UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 28, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Identification No.)
incorporation or organization)
10801 Corporate Drive, Pleasant Prairie, Wisconsin 53158-1603
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (262) 656-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
- ------------------- ------------------------------------
Common stock, $1 par value New York Stock Exchange
Preferred stock purchase rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2). Yes [X] No [ ]
The aggregate market value of voting and non-voting common equity held by
non-affiliates computed by reference to the price at which common equity was
last sold as of the last business day of the registrant's most recently
completed second fiscal quarter (June 28, 2002) was: $1,728,675,771
Number of shares outstanding of each of the registrant's classes of common
stock at February 24, 2003: Common stock, $1 par value, 58,142,484 shares
Documents incorporated by reference
- -----------------------------------
Portions of Snap-on's Annual Report to Shareholders for the fiscal year ended
December 28, 2002, are incorporated by reference into Parts I, II and IV of this
report.
Portions of Snap-on's Proxy Statement, dated March 5, 2003, prepared for the
Annual Meeting of Shareholders scheduled for April 24, 2003, are incorporated by
reference into Part III of this report.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business........................................................3
Item 2. Properties.....................................................10
Item 3. Legal Proceedings..............................................12
Item 4. Submission of Matters to a Vote of Security Holders............12
Item 4.1 Executive Officers of the Registrant...........................12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...........................................14
Item 6. Selected Financial Data........................................14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................14
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.....15
Item 8. Financial Statements and Supplementary Data....................15
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...........................15
PART III
Item 10. Directors and Executive Officers of the Registrant.............16
Item 11. Executive Compensation.........................................16
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters....................17
Item 13. Certain Relationships and Related Transactions.................18
Item 14. Controls and Procedures........................................18
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports
on Form 8-K...................................................19
Signature Pages...............................................................21
Exhibit Index.................................................................25
2
PART I
Item 1: Business
Snap-on Incorporated ("Snap-on" or "the company") was incorporated under the
laws of the state of Wisconsin in 1920 and reincorporated under the laws of the
state of Delaware in 1930. Snap-on is a leading global innovator, manufacturer
and marketer of high-quality tool, diagnostic and equipment solutions for
professional tool and equipment users. Product lines include a broad range of
hand and power tools, tool storage, saws and cutting tools, pruning tools,
vehicle service diagnostics equipment, vehicle service equipment, including
wheel service, safety testing and collision repair equipment, vehicle service
information, business management systems, equipment repair services, and other
tool and equipment solutions. Snap-on's customers include automotive
technicians, vehicle service centers, manufacturers, industrial tool and
equipment users and those involved in commercial applications such as
construction, electrical and agriculture.
Snap-on markets its products and brands through multiple distribution sales
channels in more than 115 countries. Snap-on's largest geographic markets
include the United States, Australia, Canada, France, Germany, Italy, Japan, the
Netherlands, Spain, Sweden and the United Kingdom. The originator of the mobile
dealer van tool distribution channel in the automotive repair segment, Snap-on
also reaches its customers through company direct, distributor and Internet
channels.
Snap-on's business segments are based on the organizational structure used by
management for making operating and investment decisions and for assessing
performance. Snap-on previously reported two business segments: the Snap-on
Dealer Group, which represented the worldwide franchised dealer van channel, and
the Commercial and Industrial Group, which included all of Snap-on's non-dealer
businesses. Reflecting growth opportunities in the diagnostics and information
businesses, Snap-on realigned its management organization structure, and as a
result, changed its reportable business segments in 2002 to the following: (i)
the Snap-on Dealer Group; (ii) the Commercial and Industrial Group; and (iii)
the Diagnostics and Information Group. The Snap-on Dealer Group consists of
Snap-on's business operations serving the worldwide franchised dealer van
channel. The Commercial and Industrial Group consists of the business operations
providing tools and equipment products to a broad range of industrial and
commercial customers worldwide through direct, distributor and other
non-franchised distribution channels. The Diagnostics and Information Group
consists of the business operations providing diagnostics equipment, vehicle
service information, business management systems, equipment repair services and
other solutions for customers in the worldwide vehicle service and repair
marketplace. For additional information about Snap-on's business segments,
customers, domestic and international operations and products and services, see
Note 18 entitled "Segments" on pages 58 through 60 of Snap-on's 2002 Annual
Report, incorporated herein by reference.
More information regarding Snap-on and its products is available at our Website
at www.snapon.com. Snap-on is not including the information contained on our
Website as a part of, or incorporating it by reference into, this annual report
on Form 10-K. Snap-on's annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and any amendments to those reports are made
available to the public at no charge, other than an investor's own internet
access charges, at www.snapon.com/investor/investor.asp. Snap-on makes such
material available on its Website as soon as reasonably practicable after it
electronically files such material with, or furnishes it to, the Securities and
Exchange Commission.
3
Products and Services
Snap-on derives revenue from the manufacture, marketing and distribution of its
products and related services. Snap-on's business segments offer a broad line of
products and complementary services that can be divided into two categories:
tools and equipment. The following table shows the consolidated sales of these
product categories in the last three years:
Product Category Net Sales
---------------------------------------------
(Amounts in millions) 2002 2001 2000
------------ ------------ -------------
Tools $1,281.7 $1,291.1 $1,343.5
Equipment 827.4 804.6 832.2
------------ ------------ -------------
$2,109.1 $2,095.7 $2,175.7
============ ============ =============
The tools product category includes hand tools, power tools and tool storage
products. Hand tools include wrenches, screwdrivers, sockets, pliers, ratchets,
saws and cutting tools, pruning tools and other similar products. Power tools
include pneumatic (air), cordless (battery) and corded (electric) tools such as
impact wrenches, ratchets, chisels, drills, sanders, polishers and similar
products. Tool storage units include tool chests, roll cabinets and other
similar products. The majority of products are manufactured by Snap-on and in
completing the product line, some items are purchased from external
manufacturers.
The equipment product category includes solutions for the diagnosis and service
of automotive and industrial equipment. Products include engine analyzers, air
conditioning service equipment, brake service equipment, fluid exchange
equipment, wheel balancing and alignment equipment, transmission troubleshooting
equipment, safety testing equipment, battery chargers, lifts and hoists,
diagnostics equipment, service and collision repair equipment. Also included are
service and repair information products, diagnostic services, business
management systems, point-of-sale systems, integrated systems for vehicle
service shops, equipment repair services and purchasing facilitation services.
Snap-on supports the sale of its diagnostics and vehicle service shop equipment
by offering training programs for its customers, primarily focusing on the
technologies and the application of specific products developed and marketed by
Snap-on.
Tools and equipment are marketed under a number of brand names and trademarks,
many of which are well known in the vehicle service and industrial markets
served. Some of the major trade names and trademarks and the products and
services with which they are associated include the following:
Trademarks Products and Services
---------- ---------------------
Snap-on Hand tools, power tools, tool storage
units, diagnostics and certain equipment
Blue-Point Hand tools, power tools, tool storage
units
Acesa Hand tools
BAHCO Hand tools
Fish and Hook (design) Hand tools
Irimo Hand tools
Lindstrom Hand tools
Palmera Hand tools
Pradines Hand tools
Williams Hand tools
4
ATI Tools and equipment
Sioux Power tools
Sun Diagnostics and service equipment
White Equipment to recover, recycle and
recharge refrigerant in vehicle
air-conditioning systems and other fluid
handling equipment
John Bean Under car and wheel service equipment
Wheeltronic Hoists and lifts for vehicle service
shops
Texo Hoists and lifts for vehicle service
shops
Hofmann Wheel balancers, lifts, tire changers
and aligners
Cartec Safety testing and other equipment
Blackhawk Collision repair equipment
Brewco Collision repair equipment
Mitchell1 Repair and service information and shop
management systems
ShopKey Repair and service information and shop
management systems
EquiServ Equipment maintenance and service
Equipment Solutions Vehicle manufacturer facilitation
services
Belzer Hand tools
CDI Torque measuring instruments
Snap-on also derives income from financing its products through a 50%-owned
financial services joint venture and through Snap-on's wholly owned credit
subsidiaries. Snap-on utilizes various financing programs to facilitate the
sales of its products.
Snap-on established a joint venture in January 1999 with Newcourt Financial USA
Inc. ("Newcourt"), now The CIT Group, Inc. ("CIT"). The joint venture, Snap-on
Credit LLC ("SOC"), is a 50%-owned joint venture that provides financial
services to Snap-on's U.S. dealer and customer network and to Snap-on's
industrial and other customers. Additional information about SOC is provided in
Note 9 entitled "Snap-on Credit LLC Joint Venture" on pages 47 and 48 of
Snap-on's 2002 Annual Report, incorporated herein by reference.
SOC originates loans primarily in three ways. First, extended-term contracts are
offered to technicians to enable them to purchase tools and equipment on an
extended-term payment plan, generally with an average term of 32 months. Second,
lease financing is offered to shop owners and managers, both independent and
national chains, who purchase equipment items. The duration of lease contracts
is often two to five years. Third, financing options are also available to
dealers to meet a number of financing needs, including van and truck leases,
working capital loans, and loans to enable new dealers to fund the purchase of
the franchise. The duration of these contracts can be up to 10 years. The above
contracts are generally secured by the underlying tools or equipment financed
and other dealer assets.
Currently, the majority of finance income is derived from the vehicle service
industry in North America. Internationally, Snap-on continues to provide
financing directly to its dealer and customer network through its wholly owned
credit subsidiaries.
5
Sales and Distribution
Snap-on markets and distributes its products and related services principally to
professional tool and equipment users around the world. The two largest market
sectors are the vehicle service and repair sector and the industrial sector.
Vehicle Service and Repair Sector
The vehicle service and repair sector has three main customer groups:
professional technicians who purchase tools and equipment for themselves;
vehicle service and repair shop owners and managers - including independent
shops, national chains and automotive dealerships - who purchase equipment for
use by multiple technicians within a service or repair facility; and vehicle
manufacturers.
Snap-on provides innovative tool and equipment solutions, as well as technical
sales support and training, to meet technicians' evolving needs. Snap-on's
franchised dealer van distribution system offers technicians the convenience of
purchasing quality tools with minimal disruption of their work routine. Snap-on
also provides owners and managers of shops where technicians work with tools,
diagnostics equipment, repair and service information, and shop management
products. Snap-on provides vehicle manufacturers with products and services
including tools, consulting services and facilitation services. Snap-on's
facilitation services include product procurement, distribution and
administrative support to customers for their dealership equipment programs.
Major challenges for Snap-on and the vehicle service and repair sector include
the increasing rate of technological change within motor vehicles and the
resulting impact on the businesses of both our suppliers and customers that is
necessitated by such change. Snap-on believes it is a meaningful participant in
the market sector for vehicle service and repair.
Industrial Sector
Snap-on markets its products to a wide variety of industrial customers including
industrial maintenance and repair operations; manufacturing and assembly
facilities; government facilities; schools; and original equipment manufacturers
that require instrumentation or service tools and equipment for their products.
Major challenges in the industrial sector include a highly competitive,
cost-conscious environment, and a trend toward customers making all of their
tool purchases through one integrated supplier. Snap-on believes it is a
meaningful participant in the market sector for industrial tools and equipment.
Distribution Channels
Snap-on serves customers primarily through three channels of distribution: the
mobile dealer van channel ("dealers"), including the company's technical
representatives ("tech rep") organization, company direct sales and
distributors. The following discussion represents Snap-on's general approach in
each channel, and is not intended to be all-inclusive.
Dealers and Technical Representatives
In the United States, the majority of sales to the vehicle service and repair
industry are conducted through Snap-on's dealers and its tech rep organization.
Snap-on's dealers primarily cover vehicle service technicians and vehicle
service shop owners, providing weekly contact at the customer's place of
business. Dealers' sales are concentrated in hand and power tools, tool storage
units and small diagnostic and shop equipment, which can easily be transported
in a van and demonstrated during a brief sales call. Dealers purchase Snap-on's
products at a discount from suggested retail prices and resell them at prices
established by the dealer. Although some dealers have sales areas defined by
other methods, most U.S. dealers are provided a list of places of business that
serves as the basis of the dealer's sales route.
Since 1991, new U.S. dealers, and a majority of the pre-1991 U.S. dealers, have
been enrolled as franchisees of Snap-on. Snap-on also provides certain
franchisees the opportunity to add vans to their franchise or to add a limited
number of franchises. Snap-on charges nominal initial and ongoing monthly
license fees. Through SOC, financial assistance is available to franchised
dealers, which includes van and truck leases, working capital loans, and loans
to enable new
6
dealers to fund the purchase of the franchise. At year-end 2002, approximately
94% or 3,945 of U.S. dealers were enrolled as franchisees, or employed by
franchisees, versus approximately 93% or 3,703 at year-end 2001.
Snap-on has replicated its U.S. dealer van method of distribution in certain
other countries, including Australia, Canada, Germany, Mexico, the Netherlands,
South Africa, Japan and the United Kingdom. In many of these markets, as in the
United States, purchase decisions are generally made or influenced by
professional vehicle service technicians and shop owners. Snap-on markets
products in certain other countries through its subsidiary, Snap-on Tools
International, Ltd., which sells to foreign distributors under license or
contract with Snap-on.
Snap-on supports its dealers with an extensive field organization of branch
offices, sales and field managers, and service and distribution centers. Snap-on
also provides sales and business training, customer and dealer financing
programs, and marketing and product promotion programs to strengthen dealer
sales. In the United States and Canada, the National Dealer Advisory Council and
the Snap-on Tools Canadian Dealer Advisory Council, both of which are composed
of dealers that are elected by dealers, assist Snap-on in identifying and
implementing enhancements to the franchise program.
In the United States, dealers are supported by the tech rep sales force. Tech
reps are specialists who demonstrate and sell higher-price-point diagnostics and
shop equipment, as well as vehicle service shop management information systems.
Tech reps work independently and with dealers to identify and generate sales
leads among vehicle service shop owners and managers. Tech reps are Snap-on
employees who are compensated primarily on the basis of commission; a dealer
receives a brokerage fee from certain sales made by the tech reps to the
dealer's customers. Most products sold through the dealer and tech rep
organization are sold under the Snap-on, Blue-Point, Sun and ShopKey brand
names.
Company Direct Sales
In the United States, a growing proportion of shop equipment sales under the
Sun, John Bean, Wheeltronic, White and Hofmann brands, and information products
under the Mitchell1 brand is made by a direct sales force that has
responsibility for national accounts. As the vehicle service and repair industry
consolidates (with more business conducted by national chains, automotive
dealerships and franchised service centers), these larger organizations can be
serviced most effectively by sales people who can demonstrate and sell the full
line of equipment and diagnostic products and services. Snap-on also sells these
products and services directly to vehicle manufacturers.
Snap-on brand tools and equipment are marketed to industrial and governmental
customers in the United States through both industrial sales representatives,
who are employees, and independent industrial distributors. In most markets
outside the United States, industrial sales are conducted through distributors.
The sales representatives focus on industrial customers whose main purchase
criteria are quality and service. At the end of 2002, Snap-on had industrial
sales representatives in the United States, Australia, Canada, Japan, Mexico,
Puerto Rico and some European countries, with the United States representing the
majority of Snap-on's total industrial sales.
Distributors
Sales of certain tools and equipment are made through vehicle service and
industrial distributors who purchase the items from Snap-on and resell them to
the end users. Products supplied by Bahco, under the Bahco, Fish and Hook
(design), Belzer, Pradines and Lindstrom brands and trade names, for example,
are sold through distributors in Europe, North and South America, Asia and
certain other parts of the world. Wheel service and other vehicle service
equipment are sold through distributors primarily under brands including John
Bean, Hofmann, and Brewco. Hand tools under the Irimo, Palmera and Acesa brands
and power tools under the Sioux brand, are differentiated from those products
sold through the dealer, tech rep and direct sales channels. Sun-branded
equipment is marketed through distributors in South America and Asia, and
through both a direct sales force and distributors in Europe.
7
E-commerce
Snap-on's e-commerce development initiatives allow Snap-on to combine the
capabilities of the Internet with Snap-on's existing brand sales and
distribution strengths and to reach new and under-served customer segments.
Snap-on began selling Snap-on brand products through the Internet in 2000 as
part of its "Store Without Walls" vision, which offers both current and
prospective customers online, around-the-clock access to purchase Snap-on and
Blue-Point products through its public Website at www.snapon.com. The site
features an online catalog containing more than 14,000 products, including
Snap-on hand tools, power tools, tool storage units and diagnostic equipment
available to consumers and professionals in the United States, the United
Kingdom, Canada and Australia. At the end of 2002, Snap-on had more than 131,000
registered customers, including approximately 13,000 industrial accounts. In
addition to its public Website, Snap-on began to host individual dealer Websites
in 2002 to help franchised dealers extend their industry-leading service. These
initiatives, as well as other system enhancement initiatives that are currently
under development, are designed to further leverage the one-on-one relationships
and service Snap-on has with its current and prospective customers. Through the
development of its business-to-business and business-to-consumer capabilities,
Snap-on and its dealers will be increasing communications with customers on a
real-time, 24-hour, 7-days a week basis.
Competition
Snap-on competes on the basis of its product quality and performance, service,
brand awareness and technological innovation. While no single company competes
with Snap-on across all of its product lines and distribution channels, various
companies compete in one or more product categories and/or distribution
channels.
Snap-on believes that it is a leading manufacturer and distributor of
professional tools and equipment, offering the broadest line of these products
to the vehicle service industry. The major competitors selling to professional
technicians in the vehicle service and repair sector through the mobile van
channel include MAC Tools (The Stanley Works) and Matco (Danaher Corporation).
Snap-on also competes with companies that sell through non-mobile van
distributors including Facom (Fimalac), Sears, Roebuck and Co. and The Stanley
Works. Within the power tools category, Snap-on's major competitors include
Atlas Copco, Ingersoll-Rand, Cooper Industries, Ltd., Black & Decker, Bosch, and
Makita Corporation. In the industrial sector, major competitors include
Armstrong (Danaher Corporation), Cooper Industries, Ltd. and Proto (The Stanley
Works). The major competitors selling diagnostics and shop equipment to shop
owners and managers in the vehicle service and repair sector include Corghi
S.p.A., Facom (Fimalac), Hennessy (Danaher Corporation), Hunter Engineering, OTC
and Robinair (SPX Corporation), and Rotary and Chief Automotive (Dover
Corporation).
Raw Materials and Purchased Product
Snap-on's supply of raw materials (including various grades and alloys of steel
bars and sheets) and purchased components are readily available from numerous
suppliers.
Approximately 81% of 2002 consolidated net sales consisted of products
manufactured by Snap-on, while the remaining 19% consisted of products purchased
from outside suppliers. No single supplier's products accounted for a material
portion of 2002 consolidated net sales.
8
Patents, Trademarks and Other Intellectual Property
Snap-on vigorously pursues and relies on patent protection to protect its
intellectual property and its position in its markets. As of December 28, 2002,
Snap-on and its subsidiaries held 1,592 active and pending patents worldwide. No
sales relating to any single patent represented a material portion of Snap-on's
revenues in 2002 or 2001.
Examples of products that have features or designs that benefit from patent
protection include wheel alignment systems, wheel balancers, sealed ratchets,
electronic torque instruments, ratcheting screwdrivers, emissions-sensing
devices, diagnostic equipment, and air conditioning equipment.
Much of the technology used in the manufacture of vehicle service tools and
equipment is in the public domain. Snap-on relies primarily on trade secret
protection to protect proprietary processes used in manufacturing. Methods and
processes are patented when appropriate. Copyright protection is also utilized
when appropriate.
Trademarks used by Snap-on are of continuing importance to Snap-on in the
marketplace. Trademarks have been registered in the United States and more than
115 other countries, and additional applications for trademark registrations are
pending. Snap-on vigorously polices proper use of its trademarks. Snap-on's
right to manufacture and sell certain products is dependent upon licenses from
others; however, these products under license do not represent a material
portion of Snap-on's sales.
Domain names have become a valuable corporate asset for companies around the
world, including Snap-on. Domain names often contain a trademark or service mark
or even a corporate name and are often considered intellectual property. The
recognition and value of the Snap-on name, trademark, and domain name are core
strengths of the company. Snap-on has undertaken an initiative to centralize the
administration of all domestic and international domain names, including all
registrations and renewals. Snap-on also monitors new developments in top-level
domains and country-code domains in order to preserve Snap-on's right to
relevant domain names.
Working Capital
Because most of Snap-on's business is not seasonal and its inventory needs are
relatively constant, no unusual working capital needs arise during the year.
Snap-on's financial condition and use of working capital are discussed in
"Management's Discussion and Analysis," on pages 28 through 32 of Snap-on's 2002
Annual Report, incorporated herein by reference.
Snap-on does not depend on any single customer, small group of customers or
government for any material part of its sales, and has no significant backlog of
orders.
Environment
Snap-on complies with applicable environmental control requirements in its
operations. Compliance has not had, and Snap-on does not for the foreseeable
future expect it to have, a material effect upon Snap-on's capital expenditures,
earnings or competitive position.
Employees
At the end of February 2003, Snap-on employed approximately 12,900 people
compared to approximately 13,500 people at the end of February 2002. The
year-over-year reduction primarily reflects the impact of restructuring-related
eliminations.
Approximately 4,600 employees or 35% of Snap-on's worldwide workforce are
represented by unions and/or covered under collective bargaining agreements. In
recent years, Snap-on has not experienced any significant work slow-downs,
stoppages or other labor disruptions.
9
The number of covered union employees whose contracts expire within the next
five years is approximately 2,100 in 2003, 900 in 2004, 1,000 in 2005 and 600 in
2006.
There can be no assurance that future contracts with Snap-on's unions will be
renegotiated upon terms acceptable to Snap-on.
Item 2: Properties
Snap-on maintains both leased and owned manufacturing, warehouse, distribution
and office facilities throughout the world. Snap-on believes that its facilities
currently in use are suitable and have adequate capacity to meet its present and
foreseeable future demand. Snap-on's facilities in the United States occupy
approximately 4.1 million square feet, of which 75% is owned, including its
corporate and general offices located in Pleasant Prairie and Kenosha,
Wisconsin. Snap-on's facilities outside the United States contain approximately
4.0 million square feet, of which 69% is owned. Several of Snap-on's facilities
are leased through operating lease agreements. For information on operating
leases, see Note 17 entitled "Commitments and Contingencies" on page 58 of
Snap-on's 2002 Annual Report, incorporated herein by reference. Snap-on
management continually monitors the company's capacity needs and makes
adjustments as dictated by market and other conditions. During 2002, Snap-on
finalized its 2001 restructuring actions, closing or consolidating a total of 32
facilities consisting of nine manufacturing or distribution facilities and 23
sales or administrative offices.
The following table provides information about each of Snap-on's principal
manufacturing locations and distribution centers (exceeding 50,000 square feet):
Location Type of property Owned/Leased
- -------- ---------------- ------------
U.S. Locations:
Conway, Arkansas Manufacturing Owned
City of Industry, California Manufacturing Leased
Escondido, California Manufacturing Owned
Poway, California Distribution and manufacturing Leased
San Jose, California Manufacturing Leased
Columbus, Georgia Distribution Owned
Crystal Lake, Illinois Distribution and customer service center Owned
Mt. Carmel, Illinois Manufacturing Owned
Algona, Iowa Manufacturing Owned
Olive Branch, Mississippi Distribution and customer service center Leased and owned
Carson City, Nevada Distribution and customer service center Leased and owned
Murphy, North Carolina Distribution and manufacturing Owned
10
Location Type of property Owned/Leased
- -------- ---------------- ------------
Robesonia, Pennsylvania Distribution and customer service center Owned
Elizabethton, Tennessee Manufacturing Owned
Johnson City, Tennessee Manufacturing Owned
Elkhorn, Wisconsin Manufacturing Owned
Kenosha, Wisconsin Manufacturing Owned
Milwaukee, Wisconsin Manufacturing Owned
Non-U.S. Locations:
Santo Tome, Argentina Manufacturing Owned
Santa Barbara D'oeste, Brazil Manufacturing, distribution
and customer service center Owned
Mississauga, Canada Manufacturing Leased
Newmarket, Canada Distribution and manufacturing Owned
Kettering, England Distribution Owned
King's Lynn, England Distribution and manufacturing Owned
Rotherham, England Manufacturing Leased
La Chapelle St. Ursin, France Distribution and manufacturing Leased
Pfungstadt, Germany Manufacturing Leased
Unterneukirchen, Germany Manufacturing Leased
Sopron, Hungary Manufacturing Owned
Correggio, Italy Manufacturing Owned
Juarez, Mexico Manufacturing Leased
Helmond, the Netherlands Distribution Owned
Vila do Conde, Portugal Manufacturing Owned
Irun, Spain Manufacturing Owned
Urretxu, Spain Manufacturing Owned
Vitoria, Spain Distribution and manufacturing Owned
Bollnas, Sweden Manufacturing Owned
Edsbyn, Sweden Manufacturing Owned
Enkoping, Sweden Manufacturing Owned
Lidkoping, Sweden Manufacturing Owned
Sandviken, Sweden Distribution Leased
11
Item 3: Legal Proceedings
Snap-on held 1,592 active or pending patents as of year-end 2002, and Snap-on
vigorously prosecutes its claims and defends its patents in the ordinary course
of business. In February 1998, Snap-on filed a complaint alleging infringement
of certain of Snap-on's patents by Hunter Engineering Company ("Hunter"). Hunter
counterclaimed, alleging infringement of certain of its patents and one
trademark. In April 2002, the court set a trial date of October 14, 2002, for
various patents. In May 2002, Hunter alleged infringement of two additional
patents for which a March 2003 trial date was later set. That trial date was
vacated when the case was consolidated with the above litigation in October
2002.
The October 14, 2002, trial date was later postponed by the court to October 30,
2002. On October 22, 2002, a settlement was reached between Snap-on and Hunter
for all of the above-mentioned matters, and in the fourth quarter of 2002, a
final, comprehensive agreement was reached in Snap-on's favor for $10.8 million,
net of related legal expenses incurred in the year.
In 1996, Snap-on filed a complaint against SPX Corporation ("SPX") alleging
infringement of Snap-on's patents and asserting claims relating to SPX's hiring
of the former president of Sun Electric, a subsidiary of Snap-on acquired in
1992. SPX filed a counterclaim alleging infringement of certain SPX patents.
These patents, which related to engine analyzer products first introduced in the
1980's, have expired. As part of a binding arbitration process in 2001, the
arbitrator ruled in favor of SPX and Snap-on was ordered to pay $44.0 million to
SPX. This obligation was paid in January 2002 and was recorded in "Other accrued
liabilities" on the accompanying 2001 Consolidated Balance Sheets and in
"Operating expenses" on the accompanying 2001 Consolidated Statements of
Earnings, which are incorporated by reference in Item 8 of this report.
Snap-on has various corporate and government customers worldwide that purchase
Snap-on products pursuant to multi-year contracts. These contracts can include a
variety of terms and are periodically subject to audit by the customers for
compliance. Snap-on currently has two contracts being audited by government
auditors. Snap-on is also involved in various other legal matters that are being
defended and handled in the ordinary course of business. Snap-on maintains
accruals for such costs that are expected to be incurred with regards to these
maters. Although it is not possible to predict the outcome of these matters,
management believes that the results will not have a material impact on
Snap-on's financial statements.
Item 4: Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the fourth quarter of
the fiscal year ended December 28, 2002.
Item 4.1: Executive Officers of the Registrant
The executive officers of Snap-on, their ages as of December 28, 2002, their
titles as of that date and positions held during the last five years are listed
below.
Dale F. Elliott (48) - Chairman since April 2002 and President and Chief
Executive Officer since April 2001. President - Diagnostics and Industrial from
October 1998 to April 2001 and President - Snap-on Industrial from February 1995
to October 1998. Prior to joining Snap-on, Mr. Elliott was Vice President -
Marketing at S-B Power Tool, a joint venture of the Skil division of Emerson
Electric and also held various executive positions with Emerson Electric from
June 1984 to January 1995. Member of Snap-on's Board of Directors since 2001.
Martin M. Ellen (49) - Senior Vice President - Finance and Chief Financial
Officer since November 2002. Prior to joining Snap-on, Mr. Ellen was Vice
President and Chief Financial Officer for Cabot Microelectronics Corporation, a
spin off of Cabot Corporation from March 2001 through October 2002. Mr. Ellen
joined Cabot Microelectronics after serving as Senior Vice President and Chief
Financial Officer of Whitman Corporation from October 1998 through the closing
of its merger with PepsiAmericas, Inc. in 2001. From May 1998 through September
1998, Mr. Ellen was a founding member of Casas, Ellen & White, LLC, a venture
management firm. From October 1996 to May 1998, Mr. Ellen was Executive Vice
President and Chief Financial Officer of PrimeCare International, Inc., a
healthcare services company.
12
Michael F. Montemurro (54) - Senior Vice President and President - Worldwide
Snap-on Dealer Group since November 2000 and Senior Vice President -
Transportation from October 1998 to November 2000. Senior Vice President -
Financial Services and Administration from August 1994 to October 1998. Senior
Vice President - Financial Services, Administration and Chief Financial Officer
from April 1994 to August 1994. Senior Vice President - Finance and Chief
Financial Officer from March 1990 to April 1994.
Nicholas T. Pinchuk (56) - Senior Vice President and President - Worldwide
Commercial and Industrial Group since June 2002. Prior to joining Snap-on, Mr.
Pinchuk was President of Global Refrigeration Operations for Carrier
Corporation, a producer of air conditioning, heating and refrigeration systems,
and a subsidiary of United Technologies Corporation, from July 1997 to June
2001. Prior to serving as president at Carrier Corporation, Mr. Pinchuk served
in various executive, operational, planning and financial capacities within
Carrier and United Technologies, including: President Asia-Pacific Air
Conditioning Operations; Vice President, Strategic Planning; and Chief Financial
Officer, Carrier International Corporation.
Alan T. Biland (44) - Vice President - Chief Information Officer and President -
Diagnostics and Information Group since June 2001. Vice President - Chief
Information Officer from April 1998 to June 2001. Prior to joining Snap-on, Mr.
Biland was Director, Information Technology at Case Corporation, a manufacturer,
marketer and distributor of farm and construction equipment, from December 1985
to December 1998.
Jeffrey N. Eggert (42) - Vice President - Snap-on Tools Operations since
February 2002. Assistant treasurer and controller - worldwide Snap-on dealer
group from 1999 to 2002. Assistant treasurer - tax and treasury from 1997 to
1999.
Blaine A. Metzger (46) - Vice President and Controller since May 2001. Prior to
joining Snap-on, Mr. Metzger was Chief Financial Officer for Crenlo, Inc., a
manufacturer of cabs for agricultural and construction equipment, and a division
of Dover Corporation from August 2000 to April 2001 and Vice President Financial
Planning, Reporting and Finance Centers for CNH Global N.V., a manufacturer of
agricultural and construction equipment, from November 1999 to March 2000. Prior
to serving as vice president at CNH Global, Mr. Metzger held several financial
management positions at Case Corporation, a manufacturer, marketer and
distributor of farm and construction equipment, beginning in 1990.
Susan F. Marrinan (54) - Vice President, Secretary and General Counsel since
January 1992.
There is no family relationship among the executive officers and there has been
no involvement in legal proceedings during the past five years that would be
material to the evaluation of the ability or integrity of any of the executive
officers. Executive officers may be elected by the Board of Directors or
appointed by the Chief Executive Officer at the regular meeting of the Board of
Directors that follows the Annual Shareholders' Meeting, which is ordinarily
held in April each year, and at such other times as new positions are created or
vacancies must be filled.
13
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
Snap-on has undertaken stock repurchases from time to time to offset dilution
created by shares issued for employee and dealer stock purchase plans, stock
options, and other corporate purposes, as well as to repurchase shares when
market conditions are favorable. For the fiscal years ended 2002, 2001 and 2000,
Snap-on repurchased 405,000, 400,000 and 1,019,500 shares, respectively. Since
1997, Snap-on's Board of Directors has authorized the repurchase of up to $250
million of Snap-on's common stock. As of the end of 2002, Snap-on has remaining
availability to repurchase up to an additional $142 million in common stock
pursuant to the Board of Directors' authorizations. The purchase of Snap-on
common stock is at the company's discretion, subject to prevailing financial and
market conditions. Since 1995, Snap-on has repurchased 10,394,583 shares. In
2002, Snap-on's average common stock repurchase price was $30.03.
At December 28, 2002, Snap-on had 63,571,044 shares of common stock outstanding.
This consists of 58,249,067 shares considered outstanding for purposes of
computing earnings per share and an additional 5,321,977 shares held in a
Grantor Stock Trust, which are considered outstanding for voting purposes but
not for purposes of computing earnings per share.
Snap-on's stock is listed on the New York Stock Exchange under the ticker symbol
"SNA." As of February 24, 2003, there were 10,557 registered holders of Snap-on
common stock.
Snap-on's common stock high and low prices for the last two years by quarter
were as follows:
Common Stock High/Low Prices
(Amounts in dollars)
Quarter 2002 2001
- ------------- ----------------------- ----------------------
High Low High Low
---------- --------- -------- ---------
First $34.96 $30.88 $30.75 $27.38
Second $34.12 $29.00 $30.93 $24.16
Third $29.90 $22.50 $27.31 $21.65
Fourth $30.22 $21.50 $34.21 $21.68
Snap-on has paid consecutive quarterly cash dividends since 1939. In the fourth
quarter of 2002, Snap-on's Board of Directors declared a $.01 per share increase
in the company's quarterly dividends on its common stock, effective with the
fourth-quarter 2002 dividend. The new quarterly dividend of $.25 per share
represents a 4.2% increase over the previous quarterly dividend of $.24 per
share. Cash dividends paid in 2002, 2001, and 2000 totaled $56.5 million, $55.6
million and $55.0 million. Snap-on's Board of Directors monitors and evaluates
the company's dividend practice quarterly and the Board may elect to increase,
decrease or not pay a dividend on Snap-on Common stock based upon the company's
financial condition, results of operations, cash requirements and future
prospects of Snap-on and other factors deemed relevant by the Board.
Additional information required by Item 5 is contained in the section entitled
"Quarterly Financial Information" on page 61 of Snap-on's 2002 Annual Report and
is incorporated herein by reference.
Item 6: Selected Financial Data
The information required by Item 6 is contained in the section entitled
"Six-year Data" on page 20 of Snap-on's 2002 Annual Report and is incorporated
herein by reference.
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by Item 7 is contained in the section entitled
"Management's Discussion and Analysis" on pages 21 through 36 of Snap-on's 2002
Annual Report and is incorporated herein by reference.
14
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A is contained in the section entitled
"Market, Credit and Economic Risks" on pages 33 and 34 and in Note 11 entitled
"Financial Instruments" on pages 49 through 51 of Snap-on's 2002 Annual Report
and is incorporated herein by reference.
Item 8: Financial Statements and Supplementary Data
Financial statements and supplementary data required by Item 8 are contained in
Snap-on's 2002 Annual Report appearing in the sections entitled "Consolidated
Statements of Earnings" on page 37, "Consolidated Balance Sheets" on page 38,
"Consolidated Statements of Shareholders' Equity and Comprehensive Income" on
page 39, "Consolidated Statements of Cash Flows" on page 40, "Notes to
Consolidated Financial Statements" on pages 41 through 60, "Quarterly Financial
Information" appearing on page 61, "Independent Auditors' Report" on pages 62
and 63, and "Report of Independent Public Accountants" on page 63, and is
incorporated herein by reference.
Snap-on's quarterly earnings (loss) before cumulative effect of a change in
accounting principle and related earnings (loss) per share for the fiscal years
ended December 28, 2002, and December 29, 2001, were as follows:
Quarterly Quarterly
(Amounts in millions Earnings (loss) Earnings (loss) per Share
except per share data) before Cumulative Effect before Cumulative Effect
----------------------------------------------------------------------------
2002: Basic Diluted
- ----------------------- ---------------------------- ------------------- ---------------------
First $ 21.7 $ .37 $ .37
Second $ 29.2 $ .50 $ .50
Third $ 19.2 $ .33 $ .33
Fourth $ 33.1 $ .57 $ .56
2001:
- ----------------------- ---------------------------- ------------------- ---------------------
First $ 29.4 $ .51 $ .51
Second $ 8.9 $ .15 $ .15
Third $ .6 $ .01 $ .01
Fourth $(17.4) $(.30) $(.30)
Item 9: Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
The information required by Item 9 is contained in the section entitled "Item 4.
Changes in Registrant's Certifying Accountant" on page 2 of Form 8-K filed on
June 21, 2002, and is incorporated herein by reference. Effective June 14, 2002,
Snap-on dismissed Arthur Andersen LLP as its independent auditors. For further
information see the section entitled "Independent Auditor" in Snap-on's Proxy
Statement dated March 5, 2003.
15
PART III
Item 10: Directors and Executive Officers of the Registrant
The identification of Snap-on's directors as required by Item 10 is contained in
Snap-on's Proxy Statement, dated March 5, 2003, in the section entitled
"Proposal to be Voted on: Election of Directors" on page 6 and in the section
entitled "Board of Directors-Directors Not Standing for Election" on page 7 and
is incorporated herein by reference.
With respect to information about Snap-on's executive officers, see Item 4.1,
"Executive Officers of the Registrant," at the end of Part I of this report.
The Section 16(a) filing compliance disclosure pursuant to Item 405 of
Regulation S-K is contained in Snap-on's Proxy Statement, dated March 5, 2003,
in the section entitled "Other Information - Section 16(a) Beneficial Ownership
Reporting Compliance" on page 27, and is incorporated herein by reference.
Item 11: Executive Compensation
The information required by Item 11 is contained in Snap-on's Proxy Statement,
dated March 5, 2003, in the section entitled "Executive Compensation" on pages
18 through 24 and in the section entitled "Other Information" on pages 25
through 27, and is incorporated herein by reference.
16
Item 12: Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is contained in Snap-on's Proxy Statement,
dated March 5, 2003, in the section entitled "Board of Directors - Security
Ownership of Management and Certain Beneficial Owners" contained on pages 10 and
11, and is incorporated herein by reference.
The information with respect to Item 201(d) of Regulation S-K as of December 28,
2002, is as follows:
Equity Compensation Plan Information
Number of securities
remaining available for
Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Proxy category warrants and rights warrants and rights reflected in column (a))
- -------------- ------------------- ------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders 5,460,692(1) $30.70(2) 4,549,625(3)
Equity compensation
plans not approved
by security holders 223,062(4) Not Applicable (5)
-------------------- ------------------ --------------------
Total 5,683,754 $30.70 4,549,625(5)
==================== ================== ====================
(1) Includes (i) options to acquire 3,905,699 shares granted under the 1986
Incentive Stock Program; (ii) options to acquire 1,493,895 shares granted
under the 2001 Incentive Stock and Awards Plan; (iii) 61,098 shares
represented by deferred share units under the Directors' Fee Plan. Excludes
105,600 shares issuable in connection with the vesting of restricted share
units under the 2001 Incentive Stock and Awards Plan. Also excludes shares
of common stock that may be issuable under the employee stock purchase plan
and the dealer stock purchase plan.
(2) Reflects only the weighted-average exercise price of outstanding stock
options granted under the 2001 Incentive Stock and Awards Plan and the 1986
Incentive Stock Program and does not include shares represented by deferred
share units under the Directors' Fee Plan and shares issuable in connection
with the vesting of restricted share units under the 2001 Incentive Stock
and Awards Plan for which there is no exercise prices. Also excludes shares
of common stock that may be issuable under the employee stock purchase plan
and the dealer stock purchase plan.
(3) Includes (i) 3,660,655 shares reserved for issuance under the 2001
Incentive Stock and Awards Plan (which may be issued upon the exercise of
stock options or granted as restricted stock or restricted share units);
(ii) 183,713 shares reserved for issuance under the Directors' Fee Plan;
(iii) 490,714 shares reserved for issuance under the employee stock
purchase plan; and (iv) 214,543 shares reserved for issuance under the
dealer stock purchase plan.
(4) Consists of deferred share units under Snap-on's Deferred Compensation
Plan. Snap-on's Deferred Compensation Plan allows elected and appointed
officers of Snap-on to defer all or a percentage of their respective annual
salary and/or incentive compensation. The deferred share units are payable
in shares of Snap-on Common Stock on a one-for-one basis and are calculated
at fair market value. Shares of Common Stock delivered under the Deferred
Compensation Plan are previously issued shares reacquired and held by
Snap-on.
(5) The Deferred Compensation Plan provides that Snap-on will make available as
and when required a sufficient number of shares of Common Stock to meet the
needs of the plan. It further provides that such shares shall be previously
issued shares reacquired and held by Snap-on.
17
Item 13: Certain Relationships and Related Transactions
None.
Item 14: Controls and Procedures
(a) Evaluation of disclosure controls and procedures. In accordance with
Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),
within 90 days prior to the filing date of this Annual Report on Form 10-K, an
evaluation was carried out under the supervision and with the participation of
Snap-on's management, including its Chairman of the Board, President and Chief
Executive Officer and its Senior Vice President - Finance and Chief Financial
Officer, of the effectiveness of the design and operation of Snap-on's
disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934). Based upon their evaluation of these
disclosure controls and procedures, the Chairman of the Board, President and
Chief Executive Officer and the Senior Vice President - Finance and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of the date of such evaluation to ensure that material information
relating to Snap-on, including its consolidated subsidiaries, was made known to
them by others within those entities, particularly during the period in which
this Annual Report on Form 10-K was being prepared.
(b) Changes in internal controls. There were not any significant changes in
Snap-on's internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
18
PART IV
Item 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K
Item 15(a): Documents filed as part of this report:
1. List of Financial Statements
The following consolidated financial statements of Snap-on and the Independent
Auditors' Report and Report of Independent Public Accountants thereon, contained
on pages 37 through 60 and on pages 62 and 63 of Snap-on's 2002 Annual Report to
its shareholders, are incorporated by reference in Item 8 of this report:
Consolidated Statements of Earnings for the years ended December 28, 2002,
December 29, 2001, and December 30, 2000.
Consolidated Balance Sheets as of December 28, 2002, and December 29, 2001.
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the
years ended December 28, 2002, December 29, 2001, and December 30, 2000.
Consolidated Statements of Cash Flows for the years ended December 28, 2002,
December 29, 2001, and December 30, 2000.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
Report of Independent Public Accountants.
2. Financial Statement Schedules
The following consolidated financial statement schedules of Snap-on are included
in Item 15(d) as a separate section of this report:
Schedule II Valuation and Qualifying Accounts and Reserves - page 28 herein.
Independent Auditors' Report - page 29 herein.
Report of Independent Public Accountants on Financial Statement Schedule - page
30 herein.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are inapplicable and,
therefore, have been omitted, or are included in Snap-on's 2002 Annual Report in
the Notes to Consolidated Financial Statements for the years ended December 28,
2002, December 29, 2001, and December 30, 2000, which are incorporated by
reference in Item 8 of this report.
3. List of Exhibits
The exhibits filed with or incorporated by reference in this report are as
specified in the exhibit index under Item 15(c) - pages 25 through 27 herein.
19
Item 15(b): Reports on Form 8-K
During the fourth quarter of 2002, Snap-on reported the following on Form 8-K:
Date Filed Date of Report Item
---------- -------------- ----
October 22, 2002 October 22, 2002 Snap-on filed a press release entitled "Snap-on
Third Quarter EPS in Line with Recent Outlook;
Strong Cash Flow Continues from Operational
Fitness Improvements."
November 7, 2002 November 7, 2002 Snap-on furnished copies, pursuant to Item 9 of
Form 8-K, of the certifications required
pursuant to 18 U.S.C. Section 1350 (Section 906
of the Sarbanes-Oxley Act of 2002) for the
Corporation's Quarterly Report on Form 10-Q for
the period ended June 29, 2002.
November 7, 2002 November 7, 2002 Snap-on filed a report outlining its new segment
structure.
November 7, 2002 November 7, 2002 Snap-on filed with the Securities and Exchange
Commission (the "Commission") statements (the
"Statements") in writing, under oath, of the
Chief Executive Officer and (Acting) Principal
Financial Officer of the Company in response to
the order of the Commission pursuant to Section
21(a)(1) of the Securities Exchange Act of 1934
(SEC File No. 4-460).
20
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, Snap-on has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SNAP-ON INCORPORATED
By: /s/ Dale F. Elliott Date: March 5, 2003
------------------------------------- -------------
Dale F. Elliott, Chairman of the
Board of Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Snap-on and in the
capacities as indicated.
/s/ Dale F. Elliott Date: March 5, 2003
------------------------------------- -------------
Dale F. Elliott, Chairman of the
Board of Directors, President and
Chief Executive Officer
/s/ Martin M. Ellen Date: March 5, 2003
------------------------------------- -------------
Martin M. Ellen, Principal Financial
Officer, Chief Financial Officer, and
Senior Vice President - Finance
/s/ Blaine A. Metzger Date: March 5, 2003
------------------------------------- -------------
Blaine A. Metzger, Principal
Accounting Officer,
Vice President and Controller
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Snap-on and in the
capacities as indicated.
By: /s/ Bruce S. Chelberg Date: March 5, 2003
------------------------------------- -------------
Bruce S. Chelberg, Director
By: /s/ Roxanne J. Decyk Date: March 5, 2003
------------------------------------- -------------
Roxanne J. Decyk, Director
By: /s/ Leonard A. Hadley Date: March 5, 2003
------------------------------------- -------------
Leonard A. Hadley, Director
By: /s/ Arthur L. Kelly Date: March 5, 2003
------------------------------------- -------------
Arthur L. Kelly, Director
By: /s/ Lars Nyberg Date: March 5, 2003
------------------------------------- -------------
Lars Nyberg, Director
By: /s/ Jack D. Michaels Date: March 5, 2003
------------------------------------- -------------
Jack D. Michaels, Director
By: /s/ Frank S. Ptak Date: March 5, 2003
------------------------------------- -------------
Frank S. Ptak, Director
By: /s/ Edward H. Rensi Date: March 5, 2003
------------------------------------- -------------
Edward H. Rensi, Director
By: /s/ Richard F. Teerlink Date: March 5, 2003
------------------------------------- -------------
Richard F. Teerlink, Director
22
CERTIFICATIONS
I, Dale F. Elliott, Chief Executive Officer of Snap-on Incorporated, certify
that:
1. I have reviewed this annual report on Form 10-K of Snap-on Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's Board of Directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 5, 2003
/s/ Dale F. Elliott
- --------------------------
Dale F. Elliott
Chief Executive Officer
23
I, Martin M. Ellen, Principal Financial Officer of Snap-on Incorporated, certify
that:
1. I have reviewed this annual report on Form 10-K of Snap-on Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's Board of Directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 5, 2003
/s/ Martin M. Ellen
- ---------------------------
Martin M. Ellen
Principal Financial Officer
24
EXHIBIT INDEX
Item 15(c): Exhibits
- ---------------------
(3) (a) Restated Certificate of Incorporation of the Corporation as amended
through April 25, 1997 (incorporated by reference to Exhibit 3(a) to
Snap-on's Annual Report on Form 10-K for the fiscal year ended January
2, 1998 (Commission File No. 1-7724))
(b) Bylaws of the Corporation, effective as of January 26, 1996
(incorporated by reference to Exhibit 3(b) to Snap-on's Annual Report
on Form 10-K for the fiscal year ended December 30, 1996 (Commission
File No. 1-7724))
(4) (a) Rights Agreement between the Corporation and First Chicago Trust
Company of New York, effective as of August 22, 1997 (incorporated by
reference to Snap-on's Form 8-A12B dated October 17, 1997 (Commission
File No. 1-7724))
(b) Amendment No. 1 to the Rights Agreement dated as of September 24, 2001
between the Corporation and EquiServe Trust Company, N.A. (successor
to First Chicago Trust Company of New York) (incorporated by reference
to Snap-on's Form 8-A/A dated September 26, 2001 (Commission File No.
1-7724))
Snap-on and its subsidiaries have no unregistered long-term debt
agreement for which the related outstanding debt exceeds 10% of
consolidated total assets as of December 28, 2002. Copies of debt
instruments for which the related debt is less than 10% of
consolidated total assets will be furnished to the Commission upon
request.
(10) Material Contracts
(a) Amended and Restated Snap-on Incorporated 1986 Incentive Stock Program
(incorporated by reference to Exhibit 10(a) of Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(b) Amended and Restated Snap-on Incorporated 2001 Incentive Stock and
Awards Plan (incorporated by reference to Exhibit 10(b) of Snap-on's
Quarterly Report on Form 10-Q for the quarterly period ended March 30,
2002 (Commission File No. 1-7724))*
(c) Form of Restated Senior Officer Agreement between the Corporation and
each of Dale F. Elliott, Alan T. Biland, Sharon M. Brady, Martin M.
Ellen, Susan F. Marrinan, Michael F. Montemurro and Nicholas T.
Pinchuk (incorporated by reference to Exhibit 10(c) to Snap-on's
Quarterly Report on Form 10-Q for the quarterly period ended March 30,
2002 (Commission File No. 1-7724))*
(d) Form of Restated Executive Agreement between the Corporation and each
of Richard V. Caskey, Jeffrey N. Eggert, Gary S. Henning, Nicholas L.
Loffredo, Denis J. Loverine, Blaine A. Metzger and William H. Pfund
(incorporated by reference to Exhibit 10(d) to Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(e) Form of Indemnification Agreement between the Corporation and each of
Martin M. Ellen, Susan F. Marrinan, Michael F. Montemurro and Nicholas
T. Pinchuk effective October 24, 1997 (incorporated by reference to
Exhibit 3(a) to Snap-on's Annual Report on Form 10-K for the fiscal
year ended January 2, 1998 (Commission File No. 1-7724))*
(f) Amended and Restated Snap-on Incorporated Directors' 1993 Fee Plan
(incorporated by reference to Exhibit 10(e) to Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(g) Snap-on Incorporated Deferred Compensation Plan (as amended through
March 13, 2002 incorporated by reference to Exhibit 10(j) to Snap-on's
Annual Report on Form 10-K for the fiscal year ended December 29,
2001)*
25
(h) Snap-on Incorporated Supplemental Retirement Plan for Officers
(incorporated by reference to Exhibit 10(f) to Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(i) Amended and Restated Benefit Trust Agreement between the Corporation
and The Northern Trust Company, dated as of July 2, 1998 and amended
and restated as of March 17, 2000 (incorporated by reference to
Snap-on's Form 8-K dated March 17, 2000 (Commission File No. 1-7724))
(j) Five-year Credit Agreement between the Corporation and Salomon Smith
Barney Inc., Banc One Capital Markets Inc. and the First National Bank
of Chicago (incorporated by reference to Exhibit 10(a) to Snap-on's
report on Form 10-Q for the quarterly period ended October 2, 1999
(Commission File No. 1-7724))
(k) 364-Day Credit Agreement between the Corporation and Salomon Smith
Barney Inc., Banc One Capital Markets Inc. and the First National Bank
of Chicago (incorporated by reference to Exhibit 10(a) to Snap-on's
report on Form 10-Q for the quarterly period ended October 2, 1999
(Commission File No. 1-7724))
(l) Amended and Restated 364-Day Credit Agreement between the Corporation
and Salomon Smith Barney Inc., Banc One Capital Markets, Inc.,
Citibank, N.A. and Bank One, N.A. (incorporated by reference to
Exhibit 10(a) to Snap-on's Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 2002 (Commission File No.
1-7724))
(m) Amended and Restated 364-Day Credit Agreement between the Corporation
and Salomon Smith Barney Inc., Banc One Capital Markets, Inc.,
Citibank, N.A. and Bank One, N.A. (incorporated by reference to
Exhibit 10.1 to Snap-on's report on Form 10-Q for the quarter ended
September 29, 2001 (Commission File No. 1-7724))
(n) Amended and Restated Five Year Credit Agreement between the
Corporation and Salomon Smith Barney Inc., Banc One Capital Markets
Inc., Citibank, N.A. and Bank One, N.A. (incorporated by reference to
Exhibit 10(o) to Snap-on's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000 (Commission File No. 1-7724))
(o) Form of Severance Agreements between the Corporation and each of Alan
T. Biland, Sharon M. Brady, Dale F. Elliott, Nicholas L. Loffredo,
Susan F. Marrinan and Michael F. Montemurro dated October 27, 2000
(incorporated by reference to Exhibit 10(t) to Snap-on's Annual Report
on Form 10-K for the fiscal year ended December 30, 2000 (Commission
File No. 1-7724))*
(p) Form of Split-Dollar Insurance Plan Agreement between the Corporation
and each of Dale F. Elliott, Susan F. Marrinan and Michael F.
Montemurro (incorporated by reference to Exhibit 10(v) to Snap-on's
Annual Report on Form 10-K for the fiscal year ended December 30, 2000
(Commission File No. 1-7724))*
(q) Form of Amendment to Split-Dollar Insurance Plan Agreement between the
Corporation and each of Dale F. Elliott, Susan F. Marrinan and Michael
F. Montemurro (incorporated by reference to Exhibit 10(w) to Snap-on's
Annual Report on Form 10-K for the fiscal year ended December 30, 2000
(Commission File No. 1-7724))*
(r) Form of Split-Dollar Insurance Plan Agreement between the Corporation
and each of Dale F. Elliott, Alan T. Biland, Sharon M. Brady and
Michael F. Montemurro (incorporated by reference to Exhibit 10(g) to
Snap-on's Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 2002 (Commission File No. 1-7724))*
(s) Employment Agreement between the Corporation and Dale F. Elliott,
effective as of April 27, 2001 (incorporated by reference to Exhibit
10.2 to Snap-on's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2001 (Commission File No. 1-7724))*
(t) Form of Share and Performance Award Agreement and Form of Deferred
Share and Performance Award Agreement between the Corporation and each
of Dale F. Elliott, Martin M. Ellen, Michael F. Montemurro, Nicholas
T. Pinchuk, Susan F. Marrinan, and Blaine A. Metzger dated April 1,
2002 (incorporated by
26
reference to Exhibit 10(a) to Snap-on's Quarterly Report on Form 10-Q
for the quarterly period ended June 29, 2002 (Commission File No.
1-7724))*
(u) Snap-on Incorporated 2002 Executive Management Incentive Program
(incorporated by reference to Exhibit 10(h) to Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(v) Snap-on Incorporated 2002 Executive Qualitative Incentive Program
(incorporated by reference to Exhibit 10(i) to Snap-on's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 2002
(Commission File No. 1-7724))*
(w) Letter agreement between the Corporation and Mr. Pinchuk dated June 4,
2002 (incorporated by reference to Exhibit 10(b) to Snap-on's
Quarterly Report on Form 10-Q for the quarterly period ended June 29,
2002)*
(12) Computation of Ratio of Earnings to Fixed Charges#
(13) The following portions of Snap-on's Annual Report to Shareholders, which
are incorporated by reference in this Form 10-K, are filed as Exhibit 13:
Six-year Data, Management's Discussion and Analysis, Consolidated
Statements of Earnings, Consolidated Balance Sheets, Consolidated
Statements of Shareholders' Equity and Comprehensive Income, Consolidated
Statements of Cash Flows, Notes to Consolidated Financial Statements,
Quarterly Financial Information, Management's Responsibility for
Financial Reporting, Independent Auditors' Report and Report of
Independent Public Accountants.#
(21) Subsidiaries of the Corporation#
(23) a. Independent Auditors' Consent of Deloitte & Touche LLP#
b. Information Regarding Consent of Arthur Andersen LLP#
# Filed herewith.
* Denotes management contract or compensatory plan or arrangement.
27
Item 15(d): Schedules
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Balance at Balance at
Beginning End of
Description of Year Expenses Deductions (1) Other - Net Year
- ------------------------ ------------ ------------ ----------------- --------------- -------------
Allowance for doubtful accounts:
Year ended
December 28, 2002 $39.6 $38.7 $(37.2) $.1 $41.2
Year ended
December 29, 2001 $40.9 $31.4 $(32.7) $ - $39.6
Year ended
December 30, 2000 $27.8 $27.9 $(14.8) $ - $40.9
(1) This amount represents write-offs of bad debts.
28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Snap-on Incorporated:
We have audited the consolidated financial statements of Snap-on Incorporated as
of December 28, 2002, and for the year then ended and have issued our report
thereon (which expresses an unqualified opinion on the consolidated financial
statements of Snap-on Incorporated and includes explanatory paragraphs relating
to the adoption of Statement of Financial Accounting Standard (SFAS) No. 142,
"Goodwill and Other Intangible Assets", revision of prior-period financial
statements for the transitional disclosures required upon the adoption of SFAS
No. 142, the change in composition of its reportable segments and
reclassification of prior-period financial statements for reclassification from
current assets of trade accounts and gross installment receivables not due
within one year), which is incorporated by reference in the Company's Annual
Report to Shareholders on Form 10-K. The financial statement schedule of Snap-on
Incorporated listed in Item 15(d) is presented for the purpose of complying with
the reporting requirements of the Securities and Exchange Commission and is not
a required part of the basic financial statements. This schedule is the
responsibility of the Company's management. Such schedule has been subjected to
the auditing procedures applied in our audit of the 2002 basic financial
statements and, in our opinion, is fairly stated in all material respects when
considered in relation to the 2002 basic financial statements taken as a whole.
The 2000 and 2001 schedules were subject to auditing procedures by other
auditors who have ceased operations and whose report date January 29, 2002,
stated that such information is fairly stated in all material respects when
considered in relation to the basic 2000 and 2001 financial statements taken as
a whole.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 22, 2003
29
The following Report of Independent Public Accountants is a copy of a report
that Arthur Andersen LLP previously issued in connection with Snap-on's Annual
Report on Form 10-K for the year ended December 29, 2001. Effective June 14,
2002, Snap-on dismissed Arthur Andersen LLP as its independent auditors. Arthur
Andersen LLP has not reissued this report in connection with the preparation of
Snap-on's Annual Report on Form 10-K for the year ended December 28, 2002, and
the report related only to Snap-on's financial statements as of and for the
years ended December 29, 2001, and December 30, 2000. See Exhibit 23b for
further discussion.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in Snap-on Incorporated's
("Snap-on") Annual Report to Shareholders, incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 29, 2002. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed on page 22 is the responsibility of Snap-on's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 29, 2002
30