UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- -- ACT OF 1934
For quarterly period ended June 30, 2001
Commission File Number 1-7724
SNAP-ON INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 39-0622040
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10801 Corporate Drive, Pleasant Prairie, Wisconsin 53158-1603
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (262) 656-5200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Class Outstanding at July 28, 2001
- -------------------------- ----------------------------
Common stock, $1 par value 57,997,385 shares
SNAP-ON INCORPORATED
INDEX
Page
----
Part I. Financial Information
Consolidated Statements of Earnings -
Thirteen and Twenty-six Weeks Ended
June 30, 2001 and July 1, 2000 3
Consolidated Balance Sheets -
June 30, 2001 and December 30, 2000 4-5
Consolidated Statements of Cash Flows -
Twenty-six Weeks Ended
June 30, 2001 and July 1, 2000 6
Notes to Consolidated Financial Statements 7-12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-19
Quantitative and Qualitative Disclosures
About Market Risk 20
Part II. Other Information 21-22
2
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------------- ------------------------------
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net sales $ 525.6 $ 563.2 $1,053.0 $1,107.5
Cost of goods sold (286.3) (298.4) (570.0) (593.8)
Operating expenses (205.9) (193.5) (408.4) (388.8)
Net finance income 7.9 10.5 20.0 22.2
Restructuring and other non-recurring charges (14.4) - (14.4) (.4)
Interest expense (9.2) (10.6) (18.1) (20.9)
Other income (expense) - net (1.6) .8 .3 1.9
------- ------- -------- --------
Earnings from continuing operations before
income taxes 16.1 72.0 62.4 127.7
Income taxes on earnings from continuing operations 7.2 26.3 24.1 46.7
------- ------- -------- --------
Earnings before cumulative effect of a change in
accounting principle 8.9 45.7 38.3 81.0
Cumulative effect of a change in accounting principle
for derivatives in 2001 (net of tax of $1.6 million),
and for pensions in 2000 (net of tax of $15.9 million) - - (2.5) 25.4
------- ------- -------- --------
Net earnings $ 8.9 $ 45.7 $ 35.8 $ 106.4
======= ======= ======== ========
Net earnings per share - basic and diluted:
Earnings before cumulative effect of a change in
accounting principle $ .15 $ .78 $ .66 $ 1.38
Cumulative effect of a change in accounting
principle, net of tax - - (.05) .43
------- ------- -------- --------
Net earnings per share $ .15 $ .78 $ .61 $ 1.81
======= ======= ======== ========
Weighted-average shares outstanding:
Basic 57.9 58.6 57.8 58.6
Effect of dilutive options .3 .2 .3 .2
------- ------- -------- --------
Diluted 58.2 58.8 58.1 58.8
======= ======== ======== ========
Dividends declared per common share $ .48 $ .47 $ .72 $ .70
======= ======= ======== ========
See Notes to Consolidated Financial Statements.
3
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in millions except share data)
June 30, December 30,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 6.5 $ 6.1
Accounts receivable - net of allowances 621.5 644.5
Inventories
Finished stock 402.8 386.0
Work in process 46.1 45.1
Raw materials 84.9 79.7
Excess of current cost over LIFO cost (93.6) (91.9)
-------- --------
Total inventory 440.2 418.9
Prepaid expenses and other assets 129.2 116.9
-------- --------
Total current assets 1,197.4 1,186.4
Property and equipment
Land 23.2 24.3
Buildings and improvements 198.1 204.8
Machinery and equipment 485.1 477.2
-------- --------
706.4 706.3
Accumulated depreciation (381.0) (361.2)
-------- --------
Property and equipment - net 325.4 345.1
Deferred income tax benefits 36.2 33.0
Intangibles - net 393.0 424.6
Other assets 64.6 61.3
-------- --------
Total assets $2,016.6 $2,050.4
======== ========
See Notes to Consolidated Financial Statements.
4
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in millions except share data)
June 30, December 30,
2001 2000
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 154.7 $ 161.0
Notes payable and current maturities of long-term debt 38.0 70.3
Accrued compensation 53.3 56.3
Dealer deposits 41.1 39.8
Deferred subscription revenue 48.3 44.9
Other accrued liabilities 164.3 165.7
-------- --------
Total current liabilities 499.7 538.0
Long-term debt 508.5 473.0
Deferred income taxes 22.4 24.7
Retiree health care benefits 94.1 92.2
Pension liability 32.6 41.4
Other long-term liabilities 33.6 37.1
-------- --------
Total liabilities 1,190.9 1,206.4
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock - authorized 15,000,000 shares
of $1 par value; none outstanding - -
Common stock - authorized 250,000,000 shares
of $1 par value; issued 66,817,950 and 66,789,090 shares 66.8 66.8
Additional paid-in capital 51.8 71.6
Retained earnings 1,059.3 1,051.3
Accumulated other comprehensive income (loss) (120.3) (87.2)
Grantor stock trust at fair market value - 6,133,144
and 6,443,033 shares (148.2) (179.6)
Treasury stock at cost - 2,688,435 and 2,523,435 shares (83.7) (78.9)
-------- --------
Total shareholders' equity 825.7 844.0
-------- --------
Total liabilities and shareholders' equity $2,016.6 $2,050.4
======== ========
See Notes to Consolidated Financial Statements.
5
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Twenty-six Weeks Ended
-----------------------------
June 30, July 1,
2001 2000
-------- --------
OPERATING ACTIVITIES
Net earnings $ 35.8 $ 106.4
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Cumulative effect of a change in accounting principle
(net of tax) for derivatives in 2001 and for pensions in 2000 2.5 (25.4)
Depreciation 25.8 26.9
Amortization of intangibles 8.8 9.0
Deferred income tax provision 3.5 2.9
Gain on sale of assets (.3) (1.6)
Mark-to-market on cash flow hedges, net of tax (.8) -
Restructuring and other non-recurring charges, net of tax 9.0 .2
Changes in operating assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in receivables 11.2 (27.3)
(Increase) decrease in inventories (38.0) (25.0)
(Increase) decrease in prepaid and other assets (19.0) (11.8)
Increase (decrease) in accounts payable 3.1 10.5
Increase (decrease) in accruals and other liabilities (15.3) (9.1)
-------- --------
Net cash provided by operating activities 26.3 55.7
INVESTING ACTIVITIES
Capital expenditures (23.6) (25.9)
Acquisitions of businesses - net of cash acquired (.9) (6.1)
Disposal of property and equipment 4.5 4.6
-------- --------
Net cash used in investing activities (20.0) (27.4)
FINANCING ACTIVITIES
Payment of long-term debt (3.8) (1.0)
Increase in long-term debt .7 7.1
Increase (decrease) in short-term borrowings - net 18.5 (21.9)
Purchase of treasury stock (4.9) -
Proceeds from stock purchase and option plans 11.7 5.1
Cash dividends paid (27.7) (26.9)
-------- --------
Net cash used in financing activities (5.5) (37.6)
Effect of exchange rate changes on cash (.4) (.2)
-------- --------
Increase (decrease) in cash and cash equivalents .4 (9.5)
Cash and cash equivalents at beginning of period 6.1 17.6
-------- --------
Cash and cash equivalents at end of period $ 6.5 $ 8.1
======== ========
Supplemental cash flow disclosures:
Cash paid for interest $ 19.3 $ 21.0
Cash paid for income taxes $ 11.6 $ 20.5
See Notes to Consolidated Financial Statements.
6
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. This report should be read in conjunction with the consolidated financial
statements and related notes included in Snap-on Incorporated's ("Snap-on")
Annual Report on Form 10-K for the year ended December 30, 2000.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments and adjustments related to restructuring and other
non-recurring charges) necessary to a fair statement of financial condition
and results of operations for the thirteen and twenty-six weeks ended June
30, 2001, have been made. Management also believes that the results of
operations for the thirteen and twenty-six weeks ended June 30, 2001, are
not necessarily indicative of the results to be expected for the full year.
During the fourth quarter of 2000, Snap-on recorded a pre-tax gain of $41.3
million ($25.4 million after tax) for the cumulative effect of a change in
accounting principle for pensions that was retroactive to the first quarter
of 2000. Previously reported second quarter and year-to-date 2000 results
have been restated for a reduction in periodic pension expense of $2.4
million ($1.5 million after tax) and $4.8 million ($3.0 million after tax),
respectively, as a result of this change in accounting for pensions. The
year-to-date 2000 results also reflect the cumulative effect gain of $25.4
million. Certain other prior-year amounts have been reclassified to conform
with the current-year presentation.
2. In the second quarter of 2001, Snap-on announced that it is taking
significant action to (i) reduce costs companywide to adjust to the slower
sales environment and (ii) improve operational performance in businesses
not earning acceptable financial returns. As a result of selective
rationalization and consolidation actions, Snap-on expects to reduce its
global workforce of 14,000 by approximately 4%. In implementing these
actions, Snap-on anticipates that it will incur restructuring,
non-recurring and other non-comparable, pre-tax charges that will total $65
million to $75 million in 2001, including second-quarter charges of $20.5
million. Approximately 50% of the total second quarter of 2001 charges were
non-cash, with the remaining costs requiring cash outflows provided from
operations.
In the second quarter of 2001, Snap-on recorded restructuring and other
non-recurring charges totaling $14.4 million ($9.0 million after tax),
primarily for various exit-related costs, asset impairment write-downs and
management transition costs. This charge includes a $6.0 million
restructuring reserve and $8.4 million in non-recurring charges. The
restructuring charge relates to the closure of nine facilities, comprised
of four manufacturing facilities and five sales/administration offices, and
includes $1.1 million for severance associated with the elimination of 98
positions, $4.7 million for non-cancelable lease agreements and related
facility asset write-downs, and $0.2 million for other exit costs.
Severance costs provided for worldwide salaried and hourly employees relate
to facility closures, consolidation and streamlining initiatives. During
the second quarter of 2001, Snap-on incurred expenditures of $2.0 million
against the $6.0 million restructuring reserve for facility asset
write-downs and for severance costs. At the end of the second quarter of
2001, severance costs for 11 of the 98 positions have been incurred. The
remaining restructuring reserve of $4.0 million at June 30,
7
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2001 is expected to be fully utilized by the end of 2001. The second
quarter of 2001 non-recurring charges of $8.4 million represent management
transition costs associated with the April 2001 retirement of Snap-on's
president and chief executive officer and the appointment of Dale F.
Elliott, Snap-on's President - diagnostics and industrial, as successor to
this position.
As part of the total second quarter charges, Snap-on recorded
non-comparable costs of $6.1 million (including $1.5 million reported in
cost of goods sold and $4.6 million reported in operating expenses),
primarily related to the termination of a European equipment supplier
arrangement.
3. Snap-on normally declares and pays in cash four regular, quarterly
dividends. However, the third quarter dividend in each year is declared in
June, giving rise to two regular quarterly dividends appearing in the
second quarter and, correspondingly, three regular quarterly dividends
appearing in the first twenty-six weeks' statements.
4. Snap-on accounts for its hedging activities under Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138. These
standards require that all derivative instruments be reported in the
consolidated financial statements at fair value. Changes in the fair value
of derivatives are to be recorded each period in earnings or other
comprehensive income (loss), depending on the type of hedged transaction
and whether the derivative is designated and effective as part of a hedged
transaction. Gains or losses on derivative instruments reported in other
comprehensive income (loss) must be reclassified as earnings in the period
in which earnings are affected by the underlying hedged item, and the
ineffective portion of all hedges must be recognized in earnings in the
current period.
In accordance with the provisions of SFAS No. 133, Snap-on recorded a
transition adjustment on December 31, 2000, the beginning of Snap-on's 2001
fiscal year, to recognize its derivative instruments at fair value, and to
recognize the difference between the carrying values and fair values of
related hedged assets and liabilities upon adoption of these standards. The
effect of this transition adjustment was to decrease reported net income in
the first quarter of 2001 by $2.5 million related to a hedge strategy that
did not qualify for hedge accounting under SFAS No. 133. Snap-on also
recorded in the first quarter of 2001 a transition adjustment of $1.2
million, after tax, in accumulated other comprehensive income (loss) to
recognize previously deferred net gains on derivatives designated as cash
flow hedges that qualify for hedge accounting under SFAS No. 133.
Snap-on uses derivative instruments to manage well-defined interest rate
and foreign currency exposures. Snap-on does not use derivative instruments
for trading purposes. The criteria used to determine if hedge accounting
treatment is appropriate are (i) the designation of the hedge to an
underlying exposure, (ii) whether or not overall risk is being reduced, and
(iii) if there is a correlation between the value of the derivative
instrument and the underlying obligation. Upon adoption of the new
derivative accounting requirements, on the date a derivative contract is
entered into, Snap-on designates the derivative as either a fair value
hedge, a cash flow hedge, a hedge of a net investment in a foreign
operation, or a natural hedging instrument whose change in fair value is
recognized as an economic hedge against changes in the values of the hedged
item.
8
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Foreign Currency Derivative Instruments: Snap-on has operations in a number
of countries and has intercompany transactions among them and, as a result,
is exposed to changes in foreign currency exchange rates. Snap-on manages
most of these exposures on a consolidated basis, which allows for netting
of certain exposures to take advantage of natural offsets. To the extent
the net exposures are hedged, forward exchange contracts are used. Gains
and/or losses on these foreign currency hedges are intended to offset
losses and/or gains on the hedged transaction in an effort to reduce the
earnings volatility resulting from fluctuating foreign currency exchange
rates. At June 30, 2001, Snap-on had net outstanding foreign exchange
forward contracts totaling $154.1 million comprised of $65.2 million in
euros, $52.0 million in British pounds, $26.1 million in Canadian dollars,
$5.0 million in Swedish krona and $5.8 million in other currencies.
Snap-on's forward exchange contracts are accounted for as cash flow hedges
where the effective portion of the changes in fair value of the derivative
is recorded in other comprehensive income (loss). When the hedged item is
realized in income, the gain or loss included in accumulated other
comprehensive income (loss) is reclassified to income in the same financial
statement caption as the hedged item. In addition, both the fair value
changes excluded from Snap-on's effectiveness assessments and the
ineffective portion of the changes in the fair value of derivatives used as
cash flow hedges are reported in earnings as foreign exchange gain or loss,
which is included in other income (expense) when applicable. Forward points
on forward exchange contracts are recognized as interest expense.
Non-Derivative Instruments Designated in Hedging Relationships: Snap-on
uses non-U.S. dollar financing transactions as net investment hedges of
long-term investments in the corresponding foreign currency. Hedges that
meet the effectiveness requirements are accounted for under net investment
hedging rules. The effective portion of the fair value of derivatives used
as a net investment hedge of a foreign operation is recorded in accumulated
other comprehensive income (loss) as a cumulative translation adjustment.
The ineffective portion of the change in the fair value of a derivative or
non-derivative instrument designated as a net investment hedge is recorded
in earnings as foreign exchange gain or loss, which is included in other
income (expense) when applicable. At June 30, 2001, net gains of $9.7
million arising from effective hedges of net investments have been
reflected in the cumulative translation adjustment account as a component
of accumulated other comprehensive income (loss).
Interest Rate Swap Agreements: Snap-on enters into interest rate swap
agreements to manage interest costs and risks associated with changing
interest rates, specifically the future issuance of commercial paper.
Snap-on has interest rate swap agreements in place that effectively
exchange floating rate payments for fixed rate payments. Interest rate swap
agreements are accounted for as cash flow hedges. The differentials paid or
received on interest rate swap agreements are accrued and recognized as
adjustments to interest expense. The effective portion of the change in
fair value of the derivative is recorded in other comprehensive income
(loss), while any ineffective portion is recorded as an adjustment to
interest expense. The notional amount of interest rate swaps was $25.0
million at June 30, 2001.
9
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For all derivatives qualifying for hedge accounting under SFAS No. 133, the
net accumulated derivative loss at June 30, 2001, was $0.8 million, after
tax, and is reflected in accumulated other comprehensive income (loss) on
the balance sheet. At June 30, 2001, the maximum maturity date of any cash
flow hedge is approximately four years. During the next twelve months,
Snap-on expects to reclassify into earnings net losses from accumulated
other comprehensive income (loss) of approximately $0.4 million, after tax,
at the time the underlying hedged transactions are realized.
During the second quarter ended June 30, 2001, cash flow hedge
ineffectiveness was not material. However, there were pre-tax derivative
losses of $0.3 million in the second quarter of 2001 excluded from the
assessment of effectiveness recorded in interest expense.
5. Basic and diluted earnings per share were computed by dividing net earnings
by the corresponding weighted-average common shares outstanding for the
period. The dilutive effect of the potential exercise of outstanding
options to purchase shares of common stock is calculated using the treasury
stock method.
6. In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Assets." SFAS
No. 141 requires all business combinations initiated after June 30, 2001,
to be accounted for under the purchase method. SFAS No. 142 addresses the
recognition and amortization of intangible assets acquired in a business
combination, as well as the recognition of goodwill and subsequent
assessment of impairment. Snap-on is currently evaluating the impact of
adopting these pronouncements.
7. Total comprehensive income for the thirteen and twenty-six week periods
ended June 30, 2001, and July 1, 2000, was as follows:
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ------------------------
June 30, July 1, June 30, July 1,
(Amounts in millions) 2001 2000 2001 2000
---------- ---------- ---------- ----------
Net earnings $ 8.9 $ 45.7 $ 35.8 $106.4
Foreign currency translation (11.5) (2.6) (32.3) (5.5)
Change in fair value of derivative
instruments, net of tax .2 - (.8) -
------- ------- ------- ------
Total comprehensive income $ (2.4) $ 43.1 $ 2.7 $100.9
======= ======= ======= ======
8. In April 1996, Snap-on filed a complaint against SPX Corporation ("SPX")
alleging infringement of Snap-on's patents and asserting claims relating to
SPX's hiring of the former president of Sun Electric, a subsidiary of
Snap-on. SPX filed a counterclaim, alleging infringement of certain SPX
patents. Upon Snap-on's request for re-examination, the U.S. Patent and
Trademark Office initially rejected SPX's patents as invalid, but
reconfirmed them. Following the conclusion of discovery, the parties will
engage in a binding arbitration scheduled for the fall of 2001. The
parties' claims could involve multiple millions of dollars; however, it is
not possible at this time to assess the outcome of any of the claims.
10
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Snap-on is involved in various legal matters that are being defended and
handled in the ordinary course of business and Snap-on maintains accruals
for such costs. Although it is not possible to predict the outcome of these
matters, management believes that the results will not have a material
impact on Snap-on's financial statements.
9. Snap-on has two reportable segments: the Snap-on Dealer Group and the
Commercial and Industrial Group. These segments are based on the
organization structure used by management for making operating and
investment decisions and for assessing performance. The Snap-on Dealer
Group consists of Snap-on's business operations serving the worldwide
franchised dealer van channel. The Commercial and Industrial Group consists
of the business operations serving the worldwide non-dealer tool and
equipment products businesses. These two segments derive revenues primarily
from the sale of tools and equipment.
Snap-on evaluates the performance of its operating segments based on
segment net sales and operating earnings. Snap-on defines operating
earnings for segment reporting purposes as Net Sales, less Cost of Goods
Sold and Operating Expenses, excluding restructuring and non-recurring
charges. Snap-on accounts for intersegment sales and transfers based
primarily on standard costs established between the segments. Snap-on
allocates shared service expenses to those segments that utilize the
services based on their percentage of revenues from external sources.
Financial data by segment:
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ------------------------
June 30, July 1, June 30, July 1,
(Amounts in millions) 2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales from external customers:
Snap-on Dealer Group $ 261.3 $ 281.0 $ 517.7 $ 545.3
Commercial and Industrial Group 264.3 282.2 535.3 562.2
------- ------- ------- --------
Total net sales $ 525.6 $ 563.2 $1,053.0 $1,107.5
======= ======= ======== ========
Intersegment sales:
Snap-on Dealer Group $ - $ - $ - $ -
Commercial and Industrial Group 99.7 97.2 192.6 187.9
------- ------- -------- --------
Total intersegment sales 99.7 97.2 192.6 187.9
Elimination of intersegment sales (99.7) (97.2) (192.6) (187.9)
------- ------- -------- --------
Total consolidated intersegment sales $ - $ - $ - $ -
======= ======= ======== ========
11
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ------------------------
June 30, July 1, June 30, July 1,
(Amounts in millions) 2001 2000 2001 2000
---------- ---------- ---------- ----------
Earnings:
Snap-on Dealer Group $ 25.9 $ 43.9 $ 53.8 $ 77.8
Commercial and Industrial Group 7.5 27.4 20.8 47.1
------- ------- -------- --------
Segment operating earnings 33.4 71.3 74.6 124.9
Net finance income 7.9 10.5 20.0 22.2
Restructuring and other
non-recurring charges (14.4) - (14.4) (.4)
Interest expense (9.2) (10.6) (18.1) (20.9)
Other income (expense) - net (1.6) .8 .3 1.9
------- ------- -------- --------
Total pre-tax earnings from
continuing operations $ 16.1 $ 72.0 $ 62.4 $ 127.7
======= ======= ======== ========
As of
------------------------
June 30, December 30,
2001 2000
-------- ------------
Assets:
Snap-on Dealer Group $ 835.9 $ 796.0
Commercial and Industrial Group 1,134.2 1,210.8
-------- --------
Total from reportable segments 1,970.1 2,006.8
Financial Services 99.6 96.2
Elimination of intersegment receivables (53.1) (52.6)
-------- --------
Total assets $2,016.6 $2,050.4
======== ========
12
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Consolidated
- ------------
Net sales in the second quarter of 2001 were $525.6 million, down 6.7% versus
the comparable period in 2000. For the first six months of 2001, net sales were
$1,053.0 million, down 4.9% as compared to $1,107.5 million in the first six
months of 2000. The year-over-year decrease in net sales for both the second
quarter and first six months of 2001 reflects lower organic sales of equipment
and large diagnostics products for the vehicle-repair market in Europe and North
America as a result of soft market conditions, as well as the impact of
unfavorable currency translations. Excluding the negative 3% impact from
currency translation for both the second quarter and first six months of 2001,
organic sales growth was down 4% for the second quarter of 2001, and down 2%
year to date. The decline in sales for both the three- and six-month periods was
partially offset by modest increases in U.S. sales of tools and tool storage
products in both the industrial and dealer business units. Snap-on Incorporated
("Snap-on") defines organic sales growth as the change in year-over-year base
sales volumes, excluding the impact of acquisitions, divestitures and currency
translation.
Net earnings for the second quarter of 2001 were $8.9 million, or $.15 per
diluted share, as compared with $45.7 million, or $.78 per diluted share, in
2000. The quarter-over-quarter decrease in earnings largely reflects the sales
decline and lower operating margins resulting from unfavorable operating
leverage associated with the lower-than-planned sales. Contributing to the 2001
margin erosion were higher training and recruiting costs related to Snap-on's
"More Feet on the Street" dealer expansion initiative and new product
development. Net earnings for the second quarter were also adversely impacted by
charges totaling $20.5 million ($14.4 million after tax, or $.25 per share),
including restructuring and non-recurring charges of $14.4 million and other
non-comparable charges of $6.1 million.
In the second quarter of 2001, Snap-on announced that it is taking significant
action to (i) reduce costs companywide to adjust to the slower sales environment
and (ii) improve operational performance in businesses not earning acceptable
financial returns. In implementing these actions, Snap-on anticipates that it
will incur restructuring, non-recurring and other non-comparable, pre-tax
charges that will total approximately $65 million to $75 million in 2001,
including charges incurred during the second quarter of $20.5 million. Net
earnings for the second quarter of 2001 were $23.3 million, or $.40 per share,
excluding the second quarter 2001 charges.
13
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Net earnings, before the cumulative effect of a change in accounting principle
in both years, were $38.3 million, or $.66 per share, for the first six months
of 2001, as compared with $81.0 million, or $1.38 per diluted share, in 2000.
The year-over-year decrease in earnings is primarily due to lower sales and
higher operating expenses as a result of unfavorable operating leverage from the
lower sales volumes, higher training and recruiting costs associated with the
More Feet on the Street initiative, higher energy-driven costs and increased
costs for new product development.
Net earnings for the first six months of 2001 were $35.8 million, or $.61 per
share, as compared to $106.4 million, or $1.81 per share, in the comparable
prior-year period. In 2001, Snap-on incurred a net charge of $2.5 million, or
$.05 per share, for the cumulative effect of an accounting change associated
with Snap-on's adoption of Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities." Net
earnings in 2000 included a net gain of $25.4 million, or $.43 per share, for
the cumulative effect of an accounting change related to pensions. This change,
which occurred during the fourth quarter of 2000, was retroactive to the first
quarter of 2000. As a result, previously reported second quarter and
year-to-date 2000 results have been restated to reflect a reduction in periodic
pension expense of $2.4 million pretax ($1.5 million after tax) and $4.8 million
pretax ($3.0 million after tax), respectively, as a result of this change.
Gross profit for the second quarter of 2001 was $239.3 million, down 9.6% from
$264.8 million in the second quarter of 2000. As a percentage of net sales,
gross profit margin in the second quarter of 2001 declined to 45.5%, as compared
to 47.0% in the comparable prior-year period. Gross profit for the first six
months of 2001 was $483.0 million, down 6.0% from $513.7 million in the
prior-year period. As a percentage of net sales, gross profit margin for the
first six months of 2001 declined to 45.9%, versus 46.4% in the first six months
of 2000. The year-over-year decline in gross margin for both periods primarily
reflects the under-absorption of manufacturing costs on the lower-than-planned
volume, the margin erosion effect of having sourcing platforms principally in
strong currency countries, higher energy-driven costs, lower production
utilization as a result of inventory reduction initiatives.
Operating expenses for the second quarter of 2001 were $205.9 million, up $12.4
million or 6.4%, as compared to $193.5 million in the second quarter of 2000. As
a percentage of net sales, operating expenses increased to 39.2% of net sales in
the second quarter of 2001, versus 34.4% in 2000. For the first six months of
2001, operating expenses were $408.4 million, up $19.6 million or 5.0%, as
compared to $388.8 million in the first six months of 2000. As a percentage of
net sales, year-to-date 2001 operating expenses were 38.8%, as compared to 35.1%
in the comparable prior-year period. The year-over-year increase in operating
expenses for both periods is largely due to the unfavorable operating leverage
from the lower-than-planned sales volumes and the inclusion of costs primarily
associated with the termination of a European equipment supplier arrangement.
Higher costs, including increased training and recruiting, for the continued
investment in Snap-on's dealer expansion initiative, as well as increased
energy-driven costs and costs for new product development, also contributed to
the year-over-year margin compression.
14
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Segment Results
- ---------------
Snap-on Dealer Group
In the worldwide Snap-on Dealer Group segment, sales of $261.3 million for the
second quarter of 2001 were down 7.0% from the comparable prior-year levels.
Organic sales decreased 5%, largely due to softness in demand for big-ticket
products, and currency translation had an unfavorable impact of 2%. Sales of
$517.7 million for the first six months of 2001 were down 5.1% as compared to
the first six months of 2000, also reflecting lower sales of big-ticket products
and a negative 2% impact of currency translation. In the U.S. dealer business
for both the second quarter and first six months of 2001, a modest sales
increase in tools and tool storage products was offset by the decrease in sales
of big-ticket equipment and diagnostic products, which are primarily sold
through the tech rep sales organization. International dealer sales were down 6%
on a reported basis for the second quarter of 2001, and down 7% for the first
six months of 2001 versus the comparable prior-year periods, despite volume
increases in local currencies. Year-to-date June 2001, a net increase of 130
dealers in the United States is progressing in line with the target of a 10%
increase in the More Feet on the Street program by mid-year 2002.
Segment earnings for the second quarter of 2001 were $25.9 million, as compared
to $43.9 million in the second quarter of 2000. On a year-to-date basis, segment
earnings for the Snap-on Dealer Group were $53.8 million, versus $77.8 million
in the comparable prior-year period. Segment earnings for both periods in 2001
were compressed largely as a result of the negative impact of operating leverage
on the lower-than-planned sales volume, the impact of having non-U.S. dealer
operations supplied by U.S. manufacturing facilities and higher training and
recruiting costs related to expanding the dealer base.
Commercial and Industrial Group
In the Commercial and Industrial Group segment, sales of $264.3 million for the
second quarter of 2001 declined 6.3% from prior-year levels, largely due to
continued softness in the diagnostics and equipment market, as well as a 3%
impact from unfavorable currency translation. Sales of tools in the U.S.
industrial sector were up modestly, while tool sales in Europe slowed slightly.
Equipment sales declined 10% on a reported basis, and were off 5% excluding the
impact of currency translation. The diagnostics business in Europe was down 14%
in dollar terms, and was off 7% in local currencies. Equipment sales to
new-vehicle dealerships under facilitation agreements also declined, reflecting
the caution that exists in the current economic environment when making capital
purchase decisions.
For the first six months of 2001, sales declined 4.8% principally from a 4%
unfavorable currency translation impact and continued softness in the
diagnostics and equipment market. Sales of tools in the U.S. industrial sector
were up, while tool sales in Europe were down. Equipment sales declined 10% on a
reported basis, and were off 6% excluding the impact of currency translation.
The diagnostics business in Europe was down 10% in dollar terms, and was off 3%
in local currencies. Equipment sales to new-vehicle dealerships under
facilitation agreements also declined.
15
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Segment earnings for the second quarter of 2001 were $7.5 million, as compared
to $27.4 million in the second quarter of 2000. For the first six months of
2001, segment earnings were $20.8 million, as compared to $47.1 million in the
first six months of 2000. The decline in segment earnings in both periods
reflects the lower sales volumes, as well as unfavorable operating leverage from
the $5.6 million non-comparable charges incurred in the second quarter of 2001,
primarily related to the termination of a European supplier agreement.
Restructuring and Non-Recurring Charges
- ---------------------------------------
In the second quarter of 2001, Snap-on announced that it is taking significant
action to (i) reduce costs companywide to adjust to the slower sales environment
and (ii) improve operational performance in businesses not earning acceptable
financial returns. As a result of selective rationalization and consolidation
actions, Snap-on expects to reduce its global workforce of 14,000 by
approximately 4%. In implementing these actions, Snap-on anticipates that it
will incur restructuring, non-recurring and other non-comparable, pre-tax
charges that will total $65 million to $75 million in 2001, including
second-quarter charges of $20.5 million. Approximately 50% of the total second
quarter of 2001 charges were non-cash, with the remaining costs requiring cash
outflows provided from operations.
In the second quarter of 2001, Snap-on recorded restructuring and other
non-recurring charges totaling $14.4 million ($9.0 million after tax), primarily
for various exit-related costs, asset impairment write-downs and management
transition costs. This charge includes a $6.0 million restructuring reserve and
$8.4 million in non-recurring charges. The restructuring charge relates to the
closure of nine facilities, comprised of four manufacturing facilities and five
sales/administration offices, and includes $1.1 million for severance associated
with the elimination of 98 positions, $4.7 million for non-cancelable lease
agreements and related facility asset write-downs, and $0.2 million for other
exit costs. Severance costs provided for worldwide salaried and hourly employees
relate to facility closures, consolidation and streamlining initiatives. During
the second quarter of 2001, Snap-on incurred expenditures of $2.0 million
against the $6.0 million restructuring reserve for facility asset write-downs
and for severance costs. At the end of the second quarter of 2001, severance
costs for 11 of the 98 positions have been incurred. The remaining restructuring
reserve of $4.0 million at June 30, 2001 is expected to be fully utilized by the
end of 2001. The second quarter of 2001 non-recurring charges of $8.4 million
represent management transition costs associated with the April 2001 retirement
of Snap-on's president and chief executive officer and the appointment of Dale
F. Elliott, Snap-on's President - diagnostics and industrial, as successor to
this position.
As part of the total second quarter charges, Snap-on recorded non-comparable
costs of $6.1 million (including $1.5 million reported in cost of goods sold and
$4.6 million reported in operating expenses), primarily related to the
termination of a European equipment supplier arrangement.
16
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Other
- -----
Net finance income was $7.9 million and $20.0 million for the second quarter and
first six months of 2001, a decline from $10.5 million and $22.2 million in the
comparable prior-year periods. The decrease in both periods is a result of the
inclusion of deferred income in 2000 from the sale of extended-credit
receivables associated with the formation of the joint venture in 1999 and lower
originations in the second quarter related to the soft demand for equipment and
diagnostics products. The decrease for both periods was partially offset by a
more favorable interest rate environment.
Interest expense for the second quarter of 2001 was $9.2 million, a decrease of
$1.4 million from the prior-year period. For the first six month of 2001,
interest expense of $18.1 million was down $2.8 million from $20.9 million for
the first six months of 2000. The decrease in interest expense is the result of
lower debt levels and lower average interest rates in 2001, as compared to the
prior-year periods.
Other income (expense) - net was an expense of $1.6 million in the second
quarter of 2001, as compared to income of $0.8 million in the second quarter of
2000. For the first six months of 2001, other income (expense) - net was income
of $0.3 million, as compared to income of $1.9 million for the comparable
prior-year period. The change in other income (expense) for both periods
reflects the impact of all non-operating items such as interest income, minority
interests, disposal of fixed assets, exchange rate transactions, hedging gains
and losses, gains from life insurance policies and other miscellaneous items.
The effective tax rate, before cumulative effect, restructuring, non-recurring
and other non-comparable items, was 36.5% for the second quarter and first six
months of 2001. The tax rate on the second quarter 2001 restructuring,
non-recurring and other non-comparable charges of $20.5 million was 29.8%.
Including these charges, Snap-on's overall effective tax rate, before cumulative
effect of accounting change, was 44.7% in the second quarter of 2001 and 38.6%
for the first six months of 2001. For 2000, the effective tax rate, before
cumulative effect of accounting change, was 36.5% for both the second quarter
and first six months of 2000.
FINANCIAL CONDITION
Cash and cash equivalents were $6.5 million at the end of the second quarter, up
slightly from $6.1 million at the end of 2000. Net cash provided by operating
activities decreased to $26.3 million for the first six months of 2001, as
compared to $55.7 million in the comparable prior-year period, primarily due to
the year-over-year decline in earnings. Working capital decreased to $697.7
million at the end of the second quarter of 2001, down $56.8 million from $754.5
million at the end of the second quarter of 2000, largely reflecting the
operational focus on improved inventory turnover.
17
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The total-debt-to-total-capital ratio at the end of the second quarter of 2001
was 39.8%, as compared to 40.6% in the prior-year period, and 39.2% at year-end
2000. Total invested capital was $1,372.2 million, down $126.4 million from a
year ago. Total debt levels from year-end 2000 increased $3.2 million, but were
down $61.8 million from the end of the second quarter of 2000. Total short-term
and long-term debt was $546.5 million, as compared with the prior-year level of
$608.3 million, reflecting the positive cash flow from continued focus on
reducing working capital intensity.
At June 30, 2001, Snap-on had $625.0 million of multi-currency revolving credit
facilities to support its commercial paper programs. In addition to its
revolving credit facilities, Snap-on has a $300 million shelf registration that
allows for the issuance from time to time of up to $300 million in unsecured
indebtedness. In October 1995, Snap-on issued $100 million of its notes pursuant
to this shelf registration. The notes, which mature in their entirety on October
1, 2005, require payment of interest on a semiannual basis at a rate of 6.625%.
Accounts receivable at the end of the second quarter were $621.5 million, down
$23.0 million compared with year-end 2000 and down $20.9 million from a year
ago, reflecting softening sales and impacts of currency translation.
Inventories were seasonally up $21.3 million to $440.2 million at the end of the
second quarter from $418.9 million at the end of 2000. Inventories were down
$36.5 million from a year ago showing progress on efforts to improve inventory
turnover, despite the slower sales environment.
Capital expenditures were $23.6 million for the first six months of 2001,
compared with $25.9 million in the same period a year ago. Expenditures
primarily represent ongoing replacements and upgrades of manufacturing and
distribution facilities and equipment, and additional upgrades to computer
systems. For the full year 2001, Snap-on anticipates capital expenditures will
be in the range of $45 million to $50 million, down from $57.6 million in 2000.
Snap-on believes it has sufficient sources of liquidity to support working
capital requirements, finance capital expenditures, make acquisitions,
repurchase common stock and pay dividends.
Share repurchase: Snap-on has undertaken stock repurchases from time to time to
prevent dilution created by shares issued for employee and dealer stock purchase
plans, stock options, and other corporate purposes, as well as to repurchase
shares when market conditions are favorable. During the second quarter of 2001,
Snap-on repurchased 75,000 shares of common stock for $2.2 million under its
previously announced share repurchase programs. In total, Snap-on repurchased
165,000 shares in the first six months of 2001, with approximately $129.0
million of common stock authorized and remaining available for repurchase. Since
1995, Snap-on has repurchased 9,754,583 shares for $301.9 million.
Foreign currency: Snap-on operates in a number of countries and, as a result, is
exposed to changes in foreign currency exchange rates. Most of these exposures
are managed on a consolidated basis to take advantage of natural offsets. To the
extent that net exposures are hedged, forward contracts are used. Refer to Note
4 for a discussion of Snap-on's accounting policies for the use of derivative
instruments.
18
SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Euro conversion: On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing currencies
("legacy currencies") and one common currency - the euro. The euro trades on
currency exchanges and may be used in business transactions. Beginning in
January 2002, the new euro-denominated bills and coins will be used and legacy
currencies will be withdrawn from circulation. Snap-on's operating subsidiaries
have developed plans to address the systems and business issues affected by the
euro currency conversion. These issues include, among others, (i) the need to
adapt computer and other business systems and equipment to accommodate
euro-denominated transactions, and (ii) the competitive impact of cross-border
price transparency, which may affect pricing strategies. Snap-on does not expect
this conversion to have a material impact on its financial condition or results
of operations.
Outlook: Snap-on expects earnings per share in the third quarter to be in a
range of $0.40 to $0.45 per share before restructuring, non-recurring and other
non-comparable items, assuming no further economic deterioration, continued
currency stability and typical seasonal sales factors for the remainder of the
year. Snap-on expects to benefit from its cost savings activities and see
sequential earnings improvement in the fourth quarter, with earnings per share
in a range of $0.55 to $0.65 per share before restructuring, non-recurring and
other non-comparable items. In the second quarter of 2001, Snap-on announced
that it is taking significant action to (i) reduce costs companywide to adjust
to the slower sales environment and (ii) improve operational performance in
businesses not earning acceptable financial returns. In implementing these
actions, Snap-on anticipates that it will incur restructuring, non-recurring and
other non-comparable, pre-tax charges that will total approximately $65 million
to $75 million in 2001, including charges of $20.5 million incurred during the
second quarter. Further improvements are expected in 2002, as Snap-on realizes
continuing benefits from its cost reduction and growth initiatives.
Safe Harbor: Statements in this document that are not historical facts,
including statements (i) that include the words "expects," "likely," "targets,"
"anticipates," or "estimates" or similar words that reference Snap-on or its
management; (ii) specifically identified as forward-looking; or (iii) describing
Snap-on's or management's future outlook, plans, objectives or goals, are
forward-looking statements. Snap-on or its representatives may also make similar
forward-looking statements from time to time orally or in writing. Snap-on
cautions the reader that these statements are subject to risks, uncertainties or
other factors that could cause (and in some cases have caused) actual results to
differ materially from those described in any such statement. Those important
factors include the timing and progress with which Snap-on can continue to
achieve higher productivity and attain further cost reductions, including the
acceleration of expense adjustments in response to revenue changes; Snap-on's
ability to adapt to management changes as part of the management succession
process, to retain and attract dealers, to integrate Bahco, and to withstand
external negative factors including changes in trade, monetary and fiscal
policies, laws and regulations, or other activities of governments or their
agencies; and the absence of significant changes in the current competitive
environment, inflation, energy supply or pricing, legal proceedings, supplier
disruptions, currency fluctuations or the material worsening of economic and
political situations around the world. These factors may not constitute all
factors that could cause actual results to differ materially from those
discussed in any forward-looking statement. Snap-on operates in a continually
changing business environment and new factors emerge from time to time. Snap-on
cannot predict such factors nor can it assess the impact, if any, of such
factors on Snap-on's financial position or its results of operations.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results. Snap-on disclaims any responsibility to update any
forward-looking statement provided in this document.
19
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Snap-on uses derivative instruments to manage well-defined interest rate and
foreign currency exposures and to limit the impact of interest rate and foreign
currency rate changes on earnings and cash flows. Snap-on does not use
derivative instruments for trading purposes.
Value at Risk: Snap-on utilizes a "Value-at-Risk" ("VAR") model to determine the
potential one-day loss in the fair value of its interest rate and foreign
exchange-sensitive financial instruments from adverse changes in market factors.
The VAR model estimates were made assuming normal market conditions and a 95%
confidence level. Snap-on's computations are based on the inter-relationships
among movements in various currencies and interest rates (variance/co-variance
technique). These inter-relationships were determined by observing interest rate
and foreign currency market changes over the preceding quarter.
The estimated maximum potential one-day loss in fair value, calculated using the
VAR model, at June 30, 2001, was $0.2 million on interest-rate-sensitive
financial instruments, and $2.3 million on foreign-currency-sensitive financial
instruments.
The VAR model is a risk management tool and does not purport to represent actual
losses in fair value that will be incurred by Snap-on, nor does it consider the
potential effect of favorable changes in market factors.
20
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
Snap-on held its Annual Meeting of Shareholders on April 27, 2001. The following
is a summary of the matters voted on in that meeting. There were 64,208,265
outstanding shares eligible to vote.
a) The shareholders elected four members of the Snap-on's Board of
Directors, whose terms were up for reelection, to serve until the Annual
Meeting in the year set forth below. The persons elected to the Snap-on's
Board of Directors, the number of votes cast for and the number of votes
withheld with respect to each of these persons were as follows:
Director For Withheld Term
-------- --- -------- ----
Robert A. Cornog 54,928,383 2,820,509 2002
Leonard A. Hadley 56,661,484 1,087,408 2004
Frank S. Ptak 56,695,749 1,053,143 2004
Edward H. Rensi 56,535,874 1,213,018 2004
Bruce S. Chelberg 2003
Arthur L. Kelly 2003
Roxanne J. Decyk 2003
Jack D. Michaels 2003
George W. Mead 2002
Richard F. Teerlink 2002
b) The shareholders approved the 2001 Incentive Stock and Awards Plan. The
number of votes cast for and against, as well as the number of abstentions
and broker non-votes, are as follows:
Votes For Against Abstained Broker Non-Votes
--------- ------- --------- ----------------
44,975,282 6,691,411 562,350 5,519,849
Item 5: Other Information
On April 24, 2001, Dale F. Elliott was elected president and chief executive
officer, effective April 27, 2001.
On April 27, 2001, Robert A. Cornog retired as president and chief executive
officer. Mr. Cornog will remain as chairman of the Board of Directors until the
Annual Shareholders' meeting in April 2002. In addition, the Board of Directors
appointed Mr. Elliott to the Board. As is customary practice with new Directors,
Mr. Elliott joined the class of Directors to serve until the next Annual
Shareholders' meeting.
Effective June 1, 2001, Mr. Branko M. Beronja tendered his resignation as a
Director in light of other commitments.
21
PART II. OTHER INFORMATION (continued)
Item 6: Exhibits and Reports on Form 8-K
Item 6(a): Exhibits
(10.1) Amended and Restated Snap-on Incorporated Deferred Compensation Plan,
as amended by the Board of Directors on June 22, 2001.
(10.2) Employment Agreement between Snap-on Incorporated and Dale F. Elliott,
effective as of April 27, 2001.
(12) Computation of Ratio of Earnings to Fixed Charges
Item 6(b): Reports on Form 8-K Filed During the Reporting Period
During the second quarter of 2001, Snap-on reported on Form 8-K the following:
Date Filed Date of Report Item
- ---------- -------------- ----
June 18, 2001 June 18, 2001 Item 9. Snap-on filed a press release
announcing second quarter 2001 performance
expectations.
22
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: August 10, 2001 /s/ Blaine A. Metzger
------------------ ------------------------------------------------
Blaine A. Metzger, Principal Accounting Officer,
Vice President and Controller
23
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(10.1) Amended and Restated Snap-on Incorporated Deferred Compensation Plan,
as amended by the Board of Directors on June 22, 2001.
(10.2) Employment Agreement between Snap-on Incorporated and Dale F. Elliott,
effective as of April 27, 2001.
(12) Computation of Ratio of Earnings to Fixed Charges
24