Snap-on Reports Record Fourth-Quarter and Full-Year Results
3 February 2000
Snap-on Reports Record Fourth-Quarter and Full-Year Results
KENOSHA, Wis.--Feb. 3, 2000--Snap-on Incorporated , a global leader in tools, diagnostics and equipment, announced record results for the 1999 fourth quarter and full year in net sales, and in earnings and earnings per share before non-recurring and unusual items.
-- Full-year diluted earnings per share increased to $2.60, up 39%
from $1.87 in 1998, excluding non-recurring and unusual items. On
a comparable basis, earnings increased 37% to $152.9 million from
$111.9 million in 1998. After giving affect to non-recurring and
unusual items, net earnings were $127.2 million, or $2.16 per
diluted share, compared with a net loss of $4.8 million, or $0.08
per share, in 1998.
-- Net sales increased 10% to a record $1.946 billion from $1.773
billion in 1998, reflecting solid sales gains in North America
and the contribution from the Bahco Group AB (formerly Sandvik
Saws and Tools) acquired on September 30, 1999.
-- The company's restructuring program, Project Simplify, was
essentially completed and fully provided for at year end, with no
further charges anticipated. The initiative achieved the savings
goal; more than $30 million in savings were realized during 1999.
The company expects to achieve its planned savings of $60 million
in 2000.
-- Fourth-quarter diluted earnings per share reached $0.76 in 1999,
an increase of 38% over the $0.55 earned in 1998, excluding
non-recurring and unusual items. On a comparable basis, earnings
increased 36% to $44.7 million from $32.8 million in 1998. After
giving affect to non-recurring and unusual items, net earnings in
1999 were $27.4 million, or $0.47 per diluted share, compared
with $11.1 million, or $0.19 per share, in 1998.
-- In the 1999 fourth quarter, there were non-recurring charges of
$0.24 per share related to the completion of Project Simplify
activities. In addition, there were acquisition-related and other
unusual charges of $0.12 per share. Also during the period,
Snap-on recorded a gain of $0.07 per share on the sale of a 15%
interest in its Mitchell Repair Information Company subsidiary.
In 1998, non-recurring charges were $0.21 per share related to
Project Simplify and an unusual item of $0.15 per share.
"The fourth quarter capped a year of solid improvements at Snap-on," said Robert A. Cornog, chairman, president and chief executive officer. "Significant sales growth in heritage tools, diagnostics and information services, coupled with benefits from our Project Simplify activities, provided a return to record-setting financial performance."
Full-Year 1999 Results
For 1999, diluted earnings per share were $2.60, excluding $0.44 per share in non-recurring and unusual items, up 39% over the $1.87 earned in 1998. In 1998, there was $1.95 per share in non-recurring and unusual items. After giving affect to all non-recurring and unusual items, diluted net earnings per share were $2.16 in 1999 compared with a net loss of $0.08 per share in 1998. Net sales grew 5%, excluding the contribution from Bahco and a negative 1% impact from currency translation.
The increase in earnings was driven by the increase in net sales, favorable operating leverage from those sales, higher productivity and the savings from Project Simplify actions. These items also provided a favorable affect on operating margin that was partially offset by a business mix shift, primarily due to the consolidation of Bahco. (Bahco goes to market through distributors. As a consequence, its gross margin and operating expenses as a percent of sales are substantially lower than Snap-on's previous business mix.) Gross margin improved to 46.9% compared with 46.5% in 1998, excluding non-recurring items in both years, and operating expenses as a percent of sales declined to 37.2% from 39.8% in 1998. Net finance income declined to $60.5 million from $65.9 million in 1998, resulting from the establishment of a joint venture in January 1999.
Net earnings for the full year, excluding $25.7 million in non-recurring and unusual items, were $152.9 million, up from $111.9 million, a 37% increase over 1998. For 1998, non-recurring and unusual items were $116.7 million. After giving affect to all non-recurring and unusual items, net earnings for 1999 were $127.2 million compared with a 1998 net loss of $4.8 million.
The company had essentially completed the more than 50 activities in its Project Simplify initiative by year end and it expects no further related charges to be recorded in 2000. These efforts resulted in achieving $30 million in savings in 1999. In 1999, $37.2 million in non-recurring charges were recorded compared with $149.9 million in non-recurring charges in 1998. The company completed the Project Simplify activities at a total pre-tax cost of $187.1 million against a targeted cost of $185 million.
Fourth-Quarter Performance
For the fourth quarter of 1999, diluted earnings per share increased 38% to $0.76 compared with $0.55 in 1998, excluding non-recurring and unusual items. Earnings, excluding non-recurring and unusual items, were $44.7 million, a 36% increase versus $32.8 million in the same period a year ago. After giving affect to non-recurring and unusual items, net earnings for the fourth quarter of 1999 were $27.4 million, or $0.47 per diluted share, compared with $11.1 million, or $0.19 per diluted share, a year ago. Net sales for the quarter increased 19% to $566.7 million compared with $476.8 million in 1998. Net sales grew 5%, excluding the contribution from Bahco and a negative 2% impact from currency translation.
Snap-on strengthened its business in 1999 through new product introductions, through the success of its actions to streamline the business and by expanding its business and growth potential outside the automotive industry with the Bahco acquisition. Solid operating improvements during the year resulted in enhanced customer service and faster response time. Order fill rates for Snap-on dealers and industrial customers reached record levels during 1999.
More than 10% of sales in 1999 were generated from the sale of products introduced during the prior 12 months. A record level of $50.2 million was invested in R&D activity. This focus on innovation continues to keep Snap-on at the forefront in meeting customers' needs through the most complete set of product and service solutions in the automotive repair industry.
Snap-on also reported on a realigned management structure. The company is moving from business units based on geographic regions to two, globally coordinated units, consistent with its go-to-market distribution capabilities: Global Transportation and Global Operations. "We anticipate this last change will bring greater resource planning and coordination on a worldwide basis, take advantage of the best product expertise wherever it may reside and ensure that strategic initiatives and best practices are implemented globally," said Cornog.
Under this new structure, the dealer van channel will operate on a worldwide basis to strengthen dealer activities, brand and market coordination. Global Transportation reported an 8.8% sales increase in the fourth quarter of 1999, compared with the comparable period in 1998. Strong dealer sales in North America and Japan were partially offset by currency-impacted sales declines in Europe. For the full year, sales increased 4.1% to $1.051 billion from $1.010 billion in 1998.
Global Operations, the company's non-dealer tool and equipment products business, had a 29.9% sales increase for the fourth quarter of 1999, compared with the fourth quarter of 1998. Incremental sales to new-car dealerships, under management facilitation agreements with car manufacturers, and the addition of Bahco, were partially offset by a negative impact from European currency translation. For the full year, sales grew 17.3% to $894.7 million from $762.8 million in 1998.
"Overall, we believe the fundamental trends in the industries we serve remain sound," said Cornog. "During the year ahead, our investments will be focused on developing technology and people. With continued emphasis on new, innovative products and services, on enhancing the delivery of value, on faster cycle times and on improved return on assets and cash flow, we expect to enhance shareholder value. Our e-commerce initiatives coupled with our brand strength will provide incremental growth opportunities from our expanded global platform."
Snap-on Incorporated is a leading global developer, manufacturer and marketer of tool, diagnostic 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," "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 continue to achieve higher productivity and attain further cost reductions; the Corporation's ability to retain and attract dealers, to integrate Bahco successfully and to withstand external negative factors including changes in trade, monetary and fiscal policies, laws and regulations, or other activities of governments or their agencies; and the absence of significant changes in the current competitive environment, inflation, currency fluctuations or the material worsening of economic and political situations around the world. 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)
FOURTH QUARTER ENDED TWELVE MONTHS ENDED
----------------------- -----------------------
% INCR. % INCR.
Jan. 1, Jan. 2, (DECR.) Jan. 1, Jan. 2, (DECR.)
2000 1999 2000 1999
------ ------ ------ ------ ------ ------
Net sales $ 566,726 $ 476,760 18.9 $1,945,621 $1,772,637 9.8
Cost of goods
sold (316,526) (271,207) 16.7 (1,032,836) (948,761) 8.9
Cost of goods sold
non-recurring
charges (16,598) (10,000) 66.0 (16,598) (60,562)(72.6)
Operating
expenses (196,443) (180,465) 8.9 (723,658) (705,811) 2.5
Net finance
income 14,076 18,404 (23.5) 60,476 65,933 (8.3)
Restructuring
and other non-
recurring
charges (6,307) (9,242) (31.8) (20,592) (89,301)(76.9)
Interest
expense (11,998) (5,889) 103.7 (27,358) (21,254) 28.7
Other income
(expense)-net 9,563 (417) nm 12,882 (2,041) nm
------- ------- ------ -------- -------- -----
Earnings before
income taxes 42,493 17,944 136.8 197,937 10,840 nm
Income taxes 15,056 6,850 119.8 70,710 15,619 nm
------- ------- ------ -------- -------- -----
Net earnings $ 27,437 $11,094 147.3 $127,227 $ (4,779) nm
======= ======= ====== ========= ======== =====
Earnings per
weighted average
common share -
basic $ 0.47 $ 0.19 147.4 $ 2.18 $ (0.08) nm
======= ======= ====== ========= ======== =====
Earnings per
weighted average
common share -
diluted $ 0.47 $ 0.19 147.4 $ 2.16 (0.08) nm
======= ======= ====== ========= ======== =====
Weighted average
common shares
outstanding -
basic 58,531 58,803 (0.5) 58,494 59,220 (1.2)
Weighted average
common shares
outstanding -
diluted 58,914 59,379 (0.8) 58,877 59,220 (0.6)
Snap-on Incorporated
Consolidated Balance Sheets
(Amounts in Thousands)
Jan. 1, 2000 Jan. 2, 1999
------------ ------------
ASSETS
Cash and cash equivalents $ 17,617 $ 15,041
Accounts receivable less allowances 617,645 554,703
Inventories 454,841 375,436
Prepaid expenses and other assets 116,238 134,652
------------ ------------
Total current assets 1,206,341 1,079,832
Property and equipment - net 362,598 272,030
Deferred income tax benefits 54,652 60,139
Intangible and other assets 526,231 262,919
------------ ------------
TOTAL ASSETS $ 2,149,822 $ 1,674,920
============ ============
LIABILITIES
Accounts payable $ 146,422 $ 89,442
Notes payable and current
maturities of long-term debt 22,349 93,117
Accrued compensation 57,540 42,105
Dealer deposits 48,251 42,421
Deferred subscription revenue 42,056 34,793
Accrued restructuring charges 4,500 26,165
Other accrued liabilities 131,631 130,010
Total current liabilities 452,749 458,053
Long-term debt 607,476 246,644
Deferred income taxes 26,989 9,587
Retiree health care benefits 91,391 89,124
Pension liability 96,238 75,040
Other long-term liabilities 49,718 34,205
------------ ------------
TOTAL LIABILITIES $ 1,324,561 $ 912,653
SHAREHOLDERS' EQUITY
Common stock - $1 par value 66,729 66,685
Additional paid in capital 62,292 117,384
Retained earnings 957,763 883,207
Accumulated other comprehensive
income (loss) (35,814) (30,231)
Grantor stock trust at fair market
value (177,373) (241,042)
Treasury stock at cost (48,336) (33,736)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 825,261 762,267
------------ ------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 2,149,822 $ 1,674,920
============ ============