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 2, 1994 ------------- 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.) 2801 - 80th Street, Kenosha, Wisconsin 53141-1410 - ------------------------------------------------------ (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 issuer's classes of common stock, as of the latest practicable date: Class Outstanding at April 22, 1994 - ------------------------------------- --------------------------------- Common Stock, $1.00 par value 42,728,586 Shares Page 1 of 11 Pages SNAP-ON INCORPORATED INDEX Page No. -------- Part I. Financial Information: Consolidated Balance Sheets - April 2, 1994 and January 1, 1994 3-4 Consolidated Statements of Earnings - Thirteen Weeks Ended April 2, 1994 and April 3, 1993 5 Consolidated Statements of Cash Flows - Thirteen Weeks Ended April 2, 1994 and April 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 -2- PART I. FINANCIAL INFORMATION SNAP-ON INCORPORATED CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) -3-
(Unaudited) April 2, January 1, 1994 1994 ----------- ---------- ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 11,810 $ 6,729 Receivables Less Allowances 542,231 539,949 Inventories: Finished Stock 183,686 185,260 Work-in-Process 14,285 19,292 Raw Materials 45,880 44,550 ---------- --------- Total Inventories 243,851 249,102 Prepaid Expenses 58,444 58,818 ---------- --------- Total Current Assets 856,336 854,598 PROPERTY AND EQUIPMENT - AT COST Land 26,644 27,209 Buildings and Improvements 145,914 142,438 Machinery and Equipment 279,431 282,222 ---------- --------- 451,989 451,869 Less Accumulated Depreciation (231,138) (227,059) ---------- --------- Total Property and Equipment 220,851 224,810 Deferred Income Tax Benefit 54,027 53,819 INTANGIBLE AND OTHER ASSETS 87,485 85,706 ---------- --------- TOTAL ASSETS $1,218,699 $1,218,933 ---------- --------- ---------- --------- SNAP-ON INCORPORATED CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) -4-
(Unaudited) April 2, January 1, 1994 1994 ----------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes Payable $ 58,803 $ 66,288 Accounts Payable 46,861 57,280 Accrued Compensation 24,249 33,515 Accrued Retirement Plans, Insurance and Other 86,353 80,327 Accrued Income Taxes 15,555 8,474 Dealer Deposits 62,205 62,153 ---------- --------- Total Current Liabilities 294,026 308,037 Long-Term Debt, Less Current Maturities 99,243 99,683 Deferred Income Taxes 4,470 7,413 Retiree Health Care Benefits - Long-Term 71,603 70,791 Pension - Long-Term 33,442 31,346 ---------- --------- TOTAL LIABILITIES 502,784 517,270 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 April 2, 1994, 42,971,254 shares; January 1, 1994, 42,818,696 shares 42,971 42,819 Additional Contributed Capital 56,547 52,153 Retained Earnings 643,343 632,022 Foreign Currency Translation Adjustment (17,634) (16,019) Less Treasury Stock (250,000 shares) (9,312) (9,312) ---------- --------- TOTAL SHAREHOLDERS' EQUITY 715,917 701,663 ---------- --------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,218,699 $1,218,933 ---------- --------- ---------- --------- SNAP-ON INCORPORATED CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands Except Per Share Data) (Unaudited) -5-
Thirteen Weeks Ended ------------------------- April 2, April 3, 1994 1993 ---------- ---------- Net Sales $298,777 $270,674 Cost of Goods Sold 145,307 131,736 -------- -------- Gross Profit 153,470 138,938 Operating Expenses 113,867 108,292 Other Income (Expense) - Net (2,360) (1,541) -------- -------- Earnings Before Income Taxes 37,243 29,105 Income Taxes 14,409 10,601 -------- -------- Net Earnings $ 22,834 $ 18,504 -------- -------- -------- -------- Earnings Per Weighted Average Common Share $ .54 $ .44 -------- -------- -------- -------- Dividends Declared Per Common Share $ .27 $ .27 -------- -------- -------- -------- Weighted Average Common Shares Outstanding 42,668 42,436 -------- -------- -------- -------- SNAP-ON INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited) -6-
Thirteen Weeks Ended ------------------------- April 2, April 3, 1994 1993 ---------- ---------- OPERATING ACTIVITIES Net Earnings $22,834 $18,504 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Depreciation 7,546 7,757 Amortization 962 629 Deferred Income Taxes (1,472) 1,589 Gain on Sale of Assets (32) (144) Changes in Operating Assets and Liabilities: (Increase) Decrease in Receivables (2,283) 23,733 (Increase) Decrease in Inventories 5,251 (8,351) (Increase) Decrease in Prepaid Expenses (1,175) 1,486 Increase (Decrease) in Accounts Payable (10,419) (3,052) Increase (Decrease) in Accruals, Deposits and Other Long-Term Liabilities 5,091 (7,763) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 26,303 34,388 INVESTING ACTIVITIES Capital Expenditures (6,532) (7,265) Disposal of Property and Equipment 2,977 1,090 (Increase) Decrease in Other Noncurrent Assets (1,190) (666) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (4,745) (6,841) FINANCING ACTIVITIES Payment of Long-Term Debt (410) (104) Increase in Long-Term Debt - 2,246 Increase (Decrease) in Notes Payable (7,485) (49,526) Proceeds from Stock Plans 4,546 768 Cash Dividends Paid (11,514) (11,456) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (14,863) (58,072) EFFECT OF EXCHANGE RATE CHANGES (1,614) (709) ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,081 (31,234) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,729 58,973 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,810 $27,739 ------- ------- ------- ------- INTEREST PAID $ 3,100 $ 3,100 ------- ------- ------- ------- INCOME TAXES PAID $11,200 $13,800 ------- ------- ------- ------- SNAP-ON INCORPORATED NOTES TO CONSOLIDATED UNAUDITED FINANCIAL 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 thirteen weeks ended April 2, 1994 have been made. Management also believes that the results of operations for the thirteen weeks ended April 2, 1994 are not necessarily indicative of the results to be expected for the full year. ------------------------ This report should be read in conjunction with the consolidated financial statements and related notes included in the Corporation's Annual Report for the year ended January 1, 1994. -7- SNAP-ON INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following financial comments pertain to the thirteen weeks ended April 2, 1994 and April 3, 1993. RESULTS OF OPERATIONS OVERVIEW: Consolidated net sales for the first quarter, 1994 increased 10.4%, while net earnings increased 23.4% from the first quarter, 1993. The results reflected stronger sales from the Corporation's Sun Electric subsidiary, higher sales to U.S. dealers, a continued strong gross profit margin and reduced operating expenses as a percent of sales. SALES: Net sales increased to $298.8 million compared with $270.7 million for the same period last year. Sales in North America increased to $217.3 million in first quarter, 1994 from $210.5 million in first quarter, 1993 reflecting higher demand for product from U.S. dealers, while the U.S. Industrial segment, Canada and Mexico were flat in comparison to the first quarter, 1993. Sales outside of North America increased 35.3% to $81.5 million in the first quarter, 1994 from $60.2 million a year ago. European sales continued to reflect growth due to the emission testing equipment business in Germany and increases in the U.K. tool business. Only modest additional revenues are expected from the German emissions business for the balance of the year. MARGINS: Gross profit margins continued to reflect a stronger mix of higher profit Snap-on manufactured product. As a percent of sales, gross margins were 51.4% in the first quarter, 1994 compared to 51.3% a year ago. EARNINGS: Earnings per share were $.54 compared with $.44 for the first quarter of 1993. Operating expenses in the first quarter were $113.9 million versus $108.3 million for the same period last year. As a percentage of net sales, operating expenses dropped to 38.1% versus 40.0% in the first quarter of 1993. Increased expenses resulted from additional commissions on sales related to the German emission program, a higher level of pension expense based on the interest rate assumptions, the inclusion in the quarter of expenses from the J.H. Williams acquisition in late 1993, and professional services associated with an outside consulting contract. Offsetting these increases were reduced costs upon conpletion of the consolidation of inventory from the U.S. branch warehouses to four regional distribution centers, reduced product replacement costs and a lower level of legal expenses. FINANCIAL CONDITION OVERVIEW: The Corporation finished the first quarter of 1994 in strong financial condition. Snap-on continues to generate positive cash flow, reduce short-term debt, and increase working capital. -8- LIQUIDITY: Working capital increased to $562.3 million during the first quarter, up 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 stood at $11.8 million at the end of the quarter, compared with $6.7 million at the end of 1993. As of the end of the quarter, the Corporation had bank lines of credit totaling $171.1 million, of which $39.0 million is unused and available for short-term borrowing. 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 first quarter to $542.2 million from $539.9 million at year-end 1993. There have been no material changes to the components of receivables. Most receivables involved customers' extended-credit purchases of higher-value products. Remaining accounts receivable include those from dealers, industrial and international customers, and governments. INVENTORIES: During the quarter, inventories decreased 2.1%, to $243.9 million, compared with $249.1 million at the end of 1993. In 1993 the Corporation closed its U.S. branch warehouses, consolidating inventory at four major distribution centers. Consolidation at these distribution centers continues to allow the Corporation to reduce inventory levels while maintaining consistent product availability. LIABILITIES: Short-term debt at the end of the first quarter was $58.8 million compared with $66.3 million at the end of 1993. Debt was reduced by using cash generated from first quarter, 1994 operations and cash on hand at year-end. Interest expense was $3.0 million for the quarter, up slightly from $2.8 million for the first quarter of 1993 as short-term interest rates rose slightly. Long-term debt as a percentage of shareholders' equity was 13.9%, compared with 14.2% at the end of 1993. Total long-term debt stands at $99.2 million, down from $99.7 million at year-end 1993. The Corporation has no plans for additional long-term borrowing at this time. -9- ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The shareholders of the Corporation were asked to vote on three items at its Annual Meeting held on April 22, 1994. Item #1 related to the elections of four director nominees: Bruce S. Chelberg, 35,064,178 for and 292,362 withheld; Roxanne J. Decyk, 35,058,392 for and 298,148 withheld; Arthur L. Kelly, 35,071,690 for and 284,850 withheld; and Raymond F. Farley, 35,071,350 for and 285,190 withheld. Item #2 related to an amendment to the Corporation Restatement of the Certificate of Incorporation to change the Corporation's name from Snap-on Tools Corporation to Snap-on Incorporated. Results were 34,987,174 for, 264,643 against and 104,723 withheld. Item #3 related to the ratification of Arthur Andersen as independent auditors for the 1994 fiscal year. Results were 34,992,915 for, 164,365 against and 199,260 withheld. There were 42,652,946 outstanding shares eligible to vote at the Annual Meeting. 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 On January 28, 1994, the Corporation's Board of Directors adopted amendments to the Rights Agreement between the Corporation and Harris Trust and Savings Bank, as Rights Agent. The Form 8-K, dated January 28, 1994, reporting these amendments is incorporated herein by reference. No financial statements were filed. -10- 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: 5/13/94 /s/R. A. CORNOG --------------- ------------------------------------------------- R. A. CORNOG (Chairman, President and Chief Executive Officer) Date: 5/13/94 /s/G. D. JOHNSON --------------- ------------------------------------------------- G. D. JOHNSON (Principal Accounting Officer and Controller) -11-