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Snap-on Incorporated Reports Record Sales and Earnings Per Share, and Increased Earnings for the Second Quarter and First Six Months
“The trend of quarter-over-quarter improvement in results is encouraging,” said Robert A. Cornog, Snap-on chairman, president and chief executive officer. “The solid revenue growth and positive contribution of Project Simplify, our worldwide effort to create a more effective and efficient Snap-on, contributed to the improved performance. The entire Snap-on organization has done an excellent job of balancing the implementation of the restructuring projects, while continuing the focus on building the business. The results of these actions are clearly visible in our lower cost structure, improved operations and revenue growth. The most tangible evidence of this is the return to solid performance in operating earnings driven primarily by improving service levels and the realization of Project Simplify benefits.”
Earnings from operations, before non-recurring charges, increased 91.3% in the quarter, from $26.5 million in the same period last year to $50.8 million. Gross margin in the quarter increased to 47.6% from 46.3%, and operating expenses as a percent of sales declined to 36.9% from 40.3% in the second quarter of 1998, reflecting both the growth in net sales and the effect of savings from Project Simplify.
In the second quarter of 1999, $7.0 million, pre-tax, ($0.08 per diluted share after tax) in restructuring-related transitional and other non-recurring charges were recorded related to the company’s previously announced Project Simplify initiative, which it began implementing in the third quarter of 1998. Total restructuring, transitional and other non-recurring charges recorded through the end of the second quarter were $158.8 million, against the previously announced total for Project Simplify of $185 million to be recorded through the first quarter of 2000.
In addition, an after-tax charge of $8.7 million ($0.15 per diluted share after tax) was recorded in the second quarter on the foreign currency hedge of the US$400 million equivalent purchase price commitment for the Sandvik Saws and Tools acquisition, scheduled to close at the end of the third quarter. Six-month Performance
Diluted earnings per share, excluding restructuring-related transitional and other non-recurring charges, were $1.22, compared with $0.94 for the first six months of 1998, an increase of 29.8%. Net earnings, excluding all charges, increased 26.5% to $71.6 million, versus $56.6 million in the same period a year ago. Net sales for the first six months of 1999 increased 6.6% to $925.7 million, compared with $868.6 million for the first six months of 1998.
Progress continues on the implementation of the Project Simplify initiatives. The company expects to achieve its $30 million in targeted savings for 1999 and the $60 million in annual cost savings targeted for the year 2000. “Our organization is clearly focused on streamlining our business to achieve a more competitive cost structure and build a stronger, more responsive foundation for future growth. We are pleased with the progress being made and believe that the momentum will continue through the remainder of the year and into 2000,” said Cornog.
Snap-on Incorporated is a $1.8 billion leading global developer, manufacturer and distributor of tool and equipment solutions for professional technicians, motor service shop owners, specialty repair centers, original equipment manufacturers, and industrial tool users worldwide. Product lines include hand and power tools, diagnostics and shop equipment, tool storage units, diagnostics software, and other solutions for the transportation service and industrial industries.
Statements in this news release 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 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 the Corporation can implement the Project Simplify initiatives; the timing and progress related to the acquisition of Sandvik Saws and Tools, which could include failure to receive applicable approvals; 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 enterprisewide linking of all functions; the Corporation’s ability to withstand external negative factors including changes in trade, monetary and fiscal policies, laws and regulations, or other activities of governments or their agencies; significant changes in the current competitive environment; inflation; currency fluctuations or the material worsening of the economic and political situation in Asia or other parts of the world; and the achievement of productivity improvements and cost reductions. 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. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Corporation disclaims any responsibility to update any forward-looking statement provided in this news release.
Media contact:
Richard Secor
414/656-5561