KENOSHA, Wis. - (BUSINESS WIRE) - July 21, 2016 - Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced operating results for the second quarter of 2016.
“We believe our second quarter results continue to confirm Snap-on’s capabilities in serving serious professionals performing critical tasks in workplaces of consequence around the world,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “This performance, which includes 2.9% organic sales growth and a 16.3% increase in diluted earnings per share, demonstrates further progress along our defined runways for coherent growth and ongoing strength in automotive repair while overcoming continuing headwinds in certain challenging end markets and geographies. The 140 basis point improvement in operating margin before financial services also reflects contributions from our Snap-on Value Creation Processes, which drive our ongoing improvements in safety, quality, customer connection, innovation and rapid continuous improvement. Finally, these results and achievements reflect significant effort and dedication across the organization and I thank our franchisees and associates worldwide for their extraordinary contributions and commitment.”
Commercial & Industrial Group segment sales of $285.7 million in the quarter decreased $10.1 million, or 3.4%, from 2015 levels. Excluding $4.2 million of unfavorable foreign currency translation, organic sales declined $5.9 million, or 2.0%, as lower sales to customers in critical industries were partially offset by gains in the segment’sAsia/Pacific and power tools operations, as well as higher sales from the segment’s European-based hand tools business.
Operating earnings of $39.3 million in the period, including $1.0 million of unfavorable foreign currency effects, decreased $2.9 million from 2015 levels, and the operating margin (operating earnings as a percentage of segment sales) of 13.8% declined 50 basis points from 14.3% a year ago.
Snap-on Tools Group segment sales of $416.7 million in the quarter rose $18.0 million, or 4.5%, from 2015 levels. Excluding $4.7 million of unfavorable foreign currency translation, organic sales were up 5.8%, reflecting similar sales increases in both the company’s U.S. and international franchise operations.
Operating earnings of $76.3 million in the period, including $4.1 million of unfavorable foreign currency effects, increased $8.3 million from 2015 levels, and the operating margin of 18.3% improved 120 basis points from 17.1% a year ago.
Repair Systems & Information Group segment sales of $295.2 million in the quarter rose $17.8 million, or 6.4%, from 2015 levels. Excluding $5.9 million of acquisition-related sales and $2.3 million of unfavorable foreign currency translation, organic sales increased $14.2 million, or 5.2%, due to higher sales of diagnostic and repair information products to independent repair shop owners and managers, increased sales of undercar equipment and higher sales to OEM dealerships.
Operating earnings of $74.5 million in the period, including $1.0 million of unfavorable foreign currency effects, increased $6.8 million from 2015 levels, and the operating margin of 25.2% improved 80 basis points from 24.4% a year ago.
Financial Services operating earnings of $49.5 million on revenue of $69.3 million in the quarter compared to operating earnings of $41.4 million on revenue of $58.7 million a year ago.
Corporate expenses of $23.7 million in the quarter declined $3.4 million from $27.1 million last year, primarily due to lower stock-based (mark-to-market) compensation and pension expense.
Snap-on expects to make continued progress in 2016 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but also in adjacent markets, additional geographies and other areas, including in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on continues to expect that capital expenditures in 2016 will be in a range of $80 million to $90 million. Snap-on also continues to anticipate that its full year 2016 effective income tax rate will be comparable to its 2015 full year rate.
Conference Call and Webcast on July 21, 2016, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, July 21, 2016, at 9:00 a.m. Central Time, and a replay will be available for at least 10 days following the call. To access the webcast, visit http://www.snapon.com/sna and click on the link to the webcast. The slide presentation accompanying the call can be accessed under the Downloads tab in the webcast viewer, as well as on the Snap-on website under the tabs Investor Information / Investor Events / Company Presentations.
References in this document to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding acquisition-related sales and the impact of foreign currency translation. Snap-on has significant international operations and is subject to risks inherent with foreign operations, including foreign currency translation fluctuations. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. The company’s organic sales disclosures also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in our businesses and facilitating comparisons of our sales performance with prior periods.
Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.4 billion, S&P 500 company headquartered in Kenosha, Wisconsin.
Statements in this news release that are not historical facts, including statements that (i) are in the future tense; (ii) include the words “expects,” “anticipates,” “intends,” “approximates,” or similar words that reference Snap-on or its management; (iii) are specifically identified as forward-looking; or (iv) describe Snap-on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that this news release may contain statements, including earnings projections, that are forward-looking in nature and were developed by management in good faith and, accordingly, are subject to risks and uncertainties regarding Snap-on’s expected results that could cause (and in some cases have caused) actual results to differ materially from those described or contemplated in any forward-looking statement. Factors that may cause the company’s actual results to differ materially from those contained in the forward-looking statements include those found in the company’s reports filed with the Securities and Exchange Commission, including the information under the “Safe Harbor” and “Risk Factors” headings in its Annual Report on Form 10-K for the fiscal year ended January 2, 2016, which are incorporated herein by reference. Snap-on disclaims any responsibility to update any forward-looking statement provided in this news release, except as required by law.
For additional information, please visit www.snapon.com.
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Non-GAAP Supplemental Data
The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on Incorporated's ("Snap-on's") non-financial services ("Operations") and "Financial Services" businesses.
The supplemental Operations data reflects the results of operations and financial position of Snap-on's tools, diagnostic and equipment products, software and other non-financial services operations with Financial Services on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on's U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses were eliminated to arrive at the Condensed Consolidated Financial Statements.
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Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks.