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Snap-on Reports EPS of $2.52 for the Full Year and $0.66 for the Fourth Quarter Before Charges and One-Time Gain
KENOSHA, Wis.--(BUSINESS WIRE)--Feb. 1, 2001--Snap-on Incorporated (NYSE: SNA), a global leader in tools, diagnostics and equipment, announced results for the fourth quarter and year 2000, including full-year record sales and segment operating earnings.
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Full-year 2000 earnings were $147.8 million, or $2.52 per share, compared with $152.9 million, or $2.60 per share, in 1999 before charges and one-time gains in both years (hereinafter referred to as "non-comparable items"). Net earnings in 2000 were $148.5 million, or $2.53 per share, compared with $127.2 million, or $2.16 per share, in 1999. Operating earnings from segments, excluding non-comparable items, reached a record $230.5 million in 2000.
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Net sales increased 12% to a record $2.176 billion in 2000 from $1.946 billion in 1999, reflecting a 5% increase in organic sales, an 11% contribution from the Bahco acquisition, a negative 3% effect from currency translation, and a negative 1% from discontinued activities.
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Cash generated by operations was $190.2 million in 2000 and free cash flow was $132.6 million. Improvements in working capital turnover, largely driven by reduced inventory, coupled with solid cash earnings led to record levels of free cash flow in the last two years. Consequently, in 2000, total debt was reduced by $86.5 million, and the total-debt-to-capital ratio strengthened to 39.2% from 43.3% at year-end 1999.
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Fourth-quarter earnings in 2000 were $38.2 million, or $0.66 per share, compared with $44.7 million, or $0.76 per share, in 1999, excluding the effect of non-comparable items in both years. Net fourth-quarter earnings in 2000 were $13.7 million, or $0.24 per share, compared with $27.4 million, or $0.47 per share, in 1999.
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Fourth-quarter 2000 net sales, which continued to be impacted unfavorably by currency translations, were $556.3 million compared with $566.7 million in 1999. Organic sales (adjusted for currency changes) grew 3% over the prior-year period.
Fourth-quarter Performance
For the fourth-quarter 2000, diluted earnings per share (excluding non-comparable items) were $0.66 per share compared with $0.76 in the 1999 period. Significant improvements in sales of tools and equipment in the vehicle-repair market, in both Europe and North America, were attained compared with the third-quarter 2000, but were negatively impacted year-over-year by unfavorable currency translations. The sequential progress was led by a year-over-year increase of 3% core growth in the North American dealer van business, continued steady growth in sales at Bahco and sales increases to new-car dealerships under facilitation agreements. Worldwide, organic sales (excluding currency translations) grew 2% in the dealer business and 4% in the non-dealer business.
Improvements in operating earnings from core sales growth, operating leverage on the sales growth, and streamlining benefits in European activities were more than offset by a decline in net finance income. Net finance income declined as a result of difficult comparisons to 1999 (which included gains from receivables sold in conjunction with the formation of the financial services joint venture) and the adverse effect of higher interest rates in 2000. A reduction in pension expense related to an accounting method change was offset by unfavorable absorption effects from lower utilization of production facilities related to the reduction in inventories.
Full-year 2000 Results
Snap-on strengthened its business in 2000 through successful new product introductions, net additions to the worldwide franchised dealer base, the continued benefits of actions to streamline the business and the full-year contribution of Bahco. Enhanced customer service and faster response time in its manufacturing facilities, coupled with a focused effort to reduce inventory levels, resulted in a substantial improvement in working capital productivity and strong free cash flow in 2000.
Net sales in the worldwide Snap-on Dealer Group increased 2% to $1.069 billion in 2000 from $1.051 billion in 1999, led by solid dealer sales in North America and a net addition of 197 dealers worldwide. Sales in the company's non-dealer business, the Commercial Tools and Equipment Group, reported a 23.7% increase in 2000 to $1.107 billion from $.895 billion in 1999. The increase was driven by the full-year contribution of Bahco and higher sales in the facilitation business, partially offset by unfavorable currency translations.
Organic sales rose 4% in the Snap-on Dealer Group and 5% in the Commercial Tools and Equipment Group, excluding the impact of currency translation, discontinued activities and the acquisition effect of Bahco.
Non-comparable Items
In the fourth quarter, Snap-on took charges totaling $38.2 million ($24.4 million after-tax or $0.42 per share), including costs to exit an unprofitable segment of the emissions testing business (prompted by changes in technology and regulations) and a small business operation in the Asia/Pacific region. The company will continue to provide customer and product support for its existing emissions-testing programs. In addition, Snap-on has reserved for legal costs including the aggressive defense and assertion of Snap-on's intellectual property. The company estimates that approximately 50% of the charge will be non-cash.
In a separate action, Snap-on adopted an accounting method change that provides a preferable representation of pension expense and related asset values. The adoption results in a one-time, cumulative gain of $41.3 million ($25.4 million after-tax or $0.43 per share) recognized retroactively to the first quarter of 2000 in accordance with applicable accounting rules. This change, recommended by Snap-on's outside actuarial firm, does not result in any cash flow into or out of the plan and better reflects the market-related value of benefit plan assets for financial reporting purposes. The accounting change impacted current year operating results by reducing pension expense $9.7 million, or $0.10 per share after-tax, of which $2.4 million, or $0.03 per share, was recognized in the fourth quarter.
In 1999, the fourth-quarter impact of non-comparable items was a charge of $27.4 million ($17.3 million after-tax or $0.29 per share), including costs for the completion of Project Simplify activities, acquisition-related charges and a one-time gain on the sale of a 15% interest in the Mitchell Repair Information Company subsidiary. For the full-year 1999, the impact of non-comparable items amounted to a charge of $41.0 million ($25.7 million after-tax or $0.44 per share).
Outlook 2001
"Softening economic conditions suggest caution is appropriate in looking to first-half performance," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "But we are confident that 2001 overall will be a year of record sales, operating profit and earnings per share. Our guarded optimism is founded on the solid fundamentals of our core business and product portfolio, which continue to deliver value and productivity to our customers. Our priority is on growing our dealer network in 2001 and on strengthening our market positions worldwide. We will continue to focus on improving working capital management, which is expected to lead to another year of exceptional cash flow."
A discussion of results will be broadcast live via webcast at www.snapon.com today, Feb. 1, 2001 at 9:30 a.m. CST. An audio replay of that discussion will be available at the same site for two weeks.
Snap-on Incorporated is a leading global developer, manufacturer and marketer of tool, diagnostic and equipment solutions for professional tool users. Product lines include hand and power tools, diagnostics and shop equipment, tool storage products, diagnostics software and other solutions for the transportation, industrial and other commercial industries. Products are sold through its franchise dealer van, company direct sales and distributor channels. Founded in 1920, Snap-on is an S&P 500 company headquartered in Kenosha, Wisconsin.
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 Snap-on or management; (ii) specifically identified as forward-looking; or (iii) describing Snap-on'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. 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; the Corporation's ability to retain and attract dealers, to integrate Bahco successfully 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, 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 the Corporation or its results. 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 news release.
For additional information, visit www.snapon.com or:
Media contact: Richard Secor, 262/656-5561
Investor contact: Bill Pfund, 262/656-6488
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions, except per share data)
FOURTH QUARTER ENDED YEAR ENDED
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December 30, January 1, December 30, January 1,
2000 2000 2000 2000
----------- ----------- ----------- -----------
Net sales $ 556.3 $ 566.7 $ 2,175.7 $ 1,945.6
Cost of goods sold (296.7) (316.5) (1,169.4) (1,032.8)
Cost of goods sold
- non-recurring
charges (9.5) (16.6) (9.5) (16.6)
Operating expenses (216.1) (196.5) (792.6) (723.7)
Net finance income 7.5 14.1 38.1 60.5
Restructuring and
other non-recurring
charges (11.9) (6.4) (12.3) (20.6)
Interest expense (9.5) (12.0) (40.7) (27.4)
Other income
(expense) - net 0.1 9.6 3.3 12.9
----------- ----------- ----------- -----------
Earnings from
continuing operations
before income taxes 20.2 42.4 192.6 197.9
Income taxes from
continuing operations 6.5 15.0 69.5 70.7
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Earnings before
cumulative effect of
a change in
accounting principle $ 13.7 $ 27.4 $ 123.1 $ 127.2
Cumulative effect of a
change in accounting
principle, net of tax - - 25.4 -
----------- ----------- ----------- -----------
Net Earnings $ 13.7 $ 27.4 $ 148.5 $ 127.2
=========== =========== =========== ===========
Earnings per share - basic:
Earnings before
cumulative effect of
a change in accounting
principle $ 0.25 $ 0.47 $ 2.11 $ 2.18
Cumulative effect of a
change in accounting
principle, net of tax - - 0.43 -
----------- ----------- ----------- -----------
Net earnings per share
- basic $ 0.25 $ 0.47 $ 2.54 $ 2.18
=========== =========== =========== ===========
Earnings per share - diluted:
Earnings before
cumulative effect of a
change in accounting
principle $ 0.24 $ 0.47 $ 2.10 $ 2.16
Cumulative effect of a
change in accounting
principle, net of tax - - 0.43 -
----------- ----------- ----------- -----------
Net earnings per share
- diluted $ 0.24 $ 0.47 $ 2.53 $ 2.16
=========== =========== =========== ===========
Average shares outstanding:
Basic 58.0 58.5 58.4 58.5
Effect of dilutive
options 0.2 0.4 0.2 0.4
----------- ----------- ----------- -----------
Diluted 58.2 58.9 58.6 58.9
=========== =========== =========== ===========
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
December 30, January 1,
2000 2000
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ASSETS
Cash and cash equivalents $ 6.1 $ 17.6
Accounts receivable 644.5 617.7
Inventories 418.9 454.8
Prepaid expenses and other assets 116.9 116.2
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Total current assets 1,186.4 1,206.3
Property and equipment - net 345.1 362.6
Deferred income tax benefits 33.0 54.7
Intangibles 424.6 453.3
Other assets 61.3 72.9
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TOTAL ASSETS $ 2,050.4 $ 2,149.8
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LIABILITIES
Accounts payable $ 161.0 $ 146.4
Notes payable and current
maturities of long-term debt 70.3 22.3
Accrued compensation 56.3 57.5
Dealer deposits 39.8 48.3
Deferred subscription revenue 44.9 42.1
Other accrued liabilities 165.7 136.1
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Total current liabilities 538.0 452.7
Long-term debt 473.0 607.5
Deferred income taxes 24.7 27.0
Retiree health care benefits 92.2 91.4
Pension liability 41.4 96.2
Other long-term liabilities 37.1 49.7
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TOTAL LIABILITIES $ 1,206.4 $ 1,324.5
SHAREHOLDERS' EQUITY
Common stock - $1 par value $ 66.8 $ 66.7
Additional paid-in capital 71.6 62.3
Retained earnings 1,051.3 957.8
Accumulated other comprehensive
income (loss) (87.2) (35.8)
Grantor stock trust at fair
market value (179.6) (177.4)
Treasury stock at cost (78.9) (48.3)
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TOTAL SHAREHOLDERS' EQUITY $ 844.0 $ 825.3
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TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 2,050.4 $ 2,149.8
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--30--clc/cgo*
| CONTACT: | Snap-on Incorporated |
|---|---|
| Richard Secor (MR), 262/656-5561 | |
| or | |
| Bill Pfund (IR), 262/656-6488 | |
| URL: | www.snapon.com |