Diluted EPS of $2.16 increases 15.5%;
Operating earnings before financial services of 18.6% of sales
up 190 basis points; Organic sales increase 2.5%
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 first
quarter of 2016.
- Sales of $834.2 million increased $6.4
million, or 0.8%, from 2015 levels; excluding $16.4 million of
unfavorable foreign currency translation and $2.6 million of
acquisition-related sales, organic sales increased $20.2 million or
2.5%.
- Operating earnings before financial
services of $155.4 million increased 190 basis points to 18.6% of
sales as compared to $137.9 million, or 16.7% of sales, last
year.
- Financial services operating earnings
of $47.0 million increased $6.7 million, or 16.6%, from 2015
levels; financial services revenue of $66.3 million increased 15.5%
from 2015 levels.
- Consolidated operating earnings of
$202.4 million improved to 22.5% of revenues (net sales plus
financial services revenue) as compared to $178.2 million, or 20.1%
of revenues, last year.
- The first quarter effective income tax
rate was 31.0% in 2016 and 32.0% in 2015.
- Net earnings of $128.3 million, or
$2.16 per diluted share, compared to net earnings of $110.5
million, or $1.87 per diluted share, a year ago.
“Our first quarter results, including a 15.5% increase in
diluted earnings per share, represent an encouraging start to
2016,” said Nick Pinchuk, Snap-on chairman and chief
executive officer. “We believe these results demonstrate not only
the fundamental strength of Snap-on’s value proposition of making
work easier for serious professionals, but also the continued
progress along our defined runways for coherent growth while
overcoming the headwinds of the current environment. At the same
time, our operating margin improvement further confirms the ongoing
potential of our Snap-on Value Creation Processes, which we employ
every day around safety, quality, customer connection, innovation
and rapid continuous improvement. Finally, these results would not
have been possible without the dedication and capability of our
franchisees and associates worldwide; I thank them for their
continuing commitment and extraordinary contributions.”
Segment Results
Commercial & Industrial Group segment sales of $287.0
million in the quarter decreased $10.5 million, or 3.5%, from 2015
levels. Excluding $6.7 million of unfavorable foreign currency
translation, organic sales declined $3.8 million, or 1.3%, as lower
sales to customers in critical industries were partially offset by
gains in the segment’s Asia/Pacific and power tools operations, and
higher sales from the segment’s European-based hand tools
business.
Operating earnings of $41.1 million in the period, including
$2.2 million of unfavorable foreign currency effects, decreased
$2.9 million from 2015 levels, and the operating margin (operating
earnings as a percentage of segment sales) of 14.3% declined 50
basis points from 14.8% a year ago.
Snap-on Tools Group segment sales of $402.5 million in
the quarter rose $24.3 million, or 6.4%, from 2015 levels,
reflecting sales increases in both the company’s U.S. and
international franchise operations. Excluding $6.0 million of
unfavorable foreign currency translation, organic sales were up
8.1%.
Operating earnings of $66.7 million in the period, including
$4.2 million of unfavorable foreign currency effects, increased
$6.9 million from 2015 levels, and the operating margin of 16.6%
improved 80 basis points from 15.8% a year ago.
Repair Systems & Information Group segment sales of
$278.8 million in the quarter rose $6.5 million, or 2.4%, from 2015
levels. Excluding $4.5 million of unfavorable foreign currency
translation and $2.6 million of acquisition-related sales, organic
sales increased $8.4 million, or 3.1%, primarily due to higher
sales of diagnostic and repair information products to independent
repair shop owners and managers, increased sales of undercar
equipment and higher sales to OEM dealerships.
Operating earnings of $69.0 million in the period, including
$1.3 million of unfavorable foreign currency effects, increased
$5.1 million from 2015 levels, and the operating margin of 24.7%
improved 120 basis points from 23.5% a year ago.
Financial Services operating earnings of $47.0 million on
revenue of $66.3 million in the quarter compared to operating
earnings of $40.3 million on revenue of $57.4 million a year
ago.
Corporate expenses of $21.4 million in the quarter
compared to $29.8 million last year. The year-over-year decrease in
corporate expenses primarily reflects lower stock-based
(mark-to-market) compensation and pension expense.
Outlook
Snap-on expects to make continued progress in 2016 along its
defined runways for coherent growth, leveraging capabilities
already demonstrated in the automotive repair arena and developing
and expanding its professional customer base, not only in
automotive repair, but also in adjacent markets, additional
geographies and other areas, including in critical industries,
where the cost and penalties for failure can be high. In pursuit of
these initiatives, Snap-on continues to expect that capital
expenditures in 2016 will be in a range of $80 million to $90
million. Snap-on also continues to anticipate that its full year
2016 effective income tax rate will be comparable to its 2015 full
year rate.
Conference Call and Webcast on April
21, 2016, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, April
21, 2016, 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
$3.4 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 2, 2016, 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 April 2, April 4, 2016
2015 Net sales $ 834.2 $ 827.8 Cost of goods
sold (418.9 ) (417.7 )
Gross profit 415.3
410.1 Operating expenses (259.9 ) (272.2 )
Operating earnings before financial services 155.4 137.9
Financial services revenue 66.3 57.4 Financial
services expenses (19.3 ) (17.1 )
Operating
earnings from financial services 47.0 40.3
Operating earnings 202.4 178.2 Interest
expense (13.1 ) (13.0 ) Other income (expense) – net (0.7 )
(0.7 )
Earnings before income taxes and equity
earnings 188.6 164.5 Income tax expense (57.6 )
(51.8 )
Earnings before equity earnings 131.0 112.7 Equity
earnings, net of tax 0.3 0.5
Net
earnings 131.3 113.2 Net earnings attributable to
noncontrolling interests (3.0 ) (2.7 )
Net
earnings attributable to Snap-on Inc. $ 128.3 $ 110.5
Net earnings per share attributable to
Snap-on Inc.: Basic $ 2.21 $ 1.90 Diluted 2.16 1.87
Weighted-average shares outstanding: Basic 58.1 58.1 Effect
of dilutive securities 1.4 1.0 Diluted
59.5 59.1
SNAP-ON
INCORPORATED Supplemental Segment Information
(Amounts in millions) (unaudited)
Three Months Ended April 2, April 4,
2016 2015 Net sales: Commercial &
Industrial Group $ 287.0 $ 297.5 Snap-on Tools Group 402.5 378.2
Repair Systems & Information Group 278.8
272.3
Segment net sales 968.3 948.0 Intersegment
eliminations (134.1 ) (120.2 )
Total net sales
$ 834.2 $ 827.8 Financial Services revenue 66.3
57.4
Total revenues $ 900.5 $ 885.2
Operating earnings: Commercial &
Industrial Group $ 41.1 $ 44.0 Snap-on Tools Group 66.7 59.8 Repair
Systems & Information Group 69.0 63.9 Financial Services
47.0 40.3
Segment operating earnings
223.8 208.0 Corporate (21.4 ) (29.8 )
Operating
earnings $ 202.4 $ 178.2 Interest expense (13.1 ) (13.0 ) Other
income (expense) – net (0.7 ) (0.7 )
Earnings before income taxes and equity
earnings
$ 188.6 $ 164.5
SNAP-ON
INCORPORATED Condensed Consolidated Balance Sheets
(Amounts in millions) (unaudited)
April 2, January 2, 2016
2016 Assets Cash and cash equivalents $ 106.3
$ 92.8 Trade and other accounts receivable – net 570.0 562.5
Finance receivables – net 453.3 447.3 Contract receivables – net
77.4 82.1 Inventories – net 511.6 497.8 Prepaid expenses and other
assets 122.9 106.3 Total current assets
1,841.5 1,788.8 Property and equipment – net 417.4 413.5
Deferred income tax assets 49.6 60.4 Long-term finance receivables
– net 817.1 772.7 Long-term contract receivables – net 272.0 266.6
Goodwill 797.1 790.1 Other intangibles – net 192.9 195.0 Other
assets 48.8 44.0
Total assets $
4,436.4 $ 4,331.1
Liabilities and
Equity Notes payable and current maturities of long-term debt $
170.8 $ 18.4 Accounts payable 161.7 148.3 Accrued benefits 54.0
52.1 Accrued compensation 64.0 91.0 Franchisee deposits 65.9 64.4
Other accrued liabilities 320.8 296.0
Total current liabilities 837.2 670.2 Long-term debt 714.6
861.7 Deferred income tax liabilities 14.5 14.3 Retiree health care
benefits 37.0 37.9 Pension liabilities 206.9 227.8 Other long-term
liabilities 91.1 88.5
Total
liabilities 1,901.3 1,900.4
Equity Shareholders' equity attributable to Snap-on
Inc. Common stock 67.4 67.4 Additional paid-in capital 294.2
296.3 Retained earnings 3,079.6 2,986.9 Accumulated other
comprehensive loss (340.1 ) (364.2 ) Treasury stock at cost
(584.0 ) (573.7 )
Total shareholders' equity attributable
to Snap-on Inc. 2,517.1 2,412.7 Noncontrolling interests
18.0 18.0
Total equity 2,535.1
2,430.7
Total liabilities and equity $
4,436.4 $ 4,331.1
SNAP-ON
INCORPORATED Condensed Consolidated Statements of Cash
Flows (Amounts in millions) (unaudited)
Three Months Ended April 2, April 4,
2016 2015 Operating activities: Net earnings $
131.3 $ 113.2
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 14.9 13.8 Amortization of other intangibles 6.1 6.2
Provision for losses on finance receivables 9.3 7.1 Provision for
losses on non-finance receivables 3.2 4.9 Stock-based compensation
expense 5.8 11.5 Excess tax benefits from stock-based compensation
- (11.0 ) Deferred income tax provision 9.4 10.7 Changes in
operating assets and liabilities: Increase in trade and other
accounts receivable (4.8 ) (20.2 ) Decrease (increase) in contract
receivables 0.3 (3.3 ) Increase in inventories (9.9 ) (24.0 )
Increase in prepaid and other assets (15.5 ) (27.0 ) Increase in
accounts payable 15.0 24.9 Decrease in accruals and other
liabilities (23.5 ) (28.7 )
Net cash provided by
operating activities 141.6 78.1
Investing
activities: Additions to finance receivables (230.9 ) (198.8 )
Collections of finance receivables 174.1 160.2 Capital expenditures
(19.5 ) (18.1 ) Disposals of property and equipment 0.2 - Other
(3.5 ) (2.8 )
Net cash used by investing
activities (79.6 ) (59.5 )
Financing activities:
Repayments of notes payable (0.8 ) - Net increase in other
short-term borrowings 3.6 22.8 Cash dividends paid (35.4 ) (30.9 )
Purchases of treasury stock (23.1 ) (49.7 ) Proceeds from stock
purchase and option plans 9.9 14.5 Excess tax benefits from
stock-based compensation - 11.0 Other (3.5 ) (3.0 )
Net cash used by financing activities (49.3 ) (35.3 )
Effect of exchange rate changes on cash and cash equivalents
0.8 (1.8 )
Increase (decrease) in cash and
cash equivalents 13.5 (18.5 ) Cash and cash equivalents
at beginning of year 92.8 132.9
Cash
and cash equivalents at end of period $ 106.3 $ 114.4
Supplemental cash flow disclosures: Cash paid
for interest $ (23.9 ) $ (23.7 ) Net cash paid for income taxes
(17.7 ) (20.7 )
SNAP-ON
INCORPORATED Supplemental Consolidating Data - Condensed
Statements of Earnings (Amounts in millions)
(unaudited) Operations* Financial
Services Three Months Ended Three Months Ended
April 2, April 4, April 2, April 4,
2016 2015 2016 2015 Net
sales $ 834.2 $ 827.8 $ - $ - Cost of goods sold (418.9
) (417.7 ) - -
Gross
profit 415.3 410.1 - - Operating expenses (259.9 )
(272.2 ) - -
Operating
earnings before financial services 155.4 137.9 - -
Financial services revenue - - 66.3 57.4 Financial services
expenses - - (19.3 )
(17.1 )
Operating earnings from financial services -
- 47.0 40.3
Operating earnings 155.4 137.9 47.0 40.3 Interest expense
(13.0 ) (12.9 ) (0.1 ) (0.1 ) Intersegment interest income
(expense) – net 17.3 15.0 (17.3 ) (15.0 ) Other income (expense) –
net (0.7 ) (0.7 ) - -
Earnings before income taxes and equity earnings 159.0 139.3
29.6 25.2 Income tax expense (46.7 ) (42.5 )
(10.9 ) (9.3 )
Earnings before equity earnings 112.3
96.8 18.7 15.9
Financial services – net earnings
attributable to Snap-on Inc.
18.7 15.9 - - Equity earnings, net of tax 0.3
0.5 - -
Net earnings
131.3 113.2 18.7 15.9 Net earnings attributable to noncontrolling
interests (3.0 ) (2.7 ) - -
Net earnings attributable to Snap-on Inc. $ 128.3
$ 110.5 $ 18.7 $ 15.9 *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 April 2,
January 2, April 2, January 2, 2016
2016 2016 2016 Assets Cash and
cash equivalents $ 106.2 $ 92.7 $ 0.1 $ 0.1 Intersegment
receivables 16.9 15.9 - - Trade and other accounts receivable – net
569.9 562.2 0.1 0.3 Finance receivables – net - - 453.3 447.3
Contract receivables – net 8.1 8.0 69.3 74.1 Inventories – net
511.6 497.8 - - Prepaid expenses and other assets 128.1
111.5 1.4 1.2 Total current assets 1,340.8
1,288.1 524.2 523.0 Property and equipment – net 416.0 412.1
1.4 1.4 Investment in Financial Services 259.5 251.8 - - Deferred
income tax assets 29.9 40.6 19.7 19.8 Intersegment long-term notes
receivable 433.3 398.7 - - Long-term finance receivables – net - -
817.1 772.7 Long-term contract receivables – net 11.5 12.1 260.5
254.5 Goodwill 797.1 790.1 - - Other intangibles – net 192.9 195.0
- - Other assets 55.9 49.9 0.1 1.0
Total assets $ 3,536.9 $ 3,438.4 $ 1,623.0 $ 1,572.4
Liabilities and Equity Notes payable and current maturities
of long-term debt $ 20.8 $ 18.4 $ 150.0 $ - Accounts payable 161.3
148.2 0.4 0.1 Intersegment payables - - 16.9 15.9 Accrued benefits
53.9 52.1 0.1 - Accrued compensation 62.8 86.9 1.2 4.1 Franchisee
deposits 65.9 64.4 - - Other accrued liabilities 295.2
277.4 32.2 25.0 Total current liabilities
659.9 647.4 200.8 45.1 Long-term debt and intersegment
long-term debt - - 1,147.9 1,260.4 Deferred income tax liabilities
14.5 14.1 - 0.2 Retiree health care benefits 37.0 37.9 - - Pension
liabilities 206.9 227.8 - - Other long-term liabilities 83.5
80.5 14.8 14.9
Total liabilities
1,001.8 1,007.7 1,363.5 1,320.6
Total shareholders' equity attributable to Snap-on Inc.
2,517.1 2,412.7 259.5 251.8 Noncontrolling interests 18.0
18.0 - -
Total equity 2,535.1
2,430.7 259.5 251.8
Total liabilities and
equity $ 3,536.9 $ 3,438.4 $ 1,623.0 $ 1,572.4 *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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