<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 April 1, 1995
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Commission File Number 1-7724
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
----- -----
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 May 6, 1995
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Common Stock, $1.00 par value 40,140,649 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 -
April 1, 1995 and December 31, 1994 3-4
Consolidated Statements of Earnings -
Thirteen Weeks Ended
April 1, 1995 and April 2, 1994 5
Consolidated Statements of Cash Flows -
Thirteen Weeks Ended
April 1, 1995 and April 2, 1994 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)
April 1, December 31,
1995 1994
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,254 $ 9,015
Accounts receivable, less allowances 583,312 568,378
Inventories:
Finished stock 269,487 266,792
Work in process 28,358 26,316
Raw materials 46,914 43,907
Excess of current cost over LIFO cost (111,026) (107,978)
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Total inventory 233,733 229,037
Prepaid expenses and other assets 66,842 66,590
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Total current assets 902,141 873,020
PROPERTY AND EQUIPMENT
Land 17,814 18,394
Buildings and improvements 136,220 134,038
Machinery and equipment 302,856 301,175
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456,890 453,607
Accumulated depreciation (250,297) (244,465)
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Total property and equipment 206,593 209,142
Deferred income tax benefits 61,006 56,695
Intangible and other assets 99,802 96,048
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TOTAL ASSETS $1,269,542 $1,234,905
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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)
April 1, December 31,
1995 1994
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<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 53,770 $ 56,679
Notes payable 36,883 10,631
Accrued compensation 21,856 29,957
Dealer deposits 62,159 65,494
Accrued income taxes 20,556 4,744
Other accrued liabilities 80,776 70,364
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Total current liabilities 276,000 237,869
Long-term debt 113,867 108,980
Deferred income taxes 5,401 6,264
Retiree health care benefits 77,774 76,833
Other long-term liabilities 40,281 38,561
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TOTAL LIABILITIES 513,323 468,507
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 -
April 1, 1995, 43,164,259 shares
December 31, 1994, 43,128,496 shares 43,164 43,128
Additional contributed capital 62,766 61,827
Retained earnings 699,154 684,139
Foreign currency translation adjustment (11,061) (13,384)
Treasury stock at cost
April 1, 1995, 1,094,400 shares
December 31, 1994, 250,000 shares (37,804) (9,312)
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TOTAL SHAREHOLDERS' EQUITY 756,219 766,398
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TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $1,269,542 $1,234,905
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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
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April 1, April 2,
1995 1994
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<S> <C> <C>
Net sales $309,107 $298,777
Cost of goods sold 149,838 145,307
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Gross profit 159,269 153,470
Operating expenses 132,352 128,314
Net finance income (15,874) (14,584)
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Operating earnings 42,791 39,740
Interest expense (2,509) (2,963)
Other income 1,718 466
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Earnings before income taxes 42,000 37,243
Income taxes 15,540 14,409
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Net earnings $ 26,460 $ 22,834
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Earnings per weighted average common share $ .62 $ .54
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Dividends declared per common share $ .27 $ .27
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Weighted average common shares outstanding 42,383 42,668
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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 CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
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April 1, April 2,
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 26,460 $ 22,834
Adjustments to reconcile net earnings
to net cash provided by:
Depreciation 7,109 7,546
Amortization 809 962
Deferred income taxes (6,283) (1,472)
Gain on sale of assets (16) (32)
Changes in operating assets and liabilities:
Increase in receivables (12,832) (2,283)
(Increase) decrease in inventories (2,541) 5,251
Increase in prepaid expenses (500) (1,175)
Decrease in accounts payable (3,228) (10,419)
Increase in accruals, deposits and
other long-term liabilities 19,194 5,091
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Net cash provided by operating activities 28,172 26,303
INVESTING ACTIVITIES
Capital expenditures (6,287) (6,532)
Disposal of property and equipment 2,210 2,977
Increase in other noncurrent assets (4,793) (1,190)
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Net cash used in investing activities (8,870) (4,745)
FINANCING ACTIVITIES
Payment of long-term debt -- (410)
Increase in long-term debt 4,450 --
Increase (decrease) in notes payable 25,474 (7,485)
Purchase of treasury stock (28,492) --
Proceeds from stock plans 975 4,546
Cash dividends paid (11,445) (11,514)
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Net cash used in financing activities (9,038) (14,863)
Effect of exchange rate changes (1,025) (1,614)
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Increase in cash and cash equivalents 9,239 5,081
Cash and cash equivalents at beginning of year 9,015 6,729
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Cash and cash equivalents at end of period $ 18,254 $ 11,810
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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 December 31, 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 weeks ended April 1, 1995 have been made.
Management also feels that the results of operations for the thirteen weeks
ended April 1, 1995 are not necessarily indicative of the results to be
expected for the full year.
2. In May 1995, the Corporation completed its $100 million share repurchase
program authorized in January 1995. The Corporation repurchased 2.8
million shares under the program at an average price of $35.74 per share.
This represents approximately 6.5% of total shares outstanding at the time
the program was authorized. Of the total 2.8 million shares repurchased,
.8 million shares were repurchased in the first quarter 1995 at an average
price of $33.73 per share.
3. Income taxes paid for the thirteen week period ended April 1, 1995 and
April 2, 1994 were $2.5 million and $11.2 million.
4. Interest paid for the thirteen week period ended April 1, 1995 and April 2,
1994 was $2.5 million and $3.1 million.
5. With respect to the guaranty of Lease Obligations discussed in Note 12
of Notes to Consolidated Financial Statements of the Corporation's 1994
Annual Report ("Note 12"), the State of Texas recently enacted
legislation that terminated the centralized emissions testing program
and directed the Governor to implement a new program after negotiations
with the Environmental Protection Agency. Whether or not the new program
will include a centralized testing component is currently unknown. The
Corporation is discussing with Texas officials the various ways for the
State to honor its contractual obligation to purchase the testing
facilities or to reimburse costs related to construction and
implementation of the Texas centralized emission testing program.
Fulfillment of the States's obligation is subject to an appropriation
of funds by the Texas Legislature which the Texas Natural Resources
Conservation Commission is contractually obligated to seek, although the
State's obligation could be satisfied in various ways including issuance
of public financing bonds or the lease of the facilities by State
agencies. The Corporation will not be released from its guaranty. In
the event the Corporation must satisfy the Lease Obligations and the
State does not reimburse the cost, then the value of the facilities
and equipment accrues to the Corporation. Based upon conditions as they
currently exist and management's belief that the Texas Legislature will
take sufficient action favorable to the Corporation by appropriating
funds or otherwise to enable the State of Texas to honor in all material
respects its contractual obligation, it is management's opinion that
the guarantee (and the Capital Subscription Agreement which relates to
the same obligation) referred to in Note 12 are not likely to have a
material adverse effect, if any, on the Corporation's financial condition
or results of operations.
6. Certain prior-year amounts have been reclassified to conform with current-
year presentation.
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<PAGE>
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW: First quarter 1995 net earnings rose 15.9% on a net sales increase of
3.5%. Both operating and gross profit margins improved over last year's first
quarter due to strong sales growth in the U.S. core hand tool and equipment
diagnostic businesses, an improvement in industrial sales, and gains from
subsidiaries in Australia, Brazil and Japan.
SALES: Net sales for the first quarter were $309.1 million, an increase of 3.5%
compared to first quarter 1994 sales of $298.8 million. The 1995 first quarter
sales increase represents an improvement against a strong 1994 first quarter
which included sales from a German emissions-testing program.
North American sales for the first quarter 1995 were $246.9 million which
represents a 13.6% increase over first quarter 1994 sales of $217.3 million.
First quarter 1995 sales benefited from double-digit sales increases in the U.S.
core hand tool and equipment diagnostic businesses and improvement in the
Corporation's industrial business. Sales in Canada increased in Canadian
dollars over the year-ago quarter but decreased after foreign currency
translation.
European sales for the first quarter 1995 were $43.3 million, a decrease of
36.7% from first quarter 1994 sales of $68.4 million. First quarter 1994
benefited from approximately $20 million in sales related to the German
emissions-testing program. This program was completed during the second quarter
of 1994. First quarter 1995 hand tools sales in the United Kingdom and other
European markets increased over the same period last year.
Other International sales for the first quarter 1995 increased 45.3% to $18.9
million from $13.1 million in the first quarter 1994. Approximately 7% of this
gain was due to foreign currency translation. The majority of the sales gains
were in the Corporation's Australia, Brazil and Japan subsidiaries.
EARNINGS: First quarter 1995 earnings were $26.5 million, a 15.9% increase over
1994 first quarter earnings of $22.8 million. Per share earnings rose to $.62
per share from $.54 per share in the first quarter a year ago.
GROSS MARGINS: First quarter 1995 gross margin improved slightly to 51.5% due to
increased factory utilization to support the current sales level.
OPERATING EXPENSES: Operating expenses net of finance income in the first
quarter 1995 were $116.5 million versus $113.7 million in the first quarter
1994. As a percentage of net sales, first quarter operating expenses decreased
to 37.7% from 38.1% in the first quarter 1994 primarily as a result of increased
sales.
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<PAGE>
FINANCIAL CONDITION
OVERVIEW: Snap-on Incorporated finished the first quarter in strong financial
condition.
LIQUIDITY: Cash and short-term investments increased to $18.3 million at the
end of the first quarter from $9.0 million at the end of 1994. Working capital
was $626.1 million at the end of the first quarter versus $635.2 million at the
end of 1994. At the end of the quarter, the Corporation had bank lines of
credit totaling $50 million, all of which was unused and available for short-
term borrowing. The Corporation also has a $100 million dollar revolving credit
facility to support its commercial paper. 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, the Company has on file with the Securities and Exchange Commission
a $300 million shelf registration of debt securities that gives the Company
financing flexibility to operate the business.
ACCOUNTS RECEIVABLE: Accounts receivable increased by 2.6% during the quarter
mainly due to an increase in equipment sales. 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 2.1% for the quarter to coincide with the
current sales level.
LIABILITIES: Short-term debt and long-term debt was $151.1 million at the end
of the quarter compared with $119.9 million at the end of 1994. The increase
was primarily due to purchases of the Corporation's stock under the share
repurchase program. Total debt to total capital was 16.7% at the end of the
quarter compared with 13.5% at the end of 1994.
EFFECTIVE TAX RATE: The effective tax rate was 37.0% for the quarter, compared
with 38.7% for the same period last year. The higher tax rate during the first
quarter 1994 was due to increased profits from emissions equipment sales in
Germany, which has a higher tax rate.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held its Annual Meeting of Shareholders on April 28, 1995.
The following is a summary of the matters voted on at that meeting. There were
42,217,561 outstanding shares eligible to vote.
a) The shareholders elected three members of the Corporation's Board of
Directors to serve until the 1998 Annual Meeting. The persons elected to
the Corporation's Board of Directors, the number of shares cast for, and
the number of shares withheld, with respect to each of these persons were
as follows:
Director For Withheld
-------- --- --------
Robert A. Cornog 35,363,031 310,763
Raymond F. Farley 35,397,923 275,871
Edward H. Rensi 35,399,083 274,711
b) Shareholders approved an amendment to the Corporation's Employee Stock
Ownership Plan to increase the number of authorized shares.
For Against Abstained
--- ------- ---------
35,034,505 509,249 130,040
c) Shareholders ratified the appointment of Arthur Andersen LLP as independent
auditors for 1995.
For Against Abstained
--- ------- ---------
35,557,625 69,078 47,091
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 April 1, 1995 were required to
be filed.
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<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: 5/16/95 /s/ R. A. Cornog
------------------- -------------------------------------------------
R. A. CORNOG
(Chairman, President and Chief Executive Officer)
Date: 5/16/95 /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 SHEEETS AND CONSOLIDATED STATEMENT OF EARNINGS FOUND ON
PAGES 3, 4 AND 5 OF THE CORPORATION'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS
QUALIFIED BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 18,254
<SECURITIES> 0
<RECEIVABLES> 595,794
<ALLOWANCES> 12,482
<INVENTORY> 233,733
<CURRENT-ASSETS> 902,141
<PP&E> 456,890
<DEPRECIATION> 250,297
<TOTAL-ASSETS> 1,269,542
<CURRENT-LIABILITIES> 276,000
<BONDS> 113,867
<COMMON> 43,164
0
0
<OTHER-SE> 713,055
<TOTAL-LIABILITY-AND-EQUITY> 1,269,542
<SALES> 309,107
<TOTAL-REVENUES> 309,107
<CGS> 149,838
<TOTAL-COSTS> 149,838
<OTHER-EXPENSES> 132,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,509
<INCOME-PRETAX> 42,000
<INCOME-TAX> 15,540
<INCOME-CONTINUING> 26,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,460
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
