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Snap-on Announces Second Quarter 2013 Results

By: Snap-on Tools |  2 Shares     74 Reads

Diluted EPS of $1.50 increases 15.4%; Sales of $764.1 million up 3.6% over 2012 levels; Operating earnings before financial services improves to 15.4% of sales

KENOSHA, Wis. - (BUSINESS WIRE) - Jul. 18, 2013 - 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 2013.

• Sales of $764.1 million increased $26.2 million, or 3.6%, from 2012 levels; excluding $4.7 million of unfavorable foreign currency translation and $8.5 million of sales from the previously announced May 2013 acquisition of Challenger Lifts, Inc. (“Challenger”), organic sales increased 3.1%.
• Operating earnings before financial services of $117.8 million, or 15.4% of sales, compares with $104.6 million, or 14.2% of sales, last year.
• Restructuring costs totaled $1.8 million in the quarter; restructuring costs of $10.2 million in the second quarter of 2012 included $6.8 million for the settlement of a pension plan. Stock-based and mark-to-market expenses in the quarter increased $4.4 million from 2012 levels.
• Financial services operating earnings of $30.6 million increased $5.0 million from 2012 levels.
• Consolidated operating earnings of $148.4 million improved to 18.4% of revenues (net sales plus financial services revenue) as compared to $130.2 million, or 16.7% of revenues, last year.
• Net earnings of $88.4 million, or $1.50 per diluted share, compares with net earnings of $76.4 million, or $1.30 per diluted share, a year ago.

“We believe our performance in the second quarter reaffirms Snap-on’s strengths in serving serious professionals performing critical repairs around the world every day,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Again this quarter, we achieved higher year-over-year sales and increased operating income in spite of ongoing headwinds in specific parts of our business, and we continued to progress in those strategic areas of importance that we’ve identified as being decisive to our future. For example, our recent acquisition of Challenger Lifts in the second quarter broadens our established capabilities and furthers our advancement along the growth runway of expanding with repair shop owners and managers. Finally, I thank our franchisees and associates worldwide for their significant dedication and contributions, without which these results would not have been possible.”

Segment Results

Commercial & Industrial Group segment sales of $266.2 million in the quarter decreased $17.2 million, or 6.1%, from 2012 levels primarily due to lower sales to the military and in the segment’s European-based hand tools business. Excluding $2.1 million of unfavorable foreign currency translation, organic sales in the quarter decreased 5.4%.

Operating earnings of $33.6 million in the period increased $0.8 million from 2012 levels, and the operating margin (operating earnings as a percentage of segment sales) of 12.6% improved from 11.6% a year ago.

Snap-on Tools Group segment sales of $346.2 million in the quarter rose $21.2 million, or 6.5%, from 2012 levels, reflecting sales gains across both the company’s U.S. and international franchise operations. Excluding $1.5 million of unfavorable foreign currency translation, organic sales increased 7.0%.

Operating earnings of $54.5 million in the period increased $10.0 million from 2012 levels and the operating margin of 15.7% compared with 13.7% a year ago. Operating earnings in 2013 includes $0.2 million of restructuring costs; operating earnings in the second quarter of 2012 included $6.9 million of restructuring costs largely for a pension plan settlement. Operating earnings in 2013 also includes $1.8 million of higher stock-based and mark-to-market expenses associated with the company’s franchisee stock purchase plan.

Repair Systems & Information Group segment sales of $246.2 million in the quarter increased $18.8 million, or 8.3%, from 2012 levels. Excluding $8.5 million of sales from the Challenger acquisition and $0.8 million of unfavorable foreign currency translation, organic sales in the quarter rose 4.9%, primarily due to higher sales to Original Equipment Manufacturer (OEM) dealerships and gains in sales of diagnostics and repair information products to independent repair shop owners and managers.

Operating earnings of $56.7 million in the period increased $4.5 million from 2012 levels; the operating margin was 23.0% in both the second quarters of 2013 and 2012.

Financial Services operating earnings of $30.6 million on revenue of $44.5 million in the quarter compared with operating earnings of $25.6 million on revenue of $39.9 million a year ago.

Corporate expenses of $27.0 million in the quarter increased from $24.9 million last year, primarily due to $2.6 million of higher stock-based and mark-to-market expenses.

Outlook

In 2013, Snap-on expects to continue with the advancement of its strategic framework designed to enhance its mobile tool distribution network, expand in the vehicle repair garage, extend to critical industries and build in emerging markets. In pursuit of these initiatives, Snap-on continues to anticipate that capital expenditures in 2013 will be in a range of $70 million to $80 million. Snap-on also expects that its full year 2013 effective income tax rate will be comparable to its 2012 rate.

Conference Call and Webcast July 18, 2013, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, July 18, 2013, 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, including the accompanying slide presentation, visit www.snapon.com/sna and click on the link toward the bottom of the page. Additional detail about Snap-on is also available on the Snap-on web site.

About Snap-on

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 $2.9 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 29, 2012, 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.

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Earnings
(Amounts in millions, except per share data)
(unaudited)
		Three Months Ended								Six Months Ended
		June 29,				June 30,				June 29,				June 30,
		2013				2012				2013				2012
Net sales		$	764.1			$	737.9			$	1,505.8			$	1,473.1
Cost of goods sold			(390.9	)			(388.0	)			(775.7	)			(775.5	)
Gross profit			373.2				349.9				730.1				697.6
Operating expenses			(255.4	)			(245.3	)			(504.5	)			(495.5	)
Operating earnings before financial services			117.8				104.6				225.6				202.1
Financial services revenue			44.5				39.9				88.5				77.9
Financial services expenses			(13.9	)			(14.3	)			(27.4	)			(28.4	)
Operating earnings from financial services			30.6				25.6				61.1				49.5
Operating earnings			148.4				130.2				286.7				251.6
Interest expense			(13.8	)			(13.9	)			(27.4	)			(27.8	)
Other income (expense) – net			(1.7	)			0.1				(2.3	)			(0.3	)
Earnings before income taxes and
equity earnings			132.9				116.4				257.0				223.5
Income tax expense			(42.5	)			(38.3	)			(81.3	)			(73.5	)
Earnings before equity earnings			90.4				78.1				175.7				150.0
Equity earnings, net of tax			0.3				0.4				0.1				1.5
Net earnings			90.7				78.5				175.8				151.5
Net earnings attributable to noncontrolling interests			(2.3	)			(2.1	)			(4.6	)			(4.1	)
Net earnings attributable to Snap-on Inc.		$	88.4			$	76.4			$	171.2			$	147.4
Net earnings per share attributable to Snap-on Inc.:
Basic		$	1.52			$	1.31			$	2.94			$	2.53
Diluted			1.50				1.30				2.90				2.51
Weighted-average shares outstanding:
Basic			58.2				58.2				58.2				58.2
Effect of dilutive options			0.8				0.6				0.9				0.6
Diluted			59.0				58.8				59.1				58.8

 

SNAP-ON INCORPORATED
Supplemental Segment Information
(Amounts in millions)
(unaudited)
		Three Months Ended									Six Months Ended
		June 29,				June 30,					June 29,				June 30,
		2013				2012					2013				2012
Net sales:
Commercial & Industrial Group		$	266.2			$	283.4				$	532.6			$	569.9
Snap-on Tools Group			346.2				325.0					673.5				641.6
Repair Systems & Information Group			246.2				227.4					492.3				453.5
Segment net sales			858.6				835.8					1,698.4				1,665.0
Intersegment eliminations			(94.5	)			(97.9	)				(192.6	)			(191.9	)
Total net sales		$	764.1			$	737.9				$	1,505.8			$	1,473.1
Financial Services revenue			44.5				39.9					88.5				77.9
Total revenues		$	808.6			$	777.8				$	1,594.3			$	1,551.0
Operating earnings:
Commercial & Industrial Group		$	33.6			$	32.8				$	64.2			$	62.0
Snap-on Tools Group			54.5				44.5					101.7				90.6
Repair Systems & Information Group			56.7				52.2					113.2				100.8
Financial Services			30.6				25.6					61.1				49.5
Segment operating earnings			175.4				155.1					340.2				302.9
Corporate			(27.0	)			(24.9	)				(53.5	)			(51.3	)
Operating earnings		$	148.4			$	130.2				$	286.7			$	251.6
Interest expense			(13.8	)			(13.9	)				(27.4	)			(27.8	)
Other income (expense) – net			(1.7	)			0.1					(2.3	)			(0.3	)
Earnings before income taxes
and equity earnings		$	132.9			$	116.4				$	257.0			$	223.5

 

SNAP-ON INCORPORATED
Condensed Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
		June 29,					December 29,
		2013					2012
Assets
Cash and cash equivalents		$	174.7				$	214.5
Trade and other accounts receivable – net			499.9					497.9
Finance receivables – net			355.4					323.1
Contract receivables – net			56.1					62.7
Inventories – net			418.1					404.2
Deferred income tax assets			77.0					81.8
Prepaid expenses and other assets			105.0					84.8
Total current assets			1,686.2					1,669.0
Property and equipment – net			375.1					375.2
Deferred income tax assets			104.4					110.4
Long-term finance receivables – net			520.8					494.6
Long-term contract receivables – net			203.0					194.4
Goodwill			823.9					807.4
Other intangibles – net			192.2					187.2
Other assets			55.9					64.1
Total assets		$	3,961.5				$	3,902.3
Liabilities and Equity
Notes payable and current maturities of long-term debt		$	114.9				$	5.2
Accounts payable			157.6					142.5
Accrued benefits			44.6					50.6
Accrued compensation			73.3					88.3
Franchisee deposits			54.8					54.7
Other accrued liabilities			250.9					247.9
Total current liabilities			696.1					589.2
Long-term debt			861.4					970.4
Deferred income tax liabilities			138.5					127.1
Retiree health care benefits			46.0					48.4
Pension liabilities			239.7					260.7
Other long-term liabilities			83.9					87.5
Total liabilities			2,065.6					2,083.3
Equity
Shareholders' equity attributable to Snap-on Inc.
Common stock			67.4					67.4
Additional paid-in capital			219.6					204.6
Retained earnings			2,193.2					2,067.0
Accumulated other comprehensive loss			(155.9	)				(124.2	)
Treasury stock at cost			(445.5	)				(412.7	)
Total shareholders' equity attributable to Snap-on Inc.			1,878.8					1,802.1
Noncontrolling interests			17.1					16.9
Total equity			1,895.9					1,819.0
Total liabilities and equity		$	3,961.5				$	3,902.3

 

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flow
(Amounts in millions)
(unaudited)
		Three Months Ended
		June 29,				June 30,
		2013				2012
Operating activities:
Net earnings		$	90.7			$	78.5
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation			13.0				12.6
Amortization of other intangibles			6.5				6.6
Provision for losses on finance receivables			5.6				4.8
Provision for losses on non-finance receivables			2.1				3.5
Stock-based compensation expense			10.0				7.4
Excess tax benefits from stock-based compensation			(1.9	)			(0.7	)
Deferred income tax benefit			(3.5	)			(10.8	)
Gain on sale of assets			-				(0.1	)
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) decrease in trade and other accounts receivable			2.4				(5.9	)
Increase in contract receivables			(0.8	)			(9.3	)
Increase in inventories			(15.7	)			(15.3	)
Increase in prepaid and other assets			(10.5	)			(6.6	)
Increase in accounts payable			4.4				5.1
Increase in accruals and other liabilities			7.8				21.9
Net cash provided by operating activities			110.1				91.7
Investing activities:
Additions to finance receivables			(177.1	)			(149.9	)
Collections of finance receivables			124.6				110.1
Capital expenditures			(16.7	)			(18.0	)
Acquisition of business			(38.2	)			-
Disposal of property and equipment			0.2				0.3
Other			(0.3	)			-
Net cash used by investing activities			(107.5	)			(57.5	)
Financing activities:
Proceeds from short-term borrowings			1.6				-
Repayments of short-term borrowings			-				(0.8	)
Net increase in other short-term borrowings			2.4				1.2
Cash dividends paid			(22.3	)			(19.5	)
Purchase of treasury stock			(40.4	)			(8.2	)
Proceeds from stock purchase and option plans			18.7				9.2
Excess tax benefits from stock-based compensation			1.9				0.7
Other			(2.4	)			(2.7	)
Net cash used by financing activities			(40.5	)			(20.1	)
Effect of exchange rate changes on cash and cash equivalents			(1.0	)			(2.1	)
Increase (decrease) in cash and cash equivalents			(38.9	)			12.0
Cash and cash equivalents at beginning of period			213.6				161.6
Cash and cash equivalents at end of period		$	174.7			$	173.6
Supplemental cash flow disclosures:
Cash paid for interest		$	(1.5	)		$	(1.5	)
Net cash paid for income taxes			(57.9	)			(32.2	)

 

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flow
(Amounts in millions)
(unaudited)
		Six Months Ended
		June 29,				June 30,
		2013				2012
Operating activities:
Net earnings		$	175.8			$	151.5
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation			25.5				25.2
Amortization of other intangibles			12.8				13.0
Provision for losses on finance receivables			9.5				8.7
Provision for losses on non-finance receivables			6.2				6.3
Stock-based compensation expense			19.5				16.1
Excess tax benefits from stock-based compensation			(5.9	)			(2.7	)
Deferred income tax provision			10.9				2.6
Gain on sale of assets			(0.1	)			(0.9	)
Changes in operating assets and liabilities, net of effects of acquisition:
Increase in trade and other accounts receivable			(9.9	)			(2.9	)
Increase in contract receivables			(7.3	)			(13.5	)
Increase in inventories			(18.8	)			(19.4	)
Increase in prepaid and other assets			(19.8	)			(27.0	)
Increase in accounts payable			14.3				20.1
Decrease in accruals and other liabilities			(26.9	)			(20.4	)
Net cash provided by operating activities			185.8				156.7
Investing activities:
Additions to finance receivables			(321.5	)			(285.4	)
Collections of finance receivables			247.1				216.2
Capital expenditures			(31.4	)			(39.8	)
Acquisition of business			(38.2	)			-
Disposal of property and equipment			0.5				2.2
Other			(10.5	)			-
Net cash used by investing activities			(154.0	)			(106.8	)
Financing activities:
Proceeds from short-term borrowings			1.6				6.5
Repayments of short-term borrowings			(0.5	)			(8.5	)
Net increase in other short-term borrowings			9.0				0.2
Cash dividends paid			(44.4	)			(39.6	)
Purchase of treasury stock			(62.1	)			(38.1	)
Proceeds from stock purchase and option plans			26.1				22.5
Excess tax benefits from stock-based compensation			5.9				2.7
Other			(5.4	)			(6.3	)
Net cash used by financing activities			(69.8	)			(60.6	)
Effect of exchange rate changes on cash and cash equivalents			(1.8	)			(1.3	)
Decrease in cash and cash equivalents			(39.8	)			(12.0	)
Cash and cash equivalents at beginning of year			214.5				185.6
Cash and cash equivalents at end of period		$	174.7			$	173.6
Supplemental cash flow disclosures:
Cash paid for interest		$	(27.4	)		$	(27.7	)
Net cash paid for income taxes			(79.5	)			(39.1	)

 

SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
		Operations*								Financial Services
		Three Months Ended								Three Months Ended
		June 29,				June 30,				June 29,				June 30,
		2013				2012				2013				2012
Net sales		$	764.1			$	737.9			$	-			$	-
Cost of goods sold			(390.9	)			(388.0	)			-				-
Gross profit			373.2				349.9				-				-
Operating expenses			(255.4	)			(245.3	)			-				-
Operating earnings before financial services			117.8				104.6				-				-
Financial services revenue			-				-				44.5				39.9
Financial services expenses			-				-				(13.9	)			(14.3	)
Operating earnings from financial services			-				-				30.6				25.6
Operating earnings			117.8				104.6				30.6				25.6
Interest expense			(13.3	)			(13.6	)			(0.5	)			(0.3	)
Intersegment interest income (expense) – net			11.8				10.4				(11.8	)			(10.4	)
Other income (expense) – net			(1.7	)			0.2				-				(0.1	)
Earnings before income taxes and equity earnings			114.6				101.6				18.3				14.8
Income tax expense			(35.8	)			(32.9	)			(6.7	)			(5.4	)
Earnings before equity earnings			78.8				68.7				11.6				9.4
Financial services – net earnings
attributable to Snap-on Inc.			11.6				9.4				-				-
Equity earnings, net of tax			0.3				0.4				-				-
Net earnings			90.7				78.5				11.6				9.4
Net earnings attributable to noncontrolling interests			(2.3	)			(2.1	)			-				-
Net earnings attributable to Snap-on Inc.		$	88.4			$	76.4			$	11.6			$	9.4
* Snap-on Inc. with Financial Services on the equity method.
Transactions between Operations and Financial Services were eliminated to arrive at the consolidated financial statements.

 

SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
		Operations*								Financial Services
		Six Months Ended								Six Months Ended
		June 29,				June 30,				June 29,				June 30,
		2013				2012				2013				2012
Net sales		$	1,505.8			$	1,473.1			$	-			$	-
Cost of goods sold			(775.7	)			(775.5	)			-				-
Gross profit			730.1				697.6				-				-
Operating expenses			(504.5	)			(495.5	)			-				-
Operating earnings before financial services			225.6				202.1				-				-
Financial services revenue			-				-				88.5				77.9
Financial services expenses			-				-				(27.4	)			(28.4	)
Operating earnings from financial services			-				-				61.1				49.5
Operating earnings			225.6				202.1				61.1				49.5
Interest expense			(26.5	)			(27.2	)			(0.9	)			(0.6	)
Intersegment interest income (expense) – net			23.1				20.2				(23.1	)			(20.2	)
Other income (expense) – net			(2.4	)			(0.2	)			0.1				(0.1	)
Earnings before income taxes and equity earnings			219.8				194.9				37.2				28.6
Income tax expense			(67.7	)			(63.0	)			(13.6	)			(10.5	)
Earnings before equity earnings			152.1				131.9				23.6				18.1
Financial services – net earnings
attributable to Snap-on Inc.			23.6				18.1				-				-
Equity earnings, net of tax			0.1				1.5				-				-
Net earnings			175.8				151.5				23.6				18.1
Net earnings attributable to noncontrolling interests			(4.6	)			(4.1	)			-				-
Net earnings attributable to Snap-on Inc.		$	171.2			$	147.4			$	23.6			$	18.1
* Snap-on Incorporated with Financial Services on the equity method.
Transactions between Operations and Financial Services were eliminated to arrive at the consolidated financial statements.

 

SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Balance Sheets
(Amounts in millions)
(unaudited)
		Operations*						Financial Services
		June 29,			December 29,			June 29,			December 29,
		2013			2012			2013			2012
Assets
Cash and cash equivalents		$	170.9		$	211.2		$	3.8		$	3.3
Intersegment receivables			14.8			14.1			-			-
Trade and other accounts receivable – net			499.0			497.5			0.9			0.4
Finance receivables – net			-			-			355.4			323.1
Contract receivables – net			7.4			7.4			48.7			55.3
Inventories – net			418.1			404.2			-			-
Deferred income tax assets			64.0			68.8			13.0			13.0
Prepaid expenses and other assets			108.0			88.3			1.8			1.0
Total current assets			1,282.2			1,291.5			423.6			396.1
Property and equipment – net			373.4			373.2			1.7			2.0
Investment in Financial Services			177.9			165.3			-			-
Deferred income tax assets			104.2			110.2			0.2			0.2
Long-term finance receivables – net			-			-			520.8			494.6
Long-term contract receivables – net			11.9			12.1			191.1			182.3
Goodwill			823.9			807.4			-			-
Other intangibles – net			192.2			187.2			-			-
Other assets			57.4			65.3			1.0			1.1
Total assets		$	3,023.1		$	3,012.2		$	1,138.4		$	1,076.3
Liabilities and Equity
Notes payable and current maturities of long-term debt		$	22.3		$	5.2		$	92.6		$	-
Accounts payable			157.3			142.1			0.3			0.4
Intersegment payables			-			-			14.8			14.1
Accrued benefits			44.6			50.6			-			-
Accrued compensation			71.6			84.9			1.7			3.4
Franchisee deposits			54.8			54.7			-			-
Other accrued liabilities			221.7			207.8			36.5			46.9
Total current liabilities			572.3			545.3			145.9			64.8
Long-term debt and intersegment long-term debt			64.0			143.2			797.4			827.2
Deferred income tax liabilities			137.7			125.7			0.8			1.4
Retiree health care benefits			46.0			48.4			-			-
Pension liabilities			239.7			260.7			-			-
Other long-term liabilities			67.5			69.9			16.4			17.6
Total liabilities			1,127.2			1,193.2			960.5			911.0
Total shareholders' equity attributable to Snap-on Inc.			1,878.8			1,802.1			177.9			165.3
Noncontrolling interests			17.1			16.9			-			-
Total equity			1,895.9			1,819.0			177.9			165.3
Total liabilities and equity		$	3,023.1		$	3,012.2		$	1,138.4		$	1,076.3
* Snap-on Inc. with Financial Services on the equity method.
Transactions between Operations and Financial Services were eliminated to arrive at the consolidated financial statements.

Source: Snap-on Incorporated

Contacts:

Snap-on Incorporated

Investors
Leslie Kratcoski
262/656-6121

Media
Richard Secor
262/656-5561

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