Snap-on Incorporated (
Q3 2010 Earnings Call
October 22, 2010; 10:00 am ET
Nick Pinchuk - Chief Executive Officer
Aldo Pagliari - Chief Financial Officer
Leslie Kratcoski – Investor Relations
Jim Lucas – Janney Montgomery Scott
Steven Gregory - Mandalay Research
David Leiker – Robert W. Baird
Gary Prestopino – Barrington Research
Previous Statements by SNA
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» Snap-on Incorporated Q3 2009 Earnings Call Transcript
Good day ladies and gentlemen, and welcome to the Snap-on Incorporated 2010 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our remarks, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference call, Leslie Kratcoski, please go ahead.
Thanks Evelyn and good morning everyone. Thanks for joining us today to review Snap-on's third quarter 2010 results, which are detailed in our press release issued earlier this morning.
We have on the call today Nick Pinchuk, Snap-on's Chief Executive Officer and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will lead off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions.
As usual, we have provided slides to supplement our discussion. You can find a copy of these slides on the Investor Relations portion of our website next to the audio icon for this call. These slides will be archived on our website along with the transcript of today's call.
Any statements made during this call relative to management’s expectations, estimates or beliefs or otherwise state management’s or the company’s outlook plans or projections are forward-looking statements and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings.
With that said, I'll now turn the call over to Nick Pinchuk, Nick.
Thanks Leslie. Good morning everyone. Well, Snap-on had another quarter of improved year-over-year performance and on top of that we saw some favorable market signal, so it’s very encouraging. We believe there is now clear evidence of a building Snap-on strength in the recovering market. Overall, our organic sales were up 13.4%, solid by any measure, and that’s after being up 9.5% in the second quarter and 4% in the first quarter. Needless to say, we like that trend.
Operating income rose 72% from last year with financial services contributing profitability as projected improving its performance as it brings the loan portfolio on to Snap-on’s books. The operating company ally without financial services increased by a strong 46%, so again overall we are encouraged by the strength of the quarter, and that result was in the face of an unfavorable swing in LIFO.
We would say our runways for growth are clearing and our Snap-on value creation processes around safety, quality, customer connection, innovation, Rapid Continuous Improvement or RCI, they continue to drive progress. So, having said that let me give you a bit of color, and my perspective on the trends we see.
With respect to the economic environment and the impacts on our market, there are some nice positives. It was our third straight quarter of increasing year-over-year gain. So that alone indicates a better environment, and there is also a building momentum in some of our more strategically important areas in our core auto
repair business, in emerging markets, in critical industries, all areas where we see clear long-term runway.
Now, the third quarter is seasonally are most challenging. It can be quite variable. So, it’s some times difficult to draw extended conclusions from the results, but having said that Snap-on’s quarter was robust completely overcoming the typical season low.
We often talk about big ticket items, higher-price products that either have longer paybacks like diagnostics or under-car equipment, or a more discretionary like tool storage units. Activity here is usually a barometer of our customers’ overall financial health and of their confidence.
You recall that during the downturn last year we saw quite a bit of variation from period to period in big ticket purchases, but with these results we’ve now put together three quarters in a row of year-over-year increases in all three big ticket categories. They are all back now to pre-downturn levels.
In the tools group, both diagnostics and tool storage units showed significant gains. A real help in this was our new diagnostics handheld unit called them VERDICT. It was launched at our annual franchisee conference in August and it got great reviews. It’s a fully functional unit that we believe set a new industry standard with features like detachable wireless touch screen display, remote use from anywhere in the garage, Wi-Fi internet capability and access for Snap-on’s unique repair information and database.
The VERDICT is clearly an innovation. It provides real productivity to technicians and as you would expect the reception has been very strong. Beyond the vans, our equipment division, part of the Repair Systems and Information or RS&I group showed strong year-over-year gains in particular and its big ticket under-car products that’s what equipment sales. It achieved gains in both North America and Europe well ahead of our company’s overall sales increase. In fact equivalent lines were even slightly ahead of the second quarter, and third quarter sequential increases is very rare for this business, because a large presence in Europe and the associated seasonality usually make July through September a tough period. So, this quarter’s increase, sequentially increase in equipment sales was a big win.