Back to GetFilings.com
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 January 1, 1994
Commission File Number 1-7724
SNAP-ON TOOLS CORPORATION
-------------------------
(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
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 -----.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 22, 1994, with a closing price per share on that
date of $43.875.
Common Stock, Par Value $1 Per Share, $1,865,592,000
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of February 22, 1994.
Common Stock, Par Value $1 Per Share, 42,652,946 Shares
Shares Preferred Stock Purchase Rights, None.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's Annual Report to Shareholders for the fiscal
year ended January 1, 1994, are incorporated by reference into Parts I, II,
and IV of this report.
Portions of the Corporation's Proxy Statement, dated March 18, 1994, prepared
for the Annual Meeting of Shareholders scheduled for April 22, 1994, are
incorporated by reference into Part III of this report.
Exhibit Index Page 22 Page 1 of 94 Pages
SNAP-ON TOOLS CORPORATION
1993 FORM 10-K
TABLE OF CONTENTS PAGE
----------------- ----
PART I
Item 1. Business 3
Item 2. Description of Properties 11
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Disagreements on Accounting and Financial Disclosure 14
PART III
Item 10. Directors and Officers of Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 14
Auditor's Reports 16
Signature Pages 17
Financial Schedules 20
PART I
ITEM 1: BUSINESS OVERVIEW
Snap-on Tools Corporation (the "Corporation") was incorporated under the laws
of the State of Wisconsin in 1920 and reincorporated under the laws of the
state of Delaware in 1930. Its corporate headquarters is located in Kenosha,
Wisconsin.
The Corporation, which is in a single line of business, is a leading
manufacturer and distributor of high-quality hand tools, power tools, tool
storage products, and diagnostics and shop equipment, primarily for use by
professional mechanics and technicians. In addition to individual automotive
service technicians, shop owners and other professional tool users, the
Corporation's products are marketed to industrial and government entities.
The Corporation is a multinational corporation with operations in the United
States, Australia, Belgium, Brazil, Canada, France, Germany, Japan, Mexico,
Puerto Rico, the Netherlands, New Zealand, Taiwan, and the United Kingdom.
In 1993, shareholders approved a holding company structure for the
Corporation, allowing the Corporation to realign its operating business units
with the various needs of the customers it serves and the channels of
distribution available in the market for tools, equipment and related
services. Subsequently, the Corporation established four principal operating
units:
- - The SNAP-ON TOOLS business unit focuses on the Corporation's worldwide
dealer direct sales programs to automotive and transportation technicians.
Subsidiaries in several countries manage dealer operations outside the United
States;
- - The SNAP-ON DIAGNOSTICS business unit focuses on the development and
sale of diagnostics and shop equipment, primarily to automotive shop owners.
Subsidiaries associated with Snap-on Diagnostics include: Sun Electric
Corporation ("Sun"), a leading manufacturer and distributor of high-end
diagnostics, test and service shop equipment with subsidiaries in Australia,
Austria, Belgium, Brazil, Canada, Germany, Mexico, the Netherlands, the United
Kingdom, and the United States; and Balco, Inc., a developer of engine
diagnostic and wheel balancing equipment, with subsidiaries in Switzerland and
Ireland. Systems Control, Inc., a subsidiary of Sun, provides automotive
emissions testing under contract to government entities;
- - The SNAP-ON INDUSTRIAL business unit focuses on the sale of industrial
tools and equipment through a direct sales force as well as through industrial
distributors and other channels. Subsidiaries associated with the Snap-on
Industrial business unit include: J.H. Williams Company ("Williams"), a
manufacturer of industrial-quality hand tools sold through industrial
distributors and directly to the U.S. government and original equipment
manufacturers; and A.T.I. Tools, Inc., a producer of tools and equipment for
aerospace and industrial applications;
- - SNAP-ON FINANCIAL SERVICES, INC. holds most of the Corporation's credit
assets and, through its Snap-on Credit Corporation subsidiary, manages certain
credit services for the Corporation. Credit programs support the sale of the
Corporation's products and services, especially higher-value products such as
diagnostics and other shop equipment, when traditional lending sources are not
readily available to customers.
For further information on the Corporation's international and domestic
operations, see Note 14 on Page 33 of the Corporation's 1993 Annual Report,
incorporated herein by reference.
The Corporation believes it originated the mobile dealer van method of
marketing hand tools and equipment to automotive technicians. In recent
years, it has expanded its product line and marketing and sales programs to
address additional customer needs in the market for professional tools and
equipment and to expand in international markets. Included in the
Corporation's expanded product line are automotive shop equipment, electronic
equipment service, and tools and instrumentation for aerospace and medical
applications. It has also acquired new manufacturing operations and brands to
address additional channels of distribution, particularly for industrial
customers.
The Corporation believes it is the largest single-source manufacturer of
professional hand tools and service equipment for the U.S. automotive service
industry. In 1993 the Corporation merged its U.S. Snap-on and Sun technical
sales forces into SNAP-ON/SUN Tech Systems, creating what it also believes
to be the largest technical systems sales and service organization in the
industry. In addition, within its diagnostics and shop equipment operations,
the Corporation has formed agreements, including minority investments, with
information and technology firms to strengthen its position as a leading
supplier of diagnostic hardware and software for the service and repair of the
growing number of computerized systems employed in modern automotive design.
3
In addition to direct sales to individual technicians, shop owners, industrial
and other customers at their places of business through mobile van dealers and
employee sales representatives, other methods of marketing and distribution
include both direct and indirect sales to industrial and government customers
and indirect sales through non-U.S. distributors. The Corporation's industrial
sales historically had been concentrated among small and mid-sized
manufacturing facilities, industrial maintenance and repair shops, and
government service and repair operations. With the acquisition of the assets
of J.H. Williams Industrial Products, Inc. in 1993, the Corporation entered
the industrial distributor marketing channel, which represents the largest
segment of the industrial tool market.
PRODUCTS AND SERVICES
The Corporation offers a product line of approximately 14,000 items which it
divides into four product groups -- hand tools, power tools, tool storage
products, and diagnostics and shop equipment. Following is a discussion of
the four product groups:
HAND TOOLS -- Includes wrenches, screwdrivers, sockets, pliers, ratchets,
and other similar products; hand tools developed for medical applications and
for the manufacture and servicing of electronic equipment such as computers
and photocopiers; and J.H. Williams industrial-quality hand tools. The
Stanley Works, Danaher Corporation, Cooper Industries and Strafor-Facom are
some of the many manufacturers of hand tools. Factors that influence customer
purchasing decisions vary among the Corporation's customer groups and within
distribution channels and are discussed later.
POWER TOOLS -- Includes pneumatic (air), cord-free (battery) and corded
(electric) tools such as impact wrenches, ratchets, chisels, drills, sanders,
polishers, and similar products. Makita Corporation, Atlas Copco AB,
Ingersoll-Rand Company, and The Black & Decker Corporation are some of the
many manufacturers in this product category.
TOOL STORAGE PRODUCTS -- Includes tool chests, roll cabinets, and other
similar products for automotive, industrial, aerospace, and other storage
applications. Stanley, Danaher, Waterloo Industries (a division of American
Brands, Inc.), and Kennedy Manufacturing Company are some of the many
manufacturers of tool storage products.
DIAGNOSTICS AND SHOP EQUIPMENT -- Includes both hardware and software
solutions for the diagnosis and service of automotive and industrial
equipment. Products include electronic automotive diagnostic equipment
such as engine analyzers, exhaust emissions analyzers, air conditioning
refrigerant recycling equipment, transmission troubleshooting equipment,
and anti-lock brake systems testing and service equipment. Also included
in this category are wheel balancing and aligning equipment, battery
chargers, and other similar products used in automotive service and
repair shops. SPX Corporation, Hunter Engineering Company, Inc., Robert
Bosch GmbH, and Danaher are among other manufacturers in this market.
While the Corporation historically has emphasized the development of equipment
for the automotive aftermarket, it believes some of its diagnostic
technologies may be transferable to industrial and other applications. The
Corporation believes such product extensions into additional markets represent
opportunities for future growth.
In 1994, the Corporation intends to expand its technician training services
offered through its SNAP-ON/SUN Tech Systems program, more than doubling its
number of training centers to approximately 40. These training programs offer
customers certification in both specific automotive technologies and in the
application of specific diagnostic equipment developed and marketed by the
Corporation and its subsidiaries. Technical service training for the
automotive aftermarket is a highly fragmented industry with estimated annual
sales of $800 million to $1 billion. With its strong electronic tools and
shop equipment product line and weekly sales contact with most automobile
dealerships, specialty service chains, and independent shops, the Corporation
believes it is well-positioned to grow its business in the technical training
field.
The Corporation is also a participant in the market for centralized automotive
emissions testing services. The Sun subsidiary Systems Control has a
multi-year contract to provide enhanced emission-testing services to the State
of Washington. During 1993, Systems Control and its subsidiaries also were
selected to provide centralized emissions-testing services in Maine and in
portions of Texas. Systems Control will bid on additional contracts during
1994 as additional states begin to implement requirements of the Clean Air
Act.
Revenues from Systems Control and Snap-on/Sun technical training services are
included in the diagnostic tools and shop equipment category.
The Corporation's standard line of SNAP-ON manufactured products and other
products sold by Snap-on dealers and sales representatives are described in a
general product catalog distributed to dealers and customers. Editions of the
4
general catalog currently are available in English, French, German, Spanish
and Japanese. Products manufactured under the SUN brand name and sold by
SNAP-ON/SUN Tech Systems Specialists, or Tech Reps, are described in
separate literature. J.H. Williams and A.T.I Tools, Inc. also have their own
catalogs of industrial products.
Table 1 shows the approximate percentage of total consolidated sales for each
of the Corporation's product groups in each of the past three years, including
the contributions of Sun in the fourth quarter of 1992 and for the full year
in 1993.
TABLE 1 CONSOLIDATED SALES ACTUAL
PRODUCT GROUP % OF SALES 1993 1992 1991
Hand Tools 37% 43% 49%
Power Tools 7% 8% 10%
Tool storage products 11% 13% 12%
Diagnostics/Shop 45% 36% 29%
The acquisition of Sun in the fourth quarter of 1992 had a material effect on
the Corporation's product sales mix. Table 2 provides a pro forma restatement
of the percentages of 1991 and 1992 sales derived from the four product groups
as if the acquisition had occurred at the beginning of 1991.
TABLE 2 PRO FORMA SALES WITH SUN
PRODUCT GROUP % OF SALES 1992 1991
Hand Tools 37% 39%
Power Tools 7% 8%
Tool storage products 11% 10%
Diagnostics/Shop 45% 43%
The Corporation believes this analysis is representative of its consolidated
net sales mix worldwide.
As stated earlier, sales in the diagnostics and shop equipment product group
include technical training services for the automotive service industry as
well as contracted emissions-testing services for various government entities.
MARKETS SERVED
GEOGRAPHIC MARKETS SERVED -- The Corporation's products and services are
marketed and distributed in more than 100 countries either directly through
Snap-on and Sun sales organizations, or indirectly through industrial
distributors and non-U.S. distributors. Table 3 shows the approximate
percentage of sales for the past three years.
TABLE 3 CONSOLIDATED SALES ACTUAL
MARKETS % OF SALES 1993 1992 1991
North American Sales 78% 85% 90%
European Sales 18% 11% 8%
Other Sales 4% 4% 2%
See Note 14 of the Corporation's Annual Report for further information.
The acquisition of Sun resulted in a significantly higher percentage of sales
outside North America. Table 4 provides a pro forma restatement of the
percentages of 1991 and 1992 sales derived from North American and other
markets to reflect the acquisition as if it had occurred at the beginning of
1991.
TABLE 4 PRO FORMA SALES WITH SUN
MARKETS % OF SALES 1992 1991
North American Sales 80% 80%
European Sales 17% 18%
Other Sales 3% 2%
MARKET SECTORS SERVED -- The Corporation, which operates in a single line
of business which is the manufacture and sale of hand and power tools,
diagnostic equipment, and tool storage products, markets and distributes
primarily to two market sectors, in both the U.S. and internationally:
- - The professional market of mechanics and technicians and automotive service
and repair shops, including independent, chain, and dealership garages. The
sector also includes serious hobbyists who prefer to purchase the quality
tools used by professionals.
- - The industrial market for tools and equipment used in manufacturing and
assembly applications and in industrial maintenance and repair, as well as
tools included with products sold by original equipment manufacturers as
instrumentation or used in OEM and distributor equipment service programs.
Table 5 shows the approximate percentage of total sales for the last three
years for these sectors as well as for sales to non-U.S. distributors, who
sell to the same types of customers in the markets the Corporation serves in
the United States.
5
TABLE 5 CONSOLIDATED SALES ACTUAL
MARKET SECTOR % OF SALES 1993 1992 1991
Professional 83% 79% 76%
Industrial 15% 18% 20%
Non-U.S. Distributor 2% 3% 4%
PROFESSIONAL SECTOR
The professional sector has two primary customer groups: professional
mechanics and technicians who purchase tools and equipment for themselves, and
shop owners and managers who purchase equipment generally used by multiple
technicians within a service or repair garage. Following is a discussion of
the characteristics of each type of customer and the Corporation's position in
these related markets.
PROFESSIONAL TECHNICIANS -- The Corporation markets hand tools, power
tools, diagnostic equipment, and tool storage products to professional
technicians worldwide primarily through its mobile dealer van distribution
system. It provides innovative tools and equipment to meet technicians'
evolving needs, as well as technical sales support and training to meet the
information and technology needs of the professional mechanic.
Professional technician customers demand the highest quality tools and
equipment in terms of function, reliability, productivity, appearance, and
service. Most professional technicians, particularly in the transportation
service industry, are paid based on a flat rate and buy their own tools.
Thus, these customers value the time-and-place utility of the Corporation's
mobile van distribution system and productivity advantages of
professional-quality tools.
The Corporation's success with professional technicians is believed to be due
to its consistently high-quality products, its extensive product line, its
dealer and dealer-related marketing and sales programs, its frequent call
schedule, the availability of financing for major purchases, product
warranties, and service and repair programs.
The Corporation has a strong presence in this sector, although its U.S. and
worldwide market shares cannot accurately be determined. Stanley and Danaher
are active in the mobile dealer van channel through their MAC Tools and Matco
operations. Other van operations include Vulcan and Cornwell. Additionally,
technicians purchase products from other sources, including wholesalers,
hardware stores, and retail outlets such as Sears Roebuck and Co.
For the reasons stated earlier, the Corporation's focus within the mobile
dealer van system generally is on service and product quality, performance,
and productivity. Other suppliers within the market sector, but outside the
dealer van channel, generally compete on price. However, recent economic
conditions relating to consumer and mechanic confidence have made customers
more price-conscious than in previous years.
Major challenges for the Corporation and the industry include slower
automotive technician turnover, improved vehicle quality, which reduces
service and repair demand, general economic conditions relating to consumer
and mechanic confidence, and increased competition within the mobile dealer
van channel during the past decade.
SHOP OWNERS -- Through its dealers and employee sales representatives, the
Corporation serves owners of shops where technicians work with tools,
equipment, and diagnostic products. Shops include service stations, automobile
dealers and automotive repair shops.
The needs of these customers are being increasingly driven by technological
innovation and government regulation. In order to remain competitive and stay
in business, shop owners find it necessary to purchase a growing array of
sophisticated, specialized equipment that enables their shops to service and
repair a growing number of computerized automotive systems and to help comply
with vehicle environmental and safety regulations. The ability to recruit and
retain professional technicians also depends on the quality of the equipment
and service and repair information available in the shops where they work.
The Corporation has been actively expanding its line of automotive diagnostics
and service equipment to address new needs in this market sector, expand its
customer base, and grow its sales. The acquisition of Sun in 1992 enabled the
Corporation to extend its line of engine analyzers to include high-end
equipment favored by larger shops and to add new products such as air
emissions testing and air conditioner refrigerant recycling equipment. It
also accelerated the Corporation's introduction of a new line of PC-based
automotive diagnostic hardware and software products. The Sun acquisition
followed the Corporation's completion of its acquisition one year earlier of
Balco, Inc., which enhanced its product offerings in engine diagnostics and
wheel balancing and service equipment.
During 1993, Snap-on and Sun technical sales forces were merged, creating a
285-member technical sales force by year-end. SNAP-ON/SUN Tech Systems also
offers technician training and certification services.
6
In many major markets, including the United States, Canada, and the United
Kingdom, automotive technicians generally buy their own tools and certain
lower-value diagnostic equipment. However, in most markets in Europe and
Asia, hand tools and higher-value equipment are most often purchased by shop
owners. One of the challenges in developing new international markets has
been to develop relationships with shop owners, who own or operate many
service and repair facilities in these markets.
INDUSTRIAL SECTOR
The Corporation markets its products to a wide variety of industrial tool and
equipment customers, including industrial maintenance and repair shops;
manufacturing and assembly operations; industrial distributors; original
equipment manufacturers who require instrumentation or service tools and
equipment for their products; and government facilities.
Customers in the industrial sector have different needs and make their
purchase decisions on a variety factors. Small- to mid-sized manufacturers and
industrial and government maintenance and repair shops and motor pools often
prefer the consultative advantages of direct selling and make their purchase
decisions based on quality, selection, and service. Large manufacturing
operations more often prefer the economies and efficiencies of buying through
industrial distributors. For these larger, higher-volume customers, key
purchase factors include competitive pricing, one-stop shopping and invoicing,
and on-time delivery.
The Corporation has been expanding its product line and service to the
industrial and government sector. In addition to the Williams acquisition, it
has expanded its SNAP-ON brand line of black-finish industrial tools and
expanded its offerings to government installations under a master purchase
agreement negotiated with the General Services Administration (GSA).
In addition to the hand tool, power tool, and tool storage producers
previously described, companies involved in the industrial sector include
industrial distribution houses such as W.W. Grainger, Inc. and McMaster Carr
Supply Company. While the Corporation's tool and storage lines are among the
largest offered for industrial applications, these are only two of several
categories of products these other companies offer.
Major challenges in the industrial tool and equipment market include a highly
competitive, cost-conscious environment, as well as an increase in new
technologies. While the Corporation believes it is currently a relatively
small competitor in the overall market for industrial tools and equipment, the
Corporation also believes its newly-acquired ability to address the industrial
distribution channel through J.H. Williams and to offer a broader product line
with additional brands at different price points will result in significant
market penetration and sales gains over the next decade.
DISTRIBUTION
The Corporation serves its many customers through both direct and indirect
sales channels. Direct sales distribution includes dealers,
Corporation-employed sales representatives, and technical representatives.
Indirect sales include distribution through industrial distributors, original
equipment manufacturers, and non-U.S. distributors. The Corporation's total
selling force numbered 5,879 at year-end 1993.
SNAP-ON TOOLS
DEALERS
Marketing worldwide to professional technicians and shop owners is conducted
primarily through the mobile dealer van system. As described earlier, dealers
operate from van-type vehicles, which house their inventory, and sell the
Corporation's products to customers, primarily auto technicians and shop
owners, at their places of business. Dealers purchase the products made
available to them at a discount from suggested retail prices and resell them
to customers at prices of the dealers' choosing. Since 1991, all new dealers
have been enrolled as franchisees of the Corporation. The franchise program is
more fully described later.
The Corporation's dealers are entitled to purchase and sell SNAP-ON brand
products and products contained in the SNAP-ON catalogs. In the U.S., SUN
brand products are sold only through the SNAP-ON/SUN Tech Systems sales
force, which is described more fully later, and a national accounts program.
Internationally, SUN products are sold by subsidiaries and through
distributors. Dealers are encouraged to provide sales leads to Tech Reps,
and under certain conditions participate in the proceeds of sales of SUN
brand equipment to their customers.
Although some dealers have sales areas defined by other methods, most dealers
are provided a list of calls -- addresses or places of business -- which serve
as the basis of the dealer's sales route. The need to provide a high level of
service is one of the factors used to establish the size of the sales route.
Weekly dealer calls on customers for both service and sales solicitation are
essential elements of the Corporation's dealer-marketing program.
7
SPECIAL AND SALES REPRESENTATIVES
The Corporation makes it possible for prospective dealer candidates to work as
employee sales representatives for up to one year prior to making an
investment in a franchise (subject to the Corporation's approval). This
program is particularly useful for candidates who lack the financial resources
to become franchisees or who are not certain of their aptitude for mobile van
sales work.
As employees, sales representatives are paid a salary plus commission on
sales; however, they are responsible for certain expenses. They perform
essentially all of the functions of a dealer, including making weekly sales
and service calls, collecting customer accounts receivable, and participating
in product and business training programs.
From time to time, employees of the Corporation are assigned to perform the
functions of a dealer, making sales and service calls and collecting customer
accounts receivable. These special representatives work sales routes on a
temporary basis until the routes can be assigned to a franchised dealer.
NON-U.S. DISTRIBUTORS
Sales to the Corporation's non-U.S. distributors are made by its subsidiary,
Snap-on Tools International, Ltd., in those countries where the Corporation
does not have subsidiary operations. These non-U.S. distributors operate under
license or contract with the Corporation. Their customers may include
industrial and government entities as well as individual technicians and shop
owners. These sales were not material to the Corporation's total sales in
1993.
SNAP-ON DIAGNOSTICS
Marketing of higher-value diagnostics and shop equipment in the United States
is conducted primarily through the SNAP-ON/SUN Tech Systems group. In
addition, SUN brand equipment is marketed in Europe through both a direct
sales force and distributors and, in Canada, through distributors.
TECHNICAL SPECIALISTS
Technical Specialists, or Tech Reps, are employees of the Corporation trained
in the operation and sales of certain sophisticated equipment. They are
compensated on the basis of commission. Tech Reps help dealers demonstrate and
sell technically complex equipment, and train dealers' customers in how to use
it. Dealers receive a smaller discount than their normal discount on the
Corporation's suggested retail prices on items Tech Reps help them sell.
Tech Reps demonstrate and assist in the sale of SNAP-ON brand equipment and
sell SUN brand equipment. They call on accounts on their own and also work
with the Corporation's network of dealers and sales representatives to identify
sales leads and respond to customer needs. While Snap-on dealers sell only
SNAP-ON brand equipment, they share in the proceeds of certain SNAP-ON and SUN
products to their customers.
SNAP-ON INDUSTRIAL
Marketing to industrial and government customers is by direct sales through
industrial sales representatives and indirect sales through industrial
distributors.
INDUSTRIAL SALES REPRESENTATIVES
The sale of SNAP-ON products is conducted through industrial sales
representatives who are employees of the Corporation and compensated on a
commission basis. These sales representatives focus on the Corporation's
traditional industrial customers; generally those who prefer to buy on
quality, selection, and service, as well as certain OEM accounts.
At year-end 1993, the Corporation had industrial sales representatives in
Australia, Belgium, France, Germany, Japan, Mexico, Puerto Rico, the
Netherlands, the United Kingdom and the United States. U.S. industrial sales
accounted for the majority of the Corporation's total industrial sales.
J.H. WILLIAMS SALES REPRESENTATIVES
J.H. Williams is operated as a separate company with a separate sales force
and a distinct brand and product line. Williams sales representatives focus on
sales to industrial distributors as well as appropriate OEM accounts.
FRANCHISE PROGRAM
Since 1991, all new U.S. dealers, and a majority of existing U.S. dealers,
have been enrolled as franchisees of the Corporation. It is the Corporation's
belief that a franchise program facilitates and promotes a more uniform
marketing and business program, and allows the Corporation to take additional
steps to support the success of its dealers. At year-end 1993, approximately
2,600, or 77% of all U.S. dealers, were enrolled as franchisees.
As part of the franchise program, certain programs and benefits are made
available to franchised dealers. The current package of franchise benefits
includes a volume purchase discount, a stock purchase program, certain types
of insurance coverage, access to a family assistance counseling program,
discounts on cellular telephone service, and the ability to purchase a second
franchise. Additional programs and benefits introduced during 1993 also enable
8
franchised dealers to obtain start-up financing (discussed in greater detail
later), operate a second van to service their customers, and establish
retirement savings programs. A National Dealer Advisory Council elected by
dealers assists the Corporation in identifying and implementing enhancements
to the franchise program.
The Corporation currently charges an initial franchise fee which did not add
material revenue to the Corporation's operations.
To qualify for a franchise, a new dealer applicant must meet minimum personal
and financial qualifications. The dealer must make an initial investment in
the business for such items as inventory, van acquisition, development of
customer accounts receivable, equipment, fixtures, a computer, and other
miscellaneous expenses.
In the United States and most non-U.S. locations, dealers lease or purchase
their vans from a third-party vendor not affiliated with the Corporation.
FIELD MANAGEMENT/SALES SUPPORT
The Corporation supports and services its dealer, sales representative, and
industrial sales network with an extensive field organization of branch
offices and service, repair, and distribution centers, which are discussed in
more detail later. Dealers are organized by field groups of seven to ten
dealers within branch operations. Each field group is headed by an employee
field manager, who provides product, sales, and business training on a
continuous basis.
The Corporation provides its dealers with instruction, training and practical
experience regarding its products, sales techniques, record keeping and
reporting, inventory control methods, and general business practices. Training
initially is conducted in branch offices and, on an ongoing basis, through
field managers riding with dealers as they service their list of calls.
The Corporation also engages in various marketing and sales promotion programs
designed to increase sales to both dealers and their customers. These
programs include advertising, sales materials, premiums, and the offering of
promotional tools.
FINANCIAL ASSISTANCE AND CREDIT
In 1993, the Corporation transferred its credit-related assets to the
newly-formed Snap-on Financial Services, Inc. and its subsidiary, Snap-on
Credit Corporation, to carry on its tradition of providing financing services to
its dealers and customers.
DEALER-RELATED FINANCIAL PROGRAMS
Financial assistance for dealer operations and dealer sales is offered by the
Corporation as part of its program of dealer support. This assistance
includes, but is not limited to, the financing of inventory; financing a new
dealer's purchase of accounts receivable from a predecessor dealer in a sales
route; and the purchase of various extended credit contracts between dealers
and their customers.
The Dealer Finance Program offered by Snap-on Credit Corporation provides
funds for the initial investment of start-up dealers which could include the
license fee, inventory, RA acquisition, equipment, fixtures, other expenses,
and initial checking account deposit. Dealers are required to make a minimum
equity or down payment. Participating dealers must enter into a Loan Security
Agreement and Promissory Note evidencing the loan.
Under the Dealer Finance Program, the dealer must lease a specified van on
terms arranged by Snap-on Credit Corporation, with no recourse to the
Corporation, or purchase a van meeting Snap-on specifications and other terms.
The Credit Corporation operates a credit program to provide financing for
high-value product purchases by dealers' customers. Dealers enter into
various credit contracts with their customers, and the Corporation, at its
sole discretion, may then accept assignment of these contracts from dealers.
Dealers are responsible for collecting these installment payments due to the
Corporation.
DEALER CREDIT TO CUSTOMER
Revolving account or "RA" sales typically comprise a significant percentage
of a dealer's sales. These are credit sales between a dealer and a dealer's
customer, involving the extension of the dealer's personal credit (usually at
no interest) to finance the customer's purchases. The Corporation may finance
the purchase of a portion of these accounts receivable when a new dealer takes
over a former dealer's sales route.
FIELD SERVICES AND INVENTORY
In the fourth quarter of 1993, the Corporation completed a reorganization and
consolidation of its field services and inventory. Four regional
finished-goods distribution centers replaced 48 U.S. branch warehouses. These
distribution centers are located in Carson City, Nev.; Olive Branch, Miss.;
Ottawa, Ill.; and Robesonia, Penn. In addition, the
9
Corporation continues to operate a national parts center in Kenosha, Wis., and
a new Replacement Processing Center, to process all product returns, in
Nashville, Tenn.
In addition to cost savings, this consolidation is expected to improve
customer order-fill rates by making the full 14,000-item product line
available for same- or next-day shipment from each distribution center.
Previously, branch warehouses did not stock the full product line.
In a second phase of the field services reorganization, the Corporation
consolidated most of the administrative and credit functions formerly managed
in branch offices within eight Regional Customer Service Centers located in
Atlanta, Boston, Dallas, Kansas City, Milwaukee, Philadelphia, Sacramento, and
San Diego. Three branch offices were closed, while the remaining 48 U.S.
branches have been converted to sales offices.
The new Regional Customer Service Centers, whose offices include regional
offices of the Credit Corporation, process all dealer orders and inquiries,
including billing and accounting; manage dealer credit; and provide credit
collection assistance. Service and repair of SNAP-ON products is
consolidated at four regional repair centers, while service for SUN product
is provided through a network of approximately 200 contract service
technicians.
RAW MATERIAL & PURCHASED PRODUCT
The Corporation's supply of raw materials (various grades of steel bars and
sheets) and purchased components are readily available from numerous
suppliers.
The majority of 1993 consolidated net sales consisted of products manufactured
by the Corporation. The remainder was purchased from outside suppliers. No
single supplier's products accounted for a material portion of 1993
consolidated net sales.
PATENTS AND TRADEMARKS
The Corporation vigorously pursues and relies on patent protection to protect
its inventions and its position in the market. The Corporation and its
subsidiaries currently hold approximately 345 patents and more than 175
pending patent applications.
Patent protection covers certain products which are believed to have
significant market potential. Examples of these products include Engine
Analyzers, Serrated Jaw Open End Wrenches, Wheel Balancers, Sealed Ratchets,
Electronic Torque Wrenches, Ratcheting Screwdrivers, Emissions Sensing Devices
and Air Conditioning Equipment.
Much of the technology used in the manufacturing of automotive tools and
equipment is in the public domain. The Corporation relies primarily on trade
secret protection to protect proprietary processes used in manufacturing.
Methods and processes are patented when appropriate.
Corporation trademarks, such as SNAP-ON, BLUE-POINT, FLANK DRIVE, COUNSELOR,
ELECTROTORK, SUN, SUNTESTER, SHOPMAX, INSPECTOR, NORTRON, SUN SUPER TACH and
WILLIAMS are registered U.S. trademarks and are of continuing importance to
the Corporation in the marketplace. Trademarks have been registered in 41
other countries, and additional applications for trademark registration are
pending. Proper use of the Corporation's trademarks is rigorously policed.
The Corporation's right to manufacture and sell certain products is dependent
upon licenses from others. These products do not represent a material portion
of the Corporation's sales.
WORKING CAPITAL
Since the Corporation's business is not seasonal, and since its inventory
needs are relatively constant during the year, no unusual working capital
needs arise during the year.
The Corporation's use of working capital to extend credit to its dealers and
to purchase installment credit receivables from dealers is discussed in
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," which is found on Pages 16 to 20 of the Corporation's 1993 Annual
Report and is incorporated herein by reference.
The Corporation does not depend on any single customer, small group of
customers or government for any material part of its sales. The Corporation
has no significant backlog of orders.
RESEARCH AND ENGINEERING
Each year the Corporation develops and introduces new products to advance its
diversified product line. The Corporation performs its own research and
engineering. The Corporation spent the following amounts on research and
engineering activities during the past three years.
10
TABLE 7 RESEARCH AND ENGINEERING
(MILLIONS $) 1993 1992 1991
Actual $27.7 $19.6 $15.6
Pro Forma with Sun N/A $24.9 $23.4
ENVIRONMENT
The Corporation complies with applicable environmental control requirements in
its operations. Compliance has not had a material effect upon the
Corporation's capital expenditures, earnings or competitive position.
EMPLOYEES
At the end of 1993, the Corporation employed approximately 9,000 people, of
whom approximately 18% were covered by collective bargaining agreements.
Approximately one-third of all employees are engaged in manufacturing
activities.
RECENT DEVELOPMENTS
Significant developments affecting the Corporation's business during the past
year included realignment of the Corporation's businesses into a holding
company format; the merger of the Snap-on and Sun technical systems sales
forces; consolidation of branch warehouse operations into four existing
regional distribution centers; the reorganization and consolidation of field
sales and credit operations into eight Regional Customer Service Centers; and
the acquisition of the assets of J.H. Williams Industrial Products, Inc.
These developments are discussed in greater detail elsewhere in this report.
At its 1994 annual meeting, shareholders will be asked to approve changing the
Corporation's name from Snap-on Tools Corporation to Snap-on Incorporated. The
change reflects the expansion of the products the Corporation offers and the
customers its serves.
ITEM 2: DESCRIPTION OF PROPERTIES
The Corporation's manufacturing facilities, all of which are well maintained
and in good operating condition, are suitable for producing the Corporation's
products. The productive capacity is adequate to meet present and foreseeable
future demand. Current utilization levels allow for increased production
through the addition of second and/or third shifts should increase in demand
necessitate such additions.
The following is a description of the principal properties of the Corporation,
which are owned in fee unless otherwise indicated.
NOTE: EXCEPT FOR THE MEDICAL TOOLS MANUFACTURING FACILITY LOCATED IN
KENOSHA, WISCONSIN, ALL MANUFACTURING FACILITIES LISTED BELOW PRODUCE PRODUCTS
FOR TRANSPORTATION AND INDUSTRIAL MARKETS.
MANUFACTURING APPROXIMATE AREA
LOCATION/USE (SQ.FT.)
- ------------ ----------------
U.S. MANUFACTURING AND CORPORATE OFFICE FACILITIES:
KENOSHA, WISCONSIN
Hand tools and wheel
aligning equipment. 163,300
General offices. 221,800
CRYSTAL LAKE, ILLINOIS
High-end diagnostic equipment. 275,000
Sun Electric Corporation
headquarters. 116,200
ALGONA, IOWA 410,400
Tool storage units.
MT. CARMEL, ILLINOIS 180,000
Hand tools.
MILWAUKEE, WISCONSIN 128,800
Hand tools.
(Industrial Revenue Bond obligation
maturing on May 1, 2009.)
ELIZABETHTON, TENNESSEE 117,800
Hand tools.
(Lease expires May 1, 1994, with
renewal and purchase options.)
JOHNSON CITY, TENNESSEE 65,600
Hand tools.
NATICK, MASSACHUSETTS 44,200
Pneumatic tools.
BENSENVILLE, ILLINOIS 30,000
Process development facility.
11
APPROXIMATE AREA
LOCATION/USE (SQ.FT.)
- ------------ ----------------
EAST TROY, WISCONSIN 63,100
Electronic test equipment.
ELKHORN, WISCONSIN 55,600
Unoccupied.
KENOSHA, WISCONSIN 20,000
Medical tools.
SAN JOSE, CALIFORNIA 40,000
Wheel service equipment and
diagnostic equipment.
(Lease expires June 14, 1995.)
ESCONDIDO, CALIFORNIA 97,800
Tools and components for the
aircraft and aerospace industry.
ESCONDIDO, CALIFORNIA 24,800
Tools and components for the
aircraft and aerospace industry.
COLUMBUS, GEORGIA
Industrial hand tools 116,500
J. H. Williams corporate headquarters 5,500
NON-U.S. MANUFACTURING AND CORPORATE OFFICE FACILITIES:
METTMANN, GERMANY 64,400
Sun International's
administrative headquarters.
(Lease expires April, 2000.)
NEWMARKET, CANADA 117,800
Tool storage units.
SHANNON, IRELAND 19,250
Wheel service equipment.
(Lease expires March 25, 1995.)
SHANNON, IRELAND 11,250
Wheel service equipment.
(Lease expires October 12, 1997.)
BARBARA D'OESTE, BRAZIL 57,000
Manufacture of Sun electronic
equipment.
KINGS LYNN, ENGLAND 65,000
Manufacture of Sun electronic
equipment. Facility contains offices.
DISTRIBUTION
The Corporation has completed reorganizing and consolidating its field
services and inventory. The following distribution centers replaced the 48
U.S. continental branch warehouses:
APPROXIMATE AREA
LOCATION/USE (SQ.FT.)
- ------------ ----------------
CARSON CITY, NEVADA 70,200
OLIVE BRANCH, MISSISSIPPI 147,750
OTTAWA, ILLINOIS 158,700
ROBESONIA, PENNSYLVANIA 124,750
The Corporation leases warehouse space in Carson City, Nevada, and Olive
Branch, Mississippi, totalling 80,000 square feet. Also, public warehousing
on an as needed basis is used in Fort Dodge, Iowa, Olive Branch, Mississippi,
Ottawa, Illinois and Kenosha, Wisconsin. The Corporation owns and operates a
73,000 square foot National Parts Distribution Center in Kenosha, Wisconsin,
and a 7,500 square foot sales/distribution facility in Honolulu, Hawaii.
SALES AND MARKETING
As of February 1, 1994, the Corporation had sold 18 branch warehouse
facilities, two division sales offices, and one repair center. Nineteen
branch sales/warehouse facilities are currently in transition, serving as
branch sales offices only and will be replaced by leased branch sales offices
as the current owned facilities are sold. Five have been retained to provide
added warehouse and office facilities. The branch sales/warehouse facilities
average 16,000 square feet. The Corporation leases 15 branch sales office
facilities averaging 6,000 square feet. Credit services and certain sales
support functions of the former branch warehouse facilities have been
consolidated in eight Regional Customer Service Centers (RCSCs) averaging
14,000 square feet. The Corporation owns seven of these RCSC facilities and
leases one RCSC facility. The Corporation also owns four repair center
facilities averaging 11,000 square feet and one replacement tool processing
center. Additionally, the Corporation leases a building in New Jersey for
medical products sales and engineering and an international sales office in
Miami totalling 4,500 square feet. Sun also leases 19 regional sales offices
averaging 4,000 square feet.
DISTRIBUTION AND SALES - NON-U.S.
The Corporation and its subsidiaries own 18 distribution/sales facilities
outside the United States. These properties are located in Canada, the U.K.,
Puerto Rico, Singapore, the Netherlands and Germany and total 303,400 square
feet of office and warehouse space. The Corporation also leases 57 non-U.S.
distribution/repair/sales facilities. These
12
facilities are located in Canada, the U.K., France, Holland, Germany, Japan,
Taiwan, Guam, Greece, Mexico, New Zealand, Brazil, Austria and Australia.
These properties total 425,000 square feet.
OTHER PROPERTIES
The Corporation also leases a 23,800 square foot research and development
facility in San Jose, California. The lease expires October 31, 1994.
Currently, 12,900 square feet of this facility is subleased.
ITEM 3: LEGAL PROCEEDINGS
Note 4 to the Financial Statements of the Corporation on page 27 of its 1993
Annual Report is incorporated herein by reference. None of this litigation is
material within the meaning of Section 103 of Regulation S-K in that such
matters individually or in the aggregate do not exceed 10% of current assets.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted to a vote of the shareholders during the fourth
quarter of the fiscal year ending January 1, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Corporation are listed below. All but two of
the said officers have been with the Corporation for more than five years.
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/appointed by the Board
of Directors at the regular meeting of the Board which follows the Annual
Shareholders' Meeting, held on the fourth Friday of April each year, and at
such other times as new positions are created.
NAME
POSITION AND
BUSINESS EXPERIENCE AGE
- -----------------------------------------------------------------
ROBERT A. CORNOG (53)
Chairman, President and CEO since July, 1991. A Director since 1982. Prior
to joining Snap-on, he was President of Macwhyte Company from 1981 to 1991.
MICHAEL F. MONTEMURRO (45)
Senior Vice President -- Finance and Chief Financial Officer since March, 1990.
Vice President -- Marketing Services from June, 1989 to February, 1990.
Treasurer from April, 1982 to June, 1989.
NAME
POSITION AND
BUSINESS EXPERIENCE AGE
- -----------------------------------------------------------------
JAY H. SCHNABEL (51)
Senior Vice President -- Administration since April, 1990, and Acting President
and Chief Executive Officer -- Sun Electric Corporation since December, 1992.
Senior Vice President -- Manufacturing and Research & Engineering from
November, 1988 to April, 1990. A Director since August, 1989.
DR. JAMES L. SOMERS (50)
Senior Vice President -- Manufacturing and Technology since January, 1992.
Senior Vice President -- Manufacturing and Research & Engineering from April,
1990 to January, 1992. Vice President -- Corporate Manufacturing from January,
1987 to April, 1990.
BRANKO M. BERONJA (59)
Vice President -- Sales, North America since January, 1989. Vice President --
General Sales Manager from August, 1988 to January, 1989.
GREGORY D. JOHNSON (44)
Controller since April, 1992. Financial Controller -- Asia/Pacific from April,
1991 to April, 1992. Director -- Budgets, Corporate Cost and International
Accounting from April, 1984 to April, 1991.
SUSAN F. MARRINAN (45)
Vice President, Secretary and General Counsel since January, 1992. Secretary
and General Counsel since November, 1990. Prior to joining Snap-on, she was
Vice President, General Counsel and Corporate Secretary for H. B. Fuller from
1987 to November, 1990.
PART II
ITEM 5: MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
At January 1, 1994, the Corporation had 42,568,696 shares of common stock
outstanding. Approximately 65% of these shares were in the hands of
institutional owners.
Since 1991, the Corporation has offered shareholders a no-commission dividend
reinvestment program which entitles them to reinvest the cash dividends from
all or a portion of their common stock holdings to buy additional shares. The
program also permits shareholders to invest cash (not less than $100 and not
more than $5,000 per calendar quarter) for additional shares that are
purchased for them each month. Participation is voluntary and cost-free. In
1993, 2,452 shareholders, representing approximately 1% of the Corporation's
shares outstanding, participated in the program, which is administered by the
Corporation's Transfer Agent and Registrar, Harris Trust and Savings Bank.
13
Additional information required by Item 5 is contained on Page 38 of the
Corporation's 1993 Annual Report and is incorporated herein by reference to
said Annual Report.
ITEM 6: SELECTED FINANCIAL DATA
The information required by Item 6 is contained on pages 36 and 37 of the
Corporation's 1993 Annual Report and is incorporated herein by reference to
said Annual Report.
ITEM 7: MANAGEMENT DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by Item 7 is contained on pages 16-20 of the
Corporation's 1993 Annual Report and is incorporated herein by reference to
said Annual Report.
ITEM 8: FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The information required by Item 8 is contained on pages 21-34 of the
Corporation's 1993 Annual Report and is incorporated herein by reference to
said Annual Report.
ITEM 9: DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
The identification of the Corporation's directors as required by Item 10 is
contained in the Corporation's Proxy Statement, dated March 18, 1994, and is
incorporated herein by reference to said Proxy Statement. In respect to
information as to the Corporation's executive officers, see caption "Executive
Officers of the Registrant" at the end of Part I of this report.
The disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained in the Corporation's Proxy Statement, dated March 18, 1994, and is
incorporated herein by reference to said Proxy Statement on page 12.
ITEM 11: EXECUTIVE COMPENSATION
The information required by Item 11 is contained in the Corporation's Proxy
Statement, dated March 18, 1994, and is incorporated herein by reference to said
Proxy Statement on pages 6-10.
ITEM 12: SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is contained in the Corporation's Proxy
Statement, dated March 18, 1994, and is incorporated herein by reference to
said Proxy Statement on page 5.
ITEM 13: CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
None.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14(A): DOCUMENT LIST
1. LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of Snap-on Tools Corporation,
and the Auditors' Report thereon, included in the 1993 Annual Report of the
Corporation to its shareholders for the year ended January 1, 1994, are
incorporated by reference in Item 8:
Consolidated Balance Sheets as of January 1, 1994 and January 2, 1993.
Consolidated Statements of Earnings for the years ended January 1,
1994, January 2, 1993 and December 28, 1991.
Consolidated Statements of Shareholders' Equity for the years ended
January 1, 1994, January 2, 1993 and December 28, 1991.
Consolidated Statements of Cash Flows for the years ended January 1,
1994, January 2, 1993 and December 28, 1991.
Notes to Consolidated Financial Statements.
2. LIST OF FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of Snap-on Tools
Corporation are included in Item 14(d) as a separate section of this report.
14
SCHEDULE VIII Valuation and Qualifying Accounts pg. 20
SCHEDULE IX Short-Term Borrowings 21
SCHEDULE X Supplementary Income
Statement Information 22
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 the Corporation's 1993 Annual
Report in the Notes to Consolidated Financial Statements for the years ended
January 1, 1994, January 2, 1993 and December 28, 1991, which are incorporated
by reference in Item 8.
3. LIST OF EXHIBITS
THE FOLLOWING EXHIBITS ARE FILED AS A SEPARATE SECTION OF THIS REPORT.
(3) (a) Restated Certificate of Incorporation, filed as Exhibit 3(a) to the
Corporation's Quarterly Report on Form 10-Q for the quarterly period
ended March 28, 1992, is incorporated herein by reference thereto.
(b) Bylaws of the Corporation, filed as Exhibit 3(b) to the Corporation's
Quarterly Report on Form 10-Q for the quarterly period ended June 27,
1992, is incorporated herein by reference thereto.
(4) Rights Agreement dated as of October 23, 1987, between the Corporation and
Harris Trust and Savings Bank, as Rights Agent, filed as Exhibit 1 to the
Corporation's Registration Statement on Form 8-A dated October 26, 1987, is
incorporated herein by reference thereto. A Form 8-K, dated June 4, 1992, was
filed reporting an amendment to this Rights Agreement and is incorporated
herein by reference. No financial statements were filed. On January 28,
1994, the Board of Directors adopted amendments to the Rights Agreement. A
Form 8-K dated January 28, 1994 reporting these amendments was filed and is
incorporated herein by reference. No financial statements were filed. The
Corporation and its subsidiaries have no long-term debt agreement for which
the related outstanding debt exceeds 10% of consolidated total assets as of
January 1, 1994. 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) Incentive Stock Option Plan, filed as Exhibit 10(a) to the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, is incorporated herein by reference thereto.
(b) Executive and Senior Officer Agreements, amended and restated, and
effective as of January 28, 1994.
(c) Indemnification Agreement for Directors, contained in the Proxy
Statement dated March 23, 1990, Commission File No. 1-7724 mailed on
March 23, 1990, is incorporated herein by reference thereto.
(d) Snap-on Tools Corporation Supplemental Retirement Plan, amended as of
January 28, 1994.
(13) Annual Report to Shareholders
(22) Subsidiaries of the Corporation
ITEM 14(B): REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in Snap-on Tools Corporation's (the
"Corporation") Annual Report to Shareholders, incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 4, 1994.
Our report on the financial statements includes an explanatory paragraph with
respect to the change in its method of accounting for postretirement health
benefits other than pensions in 1991, as discussed in Note 1c to the financial
statements. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed on pages 22 to 24 are the
responsibility of the Corporation's management and are presented for purposes
of complying with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These schedules have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Milwaukee, Wisconsin
February 4, 1994
- - - - - - - - - - - - - - - -
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included (or incorporated by reference) in this Form 10-K, into
the Corporation's previously filed Registration Statement File Nos. 2-53663,
2-53578, 33-7471, 33-22417, 33-37924, 33-39660 and 33-57898.
ARTHUR ANDERSEN & CO.
Milwaukee, Wisconsin
March 14, 1994
16
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SNAP-ON TOOLS CORPORATION
- --------------------------------------------------
By: Date:
---------------------------------------------- ---------------
R. A. Cornog, Chairman of the Board,
President, Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Corporation
and in the capacities as indicated.
Date:
---------------------------------------------- ---------------
R. A. Cornog, Chairman of the Board,
President, Chief Executive Officer, and Director
Date:
---------------------------------------------- ---------------
J. H. Schnabel, Senior Vice President -- Administration,
and Director
Date:
---------------------------------------------- ---------------
M. F. Montemurro, Principal Financial Officer,
and Senior Vice President -- Finance
Date:
---------------------------------------------- ---------------
G. D. Johnson, Principal Accounting Officer,
and Controller
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Corporation
and in the capacities as indicated.
By: Date:
---------------------------------------------- ---------------
R. F. Farley, Director
By: Date:
---------------------------------------------- ---------------
A. L. Kelly, Director
By: Date:
---------------------------------------------- ---------------
R. J. Decyk, Director
By: Date:
---------------------------------------------- ---------------
B. S. Chelberg, Director
By: Date:
---------------------------------------------- ---------------
G. W. Mead, Director
By: Date:
---------------------------------------------- ---------------
E. H. Rensi, Director
By: Date:
---------------------------------------------- ---------------
D. W. Brinckman, Director
18
EXHIBIT INDEX
ITEM 14(C): EXHIBITS PAGE
(13) (a) Restated Certificate of Incorporation of the
Corporation, filed as Exhibit 3(a) to the
Corporation's Quarterly Report on Form 10-Q
for the quarterly period ended March 28, 1992,
is incorporated herein by reference thereto.
(b) Bylaws of the Corporation, filed as Exhibit 3(b)
to the Corporation's Quarterly Report on Form
10-Q for the quarterly period ended June 27,1992,
is incorporated herein by reference thereto.
(4) Rights Agreement dated as of October 23, 1987 between
the Corporation and Harris Trust and Savings Bank, as
Rights Agent, filed as Exhibit 1 to the Corporation's
Registration Statement on Form 8-A dated
October 26, 1987, is incorporated herein by reference
thereto. A Form 8-K, dated June 4, 1992, was filed
reporting an amendment to this Rights Agreement and is
incorporated herein by reference. No financial
statements were filed. On January 28, 1994, the Board
of Directors adopted amendments to the Rights
Agreement. A Form 8-K dated January 28, 1994 reporting
these amendments was filed and is incorporated herein
by reference. No financial statements were filed.
The Corporation and its subsidiaries have no long-term
debt agreement for which the related outstanding debt
exceeds 10% of consolidated total assets as of
January 1, 1994. 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) Incentive Stock Option Plan, filed as Exhibit 10(a)
to the Corporation's Annual Report on Form 10-K for
the fiscal year ended December 29, 1990, is
incorporated herein by reference thereto.
(b) Executive and Senior Officer Agreements, amended and
restated, and effective as of January 28, 1994. . . . . . . . . . . .23
(c) Indemnification Agreement for Directors, contained
in the Proxy Statement dated March 23, 1990,
Commission File No. 1-7724 mailed on March 23, 1990,
is incorporated herein by reference thereto.
(d) Snap-on Tools Corporation Supplemental Retirement
Plan, amended as of January 28, 1994. . . . . . . . . . . . . . . . .49
(13) Annual Report to Shareholders . . . . . . . . . . . . . . . . . . . . . .56
(22) Subsidiaries of the Corporation . . . . . . . . . . . . . . . . . . . . .55
19
Snap-On Tools Corporation
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance of
Balance at Subsidiary Charged to Balance at
beginning at time of costs and end of
Description Of Year Acquisition Expenses Deductions Year
----------- --------- ----------- ---------- ---------- ---------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
- -------------------------------
Year ended
(1) January 1, 1994 $12,586,976 $1,443,272 $14,496,553 $13,580,593(1) $14,946,208
Year ended
(1) January 2, 1993 $ 5,825,307 $4,547,379 $11,575,491 $ 9,361,201(1) $12,586,976
Year ended
(1) December 28, 1991 $ 3,972,949 -- $ 9,327,458 $ 7,475,100(1) $ 5,825,307
(1) This amount represents write-offs of bad debts.
VALUATION ALLOWANCE FOR DEFERRED TAX ASSET(2)
- ---------------------------------------------
Year ended
January 1, 1994 $11,797,000 -- -- $ 2,258,000 $ 9,539,000
Year ended
January 2, 1993 $ 4,000,000(3) $4,978,000 $ 2,819,000 -- $11,797,000
(2) The Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes" effective the beginning of 1992. Therefore no prior year
information is applicable for 1991.
(3) This amount represents the valuation allowance established at the time of adoption.
20
Snap-On Tools Corporation
SCHEDULE IX - SHORT-TERM BORROWINGS
Years Ended January 1, 1994, January 2, 1993 and December 28, 1991
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Balance Average Outstanding Outstanding Rate
Category of Aggregate At End Interest During the During the During the
Short-Term Borrowings Of Period Rate Period Period Period
--------------------- ------------ ------------ ------------ ------------ ------------
Year Ended January 1, 1994:
Commercial Paper $65,250,000 3.34% $ 75,000,000 $24,416,209 3.22%
Notes Payable Banks 1,037,644 8.87% 38,812,195 16,442,023 8.00%
-----------
$66,287,644
-----------
-----------
Year Ended January 2, 1993:
Commercial Paper $41,000,000 3.58% $108,000,000 $19,538,462 3.26%
Notes Payable Banks 25,902,586 9.10% 39,807,473 18,351,143 8.83%
-----------
$66,902,586
-----------
-----------
Year Ended December 28, 1991:
Commercial Paper $ -- --% $ 75,000,000 $35,017,184 6.52%
Notes Payable Banks -- --% 21,000,000 3,947,802 6.16%
-----------
$ --
-----------
-----------
The additional information required by this schedule is contained in Note 5 to
the Financial Statements of the Corporation on page 28 of its 1993 Annual Report
and is incorporated herein by reference.
21
Snap-on Tools Corporation
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Column A Column B
-------- --------
Item Amount
---- ------
Maintenance and Repairs
Year Ended January 1, 1994 $16,794,068
Year Ended January 2, 1993 $15,517,000
Year Ended December 28, 1991 $15,119,000
Amortization of intangible assets, royalties, advertising
costs and taxes, other than payroll and income taxes, are
not included on this schedule since each of the items is
less than 1% of total sales and revenues.
22