Snap-on Reports Record Third-Quarter Results
21 October 1999
Snap-on Reports Record Third-Quarter Results
KENOSHA, Wis.--Oct. 21, 1999--Snap-on Incorporated , a global leader in tools and equipment, today announced record results for third-quarter earnings per share, earnings and net sales.Third-quarter diluted earnings per share were $0.62, a 63.2% increase from $0.38 in the third quarter of a year ago, excluding restructuring-related and other non-recurring items in both periods. Earnings for the third quarter, excluding all non-recurring items, improved to $36.6 million from $22.5 million, an increase of 63.1% from the same period a year ago. Net earnings were $42.6 million, or $0.72 per diluted share, for the third quarter of 1999 compared with a net loss of $74.0 million, or $1.24 per share, in the third quarter of 1998. Net sales increased 6.1% to $453.2 million compared with $427.3 million in the third quarter of 1998, driven largely by solid increases across all business segments in North America. It was the seventh consecutive third quarter with record sales.
"The third-quarter results, now exceeding the previous records established in 1997, attest to the progress that our employees achieved in implementing organizational realignments and process improvements during the past year," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "Our focus on continuing to serve customer needs, coupled with an improving cost structure, are a powerful combination in positioning Snap-on to return to its characteristic growth and profitability trends."
Earnings from operations, before all non-recurring items, increased 86.3% in the quarter. Gross margin in the quarter was 48.2% compared with 47.3% in the 1998 third quarter, and operating expenses as a percent of sales declined to 37.6% from 41.3% in 1998, reflecting favorable operating leverage and the effect of savings from Project Simplify.
In the third quarter of 1999, $5.3 million pre-tax ($3.2 million after tax or $0.06 per diluted share) in restructuring-related transitional and other non-recurring charges were recorded related to the company's previously announced Project Simplify initiative compared with $133.1 million pre-tax ($96.5 million after tax or $1.62 per diluted share) in restructuring and other non-recurring charges in the third quarter of 1998. Total restructuring, transitional and other non-recurring charges for Project Simplify recorded through the end of the third quarter were $164.1 million, against the previously announced total of $185 million to be recorded through the first quarter of 2000.
In conjunction with receiving a $36.0 million cash payment in early and final settlement from the State of Texas relating to the "Tejas Companies" litigation, Snap-on recorded in the third quarter a non-recurring $1.0 million charge ($0.7 million after tax or $0.01 per share) against the $37.0 million net receivable previously included in the company's Consolidated Balance Sheets under Intangible and Other Assets.
In addition, a non-recurring gain of $15.3 million ($9.8 million after tax or $0.17 per diluted share) was recorded in the third quarter on the foreign currency hedge of the US$400 million equivalent purchase price commitment for the Sandvik Saws and Tools acquisition, that closed on September 30, 1999. Snap-on anticipates that transaction to be neutral to Snap-on's earnings in the fourth quarter of 1999 and accretive thereafter.
Nine-month Performance
Diluted earnings per share for the first nine months of 1999 increased 39.4% to $1.84 compared with $1.32 for the first nine months of 1998, excluding restructuring-related and other non-recurring items in both years. Earnings for the first nine months, excluding all non-recurring items, were $108.2 million a 36.9% increase versus $79.1 million in the same period a year ago. Net earnings were $99.8 million, or $1.69 per diluted share, for the nine-month period ended October 2, 1999, compared with a net loss of $17.4 million, or $0.29 per diluted share, for the first nine months of 1998. Net sales for the first nine months of 1999 increased 6.4% to $1.4 billion compared with $1.3 billion for the first nine months of 1998.
These performance records were posted as the company passed the one-year mark of its Project Simplify restructuring initiative to create a more efficient and market-responsive organization. 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. In the last four quarters, the company has accomplished more than 85% of its Project Simplify initiatives. It expects to complete the majority of the remainder by year end, with a few actions carrying over into the first quarter of the year 2000.
"The contributions from our more competitive cost structure and streamlined operations are clearly visible. We believe the increased speed and flexibility in our businesses provide a sound basis for future growth and improvements," said Cornog.
Snap-on Incorporated is a leading global developer, manufacturer and marketer of tool and equipment solutions for professional tool users. Product lines include hand and power tools, diagnostics and shop equipment, tool storage products, diagnostics software and other solutions for the transportation service, industrial and other commercial industries. Products are sold through its franchise dealer van, company direct sales and distributor channels. Founded in 1920, Snap-on is an S&P 500 company headquartered in Kenosha, Wisconsin.
Statements in this news release that are not historical facts, including statements (i) that include the words "believes," "expects," 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 continue to implement Project Simplify initiatives; 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)
THIRD QUARTER ENDED
----------------------------------------
% INCR.
Oct. 2, 1999 Oct. 3, 1998 (DECR.)
------------ ------------ -------
Net sales $ 453,157 $ 427,272 6.1
Cost of goods sold (234,738) (225,184) 4.2
Operating expenses (170,504) (176,366) (3.3)
Net finance income 12,267 14,657 (16.3)
Restructuring and other
non-recurring charges (5,315) (133,121) (96.0)
Interest expense (5,262) (5,883) (10.6)
Other income (expense)
- net 16,558 604 nm
--------------- --------------- ---------
Earnings (loss) before
income taxes 66,163 (98,021) nm
Income taxes 23,613 (24,024) nm
--------------- --------------- ---------
Net earnings (loss) $ 42,550 $ (73,997) nm
=============== =============== =========
Earnings (loss) per
weighted average common
share - basic $ 0.73 $ (1.24) nm
=============== =============== =========
Earnings (loss) per
weighted average common
share - diluted $ 0.72 $ (1.24) nm
=============== =============== =========
Weighted average common
shares outstanding
- basic 58,491 58,995 (0.9)
Weighted average common
shares outstanding
- diluted 58,915 58,995 (0.1)
NINE MONTHS ENDED
-----------------------------------------
% INCR.
Oct. 2, 1999 Oct. 3, 1998 (DECR.)
------------ ------------ -------
Net sales $ 1,378,895 $ 1,295,877 6.4
Cost of goods sold (716,310) (677,554) 5.7
Operating expenses (527,215) (525,346) 0.4
Net finance income 46,400 47,529 (2.4)
Restructuring and other
non-recurring charges (14,285) (133,121) (89.3)
Interest expense (15,360) (15,365) (0.0)
Other income (expense)
- net 3,319 (1,624) nm
---------------- -------------- ---------
Earnings (loss) before
income taxes 155,444 (9,604) nm
Income taxes 55,654 7,806 nm
---------------- -------------- ---------
Net earnings (loss) $ 99,790 $ (17,410) nm
================ ============== =========
Earnings (loss) per
weighted average common
share - basic $ 1.71 $ (0.29) nm
================ ============== =========
Earnings (loss) per
weighted average common
share - diluted $ 1.69 $ (0.29) nm
================ ============== =========
Weighted average common
shares outstanding
- basic 58,482 59,359 (1.5)
Weighted average common
shares outstanding
- diluted 58,906 59,359 (0.8)
SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
Oct. 2, 1999 Jan. 2, 1999 Oct. 3, 1998
------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 21,699 $ 15,041 $ 13,470
Accounts receivable
less allowances 501,221 554,703 507,784
Inventories 415,878 375,436 420,512
Prepaid expenses
and other assets 119,319 134,652 127,180
------------ ------------ ------------
Total current assets 1,058,117 1,079,832 1,068,946
Property and equipment - net 269,608 272,030 272,391
Deferred income tax benefits 46,690 60,139 67,082
Investment in Bahco Group 411,571 - -
Intangible and other assets 265,564 262,919 262,928
------------ ------------ ------------
TOTAL ASSETS $ 2,051,550 $ 1,674,920 $ 1,671,347
============ ============ ============
LIABILITIES
Accounts payable $ 65,325 $ 89,442 $ 85,240
Notes payable and current
maturities of long-term debt 29,754 93,117 61,988
Accrued compensation 41,267 42,105 39,897
Dealer deposits 40,367 42,421 38,495
Deferred subscription revenue 41,558 34,793 31,668
Accrued restructuring reserve 15,791 26,165 -
Other accrued liabilities 141,099 130,010 182,698
------------ ------------ ------------
Total current liabilities 375,161 458,053 439,986
Long-term debt 662,800 246,644 246,096
Deferred income taxes 11,565 9,587 12,249
Retiree health care benefits 91,525 89,124 88,800
Pension and other
long-term liabilities 99,714 109,245 111,577
------------ ------------ ------------
TOTAL LIABILITIES $ 1,240,765 $ 912,653 $ 898,708
SHAREHOLDERS' EQUITY
Common stock - $1 par value 66,718 66,685 66,675
Additional paid in capital 96,936 117,384 89,708
Retained earnings 943,787 883,207 883,523
Accumulated other
comprehensive income (loss) (35,242) (30,231) (26,054)
Grantor stock trust
at fair market value (212,963) (241,042) (218,428)
Treasury stock at cost (48,451) (33,736) (22,785)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 810,785 $ 762,267 $ 772,639
------------ ------------ ------------
TOTAL LIABILITIES
& SHAREHOLDERS' EQUITY $ 2,051,550 $ 1,674,920 $ 1,671,347
============ ============ ============
For more information, please visit www.snapon.com.