, Insurance and Other 82,215 80,327
Accrued Income Taxes 11,852 8,474
Dealer Deposits 62,645 62,153
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Total Current Liabilities 252,039 308,037
Long-Term Debt, Less Current Maturities 88,430 99,683
Deferred Income Taxes 4,625 7,413
Retiree Health Care Benefits - Long-Term 73,732 70,791
Pension - Long-Term 38,887 31,346
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TOTAL LIABILITIES 457,713 517,270
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 and outstanding -
October 1, 1994, 42,860,668 shares;
January 1, 1994, 42,818,696 shares 43,111 42,819
Additional Contributed Capital 61,052 52,153
Retained Earnings 669,039 632,022
Foreign Currency Translation Adjustment (10,368) (16,019)
Less: Treasury Stock (250,000 shares) (9,312) (9,312)
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TOTAL SHAREHOLDERS' EQUITY 753,522 701,663
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TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $1,211,235 $1,218,933
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---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- ------------------------
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Net Sales $278,359 $271,096 $875,888 $814,488
Cost of Goods Sold 137,588 130,337 425,560 387,952
-------- -------- -------- --------
Gross Profit 140,771 140,759 450,328 426,536
Operating Expenses 108,924 106,050 336,166 324,138
Other Income (Expense) - Net 1,536 (3,355) (3,192) (7,488)
-------- -------- -------- --------
Earnings Before Income Taxes 33,383 31,354 110,970 94,910
Income Taxes 10,677 10,818 39,331 33,508
-------- -------- -------- --------
Net Earnings $ 22,706 $ 20,536 $ 71,639 $ 61,402
-------- -------- -------- --------
-------- -------- -------- --------
Earnings Per Weighted
Average Common Share $ .53 $ .48 $ 1.68 $ 1.44
-------- -------- -------- --------
-------- -------- -------- --------
Dividends Declared Per
Common Share (Note 3) $ - $ - $ .81 $ .81
-------- -------- -------- --------
-------- -------- -------- --------
Weighted Average Common
Shares Outstanding 42,765 42,552 42,765 42,552
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
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October 1, October 2,
1994 1993
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<S> <C> <C>
CASH PROVIDED FROM OPERATIONS
Net Earnings $ 71,639 $ 61,402
Depreciation 20,741 21,993
Amortization 2,702 2,057
Deferred Income Taxes (8,046) (6,212)
Gain on Sale of Assets (76) (402)
Gain on Disposition of Business (2,804) -
Changes in Operating Assets and Liabilities:
Decrease in Receivables 1,507 4,347
(Increase) Decrease in Inventories 1,637 (51,352)
Increase in Prepaid Expenses (7,054) (12,021)
Decrease in Accounts Payable (20,180) (3,780)
Increase (Decrease) in Accruals, Deposits
and Other Long-Term Liabilities 15,710 (6,944)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 75,776 9,088
INVESTING ACTIVITIES
Capital Expenditures (27,287) (22,423)
Acquisition of Business (4,141) (14,645)
Disposition of Business 26,611 -
Disposal of Property and Equipment 9,178 5,933
Increase in Other Noncurrent Assets (4,681) (799)
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NET CASH USED IN INVESTING ACTIVITIES (320) (31,934)
FINANCING ACTIVITIES
Payment of Long-Term Debt (578) (978)
Increase in Long-Term Debt 196 8,478
Increase (Decrease) in Notes Payable (42,111) 2,409
Proceeds from Stock Plans 9,191 10,150
Cash Dividends Paid (34,623) (34,453)
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NET CASH USED IN FINANCING ACTIVITIES (67,925) (14,394)
EFFECT OF EXCHANGE RATE CHANGES (1,458) (4,861)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,073 (42,101)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 6,729 58,973
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $12,802 $16,872
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</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. 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.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to a fair statement of results of
operations for the thirteen and thirty-nine weeks ended October 1, 1994
have been made. Management also feels that the results of operations for
the thirteen and thirty-nine weeks ended October 1, 1994 are not
necessarily indicative of the results to be expected for the full year.
2. 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.
3. Income taxes paid for the nine-month periods ended October 1, 1994 and
October 2, 1993 were $47.6 million and $52.5 million, respectively.
4. Interest paid for the nine-month periods ended October 1, 1994 and October
2, 1993 was $8.7 million and $8.8 million, respectively.
5. On September 14, 1994, the Company acquired the assets and assumed certain
liabilities of Wheel Tronic, Inc., a division of Derlan Manufacturing, Inc.
Wheel Tronic manufactures high-quality, above-ground lifts for the
automotive repair market. Pro forma results of operations are not shown as
the effect would not be material.
6. Systems Control, Inc., acquired as part of the Sun Electric purchase in
1992, was sold on September 29, 1994. This divestiture resulted in a
pretax gain of $2.8 million and contributed $.05 to earnings per share for
the quarter. The sale of this business did not have a significant impact
on the Company's financial position and will not significantly impact
ongoing results of operations.
7. On November 10, 1994, the Company acquired Sioux Tools, Inc., a leading
maker of portable electric and pneumatic tools primarily for the industrial
market. Pro forma results of operations are not shown as the effect would
not be material.
-------------------------
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<PAGE>
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW: Net earnings for the third quarter of 1994 rose 10.6% from the third
quarter last year, on a net sales increase of 2.7%. The sale of Systems
Control, Inc. contributed $.05 to earnings per share in the quarter. Nine-month
1994 net earnings increased 16.7%,on a net sales increase of 7.5%. Third
quarter gross profit margins remained strong, but declined slightly from a year
ago due primarily to lower manufacturing activity levels to reduce inventories.
SALES: Net sales for the third quarter were $278.4 million compared with $271.1
million for the third quarter last year. Nine-month net sales were $875.9
million, up from $814.5 million for the same period in 1993.
North American sales for the third quarter 1994 increased 4.9% to $227.0 million
from the $216.5 million reported during the third quarter last year. Nine-month
North American sales were $679.7 million, or a 5.0% improvement over the same
period last year. The core transportation and equipment business in the United
States remained solid with a 5% sales increase in the quarter. For the quarter,
Canadian sales were up 2% in U.S. dollars and 7% in local currency.
European sales decreased 17.5% to $34.4 million in the third quarter 1994 from
$41.7 million a year ago. The year-ago quarter included sales related to
Germany's emissions-testing program, which began in September 1993 and was
completed during the second quarter 1994. European sales for the first nine
months were $150.2 million, or a 16.4% improvement from the $129.1 million
reported in 1993. Sales for the first six months of 1994 benefited from
Germany's emissions-testing program.
Other International sales improved 31.0% to $16.9 million in the third quarter
1994 from $12.9 million in 1993. For the first nine months of 1994, Other
International sales increased 21.7% to $46.0 million from $37.8 million.
EARNINGS: On a per share basis, third quarter earnings increased to $.53 up
from $.48 in the same period last year. Earnings per share for the first nine
months of 1994 rose to $1.68 from $1.44 in 1993. The sale of Systems Control,
Inc. contributed $.05 to earnings per share for the quarter. (See note number
6.)
OTHER INCOME AND EXPENSES: During the quarter, the Company benefited from the
sale of Systems Control, Inc., a subsidiary of Sun Electric and a provider of
centralized emissions testing services. The pretax gain on the sale amounted to
$2.8 million.
OPERATING EXPENSES: Operating expenses in the third quarter 1994 were $108.9
million versus $106.1 million in the third quarter 1993. As a percentage of net
sales, third quarter operating expenses were 39.1% in both 1994 and 1993.
Operating expenses for the first nine months were $336.2 versus $324.1 million
for the same period last year. As a percentage of net sales, nine-month
operating expenses decreased to 38.4% from 39.8% in 1993.
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<PAGE>
FINANCIAL CONDITION
OVERVIEW: Snap-on Incorporated finished the third quarter in strong financial
condition. The Company continues to generate positive cash flow, reduce short-
term debt, and increase working capital.
LIQUIDITY: Working capital increased to $614.1 million during the quarter from
$546.6 million at the end of 1993. The ratio of current assets to current
liabilities was 3.4 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 $12.8 million at the
end of the third quarter from $6.7 million at the end of 1993. At the end of
the quarter, the Company had contractually committed bank lines of credit
totaling $150 million, of which $49.9 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.
In addition, on September 23, 1994, the Company filed a $300 million shelf
registration of debt securities with the SEC that gives the Company financing
flexibility to operate the business.
ACCOUNTS RECEIVABLE: Accounts receivable decreased slightly in the third
quarter to $538.5 million compared to $539.9 million at the end of 1993. The
majority of accounts receivable involve customers' extended credit purchases of
higher-value products. Other receivables include those from dealers, industrial
and international customers, and government.
INVENTORIES: Inventories increased slightly during the first nine months to
$252.8 million, up from $249.1 million at the end of 1993.
LIABILITIES: Short-term debt at the end of the third quarter was $25.6 million
compared with $68.3 million at the end of 1993. Long-term debt as a percentage
of shareholders' equity was 11.7% compared with 14.2% at the end of 1993. Total
long-term debt stands at $88.4 million down from $99.7 million at year-end 1993.
The Company has no plans for additional long-term debt at this time.
INTEREST EXPENSE: Interest expense for the third quarter 1994 was $2.9 million
compared with $2.6 million for the same period last year. For the first nine
months, interest expense was $9.1 million compared with $8.0 million last year.
The increase is due to the rise in short-term interest rates.
EFFECTIVE TAX RATE: The effective tax rate was 32.0% for the quarter and 35.4%
year-to-date, compared with 34.5% and 35.3% for the same periods last year. The
lower rate for the quarter was related to the sale of Systems Control, Inc. (see
note number 6), reduced state income taxes as a percentage of consolidated net
income and a reduction in foreign losses without tax benefits.
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<PAGE>
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 October 1, 1994 were
required to be filed.
-10-
<PAGE>
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: November 14, 1994 /s/ R. A. CORNOG
-------------------- ------------------------------------------------
R. A. CORNOG
(Chairman, President and Chief Executive Officer)
Date: November 14, 1994 /s/ G. D. JOHNSON
-------------------- ------------------------------------------------
G. D. JOHNSON
(Principal Accounting Officer and Controller)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Operations found on
pages 3, 4 and 5 of the Company's Form 10-Q for the year-to-date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000091440
<NAME> SNAP-ON INCORPORATED
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-02-1994
<PERIOD-END> OCT-01-1994
<EXCHANGE-RATE> 1
<CASH> 12,802
<SECURITIES> 0
<RECEIVABLES> 552,810
<ALLOWANCES> 14,288
<INVENTORY> 252,753
<CURRENT-ASSETS> 866,123
<PP&E> 432,366
<DEPRECIATION> 232,646
<TOTAL-ASSETS> 1,211,235
<CURRENT-LIABILITIES> 252,039
<BONDS> 88,430
<COMMON> 43,111
0
0
<OTHER-SE> 710,411
<TOTAL-LIABILITY-AND-EQUITY> 1,211,235
<SALES> 875,888
<TOTAL-REVENUES> 875,888
<CGS> 425,560
<TOTAL-COSTS> 425,560
<OTHER-EXPENSES> 2,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,750
<INCOME-PRETAX> 110,970
<INCOME-TAX> 39,331
<INCOME-CONTINUING> 71,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,639
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.68
</TABLE>
