SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
AMENDMENT #2 TO CURRENT REPORT
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1999
Snap-on Incorporated
(Exact name of registrant as specified in its charter)
Delaware 1-7724 39-0622040
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
10801 Corporate Drive, Pleasant Prairie, Wisconsin 53158-1603
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (262) 656-5200
Snap-on Incorporated hereby files Amendment Number 2 to its Report on Form 8-K
filed on October 15, 1999 for purposes of filing additional information under
Item 7a.
Item 7. Financial Statements.
(a) Financial statements of businesses acquired.
Presented on pages 3 through 12 are the 1998 audited financial statements, notes
to the financial statements and report of independent public accountants
pertaining to the Sandvik Saws and Tools business currently operating as the
Bahco Group ("Bahco Group") acquired on September 30, 1999 from Sandvik AB.
2
Bahco Group
Combined Financial Statements
As of December 31, 1998
Together with Report of
Independent Public Accountants
3
Report of Independent Public Accountants
We have audited the accompanying combined statement of assets acquired and
liabilities assumed of the Bahco Group as of December 31, 1998, and the related
combined statement of revenues and direct expenses for the year ended December
31, 1998. These combined financial statements are the responsibility of the
Bahco Group management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The statements have been prepared in connection with the sale of the Bahco Group
by Sandvik AB to Snap-on Incorporated and are not intended to be a complete
presentation of the assets and liabilities or the revenues and direct expenses
on a stand-alone basis.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets acquired and liabilities assumed of the Bahco Group as of
December 31, 1998, and the revenues and direct expenses for the year ended
December 31, 1998, in conformity with United States generally accepted
accounting principles.
Arthur Andersen LLP
Goteborg, Sweden
November 30, 1999
4
BAHCO GROUP
Combined Statement of Revenues and Direct Expenses
For the Year Ended December 31, 1998
(Amounts in thousands)
Net sales - third party $ 279,165
Net sales - affiliates 44,743
--------
Net sales 323,908
Cost of goods sold (215,119)
Operating expenses (78,989)
Equity in earnings of unconsolidated
subsidiaries 319
Other expense (39)
--------
Earnings before interest and income taxes $ 30,080
========
The accompanying notes are an integral part of these statements.
5
BAHCO GROUP
Combined Statement of Assets Acquired and Liabilities Assumed
As of December 31, 1998
(Amounts in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 25,251
Accounts receivable, less allowance for
doubtful accounts of $2.0 million 49,286
Inventories 78,935
Prepaid expenses and other assets 5,432
--------
Total current assets 158,904
Due from affiliates 5,169
Property and equipment - net 80,362
Other assets 3,710
--------
Total assets acquired $ 248,145
========
LIABILITIES
Current liabilities
Accounts payable $ 12,283
Current maturities of long-term debt 2,539
Other liabilities 27,444
--------
Total current liabilities 42,266
Due to affiliates 92,325
Long-term debt 6,188
Pension 12,872
Other liabilities 622
--------
Total liabilities assumed $ 154,273
--------
Net assets acquired and liabilities assumed $ 93,872
========
The accompanying notes are an integral part of these statements.
6
Note 1 - Summary of Accounting Policies
A summary of significant accounting policies applied in the preparation of the
accompanying combined financial statements follows:
a. NATURE OF OPERATIONS:
The Bahco Group is comprised of a combination of specific legal entities and
carved out divisions all of which are wholly-owned by the parent company Sandvik
AB. In preparation for the proposed sale of its Saws and Tools business, Sandvik
AB created the Bahco Group. The Bahco Group is a manufacturer and supplier of
professional tool products. Products are manufactured at 11 plants in Sweden,
Germany, Portugal, France, England, the United States and Argentina. These tools
are designed for and sold mainly to professional users throughout the world.
b. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
c. PRINCIPLES OF COMBINATION:
The combined financial statements include the accounts of the specific legal
entities and carved out divisions which comprise the Bahco Group. The statements
also include the investment in UTT, a speciality manufacturer of electronic
torque tools and Deville, a speciality manufacturer of professional pruning
equipment. The Bahco Group holds a 49 percentage interest in UTT and a 35
percentage interest in Deville. Both of these investments are accounting for
under the equity method of accounting. Transactions with Sandvik AB and other
Sandvik AB entities, not included in the Bahco Group, are shown as Due From
Affiliates and Due To Affiliates on the accompanying financial statements. All
significant intra-group accounts and transactions have been eliminated.
d. BASIS OF PRESENTATION:
The accompanying financial statements include the assets acquired and
liabilities assumed at December 31, 1998, and revenues and direct expenses from
January 1, 1998 through December 31, 1998. In the opinion of management, these
financial statements include all adjustments necessary to present fairly the
Combined Statement of Assets Acquired and Liabilities Assumed as of December
31,1998, and the Combined Statement of Revenues and Direct Expenses for the year
ended December 31, 1998 in accordance with United States generally accepted
accounting principles. All adjustments made have been of a normal recurring
nature.
The entities within the Bahco Group have their own administrative functions such
as human resources, finance and accounting. The costs of these functions are
included in the accompanying financial statements. Sandvik AB also has similar
administrative functions such as human resources, corporate finance, legal and
treasury departments, the cost of which were not historically allocated to the
Bahco Group. In addition, the many entities of the Bahco Group are part of and
integrated with the entities of Sandvik AB and are included in the combined tax
return of Sandvik AB. Because of the inherent nature of carved out divisions not
being legal taxed entities, separate provisions were calculated for many of the
entities that make up the Bahco Group. As a result, provisions for income taxes
are not included in the combined statement of revenues and direct expenses.
The Bahco Group's primary source of financing is through inter-company
borrowings from Sandvik Finance B.V. - a subsidiary of Sandvik AB. Sandvik
Finance B.V. cost of capital was not allocated to the Bahco Group and as such,
no interest expense on borrowings from Sandvik Finance B.V. are included in the
accompanying combined statement of revenues and direct expenses. The
inter-company debt owed by
7
the Bahco Group to Sandvik Finance B.V. is included in Due To Affiliates in the
accompanying financial statements. Third party debt exists only for the entities
that existed as separate legal units prior to the formation of the Bahco Group.
As such, no third party debt exists for the carved out divisions. Interest
expense on third party debt is not included in the accompanying financial
statements.
As a result of the relationship between the Bahco Group and Sandvik AB, the
financial position and results of operations are not indicative of the results
of the Bahco Group business had it been a stand-alone entity. Additionally,
these financial statements are not indicative of the future financial position
or results of operations of the Bahco Group business.
e. CASH EQUIVALENTS:
The Bahco Group considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash equivalents are
stated at cost, which approximates market value.
f. FOREIGN CURRENCY TRANSLATION:
The functional currency of the Bahco Group is Swedish Krona. The financial
statements of the Bahco Group's non-Swedish subsidiaries are translated into the
functional currency. Net assets of certain subsidiaries are translated at
current rates of exchange, and income and expense items are translated at the
average exchange rate for the year. For purposes of this report, amounts have
been converted into US dollars using a conversion rate as of December 31, 1998
of 8.1103 Swedish Krona per US dollar for assets and liabilities and an average
rate for the year ended December 31, 1998 of 7.9979 Swedish Krona per US dollar
for revenues and direct expenses. All amounts in this report are stated in US
dollars.
g. INVENTORIES:
Inventories consisting of manufactured products are valued at the lower of
historical cost or market. Manufactured products includes the cost of material,
labor and manufacturing overhead. Inventories are accounted for under the
first-in, first-out ("FIFO") cost method.
h. PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis over estimated useful lives.
Depreciation expense for 1998 was $11.6 million. For detailed property and
equipment information, refer to Note 4.
i. RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are expensed as incurred. For 1998 these costs
were $2.8 million.
j. REVENUE RECOGNITION:
Revenues are recognized at the time of shipment and are equal to sales price
less deductions for discounts and returns.
k. WARRANTY EXPENSE POLICY:
The company provides product warranties for specific product lines and accrues
for estimated future warranty costs in the period in which the sale was
recorded.
8
l. Advertising and promotion expense:
Advertising and promotion costs are generally expensed when incurred.
Note 2 - Inventories
The components of the Bahco Group inventory were as follows:
(Amounts in thousands)
Finished stock $ 49,386
Work in process 10,757
Raw materials 18,792
--------
Total inventories $ 78,935
========
Note 3 - Transactions with affiliates
The Bahco Group is affiliated with several entities through common direct or
indirect ownership through Sandvik AB. Various transactions are entered into
with these affiliates, primarily resulting from intercompany loans and advances.
Transactions with affiliated companies included in the accompanying combined
statements were as follows:
The Bahco Group sells manufactured products to other Sandvik AB entities not
included in the Bahco Group at arms length third party pricing. As such, margins
on sales to affiliates are included in the accompanying combined statement of
assets acquired and liabilities assumed.
Amounts due to and due from affiliates included in the accompanying combined
statement of assets acquired and liabilities assumed were as follows:
(Amounts in thousands)
Due From Affiliates was comprised of the following:
Accounts receivable $ 4,623
Prepaid expenses and other 546
------
Total $ 5,169
======
Due To Affiliates was comprised of the following:
Accounts payable $33,495
Other liabilities 12,568
Debt 46,262
------
Total $92,325
======
9
Note 4 - Property and Equipment
The Bahco Group's property and equipment values, which are carried at cost, were
as follows:
(Amounts in thousands)
Land $ 2,799
Buildings and improvements 33,798
Machinery and equipment 124,961
--------
161,558
Less: accumulated depreciation (81,196)
--------
Property and equipment - net $ 80,362
========
The estimated service lives of property and equipment are principally as
follows:
Buildings and improvements 10 to 50 years
Machinery and equipment 5 to 20 years
Transportation vehicles 2 to 5 years
Computer hardware 3 to 5 years
Note 5 - Long-term Debt
The Bahco Group's Long-term debt consisted of the following:
(Amounts in thousands)
Notes payable to banks with interest rates ranging
from 9.8% to 17.3% with a weighted average interest
rate of 12.5% at December 31, 1998, maturing at
various dates through April, 2003, payable in:
Argentina - Pesos $ 8,416
Great Britain - Pounds 138
Note payable to City of Milan, Tennessee,
non-interest bearing, maturing January, 2000,
payable in United States Dollars 173
-------
Total Long-term debt 8,727
Less: Current Maturities (2,539)
-------
Long-term portion $ 6,188
=======
Long-term debt matures as follows:
1999 $ 2,539
2000 2,402
2001 1,262
2002 1,262
2003 1,262
-----
Total $ 8,727
=====
10
Note 6 - Financial Instruments
Sandvik AB has established an internal program under which all non-Swedish
denominated receivables and payables are recorded on the Bahco Group's financial
statements at pre-established fixed exchange rates to the Swedish Krona.
Fluctuations in exchange rates between the Swedish Krona and local currencies
are absorbed at the Sandvik AB level and not allocated to the Bahco Group.
While the Bahco Group sells primarily to distributors, the Bahco Group's account
receivable do not represent significant concentrations of credit risk because of
the diversified portfolio of distributors and geographic areas.
Note 7 - Pension Plans
The Bahco Group recognizes retirement plan expenses in accordance with Statement
of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for
Pensions." The Bahco Group has several other subsidiary pension plans that do
not report pension expense in accordance with SFAS No. 87, as these plans and
the related pension expense are not material.
The Bahco Group's net pension expense included the following components:
(Amounts in thousands)
Service cost - benefits earned
during year $ 1,421
Interest cost on projected
benefits 1,212
Less actual return on plan assets (752)
Net amortization and deferral:
Transitional amount (133)
------
Net pension expense $ 1,748
======
The status of the Bahco Group's pension plans was as follows:
(Amounts in thousands)
Change in projected benefit obligation:
Benefit obligation at beginning of year $ 19,279
Service cost 1,421
Interest cost 1,212
Plan participant contributions 290
Benefits paid (348)
Actuarial loss 3,542
-------
Benefit obligation at end of year 25,396
-------
Change in plan assets:
Fair value of plan assets at beginning
of year 8,519
Actual return on plan assets 892
Contributions by employer 547
Plan participant contributions 290
Benefits paid (2)
-------
Fair value of plan assets at end of year 10,246
-------
Funded status (15,150)
Unrecognized transition obligation (1,325)
Unrecognized net loss from
experience different than assumed 3,603
-------
Net amount recognized $(12,872)
=======
11
Note 7 - Pension Plans (continued)
The assumptions used in determining pension costs and the projected benefit
obligation were:
Germany Netherlands Sweden UK US
Discount rate 6.00% 5.00% 5.50% 6.00% 7.00%
Expected long-term rate
of return on plan assets N/A 5.00% N/A 8.50% 9.00%
Expected rate of increase
in future compensation
levels 3.50% 3.00% 2.50% 3.50% 4.50%
Note 8 - Commitments and Contingencies
The Bahco Group has entered into certain operating lease agreements, which
extend for varying amounts of time. The Bahco Group's lease commitments require
future payments as follows:
(Amounts in thousands)
Year ending Amount
1999 $ 734
2000 460
2001 141
2002 30
2003 0
2004 and thereafter 0
Rent expense for 1998 was $.7 million.
Legal Matters: The Bahco Group is involved in various legal matters, which are
being defended and handled in the ordinary course of business. Although it is
not possible to predict the outcome of these matters, management believes that
the results will not have a material impact on the Bahco Group's financial
statements.
Note 9 - Subsequent event
On September 30, 1999, Sandvik AB sold the Bahco Group to Snap-on Incorporated
for approximately $379 million in cash.
12
Presented on pages 13 through 22 is the audited combined balance sheet as of
September 30, 1999 shown on a historical cost basis, accompanied by notes to the
financial statement and report of independent public accountants pertaining to
the SB Tools SARL and subsidiaries business acquired on September 30, 1999 from
Sandvik AB and now currently operating as the Bahco Group.
SB Tools SARL and subsidiaries
Combined balance sheet as at September 30, 1999
SEK '000
--------
Assets
Fixed assets
Intangible fixed assets
Patents and other intangibles 336 Note 1
Tangible fixed assets
Land and buildings 216967 Note 1
Plant and machinery 326671 Note 1
Equipment, tools, fixtures and fittings 40185 Note 1
Construction in progress incl capitalized expenses 65568 Note 1
----------
649391
Financial fixed assets
Shares 79
Participations in associated companies 44351 Note 2
Long-term receivables 1237
----------
45667
----------
Total fixed assets 695394
----------
Inventories 603494 Note 3
Receivables
Receivables with Sandvik 368904
Trade receivables 428896
Prepaid income tax 22414
Other receivables 365805
Prepaid expenses and accrued income 17981
----------
1204000
Liquid assets 125489 Note 4
----------
Total current assets 1932983
----------
Total assets 2628377
==========
13
SB Tools SARL and subsidiaries
Combined balance sheet as at September 30, 1999 (continued)
Shareholders' equity and liabilities
Shareholders' equity
Share capital 678737
Accumulated deficit -268672
----------
410065 Note 5
----------
Provisions
Provisions for pensions 116767 Note 6
Provisions for taxes 50003
Other provisions 10522 Note 7
----------
177292
Payables with Sandvik 584023
Interest-bearing liabilities
Loans from financial institutions 86895
Other liabilities 1009982
----------
1096877 Note 8
Non-interest-bearing liabilities
Trade payables 95444
Bills payable 4901
Income tax liabilities 22772
Other liabilities 89123
Accrued expenses and deferred income 147880 Note 9
----------
360120 Note 10
----------
Total shareholders' equity and liabilities 2628377
==========
14
Basis of Presentation and Significant Accounting Principles
(a) Basis of presentation
The combined balance sheet has been prepared in accordance with Swedish
generally accepted accounting principles.
(b) Consolidation principles
The combined balance sheet covers the Parent Company, all subsidiaries and
associated companies. Subsidiaries are defined as companies in which the Parent
Company directly or indirectly holds more than half the votes. Associated
companies (voting rights between 20 and 50%) are consolidated using the equity
method.
The group comprises the following subsidiaries:
Country Company % ownership
Sweden Bahco Group AB 100
Bahco Verktyg AB 100
Bahco Metal Saws AB 100
Bahco Carpentry AB 100
Bahco Tools AB 100
Kapman AB 100
Windsor Tools AB 100
Denmark Bahco Vaerktoj A/S 100
Finland Bahco Tyokalut Oy 100
Norway Bahco Verktoj A/S 100
UK Bahco Metal Saws Ltd 100
Bahco Tools Ltd 100
France Bahco Outillage S.A.S 99.99
Netherlands Bahco Tools BV 100
SB Holding BV 100
Italy Bahco Utensili SpA 100
Portugal Oberg Ferramentas Lda 100
Spain Bahco Herramientas S.A. 98.36
Germany Bahco Belzer GmbH 100
Belzer GmbH 100
USA Bahco Tools Inc. 100
Windsor Forestry Tools Inc. 100
Canada Bahco Tools Inc. 100
Argentina Bahco Argentina S.A. 99.99
15
The combined balance sheet is prepared in accordance with the principles set out
in the Swedish Financial Accounting Standards Council's recommendation.
The SB Tools Sarl group was formed in a reorganization of companies earlier
controlled by Sandvik AB and/or CTT bv. Being a transaction among enterprises
under common control, the carrying values of assets and liabilities before the
transaction have been maintained in the attached combined balance sheet and,
accordingly, no goodwill was recognized in the reorganization. The investment in
a French associated company is carried at the value assigned when contributed by
Sandvik AB to CTT bv.
All intercompany transactions, receivables, liabilities and unrealized profits
have been eliminated. When necessary, accounting policies for subsidiaries have
been changed to ensure consistency with the policies adopted for the group. This
has principally meant that the reports of certain subsidiaries, mainly Swedish
ones, which in their primary accounts report appropriations to untaxed reserves
have been adjusted to report such reserves in their equity and deferred tax
liability portions in the combined balance sheet.
(c) Reporting currency
The reporting currency for the group is Swedish kronor (SEK).
(d) Foreign group companies
The balance sheets of foreign subsidiaries have been translated at the rate
prevailing at the balance sheet date.
(e) Transactions in foreign currencies
Transactions in foreign currencies are recorded at the exchange rate prevailing
at the transaction date. For practical purposes, an approximation is often used
for the transactions entered during a month. At the end of the month, the
foreign currency receivables and liabilities are valued using the end of month
rate. Resulting differences are taken to income.
In cases where forward exchange contracts have been entered into, however, the
forward rate of exchange is used in the valuation of underlying receivables and
liabilities. Outstanding forward exchange contracts relating to sales of
currencies are not valued if the currency flow from sales of goods is expected
to cover the forward contracts.
(f) Revenue recognition
Sales are recorded upon shipment of products or the rendering of services to
customers in accordance with the agreed term of sales.
Sales include the sale of products or services less indirect sales tax and other
sales reductions.
16
(g) Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation. Depreciation is based on cost and the estimated economic lives,
generally 5-10 years straight-line depreciation for plant, machinery and
equipment, 10-50 years for buildings. Computer equipment is depreciated over 3-5
years on the declining balance method.
Any difference between such calculated depreciation and the depreciation claimed
for tax purposes is reported in the single company accounts with untaxed
reserves, adjusted as stated above in the consolidated financial statements.
(h) Computer software development costs
The development cost or acquisition cost of new software is expensed as
incurred.
(i) Research and development
Research and development costs are expensed as incurred.
(j) Inventories
Inventories are valued at the lower of cost (measured in accordance with the
first-in/first-out method) and net realizable value, or in the case of
semi-finished goods and raw materials replacement cost.
(k) Provisions
Provisions are recognized when the Group has decided on a formal plan and a
reliable estimate of the obligation can be made.
(l) Pensions
Group companies have various pension schemes in accordance with local conditions
and practices in the countries in which they operate. The schemes are generally
funded through payments to insurance companies or, mainly in Sweden and Germany,
own provisions, as determined by periodic actuarial calculations as required
under local rules.
(m) Taxes
Tax expense for the year includes actual and deferred taxes and the share of
taxes in associated companies. Deferred taxes for the SB Tools SARL group mainly
relate to appropriations to untaxed reserves as described above. Deferred tax
assets are recognized if assured beyond reasonable doubt.
17
Notes to Combined Financial Statement
Note 1. Intangible and tangible fixed assets
Patents and Land and Plant and Equipment, Construction
other intangibles buildings machinery tools etc. in progress
SEK '000 SEK '000 SEK '000 SEK '000 SEK '000
Group
Historical cost 2106 320466 832965 96063 65568
Accumulated
Scheduled depreciation -1770 -103499 -506294 -55878 0
Scheduled remaining values 336 216967 326671 40185 65568
Note 2. SB Tools SARL's holdings of shares and participations in associated
companies
Book value %
SEK '000 ownership
France Deville SA 43351 35
Ireland Uirlis Torc Teoranta Ltd. 1000 49
(owned by Bahco Tools AB)
Note 3. Inventories
Group
SEK '000
Raw materials, consumables
and work in progress 275782
Finished goods 327712
Total 603494
18
Note 4. Liquid assets
Group
SEK '000
Cash and bank balances 125489
Note 5. Shareholders' equity
The share capital of SB Tools SARL is affected by the values assigned to
subsidiaries when contributed to SB Tools. Being an internal reorganization of
companies under common control, no goodwill is recognized in the attached
combined balance sheet (see consolidation principles) and hence, the restoration
of historical cost values leads to the reporting of an accumulated deficit in
order to report total shareholders' equity uneffected by the reorganization.
Note 6. Provision for pensions
Group
SEK '000
Swedish PRI pension plan 101754
Other pensions 15013
Total 116767
Note 7. Other provisions
Group
SEK '000
Restructuring provisions 1483
Personnel-related provisions 3768
Other provisions 5271
Total 10522
19
Note 8. Interest-bearing liabilities
Maturity after balance sheet date
Group
Within After
one year one year Total
SEK '000 SEK '000 SEK '000
Liabilities to credit institutions 37043 49852 86895
Other liabilities 1008797 1185 1009982
Total 1045840 51037 1096877
Note 9. Accrued expenses and deferred income
Group
SEK '000
Personnel related 82961
Other 64919
Total 147880
Note 10. Non-interest-bearing liabilities
Maturity after balance sheet date
Group
SEK '000
Within one year 354843
After one year 5277
Total 360120
20
Note 11. Contingent liabilities
Group
SEK '000
Bills discounted 0
Other contingent liabilities 2035
Total 2035
21
Report of Independent Public Accountants
We have audited the accompanying combined balance sheet of SB Tools SARL and
subsidiaries (the Company) as of September 30, 1999, prepared in conjunction
with the acquisition of SB Tools SARL by Snap-on Incorporated.
The combined balance sheet has been prepared in conformity with Swedish
generally accepted accounting principles.
The combined balance sheet is the responsibility of the management of the
Company and Sandvik AB, the ultimate shareholder of the Company as of the date
of the combined balance sheet. Our responsibility is to express an opinion on
the combined balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Sweden. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
Because we were not engaged to audit the statements of income and cash flows for
the period ended September 30, 1999, we did not extend our auditing procedures
to enable us to express an opinion, and we do not express an opinion, on the
results of operations and cash flows for that period.
In our opinion, the accompanying combined balance sheet presents fairly the
financial position of SB Tools SARL and subsidiaries as of September 30, 1999,
in conformity with Swedish generally accepted accounting principles.
Sandviken
November 26, 1999
Ake Nasman Lars Svantemark
Authorized Public Accountant Authorized Public Accountant
KPMG Arthur Andersen
22
(b) Pro-forma financial information.
The following unaudited pro forma statements of earnings of Snap-on Incorporated
(the "Company") gives effect to the acquisition of the Bahco Group as if the
acquisition had occurred on January 1, 1998 and incorporates the purchase method
of accounting.
For pro forma purposes, the Company's Unaudited Consolidated Statement of
Earnings for the thirty-nine weeks ended October 2, 1999, has been combined with
the Unaudited Combined Statement of Revenues and Direct Expenses of the Bahco
Group for the nine months ended September 30, 1999, and the effects of pro forma
adjustments as set forth in the notes thereto.
For pro forma purposes, the Company's Audited Consolidated Statement of Earnings
for the year ended January 2, 1999, has been combined with the Audited Combined
Statement of Revenues and Direct Expenses of the Bahco Group for the year ended
December 31, 1998, and the effects of pro forma adjustments as set forth in the
notes thereto.
The following unaudited pro forma statements of earnings are based on historical
financial data, and on assumptions and adjustments described in the notes
thereto. All such assumptions and adjustments are inherently subject to
significant uncertainty and contingencies. It can be expected that some or all
of the assumptions on which the following unaudited pro forma statements of
earnings is based will prove to be inaccurate. As a result, the unaudited pro
forma statements of earnings do not purport to represent what the Company's
results of operations would have been if the acquisition of the Bahco Group had
occurred on January 1, 1998, and is not intended to project the Company's
results of operations for any future period.
23
The unaudited pro forma information should be read in conjunction with the
Company's consolidated financial statements and the related notes appearing in
the Company's 1998 Annual Report on Form 10-K.
A pro forma balance sheet is not provided since the Company's historical balance
sheet that was filed on Form 10-Q for the quarter ended October 2, 1999 includes
the effects of the acquisition prior to filing this 8-K.
A preliminary goodwill allocation in accordance with the criteria established
under Accounting Principles Board Opinion No. 16, "Business Combinations" has
been performed. This preliminary allocation results in goodwill of $177.9
million being recorded. The final purchase price allocation, when completed,
will result in changes to the amount of recorded assets and goodwill included as
pro forma amounts herein.
The preliminary allocation of the purchase price of $379.4 million which
includes direct acquisition costs of $8.3 million is as follows:
(Amounts in millions)
Fair value of property and equipment $37.2
Fair value of patents and trademarks 24.9
Other net assets acquired 139.4
Preliminary goodwill 177.9
------
Preliminary purchase price $379.4
======
Assigned useful lives are as follows:
Patents 13 years
Trademarks 40 years
Goodwill 40 years
24
SNAP-ON INCORPORATED
Unaudited Pro Forma Statement of Earnings
(Amounts in thousands except per share data)
Snap-on
Incorporated Bahco Group
Unaudited Unaudited
Consolidated Combined
Statement Statement of
of Revenues and
Earnings Direct
Thirty-nine Expenses
Weeks Ended Nine Months Ended Pro forma
October 2, 1999 September 30, 1999 Adjustments Pro forma
-------------------------------------------------- ------------
Net sales $1,378,895 $ 228,946 $ - $1,607,841
Cost of goods sold (716,310) (159,064) (1,845) a (877,219)
Cost of goods sold - discontinued products - - - -
Operating expenses (527,215) (57,964) (3,960) b (589,139)
Restructuring and other
non-recurring charges (14,285) - - (14,285)
Net finance income 46,400 - - 46,400
Interest expense
(15,360) - (11,738) c (27,098)
Other income (expense) - net 3,319 983 - 4,302
Earnings (loss) before income taxes 155,444 12,901 (17,543) 150,802
Income tax provision (benefit) 55,654 - (1,377) d 54,277
Net earnings (loss) $ 99,790 $ 12,901 $ (16,166) $ 96,525
Earnings per weighted average
common share - basic $ 1.71 $ 1.65
Earnings per weighted average
common share - diluted $ 1.69 $ 1.64
Weighted average common shares
outstanding - basic 58,482 58,482
Effect of dilutive options 424 424
Weighted average common shares
outstanding - diluted 58,906 58,906
The following notes to the pro forma adjustments for the Unaudited Statement of
Earnings for the nine months ended October 2, 1999 represent the adjustments
that would have resulted from the acquisition of the Bahco Group had the
acquisition occurred on January 1, 1998.
(a) To adjust depreciation expense for the preliminary change in the basis to
fair market value of property, plant and equipment.
(b) To adjust depreciation and amortization expense for the preliminary change
in the basis to fair market value of property, plant and equipment and
intangible assets including goodwill.
(c) To record additional interest expense resulting from the debt issued to
acquire the Bahco Group.
(d) To record an income tax benefit to return to an appropriate consolidated
effective tax rate of 36%.
25
SNAP-ON INCORPORATED
Unaudited Pro Forma Statement of Earnings
(Amounts in thousands except per share data)
Snap-on Bahco Group
Incorporated Audited
Audited Combined
Consolidated Statement of
Statement Revenues and
of Earnings Direct Expenses Pro
Year Ended Year Ended forma
January 2, 1999 December 31, 1998 Adjustments Pro forma
--------------------------------------------------- ------------
Net sales $1,772,637 $ 323,908 $ - $ 2,096,545
Cost of goods sold (948,761) (215,119) (2,460) a $(1,166,340)
Cost of goods sold - discontinued products (60,562) - - (60,562)
Operating expenses (705,811) (78,989) (5,280) b (790,080)
Restructuring and other non-recurring
charges (89,301) - - (89,301)
Net finance income 65,933 - - 65,933
Interest expense (21,254) - (15,650) c (36,904)
Other income (expense) - net (2,041) 280 - (1,761)
Earnings (loss) before income taxes 10,840 30,080 (23,390) 17,530
Income tax provision (benefit) 15,619 - 2,393 d 18,012
Net earnings (loss) $ (4,779) $ 30,080 $ (25,783) $ (482)
Earnings per weighted average
common share - basic $ (0.08) $ (0.01)
Earnings per weighted average
common share - diluted $ (0.08) $ (0.01)
Weighted average common shares
outstanding - basic 59,220 59,220
Effect of dilutive options - -
Weighted average common shares
outstanding - diluted 59,220 59,220
The following notes to the pro forma adjustments for the Unaudited Statement of
Earnings for the year ended January 2, 1999 represent the adjustments that would
have resulted from the acquisition of the Bahco Group had the acquisition
occurred on January 1, 1998.
(a) To adjust depreciation expense for the preliminary change in the basis to
fair market value of property, plant and equipment.
(b) To adjust depreciation and amortization expense for the preliminary change
in the basis to fair market value of property, plant and equipment and
intangible assets including goodwill.
(c) To record additional interest expense resulting from the debt issued to
acquire the Bahco Group.
(d) To record an income tax expense to return to an appropriate consolidated
effective tax rate of 36% before Snap-on's restructuring Project Simplify
initiative that occurred in 1998.
26
(a) Exhibits
2.1* Agreement
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
99.1* Press Release of Snap-on Incorporated, dated September 30,
1999.
---------------
* Previously filed as an Exhibit on Form 8-K dated September 30, 1999
or on the first amendment thereto.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Snap-on
Incorporated has duly caused this report to be signed on its behalf by the
undersigned duly authorized person.
SNAP-ON INCORPORATED
Date: January 19, 2000 By: /s/ N. T. Smith
------------------------
N. T. Smith
(Principal Accounting Officer
and Controller)
28