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Snap-on Announces Record Second Quarter Results and Resumption of Share Repurchase Program
-- 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* 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.
* 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. Consolidated Balance Sheets and Statements of Earnings for Second Quarter 2000
Media contact:
Richard Secor
414/656-5561