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Snap-on Earns 46 Cents Per Share in the Third Quarter in Line With Previously Announced Expectations
KENOSHA, Wis.--(BUSINESS WIRE)--Oct. 24, 2000--Snap-on Incorporated (NYSE: SNA) today reported third-quarter results in line with its previously announced expectations.
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Earnings per share - diluted were $0.46 in the 2000 third quarter compared with $0.62 in the third quarter of 1999. Third-quarter 2000 net earnings were $26.9 million compared with $36.6 million in 1999. The 1999 results exclude a non-recurring gain of $5.9 million after-tax, or $0.10 per share. Inclusive of this 1999 non-recurring gain, net earnings were $42.6 million, or $0.72 per diluted share.
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Net sales in the quarter increased 13% to a record $511.8 million from $453.2 million in 1999, principally reflecting the contribution from Bahco Group AB (formerly Sandvik Saws and Tools) acquired September 30, 1999. Organic sales growth - excluding Bahco, a 2% effect of currency translations and a 1% impact of discontinued product lines - was 1%.
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Cash earnings per share(a) were $0.52 in the third quarter of 2000 compared with $0.68 in 1999. As a result of strong free cash flow, total debt decreased $113.5 million compared to a year ago and the total debt-to-capital ratio improved to 42.0% at quarter-end compared with 46.6% a year ago. Snap-on also repurchased $20.2 million of common stock in the third quarter. The corporation has an open and available authorization of approximately $140 million for common stock repurchases, and expects to continue to make open-market purchases from time to time.
Third-quarter 2000 results were in line with the revised forecast. As previously announced, a less robust market for tools and equipment in the vehicle-repair market in both Europe and North America, coupled with unfavorable currency translation, negatively impacted results compared with a year ago.
Margins were impacted primarily due to the planned shift in business mix from the acquisition of Bahco and incremental growth in the facilitation business, as well as due to margin erosion from having significant sourcing platforms in strong currency denominated countries. With less-than-anticipated sales, higher expenses for items like freight also negatively affected year-over-year profitability, partially offset by continued cost savings benefits from Project Simplify streamlining. Bahco, impacted by unfavorable currency translations, was earnings neutral for the quarter, while sales, stated in local currencies, were largely on track with an ambitious plan.
In the worldwide Snap-on(R) dealer channel, organic sales grew 1% in the third quarter of 2000 compared with the same period in 1999. North American dealer sales increased 1% in the third quarter compared with a year ago, excluding emissions-testing equipment. In local currencies, European dealer sales decreased 5% and Japan and Australia were down 8%.
In the company's commercial and industrial tool, diagnostics and equipment business, sales increased 30%, and were up 35% excluding currency translation effects, in the third quarter compared with the prior year. Five percent growth in industrial sales and incremental facilitation sales to new-vehicle dealerships were partially offset by the negative impact from currency translation, the continued soft market for diagnostics and emissions-testing equipment in Europe, and a decline in equipment sales in North America. Organic sales grew 1% (excluding Bahco and currency translation).
Net finance income declined largely 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.
Inventories reduced
Third-quarter results continued to reflect the benefits from an increased focus on accelerating cash flow and reducing inventories. At quarter-end, inventories were $47.3 million below a year ago. Better information systems capabilities along the supply chain, from order forecasting to manufacturing planning, coupled with faster cycle times, is allowing Snap-on to improve inventory turnover while maintaining record levels of sales and service.
Nine-month results
For the nine months of 2000, diluted earnings per share were $1.79 compared with $1.84 earned in 1999. Net earnings were $104.9 million in 2000 compared with $108.2 million in 1999. The 1999 results exclude a non-recurring charge of $8.4 million after-tax, or $0.15 per share. Inclusive of this charge, 1999 earnings were $99.8 million, or $1.69 per share. Cash earnings per share - diluted* were $2.00 for the first nine months of 2000, compared with $1.99 a year ago. Net sales for the nine months increased to a record $1.6 billion in 2000 from $1.4 billion in 1999.
Outlook
As the markets adapt to the effects of higher fuel costs, the company is beginning to see some moderation in their impact on sales levels. The company, as previously noted, expects a resumption of increased sales during the fourth quarter. Increasing the number of new dealers remains a point of focus. The company anticipates that the dealer network will increase approximately 10% during the next 12 to 18 months to better serve North American customers. In addition, the company will manage expenses to adjust to the overall softer market conditions. As a result, the company expects to meet current expectations for earnings per share in the fourth quarter and the year 2001.
Management's discussion of quarterly results will be broadcast live via webcast at http://www.snapon.com this morning, October 24, 2000 at 9:00 a.m. CDT. An audio replay will be archived and available at the same site for three months.
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 non-recurring items and 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, oil and fuel prices, 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
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
THIRD QUARTER ENDED NINE MONTHS ENDED
--------------------------- ----------------------------
Sept. 30, Oct. 2, % INCR. Sept. 30, Oct. 2, % INCR.
2000 1999 (DECR.) 2000 1999 (DECR.)
---------- -------- ------ --------- -------- -------
Net sales $511,830 $453,157 12.9 $1,619,376 $1,378,895 17.4
Cost of
goods sold (279,378) (234,738) 19.0 (874,260) (716,310) 22.1
Operating
expenses (189,585) (170,504) 11.2 (582,173) (527,215) 10.4
Net finance
income 8,426 12,267 (31.3) 30,576 46,400 (34.1)
Restructuring and
other non-recurring
charges - (5,315) (100.0) (353) (14,285) (97.5)
Interest
expense (10,297) (5,262) 95.7 (31,195) (15,360) 103.1
Other income
(expense)-net 1,318 16,558 (92.0) 3,218 3,319 (3.0)
---------- -------- ------ --------- -------- -------
Earnings before
income taxes 42,314 66,163 (36.0) 165,189 155,444 6.3
Income taxes 15,445 23,613 (34.6) 60,287 55,654 8.3
---------- -------- ------ --------- --------- -------
Net earnings $ 26,869 $ 42,550 (36.9) $104,902 $ 99,790 5.1
========== ======== ====== ========= ========= =======
Earnings per weighted
average common
share-basic $ 0.46 $ 0.73 (37.0) $ 1.79 $ 1.71 4.7
========== ======== ====== ========= ========= =======
Earnings per weighted
average common
share-diluted $ 0.46 $ 0.72 (36.1) $ 1.79 $ 1.69 5.9
========== ======== ====== ========= ========= =======
Weighted average
common shares
outstanding -
basic 58,488 58,491 - 58,562 58,482 0.1
Weighted average
common shares
outstanding -
diluted 58,678 58,915 (0.4) 58,751 58,906 (0.3)
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
Sept. 30, 2000 Jan. 1, 2000 Oct. 2, 1999
-------------- ------------- ------------
ASSETS
Cash and cash
equivalents $ 8,968 $ 17,617 $ 42,688
Accounts receivable
less allowances 618,067 617,645 568,660
Inventories 450,743 454,841 498,070
Prepaid expenses and
other assets 107,324 116,238 189,536
-------------- ------------- --------------
Total current assets 1,185,102 1,206,341 1,298,954
Property and equipment
- net 351,746 362,598 351,002
Deferred income tax
benefits 53,804 54,652 48,197
Intangibles 414,540 453,293 454,256
Other assets 70,228 72,938 54,537
-------------- ------------- --------------
TOTAL ASSETS $ 2,075,420 $ 2,149,822 $ 2,206,946
============== ============= ==============
LIABILITIES
Accounts payable $ 142,769 $ 146,422 $ 152,015
Notes payable and
current maturities
of long-term debt 29,811 22,349 37,018
Accrued compensation 49,221 57,540 41,267
Dealer deposits 37,288 48,251 40,367
Deferred subscription
revenue 45,662 42,056 41,558
Other accrued liabilities 141,385 136,131 192,057
-------------- ------------- --------------
Total current liabilities 446,136 452,749 504,282
Long-term debt 563,382 607,476 669,715
Deferred income taxes 26,202 26,989 18,128
Retiree health care benefits 94,202 91,391 91,525
Pension liability 90,302 96,238 91,930
Other long-term liabilities 35,400 49,718 20,581
-------------- ------------- --------------
TOTAL LIABILITIES $ 1,255,624 $ 1,324,561 $ 1,396,161
SHAREHOLDERS' EQUITY
Common stock -
$1 par value 66,774 66,729 66,718
Additional paid-in capital 43,272 62,292 96,936
Retained earnings 1,020,582 957,763 943,787
Accumulated other
comprehensive income
(loss) (90,545) (35,814) (35,242)
Grantor stock trust at
fair market value (151,798) (177,373) (212,963)
Treasury stock at cost (68,489) (48,336) (48,451)
-------------- ------------- --------------
TOTAL SHAREHOLDERS'
EQUITY 819,796 825,261 810,785
-------------- ------------- --------------
TOTAL LIABILITIES &
SHAREHOLDERS'
EQUITY $ 2,075,420 $ 2,149,822 $ 2,206,946
============== ============= ==============
--30--cee/cgo*
| CONTACT: | Snap-on Incorporated |
|---|---|
| Media contact | |
| Richard Secor, 262/656-5561 | |
| Investor relations | |
| Bill Pfund, 262/656-6488 | |
| URL: | www.snapon.com |