Snap-on Reports First Quarter Results; Reaffirms Full-Year Outlook
KENOSHA, Wis.--April 24, 2001--Snap-on Incorporated , a global leader in tools, diagnostics and equipment, announced results for the first quarter of 2001 and reaffirmed the outlook for the year.| -- | First-quarter earnings per share were $0.51 compared with $0.60 in 2000, before the one-time, non-cash, cumulative effect of accounting changes. Net earnings from continuing operations were $29.4 million in the first quarter of 2001 compared with $35.3 million in 2000. The recent adoption of Statement of Financial Accounting Standards ("SFAS") No.133 on accounting for derivatives and hedging activities resulted in a net charge of $2.5 million, or $0.05 per share, in the first quarter of 2001. In 2000, Snap-on had a cumulative net gain of $25.4 million, or $0.43 per share, from the adoption of an accounting method change related to pensions. After giving effect to both changes, net earnings were $26.9 million, or $0.46 per diluted share, in the 2001 first quarter compared with $60.7 million, or $1.03 per diluted share, a year ago. |
| -- | Net sales in the first quarter 2001 were $527.4 million compared with $544.3 million in 2000. Modest volume improvements in the U.S. dealer and industrial sales operations were offset by unfavorable currency translations and lower equipment sales. Excluding the negative 3% impact from currency translation, organic growth was flat in the quarter reflecting softer market conditions. |
| -- | The continued emphasis on improving working capital turnover and cash flow drove a $104.4 million reduction in total debt compared with the 2000 first quarter. The total-debt-to-capital ratio strengthened to 39.6% compared to 42.8% a year ago. |
"Snap-on employees and dealers worldwide demonstrated their commitment and ability to move forward within the reality of slowing economic conditions," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "Focus on creating value for customers, new product introductions, and productivity improvements were, and are, the priorities. This focus helps to offset the impact of marketplace challenges and keeps Snap-on well-positioned for the future."
In the worldwide Snap-on Dealer Group, a modest volume increase in the United States was offset by unfavorable currency translation and a slight volume decline in non-U.S. dealer operations. Excluding the currency impact, global sales decreased 1% in the first quarter of 2001 compared with the first quarter of 2000. The "More Feet on the Street" initiative, to provide new opportunities for dealers through second van options and increase the dealer base, is proceeding well. In the quarter, 72 net new dealers were added in the United States.
In the Commercial and Industrial Group, improvements in industrial and European commercial tool sales were offset by unfavorable currency translation and by softer demand for equipment and diagnostics worldwide. Excluding currency translation, global organic sales grew 1% year over year.
Gross profit margin improved to 46.2% of net sales in the first quarter of 2001, up from 45.7% in the comparable period last year. Improvements in operating efficiencies at Bahco and continued streamlining benefits at North American and European facilities offset the negative impact of currency translation and higher energy costs. Operating expenses increased to 38.4% from 35.9% a year ago as a result of unfavorable operating leverage from lower sales, coupled with higher training and recruiting costs associated with Snap-on's More Feet on the Street initiative, and higher, energy-driven freight costs. Net finance income increased over the first quarter of 2000, primarily due to growth in credit originations and a more favorable interest rate environment.
Snap-on continues to expect improving performance in the second half of 2001 and, as a result, solid performance for the year overall. Management believes that the core business is sound, although market conditions remain soft in the second quarter. Snap-on's dealers are upbeat about business prospects and the company plans to launch a number of exciting new products later in the year. Additionally, targeted adjustments are being made to certain product line operations to improve internal processes, reduce overhead and increase operational responsiveness.
SNAP-ON INCORPORATED
Consolidated Statements of Earnings
(Amounts in millions, except per share data)
(unaudited)
First Quarter Ended
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March 31, April 1,
2001 2000
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Net sales $ 527.4 $ 544.3
Cost of goods sold (283.7) (295.4)
Operating expenses (202.5) (195.3)
Net finance income 12.1 11.7
Restructuring and other
non-recurring charges - (0.4)
Interest expense (8.9) (10.3)
Other income (expense) - net 1.9 1.1
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Earnings from continuing
operations before income taxes 46.3 55.7
Income taxes from continuing
operations 16.9 20.4
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Earnings from continuing
operations $ 29.4 $ 35.3
Cumulative effect of a change in
accounting principle, net of tax (2.5) 25.4
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Net earnings $ 26.9 $ 60.7
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Earnings per share - basic and diluted:
Earnings from continuing
operations $ 0.51 $ 0.60
Cumulative effect of a change
in accounting principle,
net of tax (0.05) 0.43
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----------------
Net earnings $ 0.46 $ 1.03
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Weighted-average shares outstanding:
Basic 57.8 58.5
Effect of dilutive options 0.4 0.2
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Diluted 58.2 58.7
SNAP-ON INCORPORATED
Consolidated Balance Sheets
(Amounts in millions)
March 31, December 30,
2001 2000
------------- --------------
(unaudited)
Assets
Cash and cash equivalents $ 4.8 $ 6.1
Accounts receivable 631.0 644.5
Inventories 430.3 418.9
Prepaid expenses and
other assets 123.5 116.9
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Total current assets 1,189.6 1,186.4
Property and equipment - net 332.2 345.1
Deferred income tax benefits 33.2 33.0
Intangibles 405.8 424.6
Other assets 68.0 61.3
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Total Assets $ 2,028.8 $ 2,050.4
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Liabilities
Accounts payable $ 169.8 $ 161.0
Notes payable and current
maturities of long-term debt 70.9 70.3
Accrued compensation 40.9 56.3
Dealer deposits 40.5 39.8
Deferred subscription revenue 46.9 44.9
Other accrued liabilities 159.9 165.7
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Total current liabilities 528.9 538.0
Long-term debt 475.9 473.0
Deferred income taxes 23.3 24.7
Retiree health care benefits 93.1 92.2
Pension liability 36.6 41.4
Other long-term liabilities 37.3 37.1
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Total Liabilities $ 1,195.1 $ 1,206.4
Shareholders' Equity
Common stock - $1 par value $ 66.8 $ 66.8
Additional paid-in capital 79.6 71.6
Retained earnings 1,064.3 1,051.3
Accumulated other
comprehensive income (loss) (108.9) (87.2)
Grantor stock trust at fair
market value (186.6) (179.6)
Treasury stock at cost (81.5) (78.9)
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Total Shareholders'
Equity $ 833.7 $ 844.0
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Total Liabilities and
Shareholders' Equity $ 2,028.8 $ 2,050.4
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