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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 27, 2005
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Snap-on Incorporated
(Exact name of registrant as specified in its charter)
Delaware 1-7724 39-0622040
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
10801 Corporate Drive, Pleasant Prairie, Wisconsin 53158-1603
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(Address of principal executive offices)
Registrant's telephone number, including area code: (262) 656-5200
---------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
- --------- ---------------------------------------------
On July 27, 2005, Snap-on Incorporated (the "Corporation") issued a press
release entitled "Snap-on Announces 2005 Second-quarter Results." The text of
the press release is furnished herewith as Exhibit 99 and incorporated herein by
reference.
The press release also contains cautionary statements identifying important
factors that could cause actual results of the Corporation to differ materially
from those described in any forward-looking statement of the Corporation.
The press release also contains information concerning the impacts of foreign
currency translation on certain items of reported results, and this information
may include non-GAAP financial measures. The Corporation presents information in
this manner to show changes in these items of reported results apart from those
related to the quarterly volatility of foreign currency changes.
Item 9.01 Financial Statements and Exhibits (furnished pursuant to Item 2.02)
- --------- -------------------------------------------------------------------
(c) Exhibits
99 Press Release of Snap-on Incorporated, dated July 27, 2005
SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of 1934, Snap-on
Incorporated has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SNAP-ON INCORPORATED
Date: July 27, 2005 By: /s/ Martin M. Ellen
-------------------------------------------
Martin M. Ellen, Principal Financial Officer,
Senior Vice President - Finance and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
99 Press Release of Snap-on Incorporated, dated July 27, 2005,
entitled "Snap-on Announces 2005 Second-quarter Results."
Exhibit 99
Snap-on Announces 2005 Second-quarter Results
KENOSHA, Wis.--(BUSINESS WIRE)--July 27, 2005--Snap-on Incorporated
(NYSE:SNA), a global leader in professional tools, diagnostics and equipment,
today announced 2005 second-quarter results.
-- Net earnings for the second quarter of 2005 increased 20% to $26.6
million, or $0.46 per diluted share, compared with $22.2 million, or
$0.38 per diluted share, a year ago.
-- Net sales were essentially flat at $592.4 million in the second
quarter of 2005 compared to $591.3 million in the prior year. Total
revenue, which includes financial services, was $608.6 million
compared to $612.1 million a year ago.
"I am encouraged by the progress being achieved by Snap-on associates in
improving our focus on our customers," said Jack D. Michaels, chairman,
president and chief executive officer. "I thank them all for their diligent
efforts. However, we all know that we still have much work - and opportunity -
ahead of us in our drive to improve manufacturing effectiveness, provide an
enhanced level of customer service, increase inventory turns and reduce the
complexity and cost structure within our organization."
Second-quarter Results
Net sales were $592.4 million in the second quarter of 2005 compared with
$591.3 million in the second quarter of 2004. Of the $1.1 million increase,
$11.9 million was due to currency translation, which offset $10.8 million of
lower sales primarily in the U.S. dealer operation, OEM facilitation business
and worldwide equipment business, partially offset by higher international
dealer sales and worldwide industrial tool sales. Total revenue was $608.6
million in the second quarter of 2005 compared with $612.1 million in the prior
year, reflecting a decline in financial services revenue caused principally by
lower credit originations and the impact of higher year-over-year interest rates
on Snap-on's domestic financing business.
Net earnings were $26.6 million in the second quarter of 2005 compared with
$22.2 million in the second quarter of 2004. Operating earnings improved to
$47.3 million in the second quarter of 2005 compared with $40.8 million a year
ago, principally the result of better margins. Operating earnings improved
despite the negative effects of higher year-over-year steel costs and a lower
earnings contribution from financial services. Operating earnings in the second
quarter of 2005 also included $6.8 million of restructuring costs, while the
year-ago results included $4.8 million of such costs and a $3.6 million charge
associated with the settlement of two GSA contract audits.
Segment Results
Snap-on Dealer Group operating earnings were $23.4 million on total
revenues of $260.6 million in the second quarter of 2005, compared with $30.0
million of operating earnings on $261.1 million of total revenues in the second
quarter of 2004.
Segment operating earnings for the second quarter of 2005 were reduced by
lower U.S. sales, primarily due to a lower average number of U.S. dealer vans in
operation for the quarter, continued high costs associated with improving
manufacturing operations and $3.9 million of higher steel costs. These effects
were partially offset by higher selling prices and increased international
sales. Currency translation increased revenue by $2.9 million, but had minimal
effect on operating earnings.
Sales to U.S. dealers have been impacted in past periods by plant
consolidations and other manufacturing challenges that resulted in low order
fill rates and higher levels of backorders. Progress, however, is being made in
improving order fill rates and in reducing the level of outstanding backorders,
although at a higher level of cost. Actions to enhance manufacturing operations,
including installation of new production equipment and machine tooling, improved
manufacturing processes, increased equipment maintenance and the acquisition in
the 2005 first quarter of a production facility formerly managed by a supplier
are beginning to provide greater production benefits and a higher level of
"complete and on-time" product deliveries. Substantial effort continues to be
focused on these initiatives. As a result of these efforts, along with the
continued strength in franchise applications, Snap-on believes that further
improvements will contribute to higher sales and lower costs.
Commercial and Industrial Group operating earnings improved to $17.9
million on total revenues of $294.8 million in the second quarter of 2005
compared with operating earnings of $4.2 million on $282.9 million of total
revenues in the second quarter of 2004.
Improved gross margins and lower operating expenses were the principal
contributors to the earnings gain in 2005. These improvements primarily reflect
product cost reduction initiatives, benefits from footprint consolidation, and
increased efficiencies associated with continuous improvement activities. These
actions, coupled with higher selling prices and the absence of the $3.6 million
GSA settlement charge incurred last year, more than offset the $3.9 million of
higher year-over-year steel costs and the continued investment spending to
support the strategy of establishing a sales presence in Asia and other emerging
markets. During the quarter, $2.5 million in restructuring costs were also
incurred, primarily for the integration and streamlining of the Bahco and
Eurotools operations in Europe, while $3.3 million of such costs were incurred a
year ago.
Of the $11.9 million increase in total revenue, $8.2 million was due to
currency translation and $3.7 million reflects higher sales. Increased sales of
hand tools for commercial and industrial applications and higher sales resulting
from the successful introduction of new power tools partially offset a decline
in vehicle service equipment sales.
Diagnostics and Information Group operating earnings were $13.7 million on
total revenues of $117.2 million for the second quarter of 2005 compared with
$6.8 million of operating earnings on $114.7 million of total revenues in the
second quarter of 2004.
The increase in total revenue, largely reflecting higher software and
handheld Snap-on(R) brand diagnostics sales made through the global dealer
business, as well as an improved margin from these higher-margin product sales,
combined with benefits from continuous improvement actions contributed to the
earnings gain year over year. Lower sales in the OEM facilitation business
largely offset the higher diagnostics sales, while currency translation
contributed $1.0 million to revenues.
Financial Services operating earnings were $5.0 million on $16.2 million of
total revenue compared with $9.6 million of operating earnings on $20.8 million
of total revenues in the second quarter of 2004. Operating earnings decreased in
the second quarter of 2005 principally as a result of higher interest rates
coupled with lower credit originations.
Corporate general expenses were $12.7 million in the second quarter of
2005, up from $9.8 million a year ago. Savings from cost reduction actions were
more than offset by $3.9 million of higher year-over-year pension and
postretirement actuarial adjustments and mark-to-market adjustments of $1.2
million on stock-based incentive plans.
At the end of the second quarter of 2005, cash and cash equivalents were
$130.6 million, a $14.8 million decrease from the first quarter of 2005,
primarily reflecting the retirement of $25.0 million of short-term debt during
the quarter. Total debt was $311.7 million at the end of the second quarter
2005, down $19.4 million from $331.1 million at the end of the first quarter
2005. Total debt as a percentage of total capital was 23.1% at the end of the
second quarter 2005, down from 23.5% at the end of the first quarter 2005 and
down from 25.2% a year ago.
Outlook
Snap-on will continue to emphasize improving its customer service, reducing
complexity and cost, strengthening its dealer van franchise system, achieving
quicker inventory turns, implementing continuous improvement actions and the
development of innovative new products. Further progress toward these objectives
is anticipated to lead to improved levels of service and product deliveries to
dealers and customers, an expectation of higher sales and further improvements
in operating margins.
As reported previously at the end of the first quarter of 2005, Snap-on
estimates that full-year 2005 restructuring costs will total $20 million to $25
million, of which $14.6 million was incurred in the first six months. Benefits
from prior rationalization actions, as well as ongoing continuous improvement
initiatives, including the further integration of business operations, are
anticipated to exceed the costs associated with those actions and provide future
operating leverage from sales activities.
"Our ongoing actions are aimed at accelerating the building of long-term
shareholder value through improved financial returns and earnings growth," said
Michaels. "We continue to believe that by placing urgent emphasis on improved
customer responsiveness, and maintaining our strong heritage of product quality,
performance and innovation, we can substantially strengthen our brands' global
appeal."
A discussion of this announcement will be webcast at 8:00 a.m. CDT on
Thursday, July 28, and a replay will be available for at least 10 days following
the call. To access the Webcast, visit www.snapon.com, click on Snap-on
Corporate and then on the link to the webcast. Additional detail about Snap-on
is also available on the Snap-on Web site.
Snap-on Incorporated is a leading global innovator, manufacturer and
marketer of tool, diagnostics and equipment solutions for professional tool
users. Product lines include hand and power tools, diagnostics and shop
equipment, tool storage, diagnostics software and other solutions for
vehicle-service, industrial, government and agricultural customers, and
commercial applications, including construction and electrical. Products are
sold through its franchised dealer van, company-direct sales and distributor
channels, as well as over the Internet. Founded in 1920, Snap-on is a $2.4
billion, S&P 500 company headquartered in Kenosha, Wisconsin, and employs
approximately 11,600 people worldwide.
Important information about forward-looking statements
Statements in this news release that are not historical facts, including
statements (i) that include the words "expects," "plans," "targets,"
"estimates," "believes," "anticipates," 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, estimates,
objectives or goals, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader
that any forward-looking statements included in this release that are based upon
assumptions and estimates were developed by management in good faith and 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. Accordingly, forward-looking statements should not be relied
upon as a prediction of actual results or regarded as a representation by the
company or its management that the projected results will be achieved. For those
forward-looking statements, Snap-on cautions the reader that numerous important
factors, such as those listed below, as well as those factors discussed in
Snap-on's Form 8-K filing (dated July 27, 2005), could affect the company's
actual results and could cause its actual consolidated results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, Snap-on.
These risks and uncertainties include, without limitation, uncertainties
related to estimates, assumptions and projections generally, and the timing and
progress with which Snap-on can attain savings from cost reduction actions,
including its ability to implement and complete planned reductions in workforce,
achieve improvements in the company's manufacturing footprint, achieve
improvements in supply chain efficiencies, and enhance machine maintenance,
plant productivity and manufacturing line set-up and change-over practices, any
or all of which could result in production inefficiencies, higher cost and lost
revenues. These risks also include uncertainties related to Snap-on's capability
to retain and attract dealers, introduce successful new products, as well as its
ability to withstand disruption arising from planned facility closures, or other
labor interruptions, and external negative factors including significant changes
in the current competitive environment, inflation and other monetary
fluctuations, interest rates, legal proceedings, energy and raw material supply
and pricing, and terrorist disruptions on business. Snap-on disclaims any
responsibility to update any forward-looking statement provided in this release.
For additional information, visit www.snapon.com.
SNAP-ON INCORPORATED
Consolidated Statements of Earnings
(Amounts in millions, except per share data)
(unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $592.4 $591.3 $1,191.1 $1,186.4
Financial services revenue 16.2 20.8 30.3 42.0
--------- --------- --------- ---------
Total revenue 608.6 612.1 1,221.4 1,228.4
Cost of goods sold (323.8) (335.4) (665.6) (681.2)
Operating expenses (237.5) (235.9) (474.2) (479.4)
--------- --------- --------- ---------
Operating earnings 47.3 40.8 81.6 67.8
Interest expense (5.6) (5.7) (11.5) (11.3)
Other income (expense) - net (0.8) (0.9) (1.7) (2.8)
--------- --------- --------- ---------
Earnings before income taxes 40.9 34.2 68.4 53.7
Income tax expense (14.3) (12.0) (23.9) (18.8)
--------- --------- --------- ---------
Net earnings $26.6 $22.2 $44.5 $34.9
========= ========= ========= =========
Earnings per share:
Basic $0.46 $0.38 $0.77 $0.60
Diluted $0.46 $0.38 $0.76 $0.60
Weighted-average shares outstanding:
Basic 57.7 57.9 57.7 58.0
Effect of dilutive options 0.6 0.6 0.6 0.6
--------- --------- --------- ---------
Diluted 58.3 58.5 58.3 58.6
========= ========= ========= =========
SNAP-ON INCORPORATED
Revenue and Operating Earnings by Reportable Segment
(Amounts in millions)
(unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
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External revenue
Snap-on Dealer Group $260.6 $261.1 $516.4 $524.0
Commercial and Industrial Group 257.6 250.4 516.8 502.6
Diagnostics and Information
Group 74.2 79.8 157.9 159.8
Financial Services 16.2 20.8 30.3 42.0
--------- --------- --------- ---------
Total external revenue $608.6 $612.1 $1,221.4 $1,228.4
========= ========= ========= =========
Intersegment revenue
Snap-on Dealer Group $- $- $- $-
Commercial and Industrial Group 37.2 32.5 71.8 63.1
Diagnostics and Information
Group 43.0 34.9 73.7 73.1
Financial Services - - - -
--------- --------- --------- ---------
Total intersegment revenue $80.2 $67.4 $145.5 $136.2
========= ========= ========= =========
Total revenue
Snap-on Dealer Group $260.6 $261.1 $516.4 $524.0
Commercial and Industrial Group 294.8 282.9 588.6 565.7
Diagnostics and Information
Group 117.2 114.7 231.6 232.9
Financial Services 16.2 20.8 30.3 42.0
--------- --------- --------- ---------
Segment revenue 688.8 679.5 1,366.9 1,364.6
Intersegment eliminations (80.2) (67.4) (145.5) (136.2)
--------- --------- --------- ---------
Total consolidated revenue $608.6 $612.1 $1,221.4 $1,228.4
========= ========= ========= =========
Operating earnings
Snap-on Dealer Group $23.4 $30.0 $41.5 $44.9
Commercial and Industrial Group 17.9 4.2 28.9 7.5
Diagnostics and Information
Group 13.7 6.8 23.0 16.0
Financial Services 5.0 9.6 9.3 20.5
--------- --------- --------- ---------
Segment operating earnings 60.0 50.6 102.7 88.9
Corporate (12.7) (9.8) (21.1) (21.1)
--------- --------- --------- ---------
Operating earnings 47.3 40.8 81.6 67.8
Interest expense (5.6) (5.7) (11.5) (11.3)
Other income (expense) - net (0.8) (0.9) (1.7) (2.8)
--------- --------- --------- ---------
Earnings before income taxes $40.9 $34.2 $68.4 $53.7
========= ========= ========= =========
Segment revenues are defined as total revenues, including both
external customer revenue and intersegment revenue. Segment operating
earnings are defined as segment revenues less cost of goods sold and
operating expenses, including restructuring costs.
Due to changes in Snap-on's management organization structure, Snap-on
realigned its business segments during the first quarter of fiscal
2005. The primary changes include the reclassification of Snap-on's
Technical Representative support organization from the Snap-on Dealer
Group to the Diagnostics and Information Group and the segregation of
Snap-on's general corporate expenses from the operating earnings of
the business segments. Prior period figures have been restated to
reflect these changes. For additional information on Snap-on's
segments, refer to the Current Report on Form 8-K filed on April 15,
2005, and to Snap-on's other 2005 Current Reports on Form 10-Q that
have been filed with the Securities and Exchange Commission.
SNAP-ON INCORPORATED
Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
Three Months Ended
-------------------
July 2, July 3,
2005 2004
--------- ---------
Operating activities
Net earnings $26.6 $22.2
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation 12.2 14.6
Amortization of other intangibles 0.6 0.6
Deferred income tax provision 4.0 4.2
Loss (gain) on sale of assets (1.3) 0.3
Loss (gain) on mark to market for cash
flow hedges 0.1 1.4
Changes in operating assets and liabilities:
(Increase) decrease in receivables 23.5 10.2
(Increase) decrease in inventories (27.5) 2.3
(Increase) decrease in prepaid and other
assets (1.1) 0.7
Increase (decrease) in accounts payable (23.8) (6.2)
Increase (decrease) in accruals and other
liabilities 18.5 6.9
--------- ---------
Net cash provided by operating activities 31.8 57.2
Investing activities
Capital expenditures (9.8) (10.0)
Proceeds from disposal of property and equipment 1.9 1.8
Proceeds from disposition of business - 0.6
--------- ---------
Net cash used in investing activities (7.9) (7.6)
Financing activities
Payment of long-term debt - (0.2)
Net decrease in short-term borrowings (20.3) (0.8)
Purchase of treasury stock (5.0) (19.9)
Proceeds from stock purchase and option plans 5.2 5.4
Cash dividends paid (14.4) (14.4)
--------- ---------
Net cash used in financing activities (34.5) (29.9)
Effect of exchange rate changes on cash and cash
equivalents (4.2) (0.7)
--------- ---------
Increase (decrease) in cash and cash equivalents (14.8) 19.0
Cash and cash equivalents at beginning of period 145.4 107.6
--------- ---------
Cash and cash equivalents at end of period $130.6 $126.6
========= =========
Supplemental cash flow disclosures
Cash paid for interest $(1.0) $(1.1)
Cash paid for income taxes (1.2) (4.9)
SNAP-ON INCORPORATED
Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
Six Months Ended
-------------------
July 2, July 3,
2005 2004
--------- ---------
Operating activities
Net earnings $44.5 $34.9
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation 25.7 33.0
Amortization of other intangibles 1.7 1.1
Deferred income tax provision 4.0 5.5
Loss (gain) on sale of assets (0.6) 0.2
Loss (gain) on mark to market for cash
flow hedges (0.2) 0.5
Changes in operating assets and liabilities:
(Increase) decrease in receivables 6.1 (4.4)
(Increase) decrease in inventories (41.6) (1.2)
(Increase) decrease in prepaid and other
assets 13.1 (4.6)
Increase (decrease) in accounts payable (14.7) 8.9
Increase (decrease) in accruals and other
liabilities 13.1 17.1
--------- ---------
Net cash provided by operating activities 51.1 91.0
Investing activities
Capital expenditures (19.0) (17.3)
Proceeds from disposal of property and equipment 4.9 2.8
Proceeds from disposition of business - 0.6
--------- ---------
Net cash used in investing activities (14.1) (13.9)
Financing activities
Payment of long-term debt - (0.2)
Net decrease in short-term borrowings (19.0) (2.1)
Purchase of treasury stock (12.7) (24.6)
Proceeds from stock purchase and option plans 11.7 10.4
Cash dividends paid (28.9) (29.0)
--------- ---------
Net cash used in financing activities (48.9) (45.5)
Effect of exchange rate changes on cash and cash
equivalents (7.5) (1.1)
--------- ---------
Increase (decrease) in cash and cash equivalents (19.4) 30.5
Cash and cash equivalents at beginning of period 150.0 96.1
--------- ---------
Cash and cash equivalents at end of period $130.6 $126.6
========= =========
Supplemental cash flow disclosures
Cash paid for interest $(11.4) $(11.4)
Cash refunded for income taxes, net 5.0 5.6
SNAP-ON INCORPORATED
Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
July 2, January 1,
2005 2005
---------- ----------
Assets
Cash and cash equivalents $130.6 $150.0
Accounts receivable - net of allowances 514.7 542.0
Inventories
Finished goods 335.9 308.6
Work in process 42.0 40.0
Raw materials 67.1 69.6
Excess of current cost over LIFO cost (78.4) (76.3)
---------- ----------
Total inventories 366.6 341.9
Deferred income tax benefits 83.7 77.1
Prepaid expenses and other assets 72.6 81.6
---------- ----------
Total current assets 1,168.2 1,192.6
Property and equipment - net 283.9 313.6
Deferred income tax benefits 8.0 9.4
Goodwill 402.1 441.1
Other intangibles - net 64.9 70.0
Pension assets 159.3 159.7
Other assets 91.3 103.7
---------- ----------
Total Assets $2,177.7 $2,290.1
========== ==========
Liabilities
Accounts payable $173.9 $194.9
Notes payable and current maturities
of long-term debt 108.5 127.8
Accrued benefits 36.4 34.5
Accrued compensation 55.1 57.2
Dealer deposits 43.5 46.9
Deferred subscription revenue 27.9 26.2
Income taxes 27.4 21.9
Other accrued liabilities 160.9 164.8
---------- ----------
Total current liabilities 633.6 674.2
Long-term debt 203.2 203.2
Deferred income taxes 81.6 76.5
Retiree health care benefits 89.2 89.0
Pension liabilities 74.0 73.3
Other long-term liabilities 58.2 63.2
---------- ----------
Total Liabilities 1,139.8 1,179.4
---------- ----------
Shareholders' Equity
Common stock 67.0 67.0
Additional paid-in capital 103.6 105.8
Retained earnings 1,124.3 1,108.7
Accumulated other comprehensive
income (loss) 41.7 129.1
Grantor stock trust at fair market value (133.2) (147.0)
Treasury stock at cost (165.5) (152.9)
---------- ----------
Total Shareholders' Equity 1,037.9 1,110.7
---------- ----------
Total Liabilities and Shareholders'
Equity $2,177.7 $2,290.1
========== ==========
CONTACT: Snap-on Incorporated
Media:
Richard Secor, 262-656-5561
or
Investors:
William Pfund, 262-656-6488