Organic sales up 8.4%; Operating
earnings before financial services of 17.7% of sales improves 100
basis points; Diluted EPS of $2.03 increases 12.8%
Snap-on Incorporated (NYSE: SNA), a leading global innovator,
manufacturer and marketer of tools, equipment, diagnostics, repair
information and systems solutions for professional users performing
critical tasks, today announced operating results for the second
quarter of 2015.
- Sales of $851.8 million increased $25.3
million, or 3.1%, from 2014 levels; excluding $43.4 million of
unfavorable foreign currency translation and $2.8 million of
acquisition-related sales, organic sales increased $65.9 million or
8.4%.
- Operating earnings before financial
services of $150.8 million improved 100 basis points to 17.7% of
sales as compared to $138.1 million, or 16.7% of sales, last
year.
- Financial services operating earnings
of $41.4 million increased $6.6 million, or 19.0%, from 2014
levels; financial services revenues of $58.7 million increased
13.5% from 2014 levels.
- Consolidated operating earnings of
$192.2 million improved to 21.1% of revenues (net sales plus
financial services revenue) as compared to $172.9 million, or 19.7%
of revenues, last year.
- The second quarter effective income tax
rate was 32.0% in 2015 and 32.9% in 2014.
- Net earnings of $120.0 million, or
$2.03 per diluted share, compared to net earnings of $106.1
million, or $1.80 per diluted share, a year ago.
“We’re encouraged by the ongoing progress reflected in our
second quarter results, including 8.4% organic sales growth, a
17.7% operating margin before financial services, representing a
100 basis point improvement, and a 12.8% increase in diluted
earnings per share,” said Nick Pinchuk, Snap-on chairman and chief
executive officer. “We believe these results once again validate
Snap-on’s ability to build upon our unique combination of
capabilities in serving serious professionals and to successfully
navigate our runways for coherent growth and operating improvement
in multiple industries across varied geographies. Finally, this
continued progress is only possible as a result of the tremendous
dedication, effort and skill across the Snap-on team. In that
regard, I thank our franchisees and associates worldwide for their
contributions, commitment and support.”
Segment Results
Commercial & Industrial Group segment sales of $295.8
million in the quarter increased $8.6 million, or 3.0%, from 2014
levels. Excluding $21.2 million of unfavorable foreign currency
translation, organic sales increased $29.8 million, or 11.2%,
reflecting sales gains across all of the segment’s businesses.
Operating earnings of $42.2 million in the period, including
$2.0 million of unfavorable foreign currency effects, increased
$4.0 million from 2014 levels, and the operating margin (operating
earnings as a percentage of segment sales) of 14.3% improved 100
basis points from 13.3% a year ago.
Snap-on Tools Group segment sales of $398.7 million in
the quarter rose $29.6 million, or 8.0%, from 2014 levels.
Excluding $10.6 million of unfavorable foreign currency
translation, organic sales increased $40.2 million, or 11.2%,
reflecting similar sales increases in both the company’s U.S. and
international franchise operations.
Operating earnings of $68.0 million in the period, including
$6.7 million of unfavorable foreign currency effects, increased
$7.5 million from 2014 levels, and the operating margin of 17.1%
improved 70 basis points from 16.4% a year ago.
Repair Systems & Information Group segment sales of
$277.4 million in the quarter decreased $1.1 million, or 0.4%, from
2014 levels. Excluding $12.6 million of unfavorable foreign
currency translation and $2.8 million of acquisition-related sales,
organic sales increased $8.7 million, or 3.3%, reflecting higher
sales of diagnostic and repair information products to independent
repair shop owners and managers, increased sales to OEM
dealerships, and higher sales of undercar equipment.
Operating earnings of $67.7 million in the period, including
$3.3 million of unfavorable foreign currency effects, increased
$3.1 million from 2014 levels, and the operating margin of 24.4%
improved 120 basis points from 23.2% a year ago.
Financial Services operating earnings of $41.4 million on
revenue of $58.7 million in the quarter, compared to operating
earnings of $34.8 million on revenue of $51.7 million a year
ago.
Corporate expenses of $27.1 million in the quarter
increased $1.9 million from $25.2 million last year, primarily
reflecting higher pension expense.
Outlook
Snap-on expects to make continued progress along its defined
runways for coherent growth, including enhancing the franchise
network, expanding in the vehicle repair garage, extending to
critical industries and building in emerging markets. In pursuit of
these initiatives, Snap-on continues to expect that capital
expenditures in 2015 will be in a range of $80 million to $90
million. Snap-on also continues to expect that its full year 2015
effective income tax rate will be at or below its 2014 full year
rate.
Conference Call and Webcast on July 23,
2015, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, July
23, 2015, 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 http://www.snapon.com/sna and click on the link to the
webcast. The slide presentation accompanying the call can be
accessed under the Downloads tab in the webcast viewer, as well as
on the Snap-on website under the tabs Investor Information /
Investor Events / Company Presentations.
About Snap-on
Snap-on Incorporated is a leading global innovator, manufacturer
and marketer of tools, equipment, diagnostics, repair information
and systems solutions for professional users performing critical
tasks. 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 for customers in industries, including
aviation and aerospace, agriculture, construction, government and
military, mining, natural resources, power generation and technical
education. Snap-on also derives income from various financing
programs to facilitate the sales of its products. Products and
services are sold through the company’s franchisee, company-direct,
distributor and internet channels. Founded in 1920, Snap-on is a
$3.3 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 may contain
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, 2015, which are
incorporated herein by reference. 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 Six Months
Ended July 4, June 28, July 4, June
28, 2015 2014 2015 2014
Net sales $ 851.8 $ 826.5 $ 1,679.6 $ 1,614.0 Cost of goods
sold (432.8 ) (426.1 ) (850.5 ) (834.9
)
Gross profit 419.0 400.4 829.1 779.1 Operating expenses
(268.2 ) (262.3 ) (540.4 ) (519.3 )
Operating earnings before financial services 150.8 138.1
288.7 259.8
Financial services revenue 58.7 51.7
116.1 101.9 Financial services expenses (17.3 ) (16.9
) (34.4 ) (32.7 )
Operating earnings from
financial services 41.4 34.8
81.7 69.2
Operating earnings
192.2 172.9 370.4 329.0 Interest expense (12.9 ) (12.7 ) (25.9 )
(26.4 ) Other income (expense) – net (0.7 ) 0.3
(1.4 ) 0.2
Earnings before income
taxes and equity earnings 178.6 160.5 343.1 302.8 Income tax
expense (56.2 ) (51.9 ) (108.0 ) (96.2
)
Earnings before equity earnings 122.4 108.6 235.1 206.6
Equity earnings, net of tax 0.6 0.2
1.1 0.4
Net earnings 123.0 108.8
236.2 207.0 Net earnings attributable to noncontrolling interests
(3.0 ) (2.7 ) (5.7 ) (5.0 )
Net
earnings attributable to Snap-on Inc. $ 120.0 $ 106.1
$ 230.5 $ 202.0
Net earnings
per share attributable to Snap-on Inc.: Basic $ 2.07 $ 1.83 $
3.97 $ 3.48 Diluted 2.03 1.80 3.90 3.42
Weighted-average
shares outstanding: Basic 58.1 58.1 58.1 58.1 Effect of
dilutive securities 1.0 0.9 1.0
0.9 Diluted 59.1 59.0
59.1 59.0
SNAP-ON INCORPORATED
Supplemental Segment Information (Amounts in
millions) (unaudited) Three Months Ended
Six Months Ended July 4, June 28, July
4, June 28, 2015 2014 2015
2014 Net sales: Commercial & Industrial
Group $ 295.8 $ 287.2 $ 593.3 $ 577.8 Snap-on Tools Group 398.7
369.1 776.9 712.7 Repair Systems & Information Group
277.4 278.5 549.7 541.2
Segment net sales 971.9 934.8 1,919.9 1,831.7
Intersegment eliminations (120.1 ) (108.3 )
(240.3 ) (217.7 )
Total net sales $ 851.8 $ 826.5 $
1,679.6 $ 1,614.0 Financial Services revenue 58.7
51.7 116.1 101.9
Total
revenues $ 910.5 $ 878.2 $ 1,795.7 $
1,715.9
Operating earnings: Commercial &
Industrial Group $ 42.2 $ 38.2 $ 86.2 $ 77.3 Snap-on Tools Group
68.0 60.5 127.8 109.7 Repair Systems & Information Group 67.7
64.6 131.6 122.7 Financial Services 41.4 34.8
81.7 69.2
Segment operating
earnings 219.3 198.1 427.3 378.9 Corporate (27.1 )
(25.2 ) (56.9 ) (49.9 )
Operating
earnings $ 192.2 $ 172.9 $ 370.4 $ 329.0 Interest expense (12.9
) (12.7 ) (25.9 ) (26.4 ) Other income (expense) – net (0.7
) 0.3 (1.4 ) 0.2
Earnings
before income taxes and equity earnings $ 178.6 $
160.5 $ 343.1 $ 302.8
SNAP-ON INCORPORATED
Condensed Consolidated Balance
Sheets
(Amounts in millions)
(unaudited)
July 4,
January 3,
Assets
2015
2015
Cash and cash equivalents $ 124.6 $ 132.9 Trade and other accounts
receivable – net 558.0 550.8 Finance receivables – net 421.7 402.4
Contract receivables – net 69.1 74.5 Inventories – net 499.2 475.5
Deferred income tax assets 96.7 101.0 Prepaid expenses and other
assets 128.6 121.5 Total current assets
1,897.9 1,858.6 Property and equipment – net 411.2 404.5
Deferred income tax assets 88.2 93.2 Long-term finance receivables
– net 708.8 650.5 Long-term contract receivables – net 252.9 242.0
Goodwill 787.8 810.7 Other intangibles – net 198.0 203.3 Other
assets 45.9 47.3
Total assets $
4,390.7 $ 4,310.1
Liabilities and
Equity Notes payable $ 61.0 $ 56.6 Accounts payable 166.1 145.0
Accrued benefits 45.1 53.8 Accrued compensation 76.6 99.2
Franchisee deposits 68.4 65.8 Other accrued liabilities
322.6 298.3 Total current liabilities 739.8
718.7 Long-term debt 861.4 862.7 Deferred income tax
liabilities 160.4 159.2 Retiree health care benefits 40.3 42.5
Pension liabilities 184.6 217.9 Other long-term liabilities
88.0 83.8
Total liabilities
2,074.5 2,084.8
Equity
Shareholders' equity attributable to Snap-on Inc. Common
stock 67.4 67.4 Additional paid-in capital 285.5 254.7 Retained
earnings 2,805.5 2,637.2 Accumulated other comprehensive loss
(302.0 ) (248.2 ) Treasury stock at cost (557.9 )
(503.3 )
Total shareholders' equity attributable to Snap-on
Inc. 2,298.5 2,207.8 Noncontrolling interests 17.7
17.5
Total equity 2,316.2
2,225.3
Total liabilities and equity $ 4,390.7
$ 4,310.1
SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows (Amounts
in millions) (unaudited)
Three Months Ended July 4, June 28,
2015 2014 Operating activities: Net earnings $
123.0 $ 108.8
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 14.4 13.6 Amortization of other intangibles 6.2 6.1
Provision for losses on finance receivables 7.3 7.2 Provision for
losses on non-finance receivables 3.0 3.2 Stock-based compensation
expense 11.6 10.1 Excess tax benefits from stock-based compensation
(3.0 ) (2.7 ) Deferred income tax benefit (7.6 ) (9.6 ) Loss on
sale of assets 0.3 0.2 Changes in operating assets and liabilities,
net of effects of acquisition: Increase in trade and other accounts
receivable (6.6 ) (5.0 ) Increase in contract receivables (6.4 )
(8.0 ) Increase in inventories (11.8 ) (9.9 ) Increase in prepaid
and other assets (11.4 ) (15.6 ) Increase in accounts payable 2.9
11.4 Increase in accruals and other liabilities 38.4
14.6
Net cash provided by operating activities
160.3 124.4
Investing activities: Additions to
finance receivables (217.2 ) (200.9 ) Collections of finance
receivables 159.1 142.9 Capital expenditures (27.7 ) (22.7 )
Acquisition of business - (41.6 ) Disposal of property and
equipment 0.4 0.3 Other - 2.3
Net
cash used by investing activities (85.4 ) (119.7 )
Financing activities: Proceeds from short-term borrowings
1.6 - Repayment of short-term borrowings (1.6 ) - Net increase
(decrease) in other short-term borrowings (17.6 ) 29.8 Purchases of
treasury stock (37.2 ) (40.4 ) Cash dividends paid (30.8 ) (25.6 )
Proceeds from stock purchase and option plans 22.0 19.3 Excess tax
benefits from stock-based compensation 3.0 2.7 Other (4.3 )
(2.9 )
Net cash used by financing activities (64.9 )
(17.1 )
Effect of exchange rate changes on cash and cash
equivalents 0.2 0.4
Increase
(decrease) in cash and cash equivalents 10.2 (12.0 )
Cash and cash equivalents at beginning of period 114.4
127.8
Cash and cash equivalents at end of
period $ 124.6 $ 115.8
Supplemental
cash flow disclosures: Cash paid for interest
$
(1.7 )
$
(1.6 ) Net cash paid for income taxes (45.7 ) (71.2 )
SNAP-ON INCORPORATED Condensed Consolidated Statements of
Cash Flows (Amounts in millions) (unaudited)
Six Months Ended July
4, June 28, 2015 2014 Operating
activities: Net earnings $ 236.2 $ 207.0
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 28.2 27.0 Amortization of other intangibles 12.4 12.3
Provision for losses on finance receivables 14.4 13.4 Provision for
losses on non-finance receivables 7.9 6.6 Stock-based compensation
expense 23.1 18.7 Excess tax benefits from stock-based compensation
(14.0 ) (9.6 ) Deferred income tax provision (benefit) 3.1 (2.8 )
Loss on sale of assets 0.3 0.2 Changes in operating assets and
liabilities, net of effects of acquisition: Increase in trade and
other accounts receivable (26.8 ) (36.0 ) Increase in contract
receivables (9.7 ) (13.9 ) Increase in inventories (35.8 ) (28.4 )
Increase in prepaid and other assets (38.4 ) (35.3 ) Increase in
accounts payable 27.8 18.4 Increase in accruals and other
liabilities 9.7 35.1
Net cash
provided by operating activities 238.4 212.7
Investing activities: Additions to finance receivables
(416.0 ) (370.6 ) Collections of finance receivables 319.3 282.3
Capital expenditures (45.8 ) (41.0 ) Acquisition of business -
(41.6 ) Disposal of property and equipment 0.4 0.5 Other
(2.8 ) (0.2 )
Net cash used by investing activities
(144.9 ) (170.6 )
Financing activities: Repayment of
long-term debt - (100.0 ) Proceeds from short-term borrowings 1.6 -
Repayment of short-term borrowings (1.6 ) - Net increase in other
short-term borrowings 5.2 33.8 Purchases of treasury stock (86.9 )
(62.5 ) Cash dividends paid (61.7 ) (51.2 ) Proceeds from stock
purchase and option plans 36.5 32.1 Excess tax benefits from
stock-based compensation 14.0 9.6 Other (7.3 ) (6.0 )
Net cash used by financing activities (100.2 ) (144.2 )
Effect of exchange rate changes on cash and cash
equivalents (1.6 ) 0.3
Decrease in cash
and cash equivalents (8.3 ) (101.8 ) Cash and cash
equivalents at beginning of year 132.9 217.6
Cash and cash equivalents at end of period $ 124.6
$ 115.8
Supplemental cash flow
disclosures: Cash paid for interest $ (25.4 ) $ (27.8 ) Net
cash paid for income taxes (66.4 ) (87.9 )
SNAP-ON
INCORPORATED Supplemental Consolidating Data - Condensed
Statements of Earnings (Amounts in millions)
(unaudited)
Operations* Financial Services Three Months
Ended Three Months Ended July 4, June 28,
July 4, June 28, 2015 2014 2015
2014 Net sales $ 851.8 $ 826.5 $ - $ - Cost of
goods sold (432.8 ) (426.1 ) - -
Gross profit 419.0 400.4 - - Operating expenses
(268.2 ) (262.3 ) - -
Operating earnings before financial services 150.8 138.1 - -
Financial services revenue - - 58.7 51.7 Financial
services expenses - - (17.3 )
(16.9 )
Operating earnings from financial services
- - 41.4 34.8
Operating earnings 150.8 138.1 41.4 34.8
Interest expense (12.8 ) (12.5 ) (0.1 ) (0.2 ) Intersegment
interest income (expense) – net 15.7 13.9 (15.7 ) (13.9 ) Other
income (expense) – net (0.7 ) 0.3 -
-
Earnings before income taxes and equity
earnings 153.0 139.8 25.6 20.7 Income tax expense (46.8
) (44.3 ) (9.4 ) (7.6 )
Earnings before
equity earnings 106.2 95.5 16.2 13.1
Financial services –
net earnings attributable to Snap-on Inc. 16.2 13.1 - -
Equity earnings, net of tax 0.6 0.2
- -
Net earnings 123.0 108.8
16.2 13.1 Net earnings attributable to noncontrolling interests
(3.0 ) (2.7 ) - -
Net
earnings attributable to Snap-on Inc. $ 120.0 $ 106.1
$ 16.2 $ 13.1 * Snap-on Inc. with
Financial Services on the equity method. Transactions between the
Operations and Financial Services businesses were eliminated to
arrive at the consolidated financial statements.
SNAP-ON INCORPORATED Supplemental Consolidating Data -
Condensed Statements of Earnings (Amounts in millions)
(unaudited)
Operations* Financial Services Six Months
Ended Six Months Ended July 4, June 28,
July 4, June 28, 2015 2014 2015
2014 Net sales $ 1,679.6 $ 1,614.0 $ - $ -
Cost of goods sold (850.5 ) (834.9 ) -
-
Gross profit 829.1 779.1 - - Operating
expenses (540.4 ) (519.3 ) - -
Operating earnings before financial services 288.7
259.8 - -
Financial services revenue - - 116.1 101.9
Financial services expenses - -
(34.4 ) (32.7 )
Operating earnings from financial
services - - 81.7
69.2
Operating earnings 288.7 259.8
81.7 69.2 Interest expense (25.7 ) (26.0 ) (0.2 ) (0.4 )
Intersegment interest income (expense) – net 30.7 27.3 (30.7 )
(27.3 ) Other income (expense) – net (1.4 ) 0.2
- -
Earnings before income
taxes and equity earnings 292.3 261.3 50.8 41.5 Income tax
expense (89.3 ) (81.0 ) (18.7 ) (15.2 )
Earnings before equity earnings 203.0 180.3 32.1 26.3
Financial services – net earnings attributable to Snap-on
Inc. 32.1 26.3 - - Equity earnings, net of tax 1.1
0.4 - -
Net
earnings 236.2 207.0 32.1 26.3 Net earnings attributable to
noncontrolling interests (5.7 ) (5.0 ) -
-
Net earnings attributable to Snap-on
Inc. $ 230.5 $ 202.0 $ 32.1 $ 26.3
* Snap-on Inc. with Financial Services on the equity method.
Transactions between the Operations and Financial Services
businesses were eliminated to arrive at the consolidated financial
statements.
SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Balance Sheets
(Amounts in millions) (unaudited)
Operations*
Financial Services July 4, January 3, July
4, January 3, 2015 2015 2015
2015 Assets Cash and cash equivalents $ 124.4
$ 132.8 $ 0.2 $ 0.1 Intersegment receivables 19.2 16.0 - - Trade
and other accounts receivable – net 557.7 550.5 0.3 0.3 Finance
receivables – net - - 421.7 402.4 Contract receivables – net 7.6
7.6 61.5 66.9 Inventories – net 499.2 475.5 - - Deferred income tax
assets 80.0 85.4 16.7 15.6 Prepaid expenses and other assets
133.1 125.5 1.6 0.9 Total current assets
1,421.2 1,393.3 502.0 486.2 Property and equipment – net
410.3 403.4 0.9 1.1 Investment in Financial Services 228.4 218.9 -
- Deferred income tax assets 87.9 92.9 0.3 0.3 Intersegment
long-term notes receivable 281.0 232.1 - - Long-term finance
receivables – net - - 708.8 650.5 Long-term contract receivables –
net 13.3 12.8 239.6 229.2 Goodwill 787.8 810.7 - - Other
intangibles – net 198.0 203.3 - - Other assets 50.7
50.9 1.0 1.0
Total assets $ 3,478.6 $ 3,418.3
$ 1,452.6 $ 1,368.3
Liabilities and Equity Notes
payable $ 61.0 $ 56.6 $ - $ - Accounts payable 166.0 144.7 0.1 0.3
Intersegment payables - - 19.2 16.0 Accrued benefits 45.1 53.8 - -
Accrued compensation 74.2 95.2 2.4 4.0 Franchisee deposits 68.4
65.8 - - Other accrued liabilities 283.2 285.0
45.5 18.2 Total current liabilities 697.9 701.1 67.2 38.5
Long-term debt and intersegment long-term debt - - 1,142.4
1,094.8 Deferred income tax liabilities 160.4 158.6 - 0.6 Retiree
health care benefits 40.3 42.5 - - Pension liabilities 184.6 217.9
- - Other long-term liabilities 79.2 72.9 14.6
15.5
Total liabilities 1,162.4 1,193.0
1,224.2 1,149.4
Total shareholders' equity
attributable to Snap-on Inc. 2,298.5 2,207.8 228.4 218.9
Noncontrolling interests 17.7 17.5 - -
Total equity 2,316.2 2,225.3 228.4
218.9
Total liabilities and equity $ 3,478.6 $
3,418.3 $ 1,452.6 $ 1,368.3 * Snap-on Inc. with Financial
Services on the equity method. Transactions between the Operations
and Financial Services businesses were eliminated to arrive at the
consolidated financial statements.
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Snap-on IncorporatedInvestors:Leslie
Kratcoski262/656-6121orMedia:Richard Secor262/656-5561
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