Snap-on Incorporated Reports Record Sales and Earnings Per Share
21 July 1999
Snap-on Incorporated Reports Record Sales and Earnings Per Share, and Increased Earnings for the Second Quarter and First Six Months
KENOSHA, Wis.--July 21, 1999--Snap-on Incorporated today announced record results for second quarter sales and earnings per share, excluding restructuring-related transitional and other non-recurring charges, and increased net earnings for the quarter. Second quarter diluted earnings per share, excluding non-recurring charges, increased 71.1% to $0.65 from $0.38 in the same quarter a year ago. Net earnings for the second quarter, excluding non-recurring charges, improved to $38.2 million from $22.7 million, an increase of 68.6% from the same year-ago period. Net sales increased 7.0% to $473.2 million, compared with $442.2 million in the second quarter of 1998, driven by increases across all segments. It was the seventh consecutive second quarter with record sales."The trend of quarter-over-quarter improvement in results is encouraging," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "The solid revenue growth and positive contribution of Project Simplify, our worldwide effort to create a more effective and efficient Snap-on, contributed to the improved performance. The entire Snap-on organization has done an excellent job of balancing the implementation of the restructuring projects, while continuing the focus on building the business. The results of these actions are clearly visible in our lower cost structure, improved operations and revenue growth. The most tangible evidence of this is the return to solid performance in operating earnings driven primarily by improving service levels and the realization of Project Simplify benefits."
Earnings from operations, before non-recurring charges, increased 91.3% in the quarter, from $26.5 million in the same period last year to $50.8 million. Gross margin in the quarter increased to 47.6% from 46.3%, and operating expenses as a percent of sales declined to 36.9% from 40.3% in the second quarter of 1998, reflecting both the growth in net sales and the effect of savings from Project Simplify.
In the second quarter of 1999, $7.0 million, pre-tax, ($0.08 per diluted share after tax) in restructuring-related transitional and other non-recurring charges were recorded related to the company's previously announced Project Simplify initiative, which it began implementing in the third quarter of 1998. Total restructuring, transitional and other non-recurring charges recorded through the end of the second quarter were $158.8 million, against the previously announced total for Project Simplify of $185 million to be recorded through the first quarter of 2000.
In addition, an after-tax charge of $8.7 million ($0.15 per diluted share after tax) was recorded in the second quarter on the foreign currency hedge of the US$400 million equivalent purchase price commitment for the Sandvik Saws and Tools acquisition, scheduled to close at the end of the third quarter.
Six-month Performance
Diluted earnings per share, excluding restructuring-related transitional and other non-recurring charges, were $1.22, compared with $0.94 for the first six months of 1998, an increase of 29.8%. Net earnings, excluding all charges, increased 26.5% to $71.6 million, versus $56.6 million in the same period a year ago. Net sales for the first six months of 1999 increased 6.6% to $925.7 million, compared with $868.6 million for the first six months of 1998.
Progress continues on the implementation of the Project Simplify initiatives. The company expects to achieve its $30 million in targeted savings for 1999 and the $60 million in annual cost savings targeted for the year 2000.
"Our organization is clearly focused on streamlining our business to achieve a more competitive cost structure and build a stronger, more responsive foundation for future growth. We are pleased with the progress being made and believe that the momentum will continue through the remainder of the year and into 2000," said Cornog.
Snap-on Incorporated is a $1.8 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 and industrial industries.
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 timing and progress with which the Corporation can implement the Project Simplify initiatives; the timing and progress related to the acquisition of Sandvik Saws and Tools, which could include failure to receive applicable approvals; 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 enterprisewide 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 or other parts of the world; 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 3, 1999 July 4, 1998 (DECR.)
------------ ------------ -----------
Net sales $ 473,153 $ 442,176 7.0
Cost of goods sold (247,888) (237,486) 4.4
Operating expenses (174,482) (178,148) (2.1)
Net finance income 13,141 15,893 (17.3)
Restructuring and other
non-recurring charges (7,037) - nm
Interest expense (5,417) (5,449) (0.6)
Other income (expense) - net (12,406) (1,578) 686.2
------------ ------------ -----------
Earnings before income taxes 39,064 35,408 10.3
Income taxes 14,065 12,747 10.3
------------ ------------ -----------
Net earnings $ 24,999 $ 22,661 10.3
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Earnings per weighted
average common share - basic $ 0.43 $ 0.38 13.2
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Earnings per weighted
average common share - diluted $ 0.42 $ 0.38 10.5
============ ============ ===========
Weighted average common
shares outstanding - basic 58,384 59,186 (1.4)
Weighted average common
shares outstanding - diluted 58,804 60,005 (2.0)
SIX MONTHS ENDED
--------------------------------------
% INCR.
July 3, 1999 July 4, 1998 (DECR.)
------------ ------------ -------
Net sales $ 925,738 $ 868,605 6.6
Cost of goods sold (481,572) (452,370) 6.5
Operating expenses (356,711) (348,980) 2.2
Net finance income 34,133 32,872 3.8
Restructuring and other
non-recurring charges (8,970) - nm
Interest expense (10,098) (9,482) 6.5
Other income (expense) - net (13,239) (2,228) 494.2
------------ ------------- --------
Earnings before income taxes 89,281 88,417 1.0
Income taxes 32,041 31,830 0.7
------------ ------------- --------
Net earnings $ 57,240 $ 56,587 1.2
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Earnings per weighted
average common share - basic $ 0.98 $ 0.95 3.2
============ ============= ========
Earnings per weighted
average common share - diluted $ 0.97 $ 0.94 3.2
============ ============= ========
Weighted average common
shares outstanding - basic 58,477 59,540 (1.8)
Weighted average common
shares outstanding - diluted 58,897 60,359 (2.4)
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
July 3, Jan. 2, July 4,
1999 1999 1998
-------- --------- --------
ASSETS
Cash and cash equivalents $ 15,664 $ 15,041 $ 11,962
Accounts receivable
less allowances 500,548 554,703 521,677
Inventories 392,760 375,436 446,562
Prepaid expenses
and other assets 131,068 134,652 101,210
----------- ----------- -----------
Total current assets 1,040,040 1,079,832 1,081,411
Property and equipment - net 269,981 272,030 270,926
Deferred income tax benefits 51,533 60,139 57,930
Intangible and other assets 308,624 262,919 284,987
----------- ----------- -----------
TOTAL ASSETS $ 1,670,178 $ 1,674,920 $ 1,695,254
=========== =========== ===========
LIABILITIES
Accounts payable $ 80,166 $ 89,442 $ 86,889
Notes payable and
current maturities
of long-term debt 61,812 93,117 60,076
Dividends payable 13,436 - 13,043
Accrued compensation 40,975 42,105 34,019
Dealer deposits 39,204 42,421 39,351
Deferred subscription revenue 41,768 34,793 31,162
Accrued restructuring reserve 21,307 26,165 -
Other accrued liabilities 158,003 130,010 121,620
----------- ----------- -----------
Total current liabilities 456,671 458,053 386,160
Long-term debt 252,856 246,644 245,120
Deferred income taxes 9,959 9,587 12,058
Retiree health care benefits 90,047 89,124 88,074
Pension and other
long-term liabilities 97,680 109,245 108,805
----------- ----------- -----------
TOTAL LIABILITIES $ 907,213 $ 912,653 $ 840,217
SHAREHOLDERS' EQUITY
Common stock - $1 par value 66,707 66,685 66,662
Additional paid in capital 124,720 117,384 125,832
Retained earnings 901,252 883,207 957,458
Accumulated other
comprehensive income (loss) (39,458) (30,231) (31,239)
Grantor stock trust
at fair market value (241,805) (241,042) (255,156)
Treasury stock at cost (48,451) (33,736) (8,520)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 762,965 762,267 855,037
----------- ----------- -----------
TOTAL LIABILITIES
& SHAREHOLDERS' EQUITY $ 1,670,178 $ 1,674,920 $ 1,695,254
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