Diluted EPS of $2.39 increases
10.6%;
Operating earnings before financial services
of 19.1% of sales up 50 basis points;
Reported net sales up 6.3%; Organic net
sales up 4.1%
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 2017.
- Net sales of $887.1 million increased
$52.9 million, or 6.3%, from 2016 levels, reflecting a $33.4
million, or 4.1%, organic sales gain and $29.1 million of
acquisition-related sales, partially offset by $9.6 million of
unfavorable foreign currency translation. (See “Non-GAAP Measures”
below for a definition of, and further explanation about, organic
sales.)
- Operating earnings before financial
services of $169.5 million improved 50 basis points to 19.1% of
sales as compared to $155.4 million, or 18.6% of sales, last
year.
- Financial services revenue of $76.8
million increased $10.5 million from 2016 levels; financial
services operating earnings of $52.5 million increased $5.5
million.
- Consolidated operating earnings of
$222.0 million improved 50 basis points to 23.0% of revenues (net
sales plus financial services revenue) as compared to $202.4
million, or 22.5% of revenues, last year.
- The first quarter effective income tax
rate was 30.7% in 2017 and 31.0% in 2016.
- Net earnings of $141.6 million, or
$2.39 per diluted share, compared to net earnings of $128.3
million, or $2.16 per diluted share, a year ago.
“We’re encouraged by our first quarter results,” said Nick
Pinchuk, Snap-on chairman and chief executive officer. “Net sales
growth of 6.3%, including an organic sales increase of 4.1%,
coupled with a 10.6% rise in diluted earnings per share, represent
a positive start to 2017. We believe these results once again
confirm Snap-on’s unique capabilities in providing valued
productivity solutions to a growing range of professional customers
performing critical tasks in workplaces of consequence. At the same
time, the improvement in operating margin before financial services
further demonstrates our ability to realize ongoing benefits from
our Snap-on Value Creation Processes. Finally, this continued
progress along our defined runways for both coherent growth and
operating improvement would not be possible without the dedication
and capability so evident across Snap-on. I thank our franchisees
and associates worldwide for their significant contributions and
extraordinary effort.”
Segment Results
Commercial & Industrial Group segment sales of $298.7
million in the quarter increased $11.7 million, or 4.1%, from 2016
levels, reflecting an $8.6 million, or 3.0%, organic sales gain,
$7.8 million of acquisition-related sales, and $4.7 million of
unfavorable foreign currency translation. The organic sales
increase primarily includes gains in the segment’s European-based
hand tools business and higher sales to customers in critical
industries.
Operating earnings of $41.6 million in the period, including
$0.9 million of favorable foreign currency effects, increased $0.5
million from 2016 levels, and the operating margin (operating
earnings as a percentage of segment sales) of 13.9% compared with
14.3% a year ago.
Snap-on Tools Group segment sales of $409.4 million in
the quarter rose $6.9 million, or 1.7%, from 2016 levels,
reflecting a $10.1 million, or 2.5%, organic sales gain and $3.2
million of unfavorable foreign currency translation.
Operating earnings of $70.3 million in the period, including
$3.7 million of unfavorable foreign currency effects, increased
$3.6 million from 2016 levels, and the operating margin of 17.2%
improved 60 basis points from 16.6% a year ago.
Repair Systems & Information Group segment sales of
$318.8 million in the quarter increased $40.0 million, or 14.3%,
from 2016 levels, reflecting a $21.6 million, or 7.8%, organic
sales gain, $21.3 million of acquisition-related sales and $2.9
million of unfavorable foreign currency translation. The organic
sales gain reflects increased sales of undercar equipment and
higher sales of diagnostics and repair information products to
independent repair shop owners and managers, as well as increased
sales to OEM dealerships.
Operating earnings of $78.7 million in the period, including
$1.0 million of unfavorable foreign currency effects, increased
$9.7 million from 2016 levels, and the operating margin was 24.7%
in both periods.
Financial Services operating earnings of $52.5 million on
revenue of $76.8 million in the quarter compared to operating
earnings of $47.0 million on revenue of $66.3 million a year
ago.
Corporate expenses of $21.1 million in the quarter
compared to expenses of $21.4 million last year.
Outlook
Snap-on expects to make continued progress in 2017 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 2017 will
be in a range of $80 million to $90 million, of which $18.6 million
was expended in the first quarter. Snap-on also anticipates that
its full year 2017 effective income tax rate will be comparable to
its 2016 full year rate.
Conference Call and Webcast on April
20, 2017, at 9:00 a.m. Central Time
A discussion of this release will be webcast on Thursday, April
20, 2017, 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.
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 $3.4 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. 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 April
1, April 2, 2017 2016 Net
sales $ 887.1 $ 834.2 Cost of goods sold (439.1 )
(418.9 )
Gross profit 448.0 415.3 Operating expenses
(278.5 ) (259.9 )
Operating earnings before financial
services 169.5 155.4
Financial services revenue
76.8 66.3 Financial services expenses (24.3 ) (19.3 )
Operating earnings from financial services 52.5
47.0
Operating earnings 222.0
202.4 Interest expense (12.7 ) (13.1 ) Other income (expense) – net
(1.7 ) (0.7 )
Earnings before income taxes and
equity earnings 207.6 188.6 Income tax expense (62.6 )
(57.6 )
Earnings before equity earnings 145.0 131.0
Equity earnings, net of tax 0.1 0.3
Net earnings 145.1 131.3 Net earnings attributable to
noncontrolling interests (3.5 ) (3.0 )
Net
earnings attributable to Snap-on Inc. $ 141.6 $ 128.3
Net earnings per share attributable to Snap-on
Inc.: Basic $ 2.45 $ 2.21 Diluted 2.39 2.16
Weighted-average shares outstanding: Basic 57.9 58.1 Effect
of dilutive securities 1.4 1.4 Diluted
59.3 59.5
SNAP-ON INCORPORATED
Supplemental Segment Information (Amounts in
millions) (unaudited) Three Months
Ended April 1, April 2, 2017 2016
Net sales: Commercial & Industrial Group $ 298.7
$ 287.0 Snap-on Tools Group 409.4 402.5 Repair Systems &
Information Group 318.8 278.8
Segment net sales 1,026.9 968.3 Intersegment eliminations
(139.8 ) (134.1 )
Total net sales $ 887.1 $
834.2 Financial Services revenue 76.8 66.3
Total revenues $ 963.9 $ 900.5
Operating earnings: Commercial & Industrial Group $ 41.6
$ 41.1 Snap-on Tools Group 70.3 66.7 Repair Systems &
Information Group 78.7 69.0 Financial Services 52.5
47.0
Segment operating earnings 243.1 223.8
Corporate (21.1 ) (21.4 )
Operating earnings $
222.0 $ 202.4 Interest expense (12.7 ) (13.1 ) Other income
(expense) – net (1.7 ) (0.7 )
Earnings before
income taxes and equity earnings $ 207.6 $ 188.6
SNAP-ON INCORPORATED Condensed Consolidated
Balance Sheets (Amounts in millions) (unaudited)
April 1, December
31, 2017 2016 Assets Cash and cash
equivalents $ 123.0 $ 77.6 Trade and other accounts receivable –
net 608.1 598.8 Finance receivables – net 484.7 472.5 Contract
receivables – net 84.5 88.1 Inventories – net 556.8 530.5 Prepaid
expenses and other assets 117.0 116.5
Total current assets 1,974.1 1,884.0 Property and equipment
– net 437.5 425.2 Deferred income tax assets 68.0 72.8 Long-term
finance receivables – net 966.3 934.5 Long-term contract
receivables – net 292.6 286.7 Goodwill 859.8 895.5 Other
intangibles – net 240.4 184.6 Other assets 39.1
39.9
Total assets $ 4,877.8 $ 4,723.2
Liabilities and Equity Notes payable and
current maturities of long-term debt $ 267.2 $ 301.4 Accounts
payable 189.9 170.9 Accrued benefits 52.5 52.8 Accrued compensation
61.5 89.8 Franchisee deposits 66.1 66.7 Other accrued liabilities
334.3 307.9 Total current liabilities
971.5 989.5 Long-term debt 755.4 708.8 Deferred income tax
liabilities 24.4 13.1 Retiree health care benefits 35.9 36.7
Pension liabilities 230.7 246.5 Other long-term liabilities
94.1 93.4
Total liabilities
2,112.0 2,088.0
Equity
Shareholders' equity attributable to Snap-on Inc. Common
stock 67.4 67.4 Additional paid-in capital 320.8 317.3 Retained
earnings 3,485.2 3,384.9 Accumulated other comprehensive loss
(450.4 ) (498.5 ) Treasury stock at cost (675.3 )
(653.9 )
Total shareholders' equity attributable to Snap-on
Inc. 2,747.7 2,617.2 Noncontrolling interests 18.1
18.0
Total equity 2,765.8
2,635.2
Total liabilities and equity $ 4,877.8
$ 4,723.2
SNAP-ON INCORPORATED Condensed
Consolidated Statements of Cash Flows (Amounts in
millions) (unaudited) Three Months
Ended April 1, April 2, 2017 2016
Operating activities: Net earnings $ 145.1 $ 131.3
Adjustments to reconcile net earnings to
net cash provided (used) by
operating activities:
Depreciation 16.0 14.9 Amortization of other intangibles 7.1 6.1
Provision for losses on finance receivables 13.0 9.3 Provision for
losses on non-finance receivables 2.2 3.2 Stock-based compensation
expense 7.4 5.8 Deferred income tax provision 7.4 9.4 Gain on sales
of assets (0.2 ) - Settlement of treasury lock 14.9 - Changes in
operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable (1.9 ) (4.8 )
(Increase) decrease in contract receivables (2.1 ) 0.3 Increase in
inventories (17.3 ) (9.9 ) Increase in prepaid and other assets
(7.5 ) (15.5 ) Increase in accounts payable 20.3 15.0 Decrease in
accruals and other liabilities (12.0 ) (23.5 )
Net
cash provided by operating activities 192.4 141.6
Investing activities: Additions to finance receivables
(227.0 ) (230.9 ) Collections of finance receivables 173.8 174.1
Capital expenditures (18.6 ) (19.5 ) Acquisitions of businesses
(9.5 ) - Disposals of property and equipment 1.0 0.2 Other
(1.4 ) (3.5 )
Net cash used by investing activities
(81.7 ) (79.6 )
Financing activities: Proceeds from
issuance of long-term debt 297.8 - Repayment of long-term debt
(150.0 ) - Repayments of notes payable - (0.8 ) Net increase
(decrease) in other short-term borrowings (135.7 ) 3.6 Cash
dividends paid (41.2 ) (35.4 ) Purchases of treasury stock (35.8 )
(23.1 ) Proceeds from stock purchase and option plans 14.1 9.9
Other (15.8 ) (3.5 )
Net cash used by financing
activities (66.6 ) (49.3 )
Effect of exchange rate
changes on cash and cash equivalents 1.3
0.8
Increase in cash and cash equivalents 45.4 13.5
Cash and cash equivalents at beginning of year 77.6
92.8
Cash and cash equivalents at end of
period $ 123.0 $ 106.3
Supplemental cash flow
disclosures: Cash paid for interest $ (24.0 ) $ (23.9 ) Net
cash paid for income taxes (14.0 ) (17.7 )
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 - Condensed Statements of Earnings (Amounts in
millions) (unaudited)
Operations* Financial Services Three Months
Ended Three Months Ended April 1, April 2,
April 1, April 2, 2017 2016 2017
2016 Net sales $ 887.1 $ 834.2 $ - $ - Cost of
goods sold (439.1 ) (418.9 ) - -
Gross profit 448.0 415.3 - - Operating expenses
(278.5 ) (259.9 ) - -
Operating earnings before financial services 169.5 155.4 - -
Financial services revenue - - 76.8 66.3 Financial
services expenses - - (24.3 )
(19.3 )
Operating earnings from financial services
- - 52.5 47.0
Operating earnings 169.5 155.4 52.5 47.0
Interest expense (12.6 ) (13.0 ) (0.1 ) (0.1 ) Intersegment
interest income (expense) – net 17.5 17.3 (17.5 ) (17.3 ) Other
income (expense) – net (1.7 ) (0.7 ) -
-
Earnings before income taxes and equity
earnings 172.7 159.0 34.9 29.6 Income tax expense (49.7
) (46.7 ) (12.9 ) (10.9 )
Earnings before
equity earnings 123.0 112.3 22.0 18.7
Financial services –
net earnings attributable to Snap-on 22.0 18.7 - -
Equity earnings, net of tax 0.1 0.3
- -
Net earnings 145.1 131.3
22.0 18.7 Net earnings attributable to noncontrolling interests
(3.5 ) (3.0 ) - -
Net
earnings attributable to Snap-on $ 141.6 $ 128.3
$ 22.0 $ 18.7 *Snap-on with Financial Services
on the equity method.
SNAP-ON INCORPORATED Non-GAAP
Supplemental Consolidating Data - Condensed Balance Sheets
(Amounts in millions) (unaudited)
Operations* Financial Services April
1, December 31, April 1, December 31,
2017 2016 2017 2016
Assets Cash and cash equivalents $ 123.0 $ 77.5 $ - $ 0.1
Intersegment receivables 18.0 15.0 - - Trade and other accounts
receivable – net 607.3 598.2 0.8 0.6 Finance receivables – net - -
484.7 472.5 Contract receivables – net 8.0 7.9 76.5 80.2
Inventories – net 556.8 530.5 - - Prepaid expenses and other assets
122.6 122.4 1.5 1.1 Total current
assets 1,435.7 1,351.5 563.5 554.5 Property and equipment –
net 435.9 423.8 1.6 1.4 Investment in Financial Services 294.5
288.7 - - Deferred income tax assets 44.4 49.1 23.6 23.7
Intersegment long-term notes receivable 467.3 584.7 - - Long-term
finance receivables – net - - 966.3 934.5 Long-term contract
receivables – net 11.4 11.2 281.2 275.5 Goodwill 859.8 895.5 - -
Other intangibles – net 240.4 184.6 - - Other assets 47.3
47.9 0.1 0.1
Total assets $ 3,836.7 $
3,837.0 $ 1,836.3 $ 1,789.7
Liabilities and Equity
Notes payable and current maturities of long-term debt $ 17.2 $
151.4 $ 250.0 $ 150.0 Accounts payable 188.8 170.3 1.1 0.6
Intersegment payables - - 18.0 15.0 Accrued benefits 52.5 52.8 - -
Accrued compensation 60.1 85.7 1.4 4.1 Franchisee deposits 66.1
66.7 - - Other accrued liabilities 307.8 292.1
33.6 22.8 Total current liabilities 692.5 819.0 304.1 192.5
Long-term debt and intersegment long-term debt - - 1,222.7
1,293.5 Deferred income tax liabilities 24.4 13.1 - - Retiree
health care benefits 35.9 36.7 - - Pension liabilities 230.7 246.5
- - Other long-term liabilities 87.4 86.5 15.0
15.0
Total liabilities 1,070.9 1,201.8
1,541.8 1,501.0
Total shareholders' equity
attributable to Snap-on 2,747.7 2,617.2 294.5 288.7
Noncontrolling interests 18.1 18.0 - -
Total equity 2,765.8 2,635.2 294.5
288.7
Total liabilities and equity $ 3,836.7 $
3,837.0 $ 1,836.3 $ 1,789.7 *Snap-on with Financial Services
on the equity method.
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version on businesswire.com: http://www.businesswire.com/news/home/20170420005278/en/
Snap-on IncorporatedInvestors:Leslie
Kratcoski262/656-6121orMedia:Richard Secor262/656-5561
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