Organic sales up 7.3%; Operating
earnings before financial services of 17.5% of sales improves 130
basis points; Diluted EPS of $1.98 increases 12.5%
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 third
quarter of 2015.
- Sales of $821.5 million increased $15.2
million, or 1.9%, from 2014 levels; excluding $42.6 million of
unfavorable foreign currency translation and $2.1 million of
acquisition-related sales, organic sales increased $55.7 million or
7.3%.
- Operating earnings before financial
services of $143.6 million improved 130 basis points to 17.5% of
sales as compared to $130.6 million, or 16.2% of sales, last
year.
- Financial services operating earnings
of $43.5 million increased $5.8 million, or 15.4%, from 2014
levels; financial services revenue of $61.1 million increased 14.0%
from 2014 levels.
- Consolidated operating earnings of
$187.1 million improved to 21.2% of revenues (net sales plus
financial services revenue) as compared to $168.3 million, or 19.6%
of revenues, last year.
- The third quarter effective income tax
rate was 31.6% in 2015 and 31.8% in 2014.
- Net earnings of $116.8 million, or
$1.98 per diluted share, compared to net earnings of $103.7
million, or $1.76 per diluted share, a year ago.
“We believe our third quarter results continue to confirm
Snap-on’s capabilities in serving serious professionals performing
critical tasks in workplaces of consequence around the world,” said
Nick Pinchuk, Snap-on chairman and chief executive officer. “These
results, which include 7.3% organic sales growth and a 12.5%
increase in diluted earnings per share, demonstrate continued
progress along our defined runways for coherent growth while
overcoming headwinds in certain end markets and geographies. The
130 basis point improvement in operating margin before financial
services also reflects contributions from our Snap-on Value
Creation Processes, which drive ongoing improvements in safety,
quality, customer connection, innovation and rapid continuous
improvement. As further evidence of our success in connecting with
customers and translating that insight into winning innovation, new
products again aided our growth in the quarter and we were honored
to have several of them recognized by both MOTOR
Magazine and Professional Tool & Equipment
News with multiple awards. Finally, these results and
achievements reflect significant effort and dedication across the
organization and I thank our franchisees and associates worldwide
for their extraordinary contributions and commitment.”
Segment Results
Commercial & Industrial Group segment sales of $288.5
million in the quarter decreased $10.3 million, or 3.4%, from 2014
levels. Excluding $19.8 million of unfavorable foreign currency
translation, organic sales increased $9.5 million, or 3.4%, as
sales gains in the segment’s European-based hand tools business and
its Asia/Pacific and power tools operations, were partially offset
by lower sales to the military and to customers in the oil and gas
sector.
Operating earnings of $41.3 million in the period, including
$2.9 million of unfavorable foreign currency effects, increased
$0.5 million from 2014 levels, and the operating margin (operating
earnings as a percentage of segment sales) of 14.3% improved 60
basis points from 13.7% a year ago.
Snap-on Tools Group segment sales of $380.6 million in
the quarter rose $25.6 million, or 7.2%, from 2014 levels.
Excluding $12.1 million of unfavorable foreign currency
translation, organic sales increased $37.7 million, or 11.0%,
reflecting similar sales increases in both the company’s U.S. and
international franchise operations.
Operating earnings of $56.3 million in the period, including
$6.8 million of unfavorable foreign currency effects, increased
$6.8 million from 2014 levels, and the operating margin of 14.8%
improved 90 basis points from 13.9% a year ago.
Repair Systems & Information Group segment sales of
$282.9 million in the quarter increased $11.7 million, or 4.3%,
from 2014 levels. Excluding $11.7 million of unfavorable foreign
currency translation and $2.1 million of acquisition-related sales,
organic sales increased $21.3 million, or 8.2%, reflecting
increased sales to OEM dealerships, higher sales of undercar
equipment, and gains in sales of diagnostic and repair information
products to independent repair shop owners and managers.
Operating earnings of $69.7 million in the period, including
$2.2 million of unfavorable foreign currency effects, increased
$6.4 million from 2014 levels, and the operating margin of 24.6%
improved 130 basis points from 23.3% a year ago.
Financial Services operating earnings of $43.5 million on
revenue of $61.1 million in the quarter compared to operating
earnings of $37.7 million on revenue of $53.6 million a year
ago.
Corporate expenses of $23.7 million in the quarter
increased $0.7 million from $23.0 million last year.
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 anticipates that capital expenditures in
2015 will be in a range of $80 million to $85 million, of which
$64.3 million was incurred through the end of the third quarter.
Snap-on 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 October
22, 2015, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday,
October 22, 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 Nine Months Ended October 3, September
27, October 3, September 27, 2015
2014 2015 2014 Net sales $ 821.5
$ 806.3 $ 2,501.1 $ 2,420.3 Cost of goods sold (414.6 )
(412.4 ) (1,265.1 ) (1,247.3 )
Gross
profit 406.9 393.9 1,236.0 1,173.0 Operating expenses
(263.3 ) (263.3 ) (803.7 ) (782.6 )
Operating earnings before financial services 143.6 130.6
432.3 390.4
Financial services revenue 61.1 53.6
177.2 155.5 Financial services expenses (17.6 ) (15.9
) (52.0 ) (48.6 )
Operating earnings from
financial services 43.5 37.7
125.2 106.9
Operating earnings
187.1 168.3 557.5 497.3 Interest expense (13.0 ) (12.7 ) (38.9 )
(39.1 ) Other income (expense) – net (0.5 ) (0.9 )
(1.9 ) (0.7 )
Earnings before income taxes and
equity earnings 173.6 154.7 516.7 457.5 Income tax expense
(53.9 ) (48.4 ) (161.9 ) (144.6 )
Earnings before equity earnings 119.7 106.3 354.8 312.9
Equity earnings, net of tax 0.2 0.1
1.3 0.5
Net earnings 119.9 106.4
356.1 313.4 Net earnings attributable to noncontrolling interests
(3.1 ) (2.7 ) (8.8 ) (7.7 )
Net
earnings attributable to Snap-on Inc. $ 116.8 $ 103.7
$ 347.3 $ 305.7
Net earnings
per share attributable to Snap-on Inc.: Basic $ 2.01 $ 1.78 $
5.98 $ 5.26 Diluted 1.98 1.76 5.88 5.18
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 Nine Months Ended October 3,
September 27, October 3, September 27,
2015 2014 2015 2014 Net
sales: Commercial & Industrial Group $ 288.5 $ 298.8 $
881.8 $ 876.6 Snap-on Tools Group 380.6 355.0 1,157.5 1,067.7
Repair Systems & Information Group 282.9
271.2 832.6 812.4
Segment net
sales 952.0 925.0 2,871.9 2,756.7 Intersegment eliminations
(130.5 ) (118.7 ) (370.8 ) (336.4 )
Total net sales $ 821.5 $ 806.3 $ 2,501.1 $ 2,420.3
Financial Services revenue 61.1 53.6
177.2 155.5
Total revenues $
882.6 $ 859.9 $ 2,678.3 $ 2,575.8
Operating earnings: Commercial & Industrial Group
$ 41.3 $ 40.8 $ 127.5 $ 118.1 Snap-on Tools Group 56.3 49.5 184.1
159.2 Repair Systems & Information Group 69.7 63.3 201.3 186.0
Financial Services 43.5 37.7
125.2 106.9
Segment operating earnings
210.8 191.3 638.1 570.2 Corporate (23.7 ) (23.0 )
(80.6 ) (72.9 )
Operating earnings $ 187.1 $
168.3 $ 557.5 $ 497.3 Interest expense (13.0 ) (12.7 ) (38.9 )
(39.1 ) Other income (expense) – net (0.5 ) (0.9 )
(1.9 ) (0.7 )
Earnings before income taxes
and equity earnings $ 173.6 $ 154.7 $ 516.7
$ 457.5
SNAP-ON INCORPORATED
Condensed Consolidated Balance Sheets (Amounts in
millions) (unaudited)
October 3, January 3, 2015 2015
Assets Cash and cash equivalents $ 119.2 $ 132.9
Trade and other accounts receivable – net 571.2 550.8 Finance
receivables – net 430.4 402.4 Contract receivables – net 86.1 74.5
Inventories – net 527.7 475.5 Deferred income tax assets 102.2
101.0 Prepaid expenses and other assets 116.1
121.5 Total current assets 1,952.9 1,858.6 Property
and equipment – net 413.2 404.5 Deferred income tax assets 88.8
93.2 Long-term finance receivables – net 734.2 650.5 Long-term
contract receivables – net 261.0 242.0 Goodwill 798.7 810.7 Other
intangibles – net 195.4 203.3 Other assets 47.2
47.3
Total assets $ 4,491.4 $ 4,310.1
Liabilities and Equity Notes payable $ 73.6 $
56.6 Accounts payable 178.1 145.0 Accrued benefits 48.7 53.8
Accrued compensation 87.2 99.2 Franchisee deposits 72.1 65.8 Other
accrued liabilities 325.8 298.3 Total
current liabilities 785.5 718.7 Long-term debt 864.1 862.7
Deferred income tax liabilities 161.0 159.2 Retiree health care
benefits 39.2 42.5 Pension liabilities 175.9 217.9 Other long-term
liabilities 86.9 83.8
Total
liabilities 2,112.6 2,084.8
Equity Shareholders' equity attributable to Snap-on
Inc. Common stock 67.4 67.4 Additional paid-in capital 293.7
254.7 Retained earnings 2,891.2 2,637.2 Accumulated other
comprehensive loss (322.2 ) (248.2 ) Treasury stock at cost
(569.1 ) (503.3 )
Total shareholders' equity attributable
to Snap-on Inc. 2,361.0 2,207.8 Noncontrolling interests
17.8 17.5
Total equity 2,378.8
2,225.3
Total liabilities and equity $
4,491.4 $ 4,310.1
SNAP-ON
INCORPORATED Condensed Consolidated Statements of Cash
Flows (Amounts in millions) (unaudited)
Three Months Ended October
3, September 27, 2015 2014 Operating
activities: Net earnings $ 119.9 $ 106.4
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 14.5 13.6 Amortization of other intangibles 6.0 6.1
Provision for losses on finance receivables 8.0 6.4 Provision for
losses on non-finance receivables 2.9 4.1 Stock-based compensation
expense 6.7 8.6 Excess tax benefits from stock-based compensation
(0.9 ) (0.7 ) Deferred income tax benefit (9.3 ) (0.3 ) Changes in
operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable (18.0 ) (25.7 )
Increase in contract receivables (21.8 ) (17.8 ) Increase in
inventories (31.3 ) (29.1 ) Decrease in prepaid and other assets
10.4 3.1 Increase (decrease) in accounts payable 7.8 (1.8 )
Increase in accruals and other liabilities 18.8
15.1
Net cash provided by operating activities
113.7 88.0
Investing activities: Additions to finance
receivables (213.2 ) (178.6 ) Collections of finance receivables
157.3 142.8 Capital expenditures (18.5 ) (22.3 ) Acquisitions of
businesses (13.1 ) 0.3 Disposal of property and equipment 0.1 0.1
Other 0.5 1.1
Net cash used by
investing activities (86.9 ) (56.6 )
Financing
activities: Proceeds from short-term borrowings 5.5 4.9
Repayments of short-term borrowings (3.2 ) (1.6 ) Net increase in
other short-term borrowings 11.6 9.4 Purchases of treasury stock
(14.7 ) (5.0 ) Cash dividends paid (30.8 ) (25.6 ) Proceeds from
stock purchase and option plans 3.2 1.8 Excess tax benefits from
stock-based compensation 0.9 0.7 Other (3.4 ) (6.1 )
Net cash used by financing activities (30.9 ) (21.5 )
Effect of exchange rate changes on cash and cash equivalents
(1.3 ) (1.0 )
Increase (decrease) in cash and cash
equivalents (5.4 ) 8.9 Cash and cash equivalents at
beginning of period 124.6 115.8
Cash
and cash equivalents at end of period $ 119.2 $ 124.7
Supplemental cash flow disclosures: Cash paid
for interest $ (23.8 ) $ (23.3 ) Net cash paid for income taxes
(57.8 ) (48.0 )
SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows (Amounts
in millions) (unaudited)
Nine Months Ended October 3, September
27, 2015 2014 Operating activities: Net
earnings $ 356.1 $ 313.4
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 42.7 40.6 Amortization of other intangibles 18.4 18.4
Provision for losses on finance receivables 22.4 19.8 Provision for
losses on non-finance receivables 10.8 10.7 Stock-based
compensation expense 29.8 27.3 Excess tax benefits from stock-based
compensation (14.9 ) (10.3 ) Deferred income tax benefit (6.2 )
(3.1 ) Loss on sale of assets 0.3 0.2 Changes in operating assets
and liabilities, net of effects of acquisitions: Increase in trade
and other accounts receivable (44.8 ) (61.7 ) Increase in contract
receivables (31.5 ) (31.7 ) Increase in inventories (67.1 ) (57.5 )
Increase in prepaid and other assets (28.0 ) (32.2 ) Increase in
accounts payable 35.6 16.6 Increase in accruals and other
liabilities 28.5 50.2
Net cash
provided by operating activities 352.1 300.7
Investing activities: Additions to finance receivables
(629.2 ) (549.2 ) Collections of finance receivables 476.6 425.1
Capital expenditures (64.3 ) (63.3 ) Acquisitions of businesses
(13.1 ) (41.3 ) Disposal of property and equipment 0.5 0.6 Other
(2.3 ) 0.9
Net cash used by investing
activities (231.8 ) (227.2 )
Financing
activities: Repayment of long-term debt - (100.0 ) Proceeds
from short-term borrowings 7.1 4.9 Repayments of short-term
borrowings (4.8 ) (1.6 ) Net increase in other short-term
borrowings 16.8 43.2 Purchases of treasury stock (101.6 ) (67.5 )
Cash dividends paid (92.5 ) (76.8 ) Proceeds from stock purchase
and option plans 39.7 30.8 Excess tax benefits from stock-based
compensation 14.9 10.3 Other (10.7 ) (9.0 )
Net
cash used by financing activities (131.1 ) (165.7 )
Effect of exchange rate changes on cash and cash equivalents
(2.9 ) (0.7 )
Decrease in cash and cash
equivalents (13.7 ) (92.9 ) Cash and cash equivalents at
beginning of year 132.9 217.6
Cash
and cash equivalents at end of period $ 119.2 $ 124.7
Supplemental cash flow disclosures: Cash paid
for interest $ (49.2 ) $ (51.1 ) Net cash paid for income taxes
(124.2 ) (135.9 )
SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Statements of
Earnings (Amounts in millions) (unaudited)
Operations* Financial Services Three Months
Ended Three Months Ended October 3, September
27, October 3, September 27, 2015
2014 2015 2014 Net sales $ 821.5
$ 806.3 $ - $ - Cost of goods sold (414.6 ) (412.4 )
- -
Gross profit 406.9 393.9 - -
Operating expenses (263.3 ) (263.3 ) -
-
Operating earnings before financial services
143.6 130.6 - -
Financial services revenue - - 61.1
53.6 Financial services expenses - -
(17.6 ) (15.9 )
Operating earnings from financial
services - - 43.5
37.7
Operating earnings 143.6 130.6
43.5 37.7 Interest expense (12.9 ) (12.6 ) (0.1 ) (0.1 )
Intersegment interest income (expense) – net 15.8 14.1 (15.8 )
(14.1 ) Other income (expense) – net (0.5 ) (0.8 )
- (0.1 )
Earnings before income taxes and
equity earnings 146.0 131.3 27.6 23.4 Income tax expense
(43.8 ) (39.7 ) (10.1 ) (8.7 )
Earnings
before equity earnings 102.2 91.6 17.5 14.7
Financial
services – net earnings attributable to Snap-on Inc.
17.5 14.7 - - Equity earnings, net of tax 0.2
0.1 - -
Net earnings
119.9 106.4 17.5 14.7 Net earnings attributable to noncontrolling
interests (3.1 ) (2.7 ) - -
Net earnings attributable to Snap-on Inc. $ 116.8
$ 103.7 $ 17.5 $ 14.7 *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 Nine Months
Ended Nine Months Ended October 3, September
27, October 3, September 27, 2015
2014 2015 2014 Net sales $
2,501.1 $ 2,420.3 $ - $ - Cost of goods sold (1,265.1 )
(1,247.3 ) - -
Gross
profit 1,236.0 1,173.0 - - Operating expenses (803.7 )
(782.6 ) - -
Operating
earnings before financial services 432.3 390.4 - -
Financial services revenue - - 177.2 155.5 Financial
services expenses - - (52.0 )
(48.6 )
Operating earnings from financial services
- - 125.2 106.9
Operating earnings 432.3 390.4 125.2 106.9
Interest expense (38.6 ) (38.6 ) (0.3 ) (0.5 ) Intersegment
interest income (expense) – net 46.5 41.4 (46.5 ) (41.4 ) Other
income (expense) – net (1.9 ) (0.6 ) -
(0.1 )
Earnings before income taxes and equity
earnings 438.3 392.6 78.4 64.9 Income tax expense (133.1
) (120.7 ) (28.8 ) (23.9 )
Earnings before
equity earnings 305.2 271.9 49.6 41.0
Financial services –
net earnings attributable to Snap-on Inc. 49.6 41.0 - -
Equity earnings, net of tax 1.3 0.5
- -
Net earnings 356.1 313.4
49.6 41.0 Net earnings attributable to noncontrolling interests
(8.8 ) (7.7 ) - -
Net
earnings attributable to Snap-on Inc. $ 347.3 $ 305.7
$ 49.6 $ 41.0 *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
October 3, January 3, October 3, January
3, 2015 2015 2015 2015
Assets Cash and cash equivalents $ 118.7 $ 132.8 $ 0.5 $ 0.1
Intersegment receivables 19.7 16.0 - - Trade and other accounts
receivable – net 571.0 550.5 0.2 0.3 Finance receivables – net - -
430.4 402.4 Contract receivables – net 7.9 7.6 78.2 66.9
Inventories – net 527.7 475.5 - - Deferred income tax assets 84.3
85.4 17.9 15.6 Prepaid expenses and other assets 120.9
125.5 1.3 0.9 Total current assets 1,450.2
1,393.3 528.5 486.2 Property and equipment – net 412.3 403.4
0.9 1.1 Investment in Financial Services 235.7 218.9 - - Deferred
income tax assets 88.5 92.9 0.3 0.3 Intersegment long-term notes
receivable 314.7 232.1 - - Long-term finance receivables – net - -
734.2 650.5 Long-term contract receivables – net 12.7 12.8 248.3
229.2 Goodwill 798.7 810.7 - - Other intangibles – net 195.4 203.3
- - Other assets 52.5 50.9 1.1 1.0
Total assets $ 3,560.7 $ 3,418.3 $ 1,513.3 $ 1,368.3
Liabilities and Equity Notes payable $ 73.6 $ 56.6 $ - $ -
Accounts payable 177.5 144.7 0.6 0.3 Intersegment payables - - 19.7
16.0 Accrued benefits 48.6 53.8 0.1 - Accrued compensation 84.2
95.2 3.0 4.0 Franchisee deposits 72.1 65.8 - - Other accrued
liabilities 271.6 285.0 60.3 18.2 Total
current liabilities 727.6 701.1 83.7 38.5 Long-term debt and
intersegment long-term debt - - 1,178.8 1,094.8 Deferred income tax
liabilities 161.0 158.6 - 0.6 Retiree health care benefits 39.2
42.5 - - Pension liabilities 175.9 217.9 - - Other long-term
liabilities 78.2 72.9 15.1 15.5
Total liabilities 1,181.9 1,193.0
1,277.6 1,149.4
Total shareholders' equity
attributable to Snap-on Inc. 2,361.0 2,207.8 235.7 218.9
Noncontrolling interests 17.8 17.5 - -
Total equity 2,378.8 2,225.3 235.7
218.9
Total liabilities and equity $ 3,560.7 $
3,418.3 $ 1,513.3 $ 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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