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Snap-on Reports Record Third-Quarter Results
Third-quarter diluted earnings per share were $0.62, a 63.2% increase from $0.38 in the third quarter of a year ago, excluding restructuring-related and other non-recurring items in both periods. Earnings for the third quarter, excluding all non-recurring items, improved to $36.6 million from $22.5 million, an increase of 63.1% from the same period a year ago. Net earnings were $42.6 million, or $0.72 per diluted share, for the third quarter of 1999 compared with a net loss of $74.0 million, or $1.24 per share, in the third quarter of 1998. Net sales increased 6.1% to $453.2 million compared with $427.3 million in the third quarter of 1998, driven largely by solid increases across all business segments in North America. It was the seventh consecutive third quarter with record sales.
"The third-quarter results, now exceeding the previous records established in 1997, attest to the progress that our employees achieved in implementing organizational realignments and process improvements during the past year," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "Our focus on continuing to serve customer needs, coupled with an improving cost structure, are a powerful combination in positioning Snap-on to return to its characteristic growth and profitability trends."
Earnings from operations, before all non-recurring items, increased 86.3% in the quarter. Gross margin in the quarter was 48.2% compared with 47.3% in the 1998 third quarter, and operating expenses as a percent of sales declined to 37.6% from 41.3% in 1998, reflecting favorable operating leverage and the effect of savings from Project Simplify.
In the third quarter of 1999, $5.3 million pre-tax ($3.2 million after tax or $0.06 per diluted share) in restructuring-related transitional and other non-recurring charges were recorded related to the company's previously announced Project Simplify initiative compared with $133.1 million pre-tax ($96.5 million after tax or $1.62 per diluted share) in restructuring and other non-recurring charges in the third quarter of 1998. Total restructuring, transitional and other non-recurring charges for Project Simplify recorded through the end of the third quarter were $164.1 million, against the previously announced total of $185 million to be recorded through the first quarter of 2000. In conjunction with receiving a $36.0 million cash payment in early and final settlement from the State of Texas relating to the "Tejas Companies" litigation, Snap-on recorded in the third quarter a non-recurring $1.0 million charge ($0.7 million after tax or $0.01 per share) against the $37.0 million net receivable previously included in the company's Consolidated Balance Sheets under Intangible and Other Assets.
In addition, a non-recurring gain of $15.3 million ($9.8 million after tax or $0.17 per diluted share) was recorded in the third quarter on the foreign currency hedge of the US$400 million equivalent purchase price commitment for the Sandvik Saws and Tools acquisition, that closed on September 30, 1999. Snap-on anticipates that transaction to be neutral to Snap-on's earnings in the fourth quarter of 1999 and accretive thereafter.
Nine-month Performance
Diluted earnings per share for the first nine months of 1999 increased 39.4% to $1.84 compared with $1.32 for the first nine months of 1998, excluding restructuring-related and other non-recurring items in both years. Earnings for the first nine months, excluding all non-recurring items, were $108.2 million a 36.9% increase versus $79.1 million in the same period a year ago. Net earnings were $99.8 million, or $1.69 per diluted share, for the nine-month period ended October 2, 1999, compared with a net loss of $17.4 million, or $0.29 per diluted share, for the first nine months of 1998. Net sales for the first nine months of 1999 increased 6.4% to $1.4 billion compared with $1.3 billion for the first nine months of 1998.
These performance records were posted as the company passed the one-year mark of its Project Simplify restructuring initiative to create a more efficient and market-responsive organization. The company expects to achieve its $30 million in targeted savings for 1999 and the $60 million in annual cost savings targeted for the year 2000. In the last four quarters, the company has accomplished more than 85% of its Project Simplify initiatives. It expects to complete the majority of the remainder by year end, with a few actions carrying over into the first quarter of the year 2000.
"The contributions from our more competitive cost structure and streamlined operations are clearly visible. We believe the increased speed and flexibility in our businesses provide a sound basis for future growth and improvements," said Cornog.
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 and other commercial industries. Products are sold through its franchise dealer van, company direct sales and distributor channels. Founded in 1920, Snap-on is an S&P 500 company headquartered in Kenosha, Wisconsin.
Statements in this news release that are not historical facts, including statements (i) that include the words "believes," "expects," or "estimates" or words of similar importance 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 implement Project Simplify initiatives; the Corporation's ability to withstand external negative factors including changes in trade, monetary and fiscal policies, laws and regulations, or other activities of governments or their agencies; significant changes in the current competitive environment; inflation; currency fluctuations or the material worsening of the economic and political situation in Asia or other parts of the world; and the achievement of productivity improvements and cost reductions. 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 Third Quarter 1999
Media contact:
Richard Secor
414/656-5561