KENOSHA, Wis. - (BUSINESS WIRE) - Feb. 8, 2018 - 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 2017 operating results for the fourth quarter and full year.
See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales and measures, as adjusted, excluding the legal and tax charges.
“We’re encouraged by our fourth quarter and full year 2017 results,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Our fourth quarter net sales growth of 9.5%, or 4.3% organically, was the highest of any quarter in 2017, with further progress along our runways for growth in both the Commercial & Industrial Group and the Repair Systems & Information Group more than offsetting continuing sales headwinds in the Snap-on Tools Group. For the full year 2017, our commitment to operating improvement through our Snap-on Value Creation Processes enabled us to overcome headwinds, including the legal and tax charges, and deliver a year-over-year increase in reported diluted earnings per share of 3.5%. On an adjusted basis, excluding the tax and legal charges, diluted earnings per share was up 10.0% for the year. We believe Snap-on’s value proposition of making work easier for serious professionals performing critical tasks remains strong in the end markets we serve and as we enter 2018, we intend to strengthen further our position by enhancing the franchise network, expanding in the vehicle repair garage, extending to critical industries and building in emerging markets. Finally, our progress in 2017 would not have been possible without the capability and commitment of our franchisees and associates, and I thank them for their dedication and their contributions.”
Commercial & Industrial Group segment sales of $341.7 million in the quarter increased $55.4 million, or 19.4%, from 2016 levels, reflecting a $29.5 million, or 10.1%, organic sales gain, $19.1 million of acquisition-related sales, and $6.8 million of favorable foreign currency translation. The organic sales increase primarily includes higher sales to customers in critical industries as well as gains in the segment’s European-based hand tools business, power tools business and Asia/Pacific operations.
Operating earnings of $50.9 million in the period increased $7.0 million from 2016 levels, and the operating margin (operating earnings as a percentage of segment sales) of 14.9% compared to 15.3% a year ago.
Snap-on Tools Group segment sales of $409.2 million in the quarter decreased $8.3 million, or 2.0%, from 2016 levels, reflecting a $12.6 million, or 3.0%, organic sales decline, partially offset by $4.3 million of favorable foreign currency translation. The organic sales decrease includes lower sales in the U.S. franchise operations, partially offset by gains in the international franchise operations.
Operating earnings of $67.3 million in the period decreased $6.2 million from 2016 levels, and the operating margin of 16.4% compared to 17.6% a year ago.
Repair Systems & Information Group segment sales of $356.8 million in the quarter increased $37.0 million, or 11.6%, from 2016 levels, reflecting a $20.2 million, or 6.2%, organic sales gain, $10.6 million of acquisition-related sales, and $6.2 million of favorable foreign currency translation. The organic sales gain includes increased sales to OEM dealerships and higher sales of diagnostics and repair information products to independent repair shop owners and managers.
Operating earnings of $89.8 million in the period increased $7.3 million from 2016 levels, and the operating margin of 25.2% compared to 25.8% a year ago.
Financial Services operating earnings of $54.4 million on revenue of $79.9 million in the quarter compared to operating earnings of $51.6 million on revenue of $74.2 million a year ago. Originations of $265.0 million in the fourth quarter increased $4.7 million, or 1.8%, from 2016 levels.
Corporate expenses of $50.3 million in the quarter compared to $23.8 million last year, primarily due to the $30.9 million legal charge, partially offset by lower performance-based compensation expense.
Outlook
Snap-on expects to make continued progress in 2018 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 in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2018 will be in a range of $90 million to $100 million.
As a result of the recently enacted tax legislation in the U.S., Snap-on currently anticipates that its full year 2018 effective income tax rate will be in a range of 24% to 25%. This compares to a full year 2017 effective tax rate on a reported basis and as adjusted of 31.1% and 30.6%, respectively.
Conference Call and Webcast on February 8, 2018, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, February 8, 2018, 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 https://www.snapon.com/EN/Investors/Investor-Events and click on the link to the call. 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 at https://www.snapon.com/EN/Investors/Financial-Information/Quarterly-Earnings.
Non-GAAP Measures
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”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation. 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.
In addition, for the fourth quarter and full year 2017, the company is including operating earnings before financial services, consolidated operating earnings, net earnings, diluted earnings per share and effective tax rate, all adjusted. The adjustments exclude the impact of a pre-tax $30.9 million charge ($19.1 million after-tax) in the fourth quarter of 2017 and a pre-tax $45.9 million charge ($28.4 million after-tax) for the full year 2017 related to judgments in litigation matters that are being appealed. For the fourth quarter and full year 2017, the company is also including net earnings, diluted earnings per share and effective tax rate, all as adjusted to exclude the impact of a $7.0 million charge related to the implementation of tax legislation. Management believes that these are unusual events and therefore the non-GAAP financial measures adjusted to exclude them provide more meaningful year-over-year comparisons of the company’s 2017 operating performance. For a reconciliation of the adjusted metrics, see “Reconciliation of Non-GAAP Financial Measures” below.
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 and support its franchise business. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.7 billion, S&P 500 company headquartered in Kenosha, Wisconsin.
Forward-looking Statements
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 December 31, 2016, which are incorporated herein by reference. In addition, Snap-on cannot assure that its appeal of the legal matters discussed above will result in diminished liability or a reversal of the legal charges. As Snap-on further evaluates the effects of the new U.S. tax legislation, it may recognize further adjustments.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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Leslie Kratcoski
Snap-on Incorporated
Investor Relations
262/656-6121
Richard Secor
Media Relations
262/656-5561
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SOURCE Snap-on Incorporated
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.