SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 4, 1998
Commission File Number 1-7724
SNAP-ON INCORPORATED
(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.)
10801 Corporate Drive, Kenosha, Wisconsin 53141-1430
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (414) 656-5200
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 registrant's
classes of common stock, as of the latest practicable date:
Class Outstanding at May 2, 1998
Common stock, $1 per value 59,186,810 shares
<PAGE>
SNAP-ON INCORPORATED
INDEX
Page
Part I. Financial Information
Consolidated Statements of Earnings -
Thirteen Weeks Ended
April 4, 1998 and March 29, 1997 3
Consolidated Balance Sheets -
April 4, 1998 and January 3, 1998 4-5
Consolidated Statements of Cash Flows -
Thirteen Weeks Ended
April 4, 1998 and March 29, 1997 6
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Part II. Other Information 12
<PAGE>
PART I. FINANCIAL INFORMATION
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Thirteen Weeks Ended
April 4, March 29,
1998 1997
Net sales $426,429 $375,299
Cost of goods sold 214,884 182,332
---------- ---------
Gross profit 211,545 192,967
Operating expenses 170,832 151,319
---------- ---------
Operating profit before net
finance income 40,713 41,648
Net finance income 16,979 17,465
---------- ---------
Operating earnings 57,692 59,113
Interest expense (4,033) (4,381)
Other income (expense) - net (650) (995)
---------- ---------
Earnings before income taxes 53,009 53,737
---------- ---------
Income taxes 19,083 19,883
---------- ---------
Net earnings $ 33,926 $ 33,854
========== =========
Earnings per weighted average
common share - basic $ .57 $ .56
========== =========
Earnings per weighted average
common share - diluted $ .56 $ .55
========== ==========
Weighted average common shares
outstanding - basic 59,894 60,855
Effect of dilutive options 863 823
---------- ----------
Weighted average common shares
outstanding - diluted 60,757 61,678
========== ==========
Dividend declared per common shares $ .21 $ .20
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)
April 4, January 3,
1998 1998
ASSETS
Current Assets
Cash and cash equivalents $ 8,990 $ 25,679
Accounts receivable, less
allowances 548,432 539,589
Inventories
Finished stock 399,180 366,324
Work in process 46,086 42,384
Raw materials 74,291 66,008
Excess of current cost
over LIFO cost (98,902) (101,561)
--------- ----------
Total inventory 420,655 373,155
Prepaid expenses and other
assets 92,516 83,286
--------- ----------
Total current assets 1,070,593 1,021,709
Property and equipment
Land 23,817 23,980
Buildings and improvements 163,569 163,596
Machinery and equipment 350,254 341,875
--------- ---------
537,640 529,451
Accumulated depreciation (271,134) (263,686)
--------- ---------
Total property and equipment 266,506 265,765
Deferred income tax benefits 57,104 55,699
Intangible and other assets 267,683 298,184
--------- --------
Total assets $1,661,886 $1,641,357
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)
April 4, January 3,
1998 1998
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Accounts payable $ 95,939 $ 91,553
Notes payable and current
maturities of long-term debt 58,165 23,951
Accrued compensation 33,234 43,712
Dealer deposits 42,142 43,848
Accrued income taxes 28,963 14,831
Deferred subscription revenue 29,209 29,265
Other accrued liabilities 103,086 105,370
---------- -----------
Total current liabilities 390,738 352,530
Long-term debt 204,191 151,016
Deferred income taxes 12,173 11,824
Retiree health care benefits 87,402 86,936
Pension and other long-term
liabilities 101,019 146,914
----------- -----------
Total liabilities 795,523 749,220
SHAREHOLDERS' EQUITY
Preferred stock - authorized
15,000,000 shares of $1 par
value; none outstanding - -
Common stock - authorized
250,000,000 shares
of $1 par value; issued -
April 4, 1998 - 66,523,085
shares January 3, 1998 -
66,472,127 shares 66,523 66,472
Additional contributed capital 83,896 82,758
Retained earnings 960,245 938,963
Foreign currency translation
adjustment (30,825) (30,385)
Treasury stock at cost -
7,111,313 and 5,956,313 shares (213,476) (165,671)
---------- ----------
Total shareholders' equity 866,363 892,137
---------- ----------
Total liabilities and
shareholders' equity $1,661,886 $1,641,357
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Thirteen Weeks Ended
April 4, March 29,
1998 1997
OPERATING ACTIVITIES
Net earnings $ 33,926 $ 33,854
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation 8,561 7,829
Amortization 2,108 1,383
Deferred income taxes (361) (9,535)
(Gain) on sale of assets (63) (39)
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables (9,121) 1,395
(Increase) in inventories (47,966) (28,272)
(Increase) decrease in prepaid
and other assets 32,670 (4,268)
Increase in accounts payable 4,691 6,392
Increase (decrease) in
accruals and other
liabilities (50,089) 16,378
---------- ----------
Net cash (used in) provided by
operating activities (25,644) 25,117
INVESTING ACTIVITIES
Capital expenditures (10,034) (11,459)
Acquisitions of businesses (10,102) (48,965)
Disposal of property and
equipment 314 368
----------- ---------
Net cash used in investing
activities (19,822) (60,056)
FINANCING ACTIVITIES
Payment of long-term debt (359) (7,755)
Increase in long-term debt 5,236 -
Increase short-term borrowings-net 83,169 46,861
Purchase of treasury stock (47,805) (417)
Proceeds from stock plans 1,189 2,481
Cash dividends paid (12,644) (12,173)
---------- -----------
Net cash provided by financing
activities 28,786 28,997
Effect of exchange rate
changes (9) (279)
---------- ----------
Decrease in cash and cash
equivalents (16,689) (6,221)
Cash and cash equivalents at
beginning of period 25,679 15,350
---------- -----------
Cash and cash equivalents at
end of period $ 8,990 $ 9,129
========== ===========
The accompanying notes are an integral part of these statements.
<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 3, 1998.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to a fair statement of
financial condition and results of operations for the thirteen weeks
ended April 4, 1998 have been made. Management also believes that
the results of operations for the thirteen weeks ended April 4, 1998
are not necessarily indicative of the results to be expected for the
full year.
2. Income tax paid for the thirteen-week period ended April 4, 1998 and
March 29, 1997 was $5.3 million and $6.6 million.
3. Interest paid for the thirteen-week period ended April 4, 1998 and
March 29, 1997 was $5.8 million and $2.6 million.
4. During the first quarter, the Corporation acquired an additional 10
percent interest in The Thomson Corporation's Mitchell Repair
Information business. The Corporation is obligated to purchase the
remaining 40 percent of Mitchell Repair Information Company within
the next four years.
Subsequent to quarter end, a subsidiary of the Corporation commenced
a tender offer for all outstanding common shares of Hein-Werner
Corporation at a net price of $12.60 per share in cash. The offer is
scheduled to expire on June 1, 1998 unless extended. Consummation of
the offer is subject to there having been validly tendered, and not
withdrawn prior to the expiration of the offer, a number of shares
which constitute at least 66-2/3% of the shares outstanding on a
fully diluted basis, the expiration or termination of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, and other customary conditions.
5. Earnings per share calculations were computed by dividing net
earnings by the corresponding weighted average number of common
shares outstanding for the period. The dilutive effect of the
potential exercise of outstanding options to purchase shares of
common stock is calculated using the treasury stock method.
6. In the first quarter of 1998, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Total comprehensive income, consisting of net
earnings and foreign currency translation adjustments, amounted to
$33.5 million and $26.1 million for the thirteen-week period ended
April 4, 1998 and March 29, 1997.
The Financial Accounting Standards Board (FASB) has issued two
accounting pronouncements which the Corporation will adopt in the
fourth quarter of 1998. FASB Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" and Statement No.
132 "Employers' Disclosures about Pensions and Other Postretirement."
The Corporation is currently evaluating the impact of these
pronouncements; however, it does not anticipate that the adoption of
these statements will have a material impact on results of operations
or financial position.
7. The Corporation uses derivative instruments to manage well-defined
interest rate and foreign currency exposures. The Corporation does
not use derivative instruments for trading purposes. The criteria
used to determine if hedge accounting treatment is appropriate are
(i) the designation of the hedge to an underlying exposure, (ii)
whether or not overall risk is being reduced and (iii) if there is a
correlation between the value of the derivative instrument and the
underlying obligation.
Interest Rate Derivative Instruments:
The Corporation enters into interest rate swap agreements to manage
interest costs and risks associated with changing interest rates.
The differentials paid or received on interest rate agreements are
accrued and recognized as adjustments to interest expense. Gains and
losses realized upon settlement of these agreements are deferred and
amortized to interest expense over a period relevant to the agreement
if the underlying hedged instrument remains outstanding, or
immediately if the underlying hedged instrument is settled.
Foreign Currency Derivative Instruments:
The Corporation has operations in a number of countries and has
intercompany transactions among them and, as a result, is exposed to
changes in foreign currency exchange rates. The Corporation manages
most of these exposures on a consolidated basis, which allows netting
certain exposures to take advantage of any natural offsets. To the
extent the net exposures are hedged, forward contracts are used.
Gains and/or losses on these foreign currency hedges are included in
income in the period in which the exchange rates change. Gains
and/or losses have not been material to the consolidated financial
statements.
8. Tejas Testing Technology One, L.C. and Tejas Testing Technology Two,
L.C. (the "Tejas Companies"), former subsidiaries of the Corporation,
previously entered into contracts with the Texas Natural Resources
Conservation Commission ("TNRCC"), an agency of the State of Texas,
to perform automotive emissions testing services. The Corporation
guaranteed payment (the "Guaranty") of the Tejas Companies'
obligations under a seven-year lease agreement in the amount of
approximately $98.8 million plus an interest factor, pursuant to
which the Tejas Companies leased the facilities necessary to perform
the contracts. The Guaranty was assigned to the lessor's lenders (the
"Lenders"). The Tejas Companies agreed to indemnify the Corporation
for any payments it must make under the Guaranty.
The State of Texas subsequently terminated the emissions program
described in the contracts. The Tejas Companies filed for bankruptcy,
and commenced litigation in state and federal court against the TNRCC
and related entities. The Corporation has recorded as assets the net
amounts paid under the guaranty, which are expected to be received
from the State of Texas pursuant to a settlement agreement approved
by the U.S. Bankruptcy Court. These net receivables total $55.8
million as of April 4, 1998 and are included in Intangible and Other
Assets on the accompanying Consolidated Balance Sheets. The Corporation
expects to receive $19.0 million toward the net receivable in
settlement payments by May 31, 1999, which payments have been
appropriated by the Texas Legislature. The Corporation expects to
receive further payments in an amount sufficient to satisfy the
balance of the net receivables by August 31, 2001, which payments
are subject to appropriation. The Corporation believes that ultimate
recovery of the net receivables is probable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview: The Corporation posted increases in first quarter sales, net
earnings and earnings per share. Net earnings for the first quarter of
1998 increased .2% over the year ago quarter on a net sales increase of
13.6%. Earnings per share for the first quarter increased 1.8% over the
1997 comparable period.
Sales: Net sales for the first quarter 1998 increased 13.6%. The
negative effect of foreign currency translation reduced the sales increase
by two percentage points. Net sales for the quarter were a record $426.4
million, up from $375.3 million in the first quarter of 1997.
North American sales for the first quarter of 1998 were $325.3 million, an
increase of 15.7% over first quarter 1997 sales of $281.2 million.
Excluding acquisitions, sales rose 14%. Strong hand tool sales, revenues
from emissions-testing equipment, and growth in ShopKey information and
shop management software all contributed to the increase. In addition,
sales in both the industrial channel and the Equipment Solutions equipment
facilitation and distribution business grew at a faster rate than that of
the region overall.
European sales for the first quarter of 1998 were $83.3 million, an
increase of 10.6% over first quarter 1997 sales of $75.3 million. In local
currency, sales increased 17%. Acquisitions and higher tool sales in most
countries were positive contributors. Excluding acquisitions, sales were
14% lower because of the negative effects of currency translation and
difficult comparisons against the year-ago period.
Other sales for the first quarter of 1998 were $17.8 million, a decrease
of 5.4% from first quarter 1997 sales of $18.8 million. Sales in local
currency rose 5%, with gains reported in both Japan and Australia.
Weakness in the developing economies of Asia hurt results in this region;
however, the Corporation's present exposure to the economic uncertainty in
this region is not material to its consolidated results or financial
position.
Earnings: Net earnings for the first quarter were $33.9 million, compared
with $33.8 million for the comparable 1997 period. Diluted per share
earnings rose 1.8% to $.56, compared with $.55 per share in the first
quarter a year ago while basic per share earnings also rose 1.8% to $.57,
compared with $.56 per share in the first quarter a year ago.
Operating expenses: As a percentage of net sales, first quarter total
operating expenses decreased to 40.1% in 1998 from 40.3% in the same
period of 1997.
Finance income: Finance income for the first quarter of 1998 was $17.0
million, a decrease of 2.8% from first quarter 1997 finance income of
$17.5 million. Growth in extended credit financings, in origination fees
from third-party lease transactions, and in financing programs outside the
United States offset much of the decrease in income related to the asset
securitizations and lease portfolio sale effected in 1997.
FINANCIAL CONDITION
Liquidity: Cash and cash equivalents decreased to $9.0 million at the end
of the first quarter from $25.7 million at the end of 1997. Working
capital increased to $679.9 million at first quarter end, from $669.2
million at the end of 1997. During the quarter, the Corporation raised
its commercial paper program to $175 million, which is supported by
revolving credit facilities.
In September 1994, the Corporation filed a registration statement with the
Securities and Exchange Commission that allows the Corporation to issue
from time to time up to $300 million of unsecured indebtedness. In
October 1995, the Corporation issued $100 million of its notes to the
public. The shelf registration gives the Corporation financing flexibility
to operate the business.
The Corporation believes it has sufficient sources of liquidity to support
working capital requirements, finance capital expenditures and pay
dividends.
Accounts receivable: Accounts receivable increased 1.6% to $548.4 million
at the end of the first quarter, compared with $539.6 million at the end
of 1997.
The majority of the Corporation's accounts receivable involve customers'
extended credit and lease purchases of higher-value products. Other
receivables include those from dealers, industrial customers, and
government entities.
Inventories: Inventories increased 12.7% to $420.7 million in the 1998
first quarter, compared with $373.2 million at the end of 1997. Total
inventory includes emissions-testing equipment which is expected to be
delivered over the next several quarters and a significantly higher build
of air conditioning equipment for this year's season, reflecting the
company's stronger presence in this category.
Liabilities: Total short-term and long-term debt was $262.4 million at
the end of the first quarter, compared with $175.0 million at the end of
1997. Funding requirements for the repurchase of common stock, an
acquisition and working capital needs were responsible for the higher debt
levels.
Average shares outstanding: Average shares outstanding for diluted EPS in
1998's first quarter were 60.8 million shares versus 61.7 in last year's
first quarter. For basic EPS, average shares were 59.9 million compared
with 60.9 million in 1997.
Share repurchase: On June 27, 1997, the Corporation's board of directors
authorized the repurchase of $100 million of the Corporation's common
stock over a two-year period. In 1996, the Corporation's board of
directors authorized the repurchase of stock in an amount equivalent to
that necessary to prevent dilution created by shares issued for stock
options, employee and dealer stock purchase plans, and other corporate
purposes. The Corporation repurchased 1,155,000 shares of its common stock
in the first quarter of 1998.
Foreign currency: The Corporation operates in a number of countries and,
as a result, is exposed to changes in exchange rates. Most of these
exposures are managed on a consolidated basis to take advantage of natural
offsets through netting. To the extent that the net exposures are hedged,
forward contracts are used. Refer to note 7 for a discussion of the
Corporation's accounting policies for the use of derivative instruments.
Other Matters: The Corporation is conducting a comprehensive review of its
products, computer systems and software to identify those that may require
modification so that they will function properly in the Year 2000. This
review is being conducted through a committee, which has the
responsibility to identify, evaluate and implement necessary changes to
achieve a Year 2000 date conversion with no disruption to business
operations. The committee has communicated with suppliers, dealers,
financial institutions and others with whom the Corporation does business,
to coordinate the Year 2000 conversion. Conversion efforts are under way,
and for a significant portion of the Corporation's internal systems this
conversion is an incidental consequence of the ongoing implementation of a
new enterprise-wide client/server computing system in North America.
However, some internal testing and conversion is required at other
geographic locations. Based upon its review and analysis to date, the
Corporation believes that the Year 2000 conversion will not have a
material effect on the Corporation's financial position or results of
operations.
Safe Harbor: Statements in this document that are not historical facts,
including statements (i) that include the words "believes," "expects,"
"anticipates" or "estimates" or words of similar importance with reference
to the Corporation or management, (ii) specifically identified as forward-
looking, or (iii) describing the Corporation's or management's future
plans, objectives or goals, are forward-looking statements. The
Corporation or its representatives may also make similar forward-looking
statements from time to time orally or in writing. The Corporation
cautions the reader that these statements are subject to risks,
uncertainties and other factors that could cause (and in some cases have
caused) actual results to differ materially from those described in any
such statement. Those important factors include the delay in
implementation of State emissions programs or delay in delivery of
products related to such programs, a weakening of sales of hand tools and
other products in those states where the Corporation is undertaking a
large emissions-testing equipment sales and service effort, and the
achievement of productivity improvements and cost reductions. These
factors may not constitute all factors that could cause actual results to
differ materially from those discussed in any forward-looking statement.
The Corporation operates in a continually changing business environment
and new factors emerge from time to time. The Corporation cannot predict
such factors nor can it assess the impact, if any, of such factors on the
Corporation or its results. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results.
PART II. OTHER INFORMATION
Item 6: Exhibits and reports on Form 8-K
Item 6(a): Exhibits
Exhibit 10(a) Amended and Restated Snap-on Incorporated Directors'
1993 Fee Plan as of April 24, 1998
Exhibit 27 Financial Data Schedule
Item 6(b): Reports on Form 8-K Filed During the Reporting Period
Date Filed Date of Report Item
February 20, 1998 February 17, 1998 Item 5. The Corporation and
Tejas Testing Technologies
completed an agreement, approved
by the U.S. Bankruptcy Court in
Austin, Texas, that fully
satisfied the Corporation's
liability related to a loan
guaranty by the Corporation of
certain Tejas lease obligations.
March 17, 1998 March 17, 1998 Item 5. The Corporation filed
those portions of its fiscal
1997 Annual Report to
Shareholders that the
Corporation has incorporated by
reference into and filed as
Exhibit 13 to its Annual Report
on Form 10-K for the fiscal year
ended January 3, 1998.
<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: May 19, 1998 /s/ R. A. Cornog
R. A. CORNOG
(Chairman, President and Chief
Executive Officer)
Date: May 19, 1998 /s/ N. T. Smith
N. T. SMITH
(Principal Accounting Officer
and Controller)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
10(a) Amended and Restated Snap-on Incorporated Directors'
1993 Fee Plan as of April 24, 1998
27 Financial Data Schedule
<PAGE>
Amended and Restated
Snap-on Incorporated
Directors' 1993 Fee Plan
(as amended through April 24, 1998)
1. Purpose. The Amended and Restated Snap-on Incorporated
Directors' 1993 Fee Plan (the "Plan") is intended to provide an incentive
to members of the Board of Directors (the "Board") of Snap-on
Incorporated, a Delaware corporation (the "Company"), who are not
employees of the Company ("Directors"), to remain in the service of the
Company and increase their efforts for the success of the Company and to
encourage such Directors to own shares of the Company's stock or
participate in a Company phantom stock account, thereby aligning their
interests more closely with the interests of stockholders.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means a committee consisting of members of the
Board authorized to administer the Plan.
(c) "Common Stock" means the common stock, par value $1.00 per
share, of the Company.
(d) "Deferral Election" means an election pursuant to Section 6
hereof to defer receipt of Fees and/or shares of Common Stock which would
otherwise be received pursuant to Minimum Grants and Elective Grants.
(e) "Deferred Amounts" mean the amounts credited to a
Director's Share Account or Cash Account pursuant to a Deferral Election.
(f) "Director" means a member of the Board or an appointed
Director Emeritus, who is not an employee of the Company.
(g) "Elective Grants" shall have the meaning set forth in
Section 5(b) hereof.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means the closing price of the Common
Stock on the New York Stock Exchange on any particular date; provided,
however, that for purposes of Section 8, Fair Market Value shall mean the
closing price of Common Stock on the New York Stock Exchange on the date
of the Change of Control (as defined therein) or, if higher, the highest
price per share of Common Stock paid in the transaction giving rise to the
Change of Control.
(j) "Fees" mean the annual retainer scheduled to be paid to a
Director for the calendar year plus any additional fees (including meeting
and committee fees) earned by a Director for his or her services on the
Board during the calendar year.
(k) "Grants" mean Minimum Grants and Elective Grants.
(l) "Minimum Grants" shall have the meaning set forth in
Section 5(a) hereof.
(m) "Share Election" shall have the meaning set forth in
Section 5(b) hereof.
3. Administration of the Plan.
(a) Member of the Committee. The Plan shall be administered by
the Committee. Members of the Committee shall be appointed from time to
time by the Board, shall serve at the pleasure of the Board and may resign
at any time upon written notice to the Board.
(b) Authority of the Committee. The Committee shall adopt such
rules as it may deem appropriate in order to carry out the purpose of the
Plan. All questions of interpretation, administration, and application of
the Plan shall be determined by a majority of the members of the Committee
then in office, except that the Committee may authorize any one or more of
its members, or any officer of the Company, to execute and deliver
documents on behalf of the Committee. The determination of such majority
shall be final and binding in all matters relating to the Plan. No member
of the Committee shall be liable for any act done or omitted to be done by
such member or by any other member of the Committee in connection with the
Plan, except for such member's own willful misconduct or as expressly
provided by statute.
4. Stock Reserved for the Plan. The number of shares of Common
Stock authorized for issuance under the Plan is 300,000, subject to
adjustment pursuant to Section 7 hereof. Shares of Common Stock delivered
hereunder may be either authorized but unissued shares or previously
issued shares reacquired and held by the Company.
5. Terms and Conditions of Grants.
(a) Minimum Grant. Subject to Section 5(e) hereof, each
Director shall automatically receive (subject to a Deferral Election) a
number of whole shares of Common Stock equal in value to fifty percent
(50%) of his or her Fees earned in each calendar year (the "Minimum
Grants"). Such shares of Common Stock (and cash in lieu of fractional
shares) shall be transferred in accordance with Section 5(c) hereof.
(b) Elective Grant. Subject to Section 5(e) hereof, each
Director may make an election (the "Share Election") to receive (subject
to a Deferral Election) any or all of his or her remaining Fees earned in
each calendar year in the form of Common Stock (the "Elective Grants").
The shares of Common Stock (and cash in lieu of fractional shares)
issuable pursuant to a Share Election shall be transferred in accordance
with Section 5(c) hereof. The Share Election (i) must be in writing and
delivered to the Secretary of the Company, (ii) shall be effective
commencing on the date the Secretary receives the Share Election or such
later date as may be specified in the Share Election, and (iii) shall
remain in effect unless modified or revoked by a subsequent Share Election
in accordance with the provisions hereof.
(c) Transfer of Shares. Shares of Common Stock issuable to a
Director with respect to Minimum Grants and Elective Grants shall be
transferred to such Director as of the last business day of each calendar
month. The total number of shares of Common Stock to be so transferred
(1) in respect of a Minimum Grant, shall be determined by dividing (a) an
amount equal to fifty percent (50%) of the Director's Fees payable during
the applicable calendar month, by (b) the Fair Market Value of a share of
Common Stock on the last business day of such calendar month, and (2) in
respect of an Elective Grant, shall be determined by dividing (x) the
dollar amount of the Director's Fees payable during the applicable
calendar month to which the Share Election applies, by (y) the Fair Market
Value of a share of Common Stock on the last business day of such calendar
month. In no event, shall the Company be required to issue fractional
shares. Whenever under the terms of this Section 5 a fractional share of
Common Stock would otherwise be required to be issued to a Director, an
amount in lieu thereof shall be paid in cash based upon the Fair Market
Value of such fractional share.
(d) Termination of Services. If a Director's services as a
Board member are terminated before the end of a calendar quarter, the
Director shall receive in cash the Fees such Director would otherwise have
been entitled to receive for such quarter in the absence of this Plan.
(e) Commencement of Grants. Notwithstanding anything in this
Plan to the contrary, no Grants shall be effective with respect to Fees to
be paid prior to the requisite approval of this Plan by the stockholders
of the Company.
6. Deferral Election.
(a) In General. Each Director may irrevocably elect annually
(a "Deferral Election") to defer receiving all or a portion of the shares
of Common Stock (that would otherwise be transferred upon a Grant) or such
Director's Fees in respect of a calendar year that are not subject to a
Grant. Deferral Elections shall be made in multiples of ten percent. A
Director who makes a Deferral Election with respect to Grants shall have
the amount of deferred shares of Common Stock credited to a "Share
Account" in the form of "Share Units." A Director who makes a Deferral
Election with respect to Fees that are not subject to a Grant shall have
the amount of Deferred Fees credited to a "Cash Account." Collectively,
the amounts deferred in a Director's Share Account and Cash Account shall
hereafter be the "Deferred Amounts."
(b) Timing of Deferral Election. The Deferral Election shall
be in writing and delivered to the Secretary of the Company on or prior to
December 31 of the calendar year immediately preceding the calendar year
in which the applicable Fees are to be earned; provided, however, that a
New Director may make a Deferral Election with respect to Fees earned
subsequent to such election during the thirty-day period immediately
following the commencement of his or her directorship. A Deferral
Election, once made, shall be irrevocable for the calendar year with
respect to which it is made and shall remain in effect for future calendar
years unless modified or revoked by a subsequent Deferral Election in
accordance with the provisions hereof. A Deferral Election may be changed
only with respect to fees earned subsequent to the effective date of such
Election.
(c) Cash Dividends and Share Accounts. Whenever cash dividends
are paid by the Company on outstanding Common Stock, there shall be
credited to the Director's Share Account additional Share Units equal to
(i) the aggregate dividend that would be payable on outstanding Shares of
Common Stock equal to the number of Share Units in such Share Account on
the record date for the dividend, divided by (ii) the Fair Market Value of
the Common Stock on the last trading business day immediately preceding
the date of payment of the dividend.
(d) Cash Accounts. At the election of a Director, a Director's
Cash Account shall be credited or debited with (i) interest at an annual
rate equal to the sum of the daily interest earned at a rate specified by
the Committee and compounded monthly or (ii) the annual investment return
relating to such investment vehicle or vehicles that the Director chooses
from those the Committee determines to make available, or such combination
of (i) and (ii) as the Director designates at the time of a Deferral
Election or a modification thereof.
(e) Commencement of Payments. Except as otherwise provided in
Sections 6(g) and 8(b), a Director's Deferred Amounts shall become payable
as soon as practicable following the earlier to occur of (a) the date the
Director terminates service as a Director or (b) the Director's attainment
of age 70 years or such later date (not later than the Director's 75th
birthday) designated by the Director in the Deferral Election.
(f) Form of Payments. Subject to a Director's right to convert
a Share Account balance to a Cash Account, all payments from a Share
Account shall be made in shares of Common Stock by converting Share Units
into Common Stock on a one-for-one basis, with payment of fractional
shares to be made in cash. All payments from a Cash Account shall be made
in cash.
(g) Manner of Payments. In his or her Deferral Election, each
Director shall elect to receive payment of his or her Deferred Amounts
either in a lump sum or in two to fifteen substantially equal annual
installments. In the event of a Director's death, payment of the
remaining portion of the Director's Deferred Amounts will be made to the
Director's beneficiary in a lump sum as soon as practicable following the
Director's death.
(h) Hardship Distribution. Notwithstanding any Deferral
Election, in the event of severe financial hardship to a Director
resulting from a sudden and unexpected illness, accident or disability of
the Director or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Director, all as determined by the Committee, a Director may withdraw any
portion of the Share Units in his or her Share Account or cash in his or
her Cash Account by providing written notice to the Secretary of the
Company. All payments resulting from such a hardship shall be made in the
form provided in Section 6(f) above.
(i) Designation of Beneficiary. Each Director or former
Director entitled to payment of deferred amounts hereunder from time to
time may designate any beneficiary or beneficiaries (who may be designated
concurrently, contingently or successively) to whom any such deferred
amounts are to be paid in case of the Director's death before receipt of
any or all of such deferred amounts. Each designation will revoke all
prior designations by the Director or former Director, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Director or former Director, during his or her lifetime, in writing with
the Secretary of the Company. Reference in this Plan to a Director's
"beneficiary" at any date shall include such persons designated as
concurrent beneficiaries on the Director's beneficiary designation form
then in effect. In the absence of any such designation, any balance
remaining in a Director's or former Director's Share Account at the time
of the Director's death shall be paid to such Director's estate in a lump
sum.
(j) Account Transfers. Subject to any applicable corporate
policies, from time to time a Director may convert all or a portion of any
Cash Account balance of the Director into deferred shares of Common Stock
credited to the Director's corresponding Share Account by written notice
to the Company. In such event, and effective as of the date the Company
receives such a notice, (i) there shall be credited to the Director's
Share Account a number of Share Units equal to the number of Share Units
specified in the notice or, if such notice specifies a dollar amount, a
number of Share Units equal to such dollar amount divided by the Fair
Market Value on the last trading business day immediately preceding the
date the Company receives such notice and (ii) the Director's Cash Account
shall be debited in an amount equal to the number of Share Units credited
to the Share Account multiplied by the Fair Market Value on the same
trading business day. Subject to any applicable corporate policies, from
time to time a Director with a credit balance in a Share Account may
convert all or a portion of such balance into an amount to be credited to
the Director's corresponding Cash Account by giving written notice to the
Company. In such event, and effective as of the date the Company receives
such a notice, (i) there shall be credited to the Director's Cash Account
an amount equal to the number of Share Units specified in the notice
multiplied by the Fair Market Value on the last trading business day
immediately preceding the date the Company receives such notice and (ii)
the Director's Share Account shall be debited by the number of Share Units
specified in the notice.
7. Effect of Certain Changes in Capitalization. If there is any
change in the number or class of shares of Common Stock through the
declaration of stock dividends, or recapitalization resulting in stock
splits, or combinations or exchanges of such shares or similar corporate
transactions, the maximum number or class of shares available under the
Plan, the number or class of shares of Common Stock to be delivered
hereunder and each Director's Share Account shall be proportionately
adjusted by the Committee to reflect any such change in the number or
class of issued shares of Common Stock; provided, however, that the number
or class of shares of Common Stock to be delivered and each Director's
Share Account shall be subject to only such adjustment as shall be
necessary to maintain the proportionate interest of the Director and
preserve, without exceeding, the value reflected by the Director's Share
Account.
8. Change of Control.
(a) A "Change of Control" of the Company shall be deemed to
have occurred if:
(1) any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as modified and used in Sections 13(d) and 14(d) thereof,
except that for purposes of this Section 8, the term "Person"
shall not include (A) the Company or any of its subsidiaries,
(B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries,
(C) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
in the Company) is or becomes the "Beneficial Owner"(as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 25% or
more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company's then
outstanding voting securities; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on January 1,1996, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on January 1,
1996 or whose appointment, election or nomination for election
was previously so approved; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (1) a merger
or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining out-
standing or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (2) a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 25% or
more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company's then
outstanding voting securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets (in one transaction or a series of
related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity, at
least 75% of the combined voting power of the voting securities
of which are owned by Persons in substantially the same pro-
portions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed
to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially
the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following
such transaction or series of transactions.
(b) Upon the occurrence of a Change of Control:
(i) All Share Units credited to a Share Account shall be
converted into cash in an amount equal to the number of Share Units
multiplied by the Fair Market Value, and together with all Deferred
Amounts credited to a Cash Account shall be transferred as soon as
practicable to each Director; and
(ii) Notwithstanding anything herein to the contrary, Fees
earned in respect of the calendar quarter in which the Change
of Control occurs, shall be paid in cash as soon as practicable.
9. Term of Plan. This Plan shall become effective as of the date
of approval of the Plan by the stockholders of the Company, and shall
remain in effect until a Change of Control, unless sooner terminated by
the Board; provided, however, that, except as provided in Section 8(b)
hereof, Deferred Amounts may be delivered pursuant to any Deferral
Election, in accordance with such election, after the Plan's termination.
Prior to the effective date of the Plan, Directors may make the elections
provided for herein, but the effectiveness of such elections shall be
contingent upon the receipt of stockholder approval of the Plan. No
transfer of shares of Common Stock may be made to any Director or any
other person under the Plan until such time as stockholder approval of the
Plan is obtained pursuant to this Section 9. In the event stockholder
approval is not obtained, Fees that were not subject to Deferral Elections
shall be paid to the Directors in cash and Fees that were subject to
Deferral Elections shall be deferred pursuant to the Prior Plan.
10. Amendment; Termination. The Board may at any time and from time
to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval
in order for the exemptions available under Rule 16b-3 of the Exchange
Act, as amended from time to time ("Rule 16b-3"), to be applicable to the
Plan and the Directors shall be effective unless the same shall be
approved by the stockholders of the Company entitled to vote thereon; and,
provided further, that the provisions of Section 5(a) hereof shall not be
amended more than once every six months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. Notwithstanding the foregoing, no amendment shall affect
adversely any of the rights of any Director (including without limitation
the rights a Director would have under Section 8 if a Change of Control
were to occur), without such Director's consent, under any election
theretofore in effect under the Plan.
11. Rights of Directors.
(a) Retention as Director. Nothing contained in the Plan or
with respect to any Grant shall interfere with or limit in any way the
right of the stockholders of the Company to remove any Director from the
Board pursuant to the bylaws of the Company, nor confer upon any Director
any right to continue in the service of the Company as a Director.
(b) Nontransferability. No right or interest of any Director
in Deferred Amounts shall be assignable or transferable during the
lifetime of the Director, either voluntarily or involuntarily, or
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Director's death, a Director's rights and
interests in his or her Deferred Amounts shall be transferable by
testamentary will or the laws of descent and distribution. If in the
opinion of the Committee a person entitled to payments or to exercise
rights with respect to the Plan is disabled from caring for his or her
affairs because of mental condition, physical condition or age, payment
due such person may be made to, and such rights shall be exercised by,
such person's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee
of such status.
12. General Restrictions.
(a) Investment Representations. The Company may require any
director to whom Common Stock is granted, as a condition of receiving such
Common Stock, to give written assurances in substance and form
satisfactory to the Company and its counsel to the effect that such person
is acquiring the Common Stock for his own account for investment and not
with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in
order to comply with Federal and applicable state securities laws.
(b) Compliance with Securities Laws. Each Grant shall be
subject to the requirement that, if at any time counsel to the Company
shall determine that the listing, registration or qualification of the
shares subject to such Grant upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, is necessary as a condition of, or in connection with,
the issuance of shares thereunder, such Grant may not be accepted or
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration
or qualification.
13. Withholding. The Company may defer making payments under the
Plan until satisfactory arrangements have been made for the payment of any
federal, state or local income taxes required to be withheld with respect
to such payment or delivery. Each Director shall be entitled to
irrevocably elect to have the Company withhold shares of Common Stock
having an aggregate value equal to the amount required to be withheld.
The value of fractional shares remaining after payment of the withholding
taxes shall be paid to the Director in cash. Shares so withheld shall be
valued at Fair Market Value on the regular business day immediately
preceding the date such shares would otherwise be transferred hereunder.
14. Governing Law. This Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of
Delaware.
15. Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the
meaning of any of the provisions of the Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SNAP-ON INCORPORATED AS OF AND FOR THE
THIRTEEN WEEKS ENDED APRIL 04, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER <F1>
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 8,990
<SECURITIES> 0
<RECEIVABLES> 568,425
<ALLOWANCES> 19,993
<INVENTORY> 420,655
<CURRENT-ASSETS> 1,070,593
<PP&E> 537,640
<DEPRECIATION> 271,134
<TOTAL-ASSETS> 1,661,886
<CURRENT-LIABILITIES> 390,738
<BONDS> 204,191
0
0
<COMMON> 66,523
<OTHER-SE> 799,840
<TOTAL-LIABILITY-AND-EQUITY> 1,661,886
<SALES> 426,429
<TOTAL-REVENUES> 426,429
<CGS> 214,884
<TOTAL-COSTS> 214,884
<OTHER-EXPENSES> 170,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,033
<INCOME-PRETAX> 53,009
<INCOME-TAX> 19,083
<INCOME-CONTINUING> 33,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,926
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.56
<FN>
<F1> THIRTEEN WEEKS
</FN>
</TABLE>
