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 July 4, 1998
Commission File Number 1-7724
SNAP-ON INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 39-0622040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10801 Corporate Drive, Pleasant Prairie, Wisconsin 53158-1603
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (414) 656-5200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Class Outstanding at Aug 1, 1998
Common stock, $1 par value 59,116,804 shares
SNAP-ON INCORPORATED
INDEX
Page
Part I. Financial Information
Consolidated Statements of Earnings -
Thirteen and Twenty-six Weeks Ended
July 4, 1998 and June 28, 1997 3
Consolidated Balance Sheets -
July 4, 1998 and January 3, 1998 4-5
Consolidated Statements of Cash Flows -
Twenty-six Weeks Ended
July 4, 1998 and June 28, 1997 6
Notes to Consolidated Unaudited Financial Statements 7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
Part II. Other Information 14
PART I. FINANCIAL INFORMATION
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
July 4, June 28, July 4, June 28,
1998 1997 1998 1997
Net sales $442,176 $409,231 $868,605 $784,530
Cost of goods sold 237,486 201,564 452,370 383,896
-------- -------- -------- --------
Gross profit 204,690 207,667 416,235 400,634
Operating expenses 178,148 159,112 348,980 310,431
-------- -------- -------- --------
Operating profit before
net finance income 26,542 48,555 67,255 90,203
Net finance income 15,893 18,362 32,872 35,827
-------- -------- -------- --------
Operating income 42,435 66,917 100,127 126,030
Interest expense (5,449) (4,479) (9,482) (8,860)
Other income (expense) - net (1,578) (580) (2,228) (1,575)
-------- -------- -------- --------
Earnings before income taxes 35,408 61,858 88,417 115,595
Income taxes 12,747 22,887 31,830 42,770
-------- -------- -------- --------
Net earnings $ 22,661 $ 38,971 $ 56,587 $ 72,825
======== ======== ======== ========
Earnings per weighted average
common share - basic $ .38 $ .64 $ .95 $ 1.20
======== ======== ======== ========
Earnings per weighted average
common share - diluted $ .38 $ .63 $ .94 $ 1.18
======== ======== ======== ========
Weighted average common shares
outstanding - basic 59,186 60,924 59,540 60,889
Effect of dilutive options 819 810 819 810
-------- -------- -------- --------
Weighted average common shares
outstanding - diluted 60,005 61,734 60,359 61,699
======== ======== ======== ========
Dividends declared per
common share $ .43 $ .41 $ .64 $ .61
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)
July 4, January 3,
1998 1998
ASSETS
Current Assets
Cash and cash equivalents $ 11,962 $ 25,679
Accounts receivable, less allowances 521,677 539,589
Inventories
Finished stock 428,932 366,324
Work in process 43,739 42,384
Raw materials 73,400 66,008
Excess of current cost over LIFO cost (99,509) (101,561)
---------- ----------
Total inventory 446,562 373,155
Prepaid expenses and other assets 101,210 83,286
---------- ----------
Total current assets 1,081,411 1,021,709
Property and equipment
Land 23,608 23,980
Buildings and improvements 175,979 163,596
Machinery and equipment 368,408 341,875
---------- ----------
567,995 529,451
Accumulated depreciation (297,069) (263,686)
---------- ----------
Total property and equipment 270,926 265,765
Deferred income tax benefits 57,930 55,699
Intangible and other assets 284,987 298,184
---------- ----------
Total assets $1,695,254 $1,641,357
========== ==========
The accompanying notes are an integral part of these statements.
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)
July 4, January 3,
1998 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 86,889 $ 91,553
Notes payable and current maturities
of long-term debt 60,076 23,951
Dividends payable 13,043 -
Accrued compensation 34,019 43,712
Dealer deposits 39,351 43,848
Accrued income taxes 14,043 14,831
Deferred subscription revenue 31,162 29,265
Other accrued liabilities 107,577 105,370
---------- ----------
Total current liabilities 386,160 352,530
Long-term debt 245,120 151,016
Deferred income taxes 12,058 11,824
Retiree health care benefits 88,074 86,936
Pension and other long-term liabilities 108,805 146,914
---------- ----------
Total liabilities 840,217 749,220
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 -
July 4, 1998 - 66,662,160 shares
January 3, 1998 - 66,472,127 shares 66,662 66,472
Additional paid-in capital 125,832 82,758
Retained earnings 957,458 938,963
Foreign currency translation adjustment (31,239) (30,385)
Employee benefit trust at fair market
value - 7,100,000 and 0 shares (255,156) -
Treasury stock at cost - 277,771 and
5,956,313 shares (8,520) (165,671)
---------- ----------
Total shareholders' equity 855,037 892,137
---------- ----------
Total liabilities and
shareholders' equity $1,695,254 $1,641,357
========== ==========
The accompanying notes are an integral part of these statements.
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Twenty-six Weeks Ended
July 4, June 28,
1998 1997
OPERATING ACTIVITIES
Net earnings $56,587 $72,825
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 16,783 15,818
Amortization 4,199 2,923
Deferred income taxes (44) (4,485)
(Gain) on sale of assets (1,462) (38)
Changes in operating assets and liabilities:
Decrease in receivables 31,792 21,528
(Increase) in inventories (60,471) (45,758)
(Increase) decrease in prepaid and
other assets 31,301 (14,674)
Increase (decrease) in accounts payable (8,479) 3,985
(Decrease) in accruals and other
liabilities (59,517) (3,211)
------- -------
Net cash provided by operating activities 10,689 48,913
INVESTING ACTIVITIES
Capital expenditures (20,272) (21,923)
Acquisitions of businesses (53,407) (48,965)
Disposal of property and equipment 2,083 1,305
------- -------
Net cash used in investing activities (71,596) (69,583)
FINANCING ACTIVITIES
Payment of long-term debt (780) (7,755)
Increase in long-term debt 46,269 -
Increase in short-term borrowings-net 81,597 44,658
Purchase of treasury stock (61,458) (417)
Proceeds from stock plans 6,717 3,537
Cash dividends paid (25,049) (24,359)
------- -------
Net cash provided by financing activities 47,296 15,664
Effect of exchange rate changes (106) (516)
------- -------
Decrease in cash and cash equivalents (13,717) (5,522)
Cash and cash equivalents at beginning of period 25,679 15,350
------- -------
Cash and cash equivalents at end of period $11,962 $ 9,828
======= =======
The accompanying notes are an integral part of these statements.
SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. This report should be read in conjunction with the consolidated
financial statements and related notes included in Snap-on
Incorporated's Annual Report for the year ended January 3, 1998.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to a fair statement of
financial condition and results of operations for the thirteen and
twenty-six weeks ended July 4, 1998 have been made. Management also
believes that the results of operations for the thirteen and twenty-
six weeks ended July 4, 1998 are not necessarily indicative of the
results to be expected for the full year.
2. Snap-on Incorporated 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.
3. Income tax paid for the twenty-six week period ended July 4, 1998 and
June 28, 1997 was $34.0 million and $42.6 million.
4. Interest paid for the twenty-six-week period ended July 4, 1998 and
June 28, 1997 was $9.4 million and $5.9 million.
5. During the first quarter of 1998, the Corporation acquired an
additional 10 percent interest in the Thomson Corporation's Mitchell
Repair Information business. The Corporation is obligated to purchase
the remaining 40 percent of Mitchell Repair Information Company within
the next four years. During the second quarter of 1998, the
Corporation acquired White Industries, a manufacturer of air
conditioning service equipment sold through distributors. Also during
the second quarter, the Corporation completed the tender offer for all
outstanding common shares of Hein-Werner Corporation, a manufacturer
of collision repair equipment. The acquisition of Hein-Werner was
completed in July 1998, at a cost of approximately $37 million.
6. During the second quarter, the Corporation sold an additional $48.5
million of interest-bearing installment receivables under its asset
securitization program. As of July 4, 1998, the total amount of
receivables sold and remaining outstanding under this program was
$348.5 million. The total amount of installment receivables that may
be sold under the current program is $350.0 million.
7. Basic earnings per share calculations were computed by dividing net
earnings by the corresponding weighted average number of 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.
8. In the first quarter of 1998, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Total comprehensive income, consisting of net
earnings and foreign currency translation adjustments, amounted to
$22.2 million and $38.5 million for the thirteen week periods ended
July 4, 1998 and June 28, 1997, and $55.7 million and $64.6 million
for the twenty-six week periods ended July 4, 1998 and June 28, 1997.
The Financial Accounting Standards Board (FASB) has issued two
accounting pronouncements which the Corporation will adopt in the
fourth quarter of 1998. FASB Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" and Statement No.
132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." The Corporation does not anticipate that the adoption of
these statements will have a material impact on results of operations
or financial position. FASB has also issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
the Corporation is required to adopt no later than January 1, 2000.
The Corporation is currently evaluating the impact of this
pronouncement.
9. The Corporation uses derivative instruments to manage well-defined
interest rate and foreign currency exposures. The Corporation 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.
Interest Rate Derivative Instruments:
The Corporation enters into interest rate swap agreements to manage
interest costs and risks associated with changing interest rates. The
differentials paid or received on interest rate agreements are accrued
and recognized as adjustments to interest expense. Gains and losses
realized upon settlement of these agreements are deferred and
amortized to interest expense over a period relevant to the agreement
if the underlying hedged instrument remains outstanding, or
immediately if the underlying hedged instrument is settled.
Foreign Currency Derivative Instruments:
The Corporation 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. The Corporation manages
most of these exposures on a consolidated basis, which allows netting
certain exposures to take advantage of any natural offsets. To the
extent the net exposures are hedged, forward contracts are used.
Gains and/or losses on these foreign currency hedges are included in
income in the period in which the exchange rates change. Gains and/or
losses have not been material to the consolidated financial
statements.
10. Tejas Testing Technology One, L.C. and Tejas Testing Technology Two,
L.C. (the "Tejas Companies"), former subsidiaries of the Corporation,
previously entered into contracts with the Texas Natural Resources
Conservation Commission ("TNRCC"), an agency of the State of Texas, to
perform automotive emissions testing services. The Corporation
guaranteed payment (the "Guaranty") of the Tejas Companies'
obligations under a seven-year lease agreement in the amount of
approximately $98.8 million plus an interest factor, pursuant to which
the Tejas Companies leased the facilities necessary to perform the
contracts. The Guaranty was assigned to the lessor's lenders. The
Tejas Companies agreed to indemnify the Corporation for any payments
it must make under the Guaranty.
The State of Texas subsequently terminated the emissions program
described in the contracts. The Tejas Companies filed for bankruptcy,
and commenced litigation in state and federal court against the TNRCC
and related entities. The Corporation has recorded as assets the net
amounts paid under the Guaranty, which are expected to be received
from the State of Texas pursuant to a settlement agreement approved by
the U.S. Bankruptcy Court. These net receivables total $53.9 million
as of July 4, 1998 and are included in Intangible and Other Assets on
the accompanying Consolidated Balance Sheets. The Corporation expects
to receive $17.1 million toward the net receivable in settlement
payments by May 31, 1999, or a lesser amount if prepaid, which
payments have been appropriated by the Texas Legislature. The
Corporation expects to receive further payments in an amount
sufficient to satisfy the balance of the net receivables by August 31,
2001, which payments are subject to appropriation. The Corporation
believes that ultimate recovery of the net receivables is probable.
11. At the end of the second quarter of 1998, the Corporation adopted a
Grantor Trust Stock Ownership Plan ("GSOP"). In conjunction with the
formation of the GSOP, the Corporation sold 7.1 million shares of
treasury stock to the GSOP at a purchase price of $255.2 million
($35.9375 per share). The sale of these shares had no net impact on
shareholders' equity or on the Corporation's statement of earnings.
The GSOP is a funding mechanism for certain benefit programs and
compensation arrangements including the incentive stock program, and
employee and dealer stock purchase plans. The GSOP is recorded as
Employee Benefit Trust at Fair Market Value on the accompanying
Consolidated Balance Sheets. Shares owned by the GSOP are accounted
for as a reduction to shareholders' equity until used in connection
with employee benefits. Each period the shares owned by the GSOP are
valued at the closing market price, with corresponding changes in the
GSOP balance reflected in additional paid-in capital.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview: The Corporation posted record sales for the second quarter and
first six months of 1998, and reduced earnings and earnings per share.
Net earnings for the second quarter of 1998 decreased 41.9% from the year
ago quarter despite a net sales increase of 8.1%. For the first six
months of 1998, net earnings decreased 22.3% from the comparable 1997
period, despite a net sales increase of 10.7%. The shortfall results from
computer system delays and the learning curve associated with the
Corporation's new enterprise-wide client/server computer system, which
have had a significant adverse effect on service levels, with a negative
impact on sales, gross margins and expenses. In addition, the economic
and political crises in Asia reduced second quarter earnings. Diluted and
basic earnings per share for the second quarter of 1998 decreased 39.7%
and 40.6%, respectively, compared to the second quarter of 1997.
Diluted and basic earnings per share for the first six months of 1998
decreased 20.3% and 20.8%, respectively, compared to the 1997 first half.
Sales: Net sales for the second quarter of 1998 were $442.2 million, an
increase of 8.1% over the second quarter of 1997 sales of $409.2 million.
Net sales for the first six months of 1998 were $868.6 million, an
increase of 10.7% over 1997 six-month sales of $784.5 million. The
negative effect of foreign currency translation reduced the sales increase
by two percentage points in both the second quarter of 1998 and the first
six months of 1998. Excluding acquisitions, net sales increased 1% in the
quarter and 4% in the first half of 1998.
North American sales for the second quarter of 1998 were $335.5 million,
an increase of 3.9% over second quarter 1997 sales of $323.0 million.
North American sales for the first six months of 1998 were $660.8 million,
an increase of 9.4% over six-month 1997 sales of $604.1 million. Excluding
acquisitions, sales rose 1% for the quarter, as increased revenues for
diagnostics, software and air conditioning service equipment offset
weakness in tool sales to all channels caused by the previously discussed
computer systems issues. Excluding acquisitions, sales rose 7% for the
first half of 1998.
European sales for the second quarter of 1998 were $88.5 million, an
increase of 35.0% over second quarter 1997 sales of $65.5 million.
European sales for the first six months of 1998 were $171.8 million, an
increase of 22.0% over six-month 1997 sales of $140.9 million. During the
quarter, strong tool sales, particularly in the United Kingdom and Spain,
were partially offset by weakness in equipment exports to Asia. A
stronger U.S. dollar relative to other currencies negatively affected
sales by 3% in the quarter and 5% in the first six months of 1998.
Excluding acquisitions, sales were 1% higher in the quarter and 7% lower
in the first half of 1998.
Other sales for the second quarter of 1998 were $18.2 million, a decrease
of 12.1% from second quarter 1997 sales of $20.7 million. Other sales for
the first six months of 1998 were $36.0 million, a decrease of 8.9% over
six-month 1997 sales of $39.5 million. Despite recent economic events in
Asia, sales in local currency rose 4% for both the quarter and the first
six months.
Earnings: Net earnings for the second quarter were $22.7 million, a
decrease of 41.9% compared with $39.0 million for the comparable 1997
period. Diluted per share earnings decreased 39.7% to $.38, compared with
$.63 per share in the second quarter a year ago, while basic per share
earnings decreased 40.6% to $.38, compared with $.64 per share in the
second quarter a year ago. Net earnings for the first six months of 1998
were $56.6 million, a decrease of 22.3% compared to net earnings of $72.8
million in the first half of 1997. Diluted per share earnings for the
first half of 1998 decreased 20.3% to $.94, compared with $1.18 per share
in the first half of 1997, while basic earnings per share decreased 20.8%
to $.95, compared with $1.20 per share in the first six months of 1997.
Gross profit: The 1998 second quarter gross profit decline from last
year's comparable period was primarily the result of a change in both
product mix and business mix. The difficulties related to the
implementation of the new computer system in North America had the
greatest negative impact on the sale of hand tools, a product line with
high gross margins. The lower gross margins of several recent
acquisitions also negatively affected corporate gross profit.
Operating expenses: As a percentage of net sales, second quarter total
operating expenses increased to 40.3% in 1998 from 38.9% in the same
period of 1997. The increase is primarily a result of higher costs (such
as freight and temporary workers) related to the computer system
difficulties, and lower productivity as employees began solely to use
the new computer system. As a percentage of net sales, six-month
operating expenses increased to 40.2% in 1998 from 39.6% in 1997.
Finance income: Finance income for the second quarter of 1998 was $15.9
million, a decrease of 13.4% from second quarter 1997 finance income of
$18.4 million. Finance income for the first six months of 1998 was $32.9
million, a decrease of 8.2% from six-month 1997 finance income of $35.8
million. Net finance income declined primarily because of the increased
securitization of extended credit receivables and the sale of a majority
of the lease portfolio in the past year.
FINANCIAL CONDITION
Liquidity: Cash and cash equivalents decreased to $12.0 million at the
end of the second quarter from $25.7 million at the end of 1997. Working
capital increased to $695.3 million at second quarter end, from $669.2
million at the end of 1997. During the first quarter, the Corporation
raised its commercial paper program to $175 million, which is supported by
revolving credit facilities.
In September 1994, the Corporation filed a registration statement with the
Securities and Exchange Commission that allows the Corporation to issue
from time to time up to $300 million of unsecured indebtedness. In
October 1995, the Corporation issued $100 million of its notes to the
public. The shelf registration gives the Corporation financing flexibility
to operate the business.
The Corporation believes it has sufficient sources of liquidity to support
working capital requirements, finance capital expenditures and pay
dividends.
Accounts receivable: Accounts receivable decreased 3.3% to $521.7 million
at the end of the second quarter, compared with $539.6 million at the end
of 1997. Growth related to acquisitions was offset by the securitization
of $48.5 million of extended credit receivables in the 1998 second
quarter, as discussed in note 6.
The majority of the Corporation's accounts receivable involve customers'
extended credit and lease purchases of higher-value products. Other
receivables include those from dealers, industrial customers, national
accounts and government entities.
Inventories: Inventories increased 19.7% to $446.6 million in the 1998
second quarter, compared with $373.2 million at the end of 1997.
Excluding acquisitions, inventories were 3% above the end of the first
quarter, as inventory reductions in air conditioning and at branch and
other field locations were offset primarily by inventories built for
second quarter planned sales that did not occur because of the computer
systems issues.
Liabilities: Total short-term and long-term debt was $305.2 million at
the end of the second quarter, compared with $175.0 million at the end of
1997. Funding requirements for acquisitions, the repurchase of common
stock and working capital needs were responsible for the higher debt
levels.
Average shares outstanding: Average shares outstanding for diluted EPS and
basic EPS in 1998's second quarter were 60.0 million and 59.2 million
shares, respectively, versus 61.7 million and 60.9 million, respectively,
in last year's second quarter. Average shares outstanding for diluted EPS
and basic EPS in the first six months of 1998 were 60.4 million and 59.5
million shares, respectively, versus 61.7 million and 60.9 million,
respectively, in last year's second quarter.
Share repurchase: On June 26, 1998, the Corporation's board of directors
authorized an additional share repurchase program aggregating $100 million
of the Corporation's common stock. On June 27, 1997, the Corporation's
board of directors authorized the repurchase of $100 million of the
Corporation's common stock over a two-year period. In 1996, the
Corporation's board of directors authorized the ongoing repurchase of
stock in an amount equivalent to that necessary to prevent dilution
created by shares issued for stock options, employee and dealer stock
purchase plans, and other corporate purposes. As of July 4, 1998,
approximately $150 million was available for share repurchases under
these programs. The Corporation repurchased 384,400 shares of its
common stock in the second quarter of 1998 and 1,539,400 shares in the
first six months of 1998.
Dividend increase: At its June 26, 1998 board meeting, the Corporation's
board of directors declared a 4.8% increase in the common stock dividend.
The new quarterly dividend will increase $.01 per share to $.22 per share,
or $.88 on an annual basis.
Foreign currency: The Corporation 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 through netting. To the extent that the net
exposures are hedged, forward contracts are used. Refer to note 9 for a
discussion of the Corporation's accounting policies for the use of
derivative instruments.
Other Matters: During the second quarter of 1998, the Corporation
announced the implementation of a restructuring program that will result
in a charge of approximately $175 million in the third quarter of 1998.
This program is expected to be reviewed and subsequently approved by the
board of directors at the August 28, 1998 meeting.
The Corporation is engaged in a comprehensive project involving its
products, software, information systems, non-IT systems and third-party
systems. The objective of this project is to identify, develop,
implement and test any modifications that are required so that these
systems will achieve a Year 2000 date conversion with no disruption to
the Corporation's business operations. A committee has been established
and given the responsibility for achieving this objective. Of the
Corporation's systems, the committee has completed the first two phases
of this project, identification and development, and is approximately
fifty percent complete with the implementation and testing phases of the
required modifications. In North America, the implementation of the
BaaN enterprise-wide system, which is Year 2000 compliant, will be
substantially complete in the fourth quarter of 1998. In Europe, the
implementation of the BaaN enterprise-wide system has just begun and is
expected to be complete by fourth quarter 1999. The timely completion
of the European implementation is a top priority for the Corporation's
European and IT management. They are working with the systems supplier
to ensure that the timetable is met and that any necessary contingency
plans are in place. For third-party systems, the committee has
communicated with suppliers, dealers, financial institutions and others
with whom the Corporation does business, and has received responses from
over eighty percent of those contacted that they either are or plan to be
Year 2000 compliant. The committee is working to ensure that necessary
third-party system's compliance occurs and to develop contingency plans
to manage the risk of any third-party non-compliance by the fourth
quarter of 1998. The Corporation expects to be fully Year 2000 compliant
by fourth quarter 1999 with additional costs to approximate between $5
and $7 million over the next two years.
Safe Harbor: Statements in this document that are not historical facts,
including statements (i) that include the words "believes," "expects,"
"anticipates" or "estimates" or words of similar importance with reference
to the Corporation or management, (ii) specifically identified as forward-
looking, or (iii) describing the Corporation's or management's future
plans, objectives or goals, are forward-looking statements. The
Corporation or its representatives may also make similar forward-looking
statements from time to time orally or in writing. The Corporation
cautions the reader that these statements are subject to risks,
uncertainties and 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 Corporation's ability
to manufacture, distribute and/or record the sale of products during the
implementation of a new computer system involving the replacement of
hardware and software components and the enterprise-wide linking of all
functions. The Corporation also referred to additional factors in its
Form 8-K filed on June 29, 1998, Commission File Number 1-7724, which is
incorporated herein by reference. These factors may not constitute all
factors that could cause actual results to differ materially from those
discussed in any forward-looking statement. The Corporation operates in a
continually changing business environment and new factors emerge from time
to time. The Corporation cannot predict such factors nor can it assess
the impact, if any, of such factors on the Corporation or its results.
The Corporation disclaims any responsibility to update any forward-looking
statement provided in this document. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results.
PART II. OTHER INFORMATION
Item 4: Submission of matters to a vote of security holders
The Corporation held its Annual Meeting of Shareholders on April 24, 1998.
The following is a summary of the matters voted on in that meeting. There
were 60,005,182 outstanding shares eligible to vote.
a) The shareholders elected three members of the Corporation's Board of
Directors to serve until the 2001 Annual Meeting and one member to
serve until the 1999 Annual Meeting. The persons elected to the
Corporation'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
Leonard A. Hadley 50,107,116 878,507 2001
Robert A. Cornog 50,075,001 910,622 2001
Edward H. Rensi 50,092,141 893,482 2001
Bruce S. Chelberg 2000
Arthur L. Kelly 2000
Roxanne J. Decyk 2000
Branko M. Beronja 2000
Richard F. Teerlink 50,105,486 880,137 1999
Donald W. Brinckman 1999
George W. Mead 1999
Item 5: Other information
Proposals of shareholders pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended ("Rule 14a-8"), that are intended to be
presented at the 1999 Annual Meeting of Shareholders must be received by
the Corporation no later than November 12, 1998 to be included in the
Corporation's proxy materials for that meeting. Further, a shareholder
who otherwise intends to present business at the 1999 annual meeting
must comply with the requirements set forth in the Corporation's By-laws.
Among other things, to bring business before an annual meeting, a
shareholder must give written notice thereof, complying with the By-laws,
to the Secretary of the Corporation not less than 60 days and not more
than 90 days prior to the anniversary date of the immediately preceding
annual meeting. If the Corporation does not receive notice of a
shareholder proposal submitted otherwise than pursuant to Rule 14a-8
prior to February 23, 1999, then the notice will be considered untimely
and the Corporation is not required to present such proposal at the 1999
annual meeting. If the board of directors chooses to present such
proposal at the 1999 annual meeting, then the persons named in the
proxies solicited by the board of directors for the 1999 annual meeting
may exercise discretionary voting power with respect to such proposal.
Item 6: Exhibits and reports on Form 8-K
Item 6(a): Exhibits
Exhibit 27 Financial Data Schedule
Item 6(b): Reports on Form 8-K Filed During the Reporting Period
Date Filed Date of Report Item
June 29, 1998 June 29, 1998 Item 5. The Corporation filed a
report outlining its use of
forward looking statements.
July 10, 1998 July 2, 1998 Item 5. The Corporation filed a
report outlining the adoption of
a Grantor Trust Stock Ownership
Plan ("GSOP") on July 2 and the
subsequent purchase of 7.1
million shares of Treasury Stock
by the GSOP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Snap-on Incorporated has duly caused this report to be signed on its
behalf by the undersigned duly authorized persons.
SNAP-ON INCORPORATED
Date: August 18, 1998 /s/ R. A. Cornog
R. A. CORNOG
(Chairman, President and Chief Executive Officer)
Date: August 18, 1998 /s/ N. T. Smith
N. T. SMITH
(Principal Accounting Officer and Controller)