KENOSHA, Wis. - (BUSINESS WIRE) - Apr. 19, 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 operating results for the first quarter of 2018.
See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales and measures, as adjusted, excluding the net debt items and tax charge.
At the beginning of fiscal 2018, Snap-on adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The adoption did not have a significant impact on the company’s consolidated financial statements. Among the changes, the adoption resulted in an increase in inventories – net in the Condensed Consolidated Balance Sheets of $20.9 million, but did not have any impact on the Condensed Consolidated Statements of Earnings.
At the beginning of fiscal 2018, Snap-on also adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires changes be applied retrospectively; as such, certain prior period year amounts have been restated to reflect this adoption and conform to the 2018 presentation.
“We are encouraged with our first quarter 2018 results, which were achieved despite continuing headwinds in the Snap-on Tools Group,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Net sales growth in both the Commercial and Industrial Group and the Repair Systems and Information Group provides ongoing validation of the fundamental strength of Snap-on’s value proposition of making work easier for serious professionals and demonstrates continued progress along our defined runways for coherent growth. At the same time, year-over-year growth in earnings per diluted share reflects both the ongoing commitment to our Snap-on Value Creation Processes and the benefits for our corporation of the new tax legislation in the United States. Finally, these results would not have been possible without the dedication and capability of our franchisees and associates worldwide; I thank them for their continuing commitment and extraordinary contributions.”
Commercial & Industrial Group segment sales of $331.6 million in the quarter increased $32.9 million, or 11.0%, from 2017 levels, reflecting a $6.0 million, or 1.9%, organic sales gain, $13.6 million of acquisition-related sales, and $13.3 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 and Asia/Pacific operations, partially offset by lower sales of power tools.
Operating earnings of $46.5 million in the period increased $4.6 million from 2017 levels, and the operating margin (operating earnings as a percentage of segment sales) of 14.0% was unchanged from 2017.
Snap-on Tools Group segment sales of $404.7 million in the quarter decreased $4.7 million, or 1.1%, from 2017 levels, reflecting an $11.4 million, or 2.7%, organic sales decline, partially offset by $6.7 million of favorable foreign currency translation. The organic sales decrease includes lower sales in the company’s U.S. franchise operations, which was offset in part by gains in the company’s international franchise operations.
Operating earnings of $68.9 million in the period decreased $1.4 million from 2017 levels, and the operating margin of 17.0% compared to 17.2% a year ago.
Repair Systems & Information Group segment sales of $337.0 million in the quarter increased $18.2 million, or 5.7%, from 2017 levels, reflecting an $8.4 million, or 2.6%, organic sales gain, $0.7 million of acquisition-related sales, and $9.1 million of favorable foreign currency translation. The organic sales gain includes higher sales of diagnostic and repair information products to independent repair shop owners and managers and increased sales to OEM dealerships; sales of undercar equipment were essentially flat.
Operating earnings of $85.8 million in the period increased $6.7 million from 2017 levels, and the operating margin of 25.5% improved 70 basis points from 24.8% a year ago.
Financial Services operating earnings of $56.9 million on revenue of $83.0 million in the quarter compared to operating earnings of $52.5 million on revenue of $76.8 million a year ago. Originations of $247.3 million in the first quarter decreased $17.3 million, or 6.5%, from 2017 levels.
Corporate expenses of $23.5 million in the quarter compared to $21.1 million last year.
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, of which $18.0 million was incurred in the first quarter.
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%.
Conference Call and Webcast on April 19, 2018, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, April 19, 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.
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 first quarter of 2018, the company is including net earnings and diluted earnings per share, both as adjusted to exclude a net gain of $5.5 million ($4.1 million after tax) associated with a treasury lock settlement gain of $13.3 million related to the issuance of debt, partially offset by a $7.8 million expense related to the early extinguishment of debt. For the first quarter 2018, the company is also including net earnings, diluted earnings per share and effective tax rate, all as adjusted, to exclude the impact of an additional $2.6 million charge related to the implementation of U.S. 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 2018 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 30, 2017, which are incorporated herein by reference. 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
Investor Relations
Snap-on Incorporated
262/656-6121
Richard Secor
Media Relations
Snap-on Incorporated
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.