Snap-on Announces Third Quarter 2018 Results

Snap-on Announces Third Quarter 2018 Results

  • Q3 2018 reported diluted EPS of $2.85, including $0.03 charge related to U.S. tax legislation, up 24.5% from Q3 2017;
  • Q3 2018 adjusted diluted EPS of $2.88 up 17.6% from Q3 2017;
  • Q3 2018 operating margin before financial services up 240 basis points on a reported basis and 70 basis points on an adjusted basis, respectively, from Q3 2017

KENOSHA, Wis. - (BUSINESS WIRE) - Oct. 18, 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 third quarter of 2018.

  • Net sales of $898.1 million were down $5.7 million, or 0.6%, from 2017 levels, reflecting a $5.4 million, or 0.6%, organic sales gain, $1.4 million of acquisition-related sales and $12.5 million of unfavorable foreign currency translation.
  • Operating earnings before financial services for the quarter were $173.1 million or 19.3% of sales. This compared to $152.7 million, or 16.9% of sales, in the third quarter of 2017. The 2017 operating earnings before financial services included a $15.0 million legal charge (the “legal charge”); excluding the legal charge, operating earnings before financial services, as adjusted, in the third quarter of 2017 were $167.7 million, or 18.6% of sales.
  • Financial services revenue of $82.0 million in the third quarter of 2018 increased $3.0 million from 2017 levels; financial services operating earnings of $59.3 million increased $3.3 million from $56.0 million last year.
  • Consolidated operating earnings totaled $232.4 million, or 23.7% of revenues (net sales plus financial services revenue), which compared to $208.7 million, or 21.2% of revenues, in the third quarter of 2017. Excluding the legal charge, consolidated operating earnings, as adjusted, in the third quarter of 2017 was $223.7 million, or 22.8% of revenues.
  • The third quarter 2018 effective income tax rate of 24.0% included a charge of 90 basis points, or $1.8 million, related to newly issued guidance associated with U.S. tax legislation (the “tax charge”). Excluding the tax charge, the effective tax rate, as adjusted, was 23.1%. The third quarter 2017 effective income tax rate was 30.1% and was reduced by 60 bps as a result of the legal charge.
  • Reported net earnings in the third quarter of 2018 were $163.2 million, or $2.85 per diluted share, compared to reported net earnings of $133.4 million, or $2.29 per diluted share a year ago. Excluding the tax charge in 2018 and the legal charge in 2017, net earnings, as adjusted, were $165.0 million, or $2.88 per diluted share, in the third quarter of 2018 and $142.7 million, or $2.45 per diluted share, in the third quarter of 2017, respectively.

See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales and measures, as adjusted, excluding the tax charge and legal charge.

At the beginning of fiscal 2018, Snap-on adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. The ASU requires changes be applied retrospectively; as such, certain prior year amounts have been adjusted to reflect this adoption and conform to the 2018 presentation.

“Our third quarter results demonstrated encouraging progress on a number of fronts, including higher operating margins and net earnings, broad-based organic sales growth in our Commercial & Industrial Group and incremental improvement in organic sales trends in the Snap-on Tools Group, driven by higher year over year sales in the U.S. franchise operations,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “While we experienced sales turbulence in our Repair Systems & Information Group this quarter, we believe the vehicle repair markets in which we operate remain robust and afford ongoing opportunity. At the same time, in addition to ongoing improvement in earnings and margins, the benefits of our Snap-on Value Creation Processes continue to be realized in a variety of ways. Snap-on was honored again this year with product awards from both MOTOR Magazine and Professional Tool & Equipment News, demonstrating our deep understanding of work through connecting with customers and then translating the insights gained into winning innovations. Finally, our progress in the third quarter 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.”

Segment Results

Commercial & Industrial Group segment sales of $330.2 million in the quarter increased $15.6 million, or 5.0%, from 2017 levels, reflecting a $20.7 million, or 6.7%, organic sales gain and $1.4 million of acquisition-related sales, partially offset by $6.5 million of unfavorable foreign currency translation. The organic sales increase includes higher sales of power tools, increased sales in the segment’s Asia Pacific operations as well as to customers in critical industries, and slightly higher sales in the segment’s European-based hand tools business.

Operating earnings of $53.0 million in the period increased $2.7 million from 2017 levels, and the operating margin (operating earnings as a percentage of segment sales) of 16.1% improved 10 basis points from 16.0% a year ago.

Snap-on Tools Group segment sales of $389.8 million in the quarter decreased $2.9 million, or 0.7%, from 2017 levels, reflecting a $0.3 million, or 0.1%, organic sales increase, more than offset by $3.2 million of unfavorable foreign currency translation. The organic sales increase includes higher sales in the U.S. franchise operations, largely offset by a decrease in the company’s international franchise operations.

Operating earnings of $59.3 million in the period increased $2.9 million from 2017 levels, and the operating margin of 15.2% improved 80 basis points from 14.4% last year.

Repair Systems & Information Group segment sales of $314.4 million in the quarter decreased $19.1 million, or 5.7%, from 2017 levels, reflecting a $15.9 million, or 4.8%, organic sales decline and $3.2 million of unfavorable foreign currency translation. The organic sales decrease includes lower sales of diagnostics and repair information products to independent repair shop owners and managers and decreased sales to OEM dealerships; sales of undercar equipment were essentially flat.

Operating earnings of $80.7 million in the period decreased $3.1 million from 2017 levels, and the operating margin of 25.7% improved 60 basis points from 25.1% a year ago.

Financial Services operating earnings of $59.3 million on revenue of $82.0 million in the quarter compared to operating earnings of $56.0 million on revenue of $79.0 million a year ago. Originations of $267.0 million in the third quarter decreased $4.8 million, or 1.8%, from 2017 levels.

Corporate expenses of $19.9 million in the quarter compared to $37.8 million last year; the 2017 level included the pre-tax legal charge of $15.0 million.

Outlook

Snap-on expects to make continued progress through the remainder of 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 $68.5 million was incurred in the first nine months of the year. 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 October 18, 2018, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, October 18, 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 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.

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.

For the three and nine months ended September 29, 2018, the company is including net earnings, diluted earnings per share and its effective tax rate, all as adjusted to exclude the impact of $1.8 million and $3.9 million of charges, respectively, related to newly issued guidance associated with the U.S. tax legislation. In addition, for the nine months ended September 29, 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, both of which were incurred in the three months ended March 31, 2018.

In addition, for the three months ended September 30, 2017, the company is including operating earnings before financial services, consolidated operating earnings, net earnings, and diluted earnings per share, all as adjusted to exclude the impact of a pre-tax $15.0 million charge ($9.3 million after tax) related to a judgment, which is being appealed, in an employment-related litigation matter.

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.

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 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. In addition, Snap-on cannot assure that its appeal of the legal matter discussed above will result in diminished liability or a reversal of the legal charge. 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   Nine Months Ended
    Sept. 29,   Sept. 30,   Sept. 29,   Sept. 30,
    2018   2017   2018   2017
                 
Net sales   $ 898.1     $ 903.8     $ 2,788.2     $ 2,712.3  
Cost of goods sold     (444.2 )     (455.0 )     (1,375.6 )     (1,352.0 )
Gross profit     453.9       448.8       1,412.6       1,360.3  
Operating expenses     (280.8 )     (296.1 )     (868.7 )     (853.7 )
Operating earnings before financial services     173.1       152.7       543.9       506.6  
                 
Financial services revenue     82.0       79.0       247.0       233.5  
Financial services expenses     (22.7 )     (23.0 )     (73.0 )     (70.4 )
Operating earnings from financial services     59.3       56.0       174.0       163.1  
                 
Operating earnings     232.4       208.7       717.9       669.7  
Interest expense     (12.4 )     (13.1 )     (38.0 )     (38.8 )
Other income (expense) – net     (1.0 )     (1.7 )     1.2       (6.0 )
Earnings before income taxes and equity earnings     219.0       193.9       681.1       624.9  
Income tax expense     (51.5 )     (57.2 )     (164.9 )     (187.1 )
Earnings before equity earnings (loss)     167.5       136.7       516.2       437.8  
Equity earnings (loss), net of tax     (0.1 )     0.4       0.7       1.2  
Net earnings     167.4       137.1       516.9       439.0  
Net earnings attributable to noncontrolling interests     (4.2 )     (3.7 )     (12.0 )     (10.8 )
Net earnings attributable to Snap-on Inc.   $ 163.2     $ 133.4     $ 504.9     $ 428.2  
                 
Net earnings per share attributable to Snap-on Inc.:                
Basic   $ 2.90     $ 2.33     $ 8.95     $ 7.43  
Diluted     2.85       2.29       8.78       7.27  
                 
Weighted-average shares outstanding:                
Basic     56.3       57.2       56.4       57.6  
Effect of dilutive securities     1.0       1.1       1.1       1.3  
Diluted     57.3       58.3       57.5       58.9  

 

SNAP-ON INCORPORATED
Supplemental Segment Information
(Amounts in millions)
(unaudited)
                   
    Three Months Ended     Nine Months Ended
    Sept. 29,   Sept. 30,     Sept. 29,   Sept. 30,
    2018   2017     2018   2017
                   
Net sales:                  
Commercial & Industrial Group   $ 330.2     $ 314.6       $ 999.6     $ 923.3  
Snap-on Tools Group     389.8       392.7         1,206.4       1,215.9  
Repair Systems & Information Group     314.4       333.5         994.5       990.4  
Segment net sales     1,034.4       1,040.8         3,200.5       3,129.6  
Intersegment eliminations     (136.3 )     (137.0 )       (412.3 )     (417.3 )
Total net sales   $ 898.1     $ 903.8       $ 2,788.2     $ 2,712.3  
Financial Services revenue     82.0       79.0         247.0       233.5  
Total revenues   $ 980.1     $ 982.8       $ 3,035.2     $ 2,945.8  
                   
Operating earnings:                  
Commercial & Industrial Group   $ 53.0     $ 50.3       $ 148.5     $ 135.2  
Snap-on Tools Group     59.3       56.4         207.2       207.4  
Repair Systems & Information Group     80.7       83.8         255.2       245.1  
Financial Services     59.3       56.0         174.0       163.1  
Segment operating earnings     252.3       246.5         784.9       750.8  
Corporate     (19.9 )     (37.8 )       (67.0 )     (81.1 )
Operating earnings   $ 232.4     $ 208.7       $ 717.9     $ 669.7  
Interest expense     (12.4 )     (13.1 )       (38.0 )     (38.8 )
Other income (expense) – net     (1.0 )     (1.7 )       1.2       (6.0 )
Earnings before income taxes                  
and equity earnings   $ 219.0     $ 193.9       $ 681.1     $ 624.9  

 

SNAP-ON INCORPORATED
Condensed Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
             
    Sept. 29,      

Dec. 30,

    2018       2017
             
Assets            
Cash and cash equivalents   $ 122.2         $ 92.0  
Trade and other accounts receivable – net     678.7           675.6  
Finance receivables – net     519.0           505.4  
Contract receivables – net     105.6           96.8  
Inventories – net     690.6           638.8  
Prepaid expenses and other assets     98.5           110.7  
Total current assets     2,214.6           2,119.3  
             
Property and equipment – net     491.0           484.4  
Deferred income tax assets     52.0           52.0  
Long-term finance receivables – net     1,058.3           1,039.2  
Long-term contract receivables – net     338.1           322.6  
Goodwill     913.9           924.1  
Other intangibles – net     237.8           253.7  
Other assets     49.1           53.8  
Total assets   $ 5,354.8         $ 5,249.1  
             
Liabilities and Equity            
Notes payable and current maturities of long-term debt   $ 164.5         $ 433.2  
Accounts payable     197.6           178.2  
Accrued benefits     49.8           55.8  
Accrued compensation     72.7           71.5  
Franchisee deposits     76.8           66.5  
Other accrued liabilities     395.4           388.1  
Total current liabilities     956.8           1,193.3  
             
Long-term debt     944.8           753.6  
Deferred income tax liabilities     27.3           28.4  
Retiree health care benefits     33.7           36.0  
Pension liabilities     92.8           158.9  
Other long-term liabilities     115.3           106.6  
Total liabilities     2,170.7           2,276.8  
             
Equity            
Shareholders' equity attributable to Snap-on Inc.            
Common stock     67.4           67.4  
Additional paid-in capital     360.9           343.2  
Retained earnings     4,135.8           3,772.3  
Accumulated other comprehensive loss     (369.7 )         (329.0 )
Treasury stock at cost     (1,030.0 )         (900.0 )
Total shareholders' equity attributable to Snap-on Inc.     3,164.4           2,953.9  
Noncontrolling interests     19.7           18.4  
Total equity     3,184.1           2,972.3  
Total liabilities and equity   $ 5,354.8         $ 5,249.1  

 

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
         
    Three Months Ended
    Sept. 29,   Sept. 30,
    2018   2017
Operating activities:        
Net earnings   $ 167.4     $ 137.1  
Adjustments to reconcile net earnings to net cash provided (used) by        
operating activities:        
Depreciation     17.0       16.4  
Amortization of other intangibles     6.2       7.1  
Provision for losses on finance receivables     12.1       12.8  
Provision for losses on non-finance receivables     3.9       3.3  
Stock-based compensation expense     8.0       7.0  
Deferred income tax benefit     (2.8 )     (13.2 )
Loss on sales of assets     0.6       0.1  
Changes in operating assets and liabilities, net of effects of acquisitions:        
Increase in trade and other accounts receivable     (17.4 )     (24.0 )
Increase in contract receivables     (23.4 )     (26.2 )
Increase in inventories     (24.8 )     (38.6 )
(Increase) decrease in prepaid and other assets     (7.5 )     0.2  
Decrease in accounts payable     (0.2 )     (1.2 )
Increase (decrease) in accruals and other liabilities     (9.3 )     14.7  
Net cash provided by operating activities     129.8       95.5  
         
Investing activities:        
Additions to finance receivables     (206.8 )     (211.2 )
Collections of finance receivables     184.1       176.0  
Capital expenditures     (29.9 )     (22.9 )
Acquisitions of businesses, net of cash acquired     -       (2.7 )
Disposals of property and equipment     (0.2 )     0.5  
Other     4.2       (1.8 )
Net cash used by investing activities     (48.6 )     (62.1 )
         
Financing activities:        
Proceeds from notes payable     -       16.8  
Repayments of notes payable     -       (4.5 )
Net increase in other short-term borrowings     38.1       91.4  
Cash dividends paid     (46.1 )     (40.7 )
Purchases of treasury stock     (85.7 )     (90.1 )
Proceeds from stock purchase and option plans     25.8       1.6  
Other     (3.4 )     (4.0 )
Net cash used by financing activities     (71.3 )     (29.5 )
         
Effect of exchange rate changes on cash and cash equivalents     -       1.2  
Increase in cash and cash equivalents     9.9       5.1  
         
Cash and cash equivalents at beginning of period     112.3       89.0  
Cash and cash equivalents at end of period   $ 122.2     $ 94.1  
         
Supplemental cash flow disclosures:        
Cash paid for interest   $ (21.9 )   $ (24.8 )
Net cash paid for income taxes     (50.7 )     (68.5 )

 

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
         
    Nine Months Ended
    Sept. 29,   Sept. 30,
    2018   2017
Operating activities:        
Net earnings   $ 516.9     $ 439.0  
Adjustments to reconcile net earnings to net cash provided (used) by        
operating activities:        
Depreciation     52.0       48.7  
Amortization of other intangibles     19.2       20.7  
Provision for losses on finance receivables     41.5       38.6  
Provision for losses on non-finance receivables     9.4       7.9  
Stock-based compensation expense     22.6       21.4  
Deferred income tax benefit     (6.9 )     (10.1 )
Loss (gain) on sales of assets     0.7       (0.1 )
Settlement of treasury lock     -       14.9  
Loss on early extinguishment of debt     7.8       -  
Changes in operating assets and liabilities, net of effects of acquisitions:        
Increase in trade and other accounts receivable     (26.5 )     (50.8 )
Increase in contract receivables     (27.9 )     (31.8 )
Increase in inventories     (49.3 )     (86.9 )
Increase in prepaid and other assets     (1.1 )     (9.7 )
Increase in accounts payable     25.2       26.5  
Decrease in accruals and other liabilities     (35.0 )     (13.3 )
Net cash provided by operating activities     548.6       415.0  
         
Investing activities:        
Additions to finance receivables     (643.5 )     (670.0 )
Collections of finance receivables     564.0       528.9  
Capital expenditures     (68.5 )     (57.3 )
Acquisitions of businesses, net of cash acquired     (3.0 )     (82.9 )
Disposals of property and equipment     0.3       1.4  
Other     1.3       (2.5 )
Net cash used by investing activities     (149.4 )     (282.4 )
         
Financing activities:        
Proceeds from issuance of long-term debt     395.4       297.8  
Repayments of long-term debt     (457.8 )     (150.0 )
Proceeds from notes payable     -       16.8  
Repayment of notes payable     (16.8 )     (4.5 )
Net increase in other short-term borrowings     0.9       38.7  
Cash dividends paid     (138.9 )     (123.0 )
Purchases of treasury stock     (184.4 )     (212.6 )
Proceeds from stock purchase and option plans     54.1       36.2  
Other     (19.6 )     (18.9 )
Net cash used by financing activities     (367.1 )     (119.5 )
         
Effect of exchange rate changes on cash and cash equivalents     (1.9 )     3.4  
Increase in cash and cash equivalents     30.2       16.5  
         
Cash and cash equivalents at beginning of year     92.0       77.6  
Cash and cash equivalents at end of period   $ 122.2     $ 94.1  
         
Supplemental cash flow disclosures:        
Cash paid for interest   $ (49.7 )   $ (49.7 )
Net cash paid for income taxes     (148.1 )     (168.3 )

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") 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.

SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
 
    Operations*   Financial Services
    Three Months Ended   Three Months Ended
    Sept. 29,   Sept. 30,   Sept. 29,   Sept. 30,
    2018   2017   2018   2017
                 
Net sales   $ 898.1     $ 903.8     $ -     $ -  
Cost of goods sold     (444.2 )     (455.0 )     -       -  
Gross profit     453.9       448.8       -       -  
Operating expenses     (280.8 )     (296.1 )     -       -  
Operating earnings before financial services     173.1       152.7       -       -  
                 
Financial services revenue     -       -       82.0       79.0  
Financial services expenses     -       -       (22.7 )     (23.0 )
Operating earnings from financial services     -       -       59.3       56.0  
                 
Operating earnings     173.1       152.7       59.3       56.0  
Interest expense     (12.3 )     (13.1 )     (0.1 )     -  
Intersegment interest income (expense) – net     16.8       17.7       (16.8 )     (17.7 )
Other income (expense) – net     (1.0 )     (1.7 )     -       -  
Earnings before income taxes and equity earnings     176.6       155.6       42.4       38.3  
Income tax expense     (40.7 )     (43.2 )     (10.8 )     (14.0 )
Earnings before equity earnings (loss)     135.9       112.4       31.6       24.3  
Financial services – net earnings                
attributable to Snap-on     31.6       24.3       -       -  
Equity earnings (loss), net of tax     (0.1 )     0.4       -       -  
Net earnings     167.4       137.1       31.6       24.3  
Net earnings attributable to noncontrolling interests     (4.2 )     (3.7 )     -       -  
Net earnings attributable to Snap-on   $ 163.2     $ 133.4     $ 31.6     $ 24.3  
                 

* Snap-on with Financial Services on the equity method.

 

SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
 
    Operations*   Financial Services
    Nine Months Ended   Nine Months Ended
    Sept. 29,   Sept. 30,   Sept. 29,   Sept. 30,
    2018   2017   2018   2017
                 
Net sales   $ 2,788.2     $ 2,712.3     $ -     $ -  
Cost of goods sold     (1,375.6 )     (1,352.0 )     -       -  
Gross profit     1,412.6       1,360.3       -       -  
Operating expenses     (868.7 )     (853.7 )     -       -  
Operating earnings before financial services     543.9       506.6       -       -  
                 
Financial services revenue     -       -       247.0       233.5  
Financial services expenses     -       -       (73.0 )     (70.4 )
Operating earnings from financial services     -       -       174.0       163.1  
                 
Operating earnings     543.9       506.6       174.0       163.1  
Interest expense     (37.7 )     (38.6 )     (0.3 )     (0.2 )
Intersegment interest income (expense) – net     52.9       53.1       (52.9 )     (53.1 )
Other income (expense) – net     1.1       (6.0 )     0.1       -  
Earnings before income taxes and equity earnings     560.2       515.1       120.9       109.8  
Income tax expense     (133.7 )     (146.6 )     (31.2 )     (40.5 )
Earnings before equity earnings     426.5       368.5       89.7       69.3  
Financial services – net earnings                
attributable to Snap-on     89.7       69.3       -       -  
Equity earnings, net of tax     0.7       1.2       -       -  
Net earnings     516.9       439.0       89.7       69.3  
Net earnings attributable to noncontrolling interests     (12.0 )     (10.8 )     -       -  
Net earnings attributable to Snap-on   $ 504.9     $ 428.2     $ 89.7     $ 69.3  
                 

* Snap-on with Financial Services on the equity method.

 

SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Balance Sheets
(Amounts in millions)
(unaudited)
 
               
  Operations*   Financial Services
  Sept. 29,  

Dec. 30,

  Sept. 29,  

Dec. 30,

  2018   2017   2018   2017
               
Assets              
Cash and cash equivalents $ 122.0   $ 91.8   $ 0.2   $ 0.2
Intersegment receivables   19.8     17.1     -     -
Trade and other accounts receivable – net   678.2     674.9     0.5     0.7
Finance receivables – net   -     -     519.0     505.4
Contract receivables – net   6.8     9.4     98.8     87.4
Inventories – net   690.6     638.8     -     -
Prepaid expenses and other assets   105.4     117.6     0.8     0.7
Total current assets   1,622.8     1,549.6     619.3     594.4
               
Property and equipment – net   489.2     482.4     1.8     2.0
Investment in Financial Services   325.6     317.4     -     -
Deferred income tax assets   33.8     25.2     18.2     26.8
Intersegment long-term notes receivable   683.3     583.7     -     -
Long-term finance receivables – net   -     -     1,058.3     1,039.2
Long-term contract receivables – net   11.8     13.2     326.3     309.4
Goodwill   913.9     924.1     -     -
Other intangibles – net   237.8     253.7     -     -
Other assets   58.6     63.1     0.1     -
Total assets $ 4,376.8   $ 4,212.4   $ 2,024.0   $ 1,971.8
               
Liabilities and Equity              
Notes payable and current maturities of long-term debt $ 164.5   $ 183.2   $ -   $ 250.0
Accounts payable   196.5     177.1     1.1     1.1
Intersegment payables   -     -     19.8     17.1
Accrued benefits   49.8     55.8     -     -
Accrued compensation   69.4     67.8     3.3     3.7
Franchisee deposits   76.8     66.5     -     -
Other accrued liabilities   372.4     366.0     30.7     29.7
Total current liabilities   929.4     916.4     54.9     301.6
               
Long-term debt and intersegment long-term debt   -     -     1,628.1     1,337.3
Deferred income tax liabilities   27.3     28.4     -     -
Retiree health care benefits   33.7     36.0     -     -
Pension liabilities   92.8     158.9     -     -
Other long-term liabilities   109.5     100.4     15.4     15.5
Total liabilities   1,192.7     1,240.1     1,698.4     1,654.4
               
Total shareholders' equity attributable to Snap-on   3,164.4     2,953.9     325.6     317.4
Noncontrolling interests   19.7     18.4     -     -
Total equity   3,184.1     2,972.3     325.6     317.4
Total liabilities and equity $ 4,376.8   $ 4,212.4   $ 2,024.0   $ 1,971.8
               

* Snap-on with Financial Services on the equity method.

 

SNAP-ON INCORPORATED
Reconciliation of Non-GAAP Financial Measures
(Amounts in millions, except per share data)
(unaudited)
                 
    Three Months Ended   Nine Months Ended
    Sept. 29,   Sept. 30,   Sept. 29,   Sept. 30,
    2018   2017   2018   2017

AS REPORTED

               
                 
Debt-related items ("net debt items")                

Gain on settlement of treasury lock (A)

               
Gain on settlement of treasury lock   $ -     $ -     $ 13.3     $ -  
Income tax expense     -       -       (3.3 )     -  
Gain on settlement of treasury lock, after tax   $ -     $ -     $ 10.0     $ -  
                 
Weighted-average shares outstanding - diluted     57.3       58.3       57.5       58.9  
                 
Diluted EPS - gain on settlement of treasury lock   $ -     $ -     $ 0.17     $ -  
                 
Loss on early extinguishment of debt (B)                
Loss on early extinguishment of debt   $ -     $ -     $ (7.8 )   $ -  
Income tax benefit     -       -       1.9       -  
Loss on early extinguishment of debt, after tax   $ -     $ -     $ (5.9 )   $ -  
                 
Weighted-average shares outstanding - diluted     57.3       58.3       57.5       58.9  
                 
Diluted EPS - loss on early extinguishment of debt   $ -     $ -     $ (0.10 )   $ -  
                 
Net debt items (A + B)                
Net debt items   $ -     $ -     $ 5.5     $ -  
Income tax expense     -       -       (1.4 )     -  
Net debt items, after tax   $ -     $ -     $ 4.1     $ -  
                 
Weighted-average shares outstanding - diluted     57.3       58.3       57.5       58.9  
                 
Diluted EPS - net debt items   $ -     $ -     $ 0.07     $ -  
                 
Adjustments related to implementation of tax                
legislation ("tax charge")                
Tax charge   $ (1.8 )   $ -     $ (3.9 )   $ -  
                 
Weighted-average shares outstanding - diluted     57.3       58.3       57.5       58.9  
                 
Diluted EPS - tax charge   $ (0.03 )   $ -     $ (0.07 )   $ -  
                 

Charge related to a judgment in an

               
employment-related litigation matter that is                
being appealed ("legal charge")                
Pre-tax legal charge   $ -     $ 15.0     $ -     $ 15.0  
Income tax expense     -       (5.7 )     -       (5.7 )
Legal charge, after tax   $ -     $ 9.3     $ -     $ 9.3  
                 
Weighted-average shares outstanding - diluted     57.3       58.3       57.5       58.9  
                 
Diluted EPS - legal charge   $ -     $ 0.16     $ -     $ 0.16  

 

SNAP-ON INCORPORATED
Reconciliation of Non-GAAP Financial Measures (continued)
(Amounts in millions, except per share data)
(unaudited)
                     
        Three Months Ended   Nine Months Ended
        Sept. 29,   Sept. 30,   Sept. 29,   Sept. 30,
        2018   2017   2018   2017

ADJUSTED INFORMATION - NON-GAAP

               
                     
1)   Operating earnings before financial services                
    As reported   $ 173.1     $ 152.7     $ 543.9     $ 506.6  
    Legal charge     -       15.0       -       15.0  
    As adjusted   $ 173.1     $ 167.7     $ 543.9     $ 521.6  
                     
    Operating earnings before financial services                
    as a percentage of sales                
    As reported     19.3 %     16.9 %     19.5 %     18.7 %
    As adjusted     19.3 %     18.6 %     19.5 %     19.2 %
                     
2)   Operating earnings                
    As reported   $ 232.4     $ 208.7     $ 717.9     $ 669.7  
    Legal charge     -       15.0       -       15.0  
    As adjusted   $ 232.4     $ 223.7     $ 717.9     $ 684.7  
                     
    Operating earnings as a percentage of revenue                
    As reported     23.7 %     21.2 %     23.7 %     22.7 %
    As adjusted     23.7 %     22.8 %     23.7 %     23.2 %
                     
3)   Net earnings attributable to Snap-on Incorporated                
    As reported   $ 163.2     $ 133.4     $ 504.9     $ 428.2  
    Net debt items, after tax     -       -       (4.1 )     -  
    Tax charge     1.8       -       3.9       -  
    Legal charge, after tax     -       9.3       -       9.3  
    As adjusted   $ 165.0     $ 142.7     $ 504.7     $ 437.5  
                     
4)   Diluted EPS                
    As reported   $ 2.85     $ 2.29     $ 8.78     $ 7.27  
    Net debt items, after tax     -       -       (0.07 )     -  
    Tax charge     0.03       -       0.07       -  
    Legal charge, after tax     -       0.16       -       0.16  
    As adjusted   $ 2.88     $ 2.45     $ 8.78     $ 7.43  
                     
5)   Effective tax rate                
    As reported     24.0 %     30.1 %     24.6 %     30.5 %
    Tax charge     -0.9 %     -       -0.5 %     -  
    Legal charge     -       0.6 %     -       0.2 %
    As adjusted     23.1 %     30.7 %     24.1 %     30.7 %

Contacts:

Leslie Kratcoski
Snap-on Incorporated
Investor Relations
262/656-6121

Richard Secor
Media Relations
262/656-5561

View source version on businesswire.com: https://www.businesswire.com/news/home/20181018005169/en/

Source: Snap-on Incorporated

###

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