EPS of $0.60 for the first quarter 2009;Global recession and general uncertainty cause expected lower sales and earnings;Continues planned expansion efforts in emerging-growth markets
KENOSHA, Wis.--(BUSINESS WIRE)--Apr. 22, 2009--
Snap-on Incorporated (NYSE: SNA), a leading global innovator,
manufacturer and marketer of tools, diagnostics, equipment, software and
service solutions for professional users, today announced operating
results for the first quarter of 2009.
-
Net sales of $572.6 million in the quarter declined 20.6% from 2008
levels; down 13.1% excluding foreign currency translation.
-
Operating earnings of $64.3 million in the quarter decreased $28.9
million from 2008 levels. Foreign currency impacts reduced 2009
operating earnings by $11.0 million. As a percentage of revenues,
operating earnings were 10.9% as compared with 12.5% last year.
-
Net earnings attributable to Snap-on of $34.8 million, or $0.60 per
diluted share, compared with $56.6 million, or $0.97 per diluted
share, in 2008.
“Continuing difficult economic conditions further weakened customer
demand in the first quarter,” said Nick Pinchuk, Snap-on president and
chief executive officer. “In light of these challenges we increased our
focus on rapid continuous improvement, sourcing and other cost reduction
initiatives. At the same time, we moved forward during the quarter with
our strategic growth investments and with our most important value
creation initiatives, such as product innovation. I thank our
franchisees and associates worldwide for their continuing confidence and
contributions during these challenging times.”
Commercial & Industrial Group segment sales of $259.8 million
in the quarter declined $96.9 million, or 27.2%, from 2008 levels.
Excluding $33.6 million of unfavorable currency translation,
year-over-year sales declined 17.7% principally due to continued lower
sales of professional tools in Europe and decreased sales of equipment
worldwide.
Operating earnings of $18.0 million in the quarter declined $20.2
million from prior-year levels primarily due to the lower sales volumes,
including the costs to carry manufacturing capacity, and $3.9 million of
unfavorable currency translation. These declines in year-over-year
operating earnings were partially offset by $6.6 million of savings from
ongoing efficiency, productivity and other cost reduction (collectively
“Rapid Continuous Improvement” or “RCI”) initiatives.
Snap-on Tools Group segment sales of $242.4 million in the
quarter declined $46.9 million, or 16.2%, from 2008 levels; excluding
$15.9 million of unfavorable currency translation, organic sales
declined 10.7%. The year-over-year sales decline is primarily due to the
continued challenging sales environment, particularly for sales of
larger-price items.
Operating earnings of $21.1 million in the quarter declined $13.3
million from 2008 levels primarily due to the lower sales volumes,
including the costs to carry manufacturing capacity, and unfavorable
currency movement. The stronger U.S. dollar decreased international
margins on U.S. sourced product by $5.3 million and currency translation
further reduced operating earnings by $2.4 million. These declines in
year-over-year operating earnings were partially offset by $6.5 million
of savings from RCI initiatives.
Diagnostics & Information Group segment sales of $132.5
million in the quarter declined $22.5 million, or 14.5%, from 2008
levels. Excluding $6.7 million of unfavorable currency translation,
year-over-year sales declined 10.2% as higher volumes of diagnostics
products in Europe and increased sales of Mitchell1™ information
products were more than offset by lower essential tool and facilitation
program sales to Original Equipment Manufacturer (OEM) dealerships and
by lower volumes of diagnostics products in North America.
Operating earnings of $25.7 million in the quarter increased $5.3
million, or 26.0%, over 2008 levels primarily due to $5.1 million of
savings from ongoing RCI initiatives and $1.8 million of lower
restructuring costs. These improvements to year-over-year operating
earnings were partially offset by the lower sales and by $1.9 million of
increased software development costs.
Financial Services operating income of $10.0 million in the
quarter declined $2.8 million from 2008 levels primarily due to lower
levels of originations partially offset by contributions from lower
market discount rates.
Corporate expenses of $10.5 million in the quarter declined $2.1
million from prior-year levels primarily due to lower performance-based
and stock-based incentive compensation expense partially offset by $3.0
million of expected higher pension expense.
Outlook
As expected, the difficulties posed by the global economy increased
significantly during the first quarter, further challenging Snap-on’s
sales of big-ticket items, such as tool storage and undercar equipment,
and these difficult economic conditions further extended across more
industries and geographies. Slowdowns in the economies of Europe
deepened, particularly in Southern Europe, further impacting volume at
the company’s European-based tools business. In the near term, Snap-on
anticipates no change in this environment and, as a result, expects
sales and earnings in the second quarter of 2009 to be down year over
year.
Snap-on is continuously responding to the global macroeconomic
challenges by furthering its RCI and cost reduction initiatives. Snap-on
recorded $2.0 million of restructuring costs in the first quarter of
2009 and now anticipates that full-year 2009 restructuring costs will be
in a range of $14 million to $18 million, up from the previously
communicated $12 million to $16 million. Snap-on expects restructuring
costs in the second quarter of 2009 to approximate $8 million to $10
million. Snap-on is also continuing a number of its planned growth
investments, including further expansion of its manufacturing capacity
in China and in Eastern Europe. Capital expenditures for full-year 2009
are expected to be in a range of $60 million to $70 million, down from
the previously communicated $75 million to $80 million.
The company continues to expect approximately $3.0 million per quarter
of higher year-over-year pension expense in 2009 due to declines in
pension asset values. In the first quarter, foreign currency effects
reduced operating earnings by $11.0 million on a year-over-year basis
which, at current exchange rates, could similarly impact second quarter
year-over-year comparisons. Snap-on anticipates that its full-year 2009
effective income tax rate on earnings before equity earnings will
approximate 33.4%.
In 2009, Snap-on will continue to aggressively manage the balance
between investing and capturing strategic growth opportunities with the
need for cost reduction actions beyond those already implemented; the
current economic uncertainty makes it extremely difficult to presently
predict this balance as the company continually adjusts to the
challenging business environment.
Conference Call and Webcast April 22,
2009, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Wednesday, April 22,
2009, at 9:00 a.m. Central Time, 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 click on the link for the webcast.
Additional detail about Snap-on is also available on the Snap-on Web
site.
About Snap-on
Snap-on Incorporated is a leading global innovator, manufacturer and
marketer of tools, diagnostics, equipment, software and service
solutions for professional users. Products and services include hand and
power tools, tool storage, diagnostics software, information and
management systems, shop equipment and other solutions for vehicle
dealerships and repair centers, as well as customers in industry,
government, agriculture, aviation and natural resources. Products and
services are sold through the company’s franchisee, company-direct,
distributor and Internet channels. Founded in 1920, Snap-on is a $2.9
billion, S&P 500 company headquartered in Kenosha, Wisconsin.
Forward-looking Statements
Statements in this news release that are not historical facts,
including statements that (i) are in the future tense; (ii) include the
words “expects,” “anticipates,” “intends,” “approximates,” or similar
words that reference Snap-on or its management; (iii) are specifically
identified as forward-looking; or (iv) describe 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
this news release contains statements, including earnings projections,
that are forward-looking in nature and were developed by management in
good faith and, accordingly, are subject to risks and uncertainties
regarding Snap-on’s expected results that could cause (and in some cases
have caused) actual results to differ materially from those described or
contemplated in any forward-looking statement. Factors that may cause
the company’s actual results to differ materially from those contained
in the forward-looking statements include those found in the company’s
reports filed with the Securities and Exchange Commission, including the
information under the “Safe Harbor” and “Risk Factors” headings in its
Annual Report on Form 10-K for the fiscal year ended January 3, 2009,
which are incorporated herein by reference, weakness in the global
economy, and the substantial weakness and uncertainty in the U.S.
automotive industry. Snap-on disclaims any responsibility to
update any forward-looking statement provided in this news release,
except as required by law.
For additional information, please visit www.snapon.com.
|
|
|
|
|
SNAP-ON INCORPORATED
|
|
Condensed Consolidated Statements of Earnings
|
|
(Amounts in millions, except per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
April 4,
|
|
|
March 29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
572.6
|
|
|
|
$
|
721.6
|
|
|
Cost of goods sold
|
|
|
(313.9
|
)
|
|
|
|
(395.7
|
)
|
|
Gross profit
|
|
|
258.7
|
|
|
|
|
325.9
|
|
|
|
|
|
|
|
|
|
|
Financial services revenue
|
|
|
20.0
|
|
|
|
|
25.4
|
|
|
Financial services expenses
|
|
|
(10.0
|
)
|
|
|
|
(12.6
|
)
|
|
Operating income from financial services
|
|
|
10.0
|
|
|
|
|
12.8
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(204.4
|
)
|
|
|
|
(245.5
|
)
|
|
Operating earnings
|
|
|
64.3
|
|
|
|
|
93.2
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(8.6
|
)
|
|
|
|
(9.5
|
)
|
|
Other income (expense) - net
|
|
|
(0.3
|
)
|
|
|
|
1.0
|
|
|
Earnings before income taxes and equity earnings
|
|
|
55.4
|
|
|
|
|
84.7
|
|
|
Income tax expense
|
|
|
(18.3
|
)
|
|
|
|
(28.3
|
)
|
|
Net earnings before equity earnings
|
|
|
37.1
|
|
|
|
|
56.4
|
|
|
Equity earnings, net of tax
|
|
|
0.1
|
|
|
|
|
1.3
|
|
|
Net earnings
|
|
|
37.2
|
|
|
|
|
57.7
|
|
|
Net earnings attributable to noncontrolling interests
|
|
|
(2.4
|
)
|
|
|
|
(1.1
|
)
|
|
Net earnings attributable to Snap-on Incorporated
|
|
$
|
34.8
|
|
|
|
$
|
56.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share attributable to Snap-on Incorporated:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.61
|
|
|
|
$
|
0.98
|
|
|
|
Diluted
|
|
|
0.60
|
|
|
|
|
0.97
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
57.5
|
|
|
|
|
57.5
|
|
|
|
Effect of dilutive options
|
|
|
0.3
|
|
|
|
|
0.7
|
|
|
|
Diluted
|
|
|
57.8
|
|
|
|
|
58.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SNAP-ON INCORPORATED
|
|
Supplemental Segment Information
|
|
(Amounts in millions)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
April 4,
|
|
|
March 29,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
Commercial & Industrial Group
|
|
|
$
|
259.8
|
|
|
|
$
|
356.7
|
|
|
Snap-on Tools Group
|
|
|
|
242.4
|
|
|
|
|
289.3
|
|
|
Diagnostics & Information Group
|
|
|
|
132.5
|
|
|
|
|
155.0
|
|
|
Segment net sales
|
|
|
|
634.7
|
|
|
|
|
801.0
|
|
|
Intersegment eliminations
|
|
|
|
(62.1
|
)
|
|
|
|
(79.4
|
)
|
|
Total net sales
|
|
|
$
|
572.6
|
|
|
|
$
|
721.6
|
|
|
Financial Services revenue
|
|
|
|
20.0
|
|
|
|
|
25.4
|
|
|
Total revenues
|
|
|
$
|
592.6
|
|
|
|
$
|
747.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings:
|
|
|
|
|
|
|
|
Commercial & Industrial Group
|
|
|
$
|
18.0
|
|
|
|
$
|
38.2
|
|
|
Snap-on Tools Group
|
|
|
|
21.1
|
|
|
|
|
34.4
|
|
|
Diagnostics & Information Group
|
|
|
|
25.7
|
|
|
|
|
20.4
|
|
|
Financial Services
|
|
|
|
10.0
|
|
|
|
|
12.8
|
|
|
Segment operating earnings
|
|
|
|
74.8
|
|
|
|
|
105.8
|
|
|
Corporate
|
|
|
|
|
(10.5
|
)
|
|
|
|
(12.6
|
)
|
|
Operating earnings
|
|
|
$
|
64.3
|
|
|
|
$
|
93.2
|
|
|
Interest expense
|
|
|
|
(8.6
|
)
|
|
|
|
(9.5
|
)
|
|
Other income (expense) - net
|
|
|
|
(0.3
|
)
|
|
|
|
1.0
|
|
|
Earnings before income taxes and equity earnings
|
|
$
|
55.4
|
|
|
|
$
|
84.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SNAP-ON INCORPORATED
|
|
Condensed Consolidated Balance Sheets
|
|
(Amounts in millions)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 4,
|
|
|
January 3,
|
|
|
|
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
400.7
|
|
|
|
$
|
115.8
|
|
|
|
Accounts receivable - net of allowances
|
|
|
|
478.3
|
|
|
|
|
522.1
|
|
|
|
Inventories - net
|
|
|
|
340.7
|
|
|
|
|
359.2
|
|
|
|
Deferred income tax assets
|
|
|
|
56.5
|
|
|
|
|
64.1
|
|
|
|
Prepaid expenses and other assets
|
|
|
|
80.2
|
|
|
|
|
79.5
|
|
|
|
Total current assets
|
|
|
|
1,356.4
|
|
|
|
|
1,140.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment - net
|
|
|
|
321.5
|
|
|
|
|
327.8
|
|
|
|
Deferred income tax assets
|
|
|
|
70.5
|
|
|
|
|
77.2
|
|
|
|
Goodwill
|
|
|
|
781.3
|
|
|
|
|
801.8
|
|
|
|
Other intangibles - net
|
|
|
|
213.2
|
|
|
|
|
218.3
|
|
|
|
Other assets
|
|
|
|
133.9
|
|
|
|
|
144.5
|
|
|
|
Total Assets
|
|
|
$
|
2,876.8
|
|
|
|
$
|
2,710.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
119.0
|
|
|
|
$
|
126.0
|
|
|
|
Notes payable and current maturities of long-term debt
|
|
|
164.1
|
|
|
|
|
12.0
|
|
|
|
Accrued benefits
|
|
|
|
40.6
|
|
|
|
|
41.7
|
|
|
|
Accrued compensation
|
|
|
|
44.0
|
|
|
|
|
78.3
|
|
|
|
Franchisee deposits
|
|
|
|
43.1
|
|
|
|
|
46.9
|
|
|
|
Deferred subscription revenue
|
|
|
|
23.8
|
|
|
|
|
22.3
|
|
|
|
Income taxes
|
|
|
|
7.8
|
|
|
|
|
15.4
|
|
|
|
Other accrued liabilities
|
|
|
|
161.5
|
|
|
|
|
204.9
|
|
|
|
Total current liabilities
|
|
|
|
603.9
|
|
|
|
|
547.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
652.9
|
|
|
|
|
503.4
|
|
|
|
Deferred income tax liabilities
|
|
|
|
94.1
|
|
|
|
|
95.0
|
|
|
|
Retiree health care benefits
|
|
|
|
56.8
|
|
|
|
|
57.5
|
|
|
|
Pension liabilities
|
|
|
|
208.1
|
|
|
|
|
209.1
|
|
|
|
Other long-term liabilities
|
|
|
|
87.3
|
|
|
|
|
93.3
|
|
|
|
Total Liabilities
|
|
|
|
1,703.1
|
|
|
|
|
1,505.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Shareholders' Equity attributable to Snap-on Incorporated:
|
|
|
|
|
|
Common stock
|
|
|
|
67.2
|
|
|
|
|
67.2
|
|
|
|
Additional paid-in capital
|
|
|
|
156.6
|
|
|
|
|
155.5
|
|
|
|
Retained earnings
|
|
|
|
1,481.1
|
|
|
|
|
1,463.7
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
(158.0
|
)
|
|
|
|
(106.5
|
)
|
|
|
Treasury stock at cost
|
|
|
|
(393.3
|
)
|
|
|
|
(393.4
|
)
|
|
|
Total Shareholders' Equity attributable to Snap-on Incorporated
|
|
|
|
1,153.6
|
|
|
|
|
1,186.5
|
|
|
|
Noncontrolling interests
|
|
|
|
20.1
|
|
|
|
|
18.0
|
|
|
|
Total Shareholders' Equity
|
|
|
|
1,173.7
|
|
|
|
|
1,204.5
|
|
|
|
Total Liabilities and Shareholders' Equity
|
|
|
$
|
2,876.8
|
|
|
|
$
|
2,710.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SNAP-ON INCORPORATED
|
|
Condensed Consolidated Statements of Cash Flow
|
|
(Amounts in millions)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
April 4,
|
|
|
March 29,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
Net earnings
|
|
$
|
37.2
|
|
|
|
$
|
57.7
|
|
|
Adjustments to reconcile net earnings to net cash provided (used) by
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
|
12.0
|
|
|
|
|
12.0
|
|
|
Amortization of other intangibles
|
|
|
6.1
|
|
|
|
|
5.7
|
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
|
3.7
|
|
|
Excess tax benefits from stock-based compensation
|
|
|
-
|
|
|
|
|
(2.8
|
)
|
|
Deferred income tax provision
|
|
|
14.6
|
|
|
|
|
15.3
|
|
|
Loss (gain) on sale of assets
|
|
|
0.1
|
|
|
|
|
(0.2
|
)
|
|
Changes in operating assets and liabilities, net of effects of
acquisition:
|
|
|
|
|
|
|
(Increase) decrease in receivables
|
|
|
27.2
|
|
|
|
|
(14.1
|
)
|
|
(Increase) decrease in inventories
|
|
|
7.4
|
|
|
|
|
(11.2
|
)
|
|
(Increase) decrease in prepaid and other assets
|
|
|
(8.0
|
)
|
|
|
|
13.1
|
|
|
Increase (decrease) in accounts payable
|
|
|
(4.2
|
)
|
|
|
|
19.9
|
|
|
Increase (decrease) in accruals and other liabilities
|
|
|
(77.7
|
)
|
|
|
|
(24.7
|
)
|
|
Net cash provided by operating activities
|
|
|
14.7
|
|
|
|
|
74.4
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(14.1
|
)
|
|
|
|
(15.4
|
)
|
|
Acquisition of business – net of cash acquired
|
|
|
-
|
|
|
|
|
(13.4
|
)
|
|
Proceeds from disposal of property and equipment
|
|
|
0.2
|
|
|
|
|
0.9
|
|
|
Other
|
|
|
2.9
|
|
|
|
|
(0.8
|
)
|
|
Net cash used by investing activities
|
|
|
(11.0
|
)
|
|
|
|
(28.7
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
297.7
|
|
|
|
|
-
|
|
|
Net increase (decrease) in short-term borrowings
|
|
|
2.3
|
|
|
|
|
(2.0
|
)
|
|
Purchase of treasury stock
|
|
|
-
|
|
|
|
|
(20.8
|
)
|
|
Proceeds from stock purchase and option plans
|
|
|
0.1
|
|
|
|
|
11.2
|
|
|
Cash dividends paid
|
|
|
(17.4
|
)
|
|
|
|
(17.5
|
)
|
|
Excess tax benefits from stock-based compensation
|
|
|
-
|
|
|
|
|
2.8
|
|
|
Other
|
|
|
(0.2
|
)
|
|
|
|
(0.2
|
)
|
|
Net cash provided (used) by financing activities
|
|
|
282.5
|
|
|
|
|
(26.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(1.3
|
)
|
|
|
|
2.1
|
|
|
Increase in cash and cash equivalents
|
|
|
284.9
|
|
|
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
115.8
|
|
|
|
|
93.0
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
400.7
|
|
|
|
$
|
114.3
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
(12.4
|
)
|
|
|
$
|
(14.8
|
)
|
|
Net cash paid for income taxes
|
|
|
(10.6
|
)
|
|
|
|
(9.8
|
)
|
Source: Snap-on Incorporated
Snap-on Incorporated
Investors:
Martin M. Ellen
262/656-6462
or
Media:
Richard
Secor
262/656-5561