Snap-on Incorporated Reports Q2 Results
23 July 1998
Snap-on Incorporated Reports Higher Sales, Reduced Earnings and Earnings Per Share for the Quarter and First Six Months
KENOSHA, Wis.--July 23, 1998--Snap-on Incorporated today announced record sales, but lower earnings and earnings per share for the second quarter and first six months of 1998. The second quarter performance was consistent with the company's pre-announcement statement of June 29, 1998.Second quarter net sales increased 8.1% to $442.2 million, compared with $409.2 million in the second quarter of 1997. Excluding acquisitions, second quarter net sales were up 1%. Net earnings for the quarter declined to $22.7 million from $39.0 million in last year's second quarter, a decrease of 41.9%. Diluted earnings per share declined 39.7% to $0.38, from $0.63 in the second quarter a year ago.
Net sales for the first six months of 1998 increased 10.7% to $868.6 million, compared with $784.5 million for the first six months of 1997. Net earnings declined 22.3% to $56.6 million, versus $72.8 million in the same period a year ago. Diluted earnings per share were $0.94, compared with $1.18 for the first six months of 1997, a decrease of 20.3%.
The second quarter performance was due primarily to the slow pace of implementation and the related disruptive effect of the company's new enterprise-wide client/server computer system. Systems delays and the learning curve for the required new computer processes had a significant adverse effect on sales, expenses and productivity. In addition, the impact of the economic and political crises in Asia reduced second quarter earnings.
North American net sales increased 3.9% in the quarter, as the computer systems issues affected the company's tool revenue. European sales grew 35.0%, due primarily to the Hofmann acquisition. Other Non-U.S. sales, which includes the Asia/Pacific region, declined 12.1% due to the negative effects of foreign currency translation.
As stated in the June 29 release, Snap-on anticipates that 1998 revenues will be well ahead of 1997's $1.7 billion. It expects that it will return to its more normal patterns of growth and profitability in the 1998 fourth quarter. Prior to the second quarter of 1998, Snap-on had generated 20 consecutive quarters of earnings per share growth.
Snap-on Incorporated is a $1.7 billion leading global developer, manufacturer and distributor of tool and equipment solutions for professional technicians, motor service shop owners, specialty repair centers, original equipment manufacturers, and industrial tool users worldwide. Product lines include hand and power tools, diagnostics and shop equipment, tool storage units, diagnostics software, and other solutions for the transportation service industry.
Statements in this news release that are not historical facts, including statements (i) that include the words "believes," "expects," "anticipates," or "estimates" or words of similar importance with reference to the Corporation or management; (ii) specifically identified as forward-looking; or (iii) describing the Corporation's or management's future plans, objectives or goals, are forward-looking statements. The Corporation or its representatives may also make similar forward-looking statements from time to time orally or in writing. The Corporation cautions the reader that these statements are subject to risks, uncertainties or other factors that could cause (and in some cases have caused) actual results to differ materially from those described in any such statement. Those important factors include the Corporation's ability to manufacture, distribute, and/or record the sale of products during the implementation of a new computer system involving the replacement of hardware and software components and the enterprise-wide linking of all functions; the Corporation's ability to withstand external negative factors including changes in trade, monetary and fiscal policies, laws and regulations, or other activities of governments or their agencies; significant changes in the current competitive environment; inflation; currency fluctuations or the material worsening of the economic and political situation in Asia; and the achievement of productivity improvements and cost reductions. These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. The Corporation operates in a continually changing business environment and new factors emerge from time to time. The Corporation cannot predict such factors nor can it assess the impact, if any, of such factors on the Corporation or its results. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Corporation disclaims any responsibility to update any forward-looking statement provided in this news release.
SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands)
SECOND QUARTER ENDED
-------------------------------------------
% INCR.
July 4, 1998 June 28, 1997 (DECR.)
---------------- ---------------- ----------
Net sales $ 442,176 $ 409,231 8.1
Cost of goods sold 237,486 201,564
---------------- --------------- ----------
Gross profit 204,690 207,667 (1.4)
Operating expenses 178,148 159,112
Operating profit
before net ---------------- --------------- ----------
finance income 26,542 48,555 (45.3)
Net finance income 15,893 18,362
---------------- --------------- ----------
Operating income 42,435 66,917 (36.6)
Interest expense (5,449) (4,479)
Other income
(expense) - net (1,578) (580)
---------------- --------------- ----------
Earnings before
income taxes 35,408 61,858 (42.8)
Income taxes 12,747 22,887
---------------- --------------- ----------
Net earnings $ 22,661 $ 38,971 (41.9)
================ =============== ==========
Earnings per weighted
average common
share - basic $ 0.38 $ 0.64 (40.6)
================ =============== ==========
Earnings per weighted
average common share
- diluted $ 0.38 $ 0.63 (39.7)
================ =============== ==========
Weighted average common
shares outstanding
- basic 59,186 60,924 (2.9)
Weighted average common
shares outstanding
- diluted 60,005 61,734 (2.8)
SIX MONTHS ENDED
-------------------------------------------
% INCR.
July 4, 1998 June 28, 1997 (DECR.)
---------------- ---------------- ----------
Net sales $ 868,605 $ 784,530 10.7
Cost of goods sold 452,370 383,896
---------------- ---------------- ----------
Gross profit 416,235 400,634 3.9
Operating expenses 348,980 310,431
Operating profit
before net ---------------- --------------- ----------
finance income 67,255 90,203 (25.4)
Net finance income 32,872 35,827
---------------- ---------------- ----------
Operating income 100,127 126,030 (20.6)
Interest expense (9,482) (8,860)
Other income
(expense) - net (2,228) (1,575)
---------------- ---------------- ----------
Earnings before
income taxes 88,417 115,595 (23.5)
Income taxes 31,830 42,770
---------------- ---------------- ----------
Net earnings $ 56,587 $ 72,825 (22.3)
================ ================ ==========
Earnings per weighted
average common
share - basic $ 0.95 $ 1.20 (20.8)
================ ================ ==========
Earnings per weighted
average common share
- diluted $ 0.94 $ 1.18 (20.3)
================ ================ ==========
Weighted average common
shares outstanding
- basic 59,540 60,889 (2.2)
Weighted average common
shares outstanding
- diluted 60,359 61,699 (2.2)
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
July 4, 1998 Jan. 3, 1998 June 28, 1997
-------------- -------------- ----------------
ASSETS
Cash and cash
equivalents $ 11,962 $ 25,679 $ 9,828
Accounts receivable
less allowances 521,677 539,589 637,416
Inventories 446,562 373,155 316,260
Prepaid expenses
and other assets 101,210 83,286 87,309
-------------- -------------- ----------------
Total current
assets 1,081,411 1,021,709 1,050,813
Property and
equipment - net 270,926 265,765 248,457
Deferred income
tax benefits 57,930 55,699 64,743
Intangible and
other assets 284,987 298,184 253,968
-------------- -------------- ----------------
TOTAL ASSETS $1,695,254 $1,641,357 $ 1,617,981
============== ============== ================
LIABILITIES
Accounts payable $ 86,889 $ 91,553 $ 93,381
Notes payable and
current maturities
of long-term debt 60,076 23,951 27,583
Dividends payable 13,043 0 12,798
Accrued compensation 34,019 43,712 32,332
Dealer deposits 39,351 43,848 40,431
Accrued income taxes 14,043 14,831 13,725
Deferred subscription
revenue 31,162 29,265 18,318
Other accrued
liabilities 107,577 105,370 129,296
-------------- -------------- ----------------
Total current
liabilities 386,160 352,530 367,864
Long-term debt 245,120 151,016 182,624
Deferred income
taxes 12,058 11,824 7,407
Retiree health care
benefits 88,074 86,936 86,232
Pension and other
long-term
liabilities 108,805 146,914 115,176
-------------- -------------- ----------------
TOTAL LIABILITIES $840,217 $ 749,220 $ 759,303
SHAREHOLDERS' EQUITY
Common stock -
$1 par value 66,662 66,472 66,141
Additional paid -
in capital 125,832 82,758 69,873
Retained earnings 957,458 938,963 874,152
Foreign currency
translation
adjustment (31,239) (30,385) (22,200)
Employee benefits
trust at fair market
value (255,156) 0 0
Treasury stock at
cost (8,520) (165,671) (129,288)
-------------- -------------- ----------------
TOTAL
SHAREHOLDERS'
EQUITY 855,037 892,137 858,678
-------------- -------------- ----------------
TOTAL
LIABILITIES &
SHAREHOLDERS'
EQUITY $1,695,254 $1,641,357 $ 1,617,981
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