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Snap-on Announces Record Second Quarter Results and Resumption of Share Repurchase Program
KENOSHA, Wis.--(BUSINESS WIRE)--July 25, 2000--Snap-on Incorporated (NYSE:SNA), a global leader in tools, diagnostics and equipment, announced record net sales, net earnings and earnings per share for the second quarter 2000.
-- Earnings per share - diluted were $0.75 in the 2000 second
quarter, a 15% increase over the $0.65 earned in the second
quarter of 1999. Currency translation, primarily from the
company's European operations, negatively impacted second
quarter 2000 results by $0.02 per share. Second quarter net
earnings increased 16% to $44.2 million from $38.2 million in
1999. The 1999 results exclude $13.2 million after-tax, or
$0.23 per share, in non-recurring charges. Inclusive of these
charges, net earnings increased 77% over 1999 net earnings of
$25.0 million, or $0.42 per share - diluted.
-- Cash earnings per share(a) for the second quarter increased
17% to $0.83 in the second quarter of 2000 from $0.71 in 1999.
The increase in cash earnings, along with improved free cash
flow, reduced debt to 41.4% of total capital compared with
43.3% at year-end 1999.
-- Snap-on will resume its share repurchase program in the third
quarter as a result of the improved cash flow and lower debt
levels. The corporation has an open authorization of
approximately $150 million currently available for common
stock repurchases.
-- Net sales in the quarter increased 19% to $563.2 million from
$473.2 million in 1999, reflecting continued solid gains in
franchised dealer sales and the contribution from Bahco Group
AB (formerly Sandvik Saws and Tools) acquired September 30,
1999. Organic sales growth was 8%, excluding the contribution
from Bahco, the effect of currency translation and the impact
of discontinued product lines.
"Our business continues to perform well," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "Overall demand remains firm, and the streamlining benefits of Project Simply activities continue to enhance profitability. Second quarter results also began to reflect the benefits from an increased focus on improving working capital turnover and free cash flow. Having reduced debt to our interim target level, we will use a portion of our strong cash flow to repurchase shares opportunistically in the open market to enhance shareholder value. We believe that our stock at current prices represents an attractive investment of corporate funds."
Operating profit increased 36% in the quarter, resulting from higher net sales coupled with the savings and productivity improvements arising from Project Simplify. Partially offsetting those benefits were the negative impact of currency translations and energy-cost driven increases in freight. As a percentage of sales, operating profit improved to 12.2% in the quarter compared with 10.7% in the second quarter of 1999.
"This increase in operating profitability, combined with the significant improvement achieved in the prior year, continues the steady, consistent and ongoing improvement in the performance of our business portfolio," noted Cornog.
Finance income declined compared with 1999, which included gains from receivables sold in conjunction with the formation of the financial services joint venture. Finance income was also impacted by higher interest rates.
Growth in the worldwide dealer van channel segment, Global Transportation, was driven by solid North American dealer sales, up 8% in the second quarter of 2000 over the comparable period in 1999, excluding the effect of certain discontinued product lines. Reported sales grew 4% on a year-over-year basis.
The corporation's commercial and industrial tool, diagnostics and equipment products business, Global Operations, recorded a 38% sales increase in the second quarter of 2000 compared with the second quarter of 1999. The principal contributions to the increase were the addition of Bahco and increased equipment sales to new-vehicle dealerships under distribution facilitation agreements. The increase was partially offset by negative currency effects on European sales. Bahco results were accretive and contributed to results, in local currencies, as expected. Organic sales grew 8%, excluding the impact of currency translations and the contribution of Bahco.
Six-month results
For the first six months of 2000, diluted earnings per share increased 9% to $1.33 from $1.22 earned in 1999. Net earnings were $78.0 million in 2000 compared with $71.6 million in 1999. The 1999 results exclude $14.4 million after-tax, or $0.25 per share, in non-recurring charges. Inclusive of these charges, net earnings increased 36% over 1999 net earnings of $57.2 million, or $0.97 per share - diluted. Net sales increased 20% in the first six months of 2000 to $1.1 billion from $925.7 million in 1999.
Outlook
"As we look to the remainder of the year, we believe our overall business is sound," Cornog said. "Bahco is performing to our expectations and offers a solid platform to reach new professional tool users in North America. Our Internet activities are on track with a new dealer portal and an exciting redesigned web site ready for launch during the third quarter. Our investments in technology: in systems, in products and in processes, are producing solid benefits.
"We have a number of new, innovative, high-value-added products that will be introduced throughout the remainder of the year, which we expect to contribute to further growth," Cornog said. "Higher interest rates and unfavorable currency effects appear likely to remain with us, however, tempering somewhat our optimism for the remainder of the year. Overall, we expect to achieve continued strong results in the second half of the year, with diluted earnings per share in the second half increasing approximately 15% on a year-over-year basis, excluding non-recurring items."
Snap-on Incorporated is a leading global developer, manufacturer and marketer of tool 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 service, industrial, government, education, agricultural and other commercial applications, including construction and electrical. Products are sold through its franchised dealer van, company direct sales and distributor channels. Founded in 1920, Snap-on is a $2+ billion, S&P 500 company headquartered in Kenosha, Wisconsin and employs approximately 14,000 worldwide.
(a) Cash earnings per share exclude the ongoing amortization of
goodwill and other acquisition-related intangibles and, thus,
differ from earnings presented according to GAAP (generally
accepted accounting principles). Cash earnings per share are
presented to provide additional insight into the cash flow
generated by the organic growth of the business.
Statements in this news release that are not historical facts, including statements (i) that include the words "believes," "expects," "anticipates," or "estimates" or similar words 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 continue to achieve higher productivity and attain further cost reductions; the Corporation's ability to retain and attract dealers, to integrate Bahco successfully, to realize benefits in growth and efficiencies from e-business investments 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. 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.
For additional information, visit www.snapon.com or:
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Media contact: Investor contact:
Richard Secor Bill Pfund
262/656-5561 262/656-6488
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands)
SECOND QUARTER ENDED
-----------------------------------
% INCR.
July 1, 2000 July 3, 1999 (DECR.)
------------ ------------ -------
Net sales $ 563,201 $ 473,153 19.0
Cost of goods sold (298,982) (247,888) 20.6
Operating expenses (195,354) (174,482) 12.0
Net finance income 10,479 13,141 (20.3)
Restructuring and other
non-recurring charges - (7,037) N/M
Interest expense (10,573) (5,417) 95.2
Other income (expense) - net 817 (12,406) (106.6)
------------ ------------ -------
Earnings before income taxes 69,588 39,064 78.1
Income taxes 25,399 14,065 80.6
------------ ------------ -------
Net earnings $ 44,189 $ 24,999 76.8
============ ============ =======
Earnings per weighted
average common share - basic $ 0.75 $ 0.43 74.4
============ ============ =======
Earnings per weighted
average common share - diluted $ 0.75 $ 0.42 78.6
============ ============ =======
Weighted average common
shares outstanding - basic 58,640 58,384 0.4
Weighted average common
shares outstanding - diluted 58,823 58,804 -
SIX MONTHS ENDED
% INCR.
July 1, 2000 July 3, 1999 (DECR.)
------------ ------------ -------
Net sales $ 1,107,546 $ 925,738 19.6
Cost of goods sold (594,882) (481,572) 23.5
Operating expenses (392,588) (356,711) 10.1
Net finance income 22,150 34,133 (35.1)
Restructuring and other
non-recurring charges (353) (8,970) N/M
Interest expense (20,898) (10,098) 107.0
Other income (expense) - net 1,900 (13,239) (114.4)
Earnings before income taxes 122,875 89,281 37.6
Income taxes 44,842 32,041 40.0
------------ ------------ -------
Net earnings $ 78,033 $ 57,240 36.3
============ ============ =======
Earnings per weighted
average common share - basic $ 1.33 $ 0.98 35.7
============ ============ =======
Earnings per weighted
average common share - diluted $ 1.33 $ 0.97 37.1
============ ============ =======
Weighted average common
shares outstanding - basic 58,598 58,477 0.2
Weighted average common
shares outstanding - diluted 58,782 58,897 (0.2)
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
July 1, 2000 Jan. 1, 2000 July 3, 1999
------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 8,055 $ 17,617 $ 15,664
Accounts receivable less
allowances 642,398 617,645 500,548
Inventories 476,656 454,841 392,760
Prepaid expenses and
other assets 113,454 116,238 131,068
------------ ------------ ------------
Total current assets 1,240,563 1,206,341 1,040,040
Property and equipment - net 354,593 362,598 269,981
Deferred income tax benefits 54,960 54,652 51,533
Intangibles 454,577 453,293 217,455
Other assets 73,596 72,938 91,169
------------ ------------ ------------
TOTAL ASSETS $ 2,178,289 $ 2,149,822 $ 1,670,178
============ ============ ============
LIABILITIES
Accounts payable $ 155,989 $ 146,422 $ 80,166
Notes payable and current
maturities of
long-term debt 28,378 22,349 61,812
Dividends payable 14,101 - 13,436
Accrued compensation 51,157 57,540 40,975
Dealer deposits 40,676 48,251 39,204
Deferred subscription revenue 47,643 42,056 41,768
Other accrued liabilities 148,167 136,131 179,310
------------ ------------ ------------
Total current liabilities 486,111 452,749 456,671
Long-term debt 579,908 607,476 252,856
Deferred income taxes 28,032 26,989 9,959
Retiree health care benefits 93,212 91,391 90,047
Pension liability 92,806 96,238 76,234
Other long-term liabilities 36,350 49,718 21,446
------------ ------------ ------------
TOTAL LIABILITIES $ 1,316,419 $ 1,324,561 $ 907,213
SHAREHOLDERS' EQUITY
Common stock - $1 par value 66,762 66,729 66,707
Additional paid-in capital 63,243 62,292 124,720
Retained earnings 994,755 957,763 901,252
Accumulated other
comprehensive income (loss) (41,311) (35,814) (39,458)
Grantor stock trust at fair
market value (173,243) (177,373) (241,805)
Treasury stock at cost (48,336) (48,336) (48,451)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 861,870 825,261 762,965
------------ ------------ ------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 2,178,289 $ 2,149,822 $ 1,670,178
============ ============ ============
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CONTACT: Snap-on Incorporated
Media
Richard Secor, 262/656-5561
or
Investor
Bill Pfund, 262/656-6488