Hand and Power ToolsNews and Events

Snap-on Announces First Quarter 2019 Results

KENOSHA, Wis.–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 2019.

  • Net sales of $921.7 million in the quarter decreased $13.8 million, or 1.5%, from 2018 levels; reflecting a $12.3 million, or 1.4%, organic sales increase, more than offset by $26.1 million of unfavorable foreign currency translation.
  • Operating earnings before financial services in the quarter of $187.4 million, or 20.3% of sales, included an $11.6 million benefit from the settlement of a patent-related litigation matter that was being appealed (the “legal settlement”) and $5.7 million of unfavorable foreign currency effects, compared to $177.7 million, or 19.0% of sales, last year. Excluding the legal settlement, operating earnings before financial services, as adjusted, in the first quarter of 2019 were $175.8 million, or 19.1% of sales.
  • Financial services revenue in the quarter of $85.6 million increased $2.6 million from 2018 levels; financial services operating earnings of $62.1 million increased $5.2 million from $56.9 million last year.
  • Consolidated operating earnings in the quarter of $249.5 million, or 24.8% of revenues (net sales plus financial services revenue), compared to $234.6 million, or 23.0% of revenues, last year. Excluding the legal settlement, consolidated operating earnings, as adjusted, in the first quarter of 2019 were $237.9 million, or 23.6% of revenues.
  • Other income (expense) – net in the quarter of $1.5 million of income compares to $2.8 million of income in 2018, which included a net gain of $5.5 million related to the issuance and extinguishment of debt (the “net debt items”).
  • The first quarter 2019 effective income tax rate of 24.3% was increased by 10 basis points from the legal settlement. The first quarter 2018 effective income tax rate of 26.2% was increased by 120 basis points as a result of a $2.6 million charge related to the implementation of U.S. tax legislation (the “tax charge”). Excluding the tax charge in 2018, the effective tax rate, as adjusted, was 25.0%.
  • Reported net earnings in the first quarter of 2019 of $177.9 million, or $3.16 per diluted share, compared to $163.0 million, or $2.82 per diluted share, a year ago. Excluding the legal settlement in 2019, and the net debt items and tax charge in 2018, net earnings, as adjusted, were $169.2 million, or $3.01 per diluted share, in 2019, and $161.5 million, or $2.79 per diluted share, last year.

See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales and measures, as adjusted, excluding the legal settlement, net debt items and tax charge.

At the beginning of fiscal 2019, Snap-on adopted ASU No. 2016-02, Leases (Topic 842). The adoption did not have a significant impact on the company’s consolidated financial statements. The adoption resulted in the recognition of right-of-use assets and lease liabilities for operating leases in the Condensed Consolidated Balance Sheets of $60.5 million, while accounting for finance leases and lessor accounting remained substantially unchanged. The adoption did not have any impact on the Condensed Consolidated Statement of Earnings.

“We are encouraged by our first quarter 2019 results, which included a continuing recovery in our U.S. franchise network, with a mid single-digit sales gain in that operation,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Our advancements in the quarter, despite uncertainty in several geographies, demonstrated progress along our runways for growth and reflects the strength of Snap-on’s value proposition of making work easier for serious professionals in both critical industries and vehicle repair. At the same time, year-over-year growth in earnings per diluted share reflects the ongoing effectiveness of our Snap-on Value Creation Processes and the opportunities available in our end markets. Finally, our progress would not have been possible without the dedication and capability of our franchisees and associates, and I thank them for their commitment and their contributions.”

Segment Results

Commercial & Industrial Group segment sales of $322.5 million in the quarter decreased $9.1 million, or 2.7%, from 2018 levels, reflecting a $4.7 million, or 1.5%, organic sales gain, more than offset by $13.8 million of unfavorable foreign currency translation. The organic sales increase includes higher sales in the segment’s specialty tools business, as well as increases with customers in critical industries, partially offset by lower sales in the segment’s Asia Pacific operations.

Operating earnings of $46.5 million in the period, including $1.1 million of unfavorable foreign currency effects, were unchanged from 2018 levels, while the operating margin (operating earnings as a percentage of segment sales) of 14.4% compared to 14.0% a year ago.

Snap-on Tools Group segment sales of $410.2 million in the quarter increased $5.5 million, or 1.4%, from 2018 levels, reflecting an $11.7 million, or 2.9%, organic sales increase, partially offset by $6.2 million of unfavorable foreign currency translation. The organic sales increase includes higher sales in the U.S. franchise operations, partially offset by a decrease in the segment’s international operations.

Operating earnings of $67.2 million in the period, including $3.1 million of unfavorable foreign currency effects, decreased $1.7 million from 2018 levels, and the operating margin of 16.4% compared to 17.0% last year.

Repair Systems & Information Group segment sales of $327.9 million in the quarter decreased $9.1 million, or 2.7%, from 2018 levels, reflecting a $1.5 million, or 0.5%, organic sales decline and $7.6 million of unfavorable foreign currency translation. The organic sales decrease reflects lower sales of undercar equipment, partially offset by higher sales to OEM dealerships.

Operating earnings of $83.6 million in the period, including $1.5 million of unfavorable foreign currency effects, decreased $2.2 million from 2018 levels, while the operating margin of 25.5% was unchanged from a year ago.

Financial Services operating earnings of $62.1 million on revenue of $85.6 million in the quarter compared to operating earnings of $56.9 million on revenue of $83.0 million a year ago. Originations of $252.5 million in the first quarter increased $5.2 million, or 2.1%, from 2018 levels.

Corporate expenses of $9.9 million in the quarter, including the $11.6 million benefit from the legal settlement, compared to $23.5 million last year.

Outlook

Snap-on expects to make continued progress in 2019 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 in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2019 will be in a range of $90 million to $100 million, of which $20.2 million was incurred in the first quarter.

Snap-on currently anticipates that its full year 2019 effective income tax rate will be comparable to its full year 2018 effective tax rate of 24.0%.

Conference Call and Webcast on April 18, 2019, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, April 18, 2019, 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 https://www.snapon.com/EN/Investors/Investor-Events and click on the link to the call. 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 at https://www.snapon.com/EN/Investors/Financial-Information/Quarterly-Earnings.

Non-GAAP Measures

References in this document to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. The company’s organic sales disclosures also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in our businesses and facilitating comparisons of our sales performance with prior periods.

For the first quarter of 2019, the company is including operating earnings before financial services, consolidated operating earnings, net earnings, diluted earnings per share and its effective tax rate, all as adjusted to exclude the impact of an $11.6 million benefit ($8.7 million after tax) from the legal settlement.

For the first quarter of 2018, the company is including net earnings and diluted earnings per share, both as adjusted to exclude a net gain of $5.5 million ($4.1 million after tax) associated with a treasury lock settlement gain of $13.3 million related to the issuance of debt, partially offset by a $7.8 million expense related to the early extinguishment of debt. For the first quarter of 2018, the company is also including net earnings, diluted earnings per share and its effective tax rate, all as adjusted, to exclude the impact of $2.6 million of charges related to the implementation of tax legislation.

Management believes that these are unusual events and therefore the non-GAAP financial measures adjusted to exclude them provide more meaningful year-over-year comparisons of the company’s 2019 operating performance. For a reconciliation of the adjusted metrics, see “Reconciliation of Non-GAAP Financial Measures” below.

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 and support its franchise business. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.7 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 December 29, 2018, 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.

Courtesy of -(BUSINESS WIRE)-


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.