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 2015.
  • Sales of $821.5 million increased $15.2 million, or 1.9%, from 2014 levels; excluding $42.6 million of unfavorable foreign currency translation and $2.1 million of acquisition-related sales, organic sales increased $55.7 million or 7.3%.
  • Operating earnings before financial services of $143.6 million improved 130 basis points to 17.5% of sales as compared to $130.6 million, or 16.2% of sales, last year.
  • Financial services operating earnings of $43.5 million increased $5.8 million, or 15.4%, from 2014 levels; financial services revenue of $61.1 million increased 14.0% from 2014 levels.
  • Consolidated operating earnings of $187.1 million improved to 21.2% of revenues (net sales plus financial services revenue) as compared to $168.3 million, or 19.6% of revenues, last year.
  • The third quarter effective income tax rate was 31.6% in 2015 and 31.8% in 2014.
  • Net earnings of $116.8 million, or $1.98 per diluted share, compared to net earnings of $103.7 million, or $1.76 per diluted share, a year ago.

"We believe our third quarter results continue to confirm Snap-on's capabilities in serving serious professionals performing critical tasks in workplaces of consequence around the world," said Nick Pinchuk, Snap-on chairman and chief executive officer. "These results, which include 7.3% organic sales growth and a 12.5% increase in diluted earnings per share, demonstrate continued progress along our defined runways for coherent growth while overcoming headwinds in certain end markets and geographies. The 130 basis point improvement in operating margin before financial services also reflects contributions from our Snap-on Value Creation Processes, which drive ongoing improvements in safety, quality, customer connection, innovation and rapid continuous improvement. As further evidence of our success in connecting with customers and translating that insight into winning innovation, new products again aided our growth in the quarter and we were honored to have several of them recognized by both  MOTOR Magazine and  Professional Tool & Equipment News with multiple awards. Finally, these results and achievements reflect significant effort and dedication across the organization and I thank our franchisees and associates worldwide for their extraordinary contributions and commitment."

Segment Results

Commercial & Industrial Group segment sales of $288.5 million in the quarter decreased $10.3 million, or 3.4%, from 2014 levels. Excluding $19.8 million of unfavorable foreign currency translation, organic sales increased $9.5 million, or 3.4%, as sales gains in the segment's European-based hand tools business and its Asia/Pacific and power tools operations, were partially offset by lower sales to the military and to customers in the oil and gas sector.

Operating earnings of $41.3 million in the period, including $2.9 million of unfavorable foreign currency effects, increased $0.5 million from 2014 levels, and the operating margin (operating earnings as a percentage of segment sales) of 14.3% improved 60 basis points from 13.7% a year ago.

Snap-on Tools Group segment sales of $380.6 million in the quarter rose $25.6 million, or 7.2%, from 2014 levels. Excluding $12.1 million of unfavorable foreign currency translation, organic sales increased $37.7 million, or 11.0%, reflecting similar sales increases in both the company's U.S. and international franchise operations.

Operating earnings of $56.3 million in the period, including $6.8 million of unfavorable foreign currency effects, increased $6.8 million from 2014 levels, and the operating margin of 14.8% improved 90 basis points from 13.9% a year ago.

Repair Systems & Information Group segment sales of $282.9 million in the quarter increased $11.7 million, or 4.3%, from 2014 levels. Excluding $11.7 million of unfavorable foreign currency translation and $2.1 million of acquisition-related sales, organic sales increased $21.3 million, or 8.2%, reflecting increased sales to OEM dealerships, higher sales of undercar equipment, and gains in sales of diagnostic and repair information products to independent repair shop owners and managers.

Operating earnings of $69.7 million in the period, including $2.2 million of unfavorable foreign currency effects, increased $6.4 million from 2014 levels, and the operating margin of 24.6% improved 130 basis points from 23.3% a year ago.

Financial Services operating earnings of $43.5 million on revenue of $61.1 million in the quarter compared to operating earnings of $37.7 million on revenue of $53.6 million a year ago.

Corporate expenses of $23.7 million in the quarter increased $0.7 million from $23.0 million last year.

Outlook

Snap-on expects to make continued progress along its defined runways for coherent growth, including enhancing the franchise network, expanding in the vehicle repair garage, extending to critical industries and building in emerging markets. In pursuit of these initiatives, Snap-on anticipates that capital expenditures in 2015 will be in a range of $80 million to $85 million, of which $64.3 million was incurred through the end of the third quarter. Snap-on continues to expect that its full year 2015 effective income tax rate will be at or below its 2014 full year rate.

Conference Call and Webcast on October 22, 2015, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, October 22, 2015, 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.

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 $3.3 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 January 3, 2015, 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 Nine Months Ended
October 3, September 27, October 3, September 27,
2015 2014 2015 2014
 
Net sales $ 821.5 $ 806.3 $ 2,501.1 $ 2,420.3
Cost of goods sold   (414.6 )   (412.4 )   (1,265.1 )   (1,247.3 )
Gross profit 406.9 393.9 1,236.0 1,173.0
Operating expenses   (263.3 )   (263.3 )   (803.7 )   (782.6 )
Operating earnings before financial services 143.6 130.6 432.3 390.4
 
Financial services revenue 61.1 53.6 177.2 155.5
Financial services expenses   (17.6 )   (15.9 )   (52.0 )   (48.6 )
Operating earnings from financial services   43.5     37.7     125.2     106.9  
 
Operating earnings 187.1 168.3 557.5 497.3
Interest expense (13.0 ) (12.7 ) (38.9 ) (39.1 )
Other income (expense) - net   (0.5 )   (0.9 )   (1.9 )   (0.7 )
Earnings before income taxes and equity earnings 173.6 154.7 516.7 457.5
Income tax expense   (53.9 )   (48.4 )   (161.9 )   (144.6 )
Earnings before equity earnings 119.7 106.3 354.8 312.9
Equity earnings, net of tax   0.2     0.1     1.3     0.5  
Net earnings 119.9 106.4 356.1 313.4
Net earnings attributable to noncontrolling interests   (3.1 )   (2.7 )   (8.8 )   (7.7 )
Net earnings attributable to Snap-on Inc. $ 116.8   $ 103.7   $ 347.3   $ 305.7  
 
 
Net earnings per share attributable to Snap-on Inc.:
Basic $ 2.01 $ 1.78 $ 5.98 $ 5.26
Diluted 1.98 1.76 5.88 5.18
 
Weighted-average shares outstanding:
Basic 58.1 58.1 58.1 58.1
Effect of dilutive securities   1.0     0.9     1.0     0.9  
Diluted   59.1     59.0     59.1     59.0  

 
 
SNAP-ON INCORPORATED
Supplemental Segment Information
(Amounts in millions)
(unaudited)
                 
 
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
2015 2014 2015 2014
 
Net sales:
Commercial & Industrial Group $ 288.5 $ 298.8 $ 881.8 $ 876.6
Snap-on Tools Group 380.6 355.0 1,157.5 1,067.7
Repair Systems & Information Group   282.9     271.2     832.6     812.4  
Segment net sales 952.0 925.0 2,871.9 2,756.7
Intersegment eliminations   (130.5 )   (118.7 )   (370.8 )   (336.4 )
Total net sales $ 821.5 $ 806.3 $ 2,501.1 $ 2,420.3
Financial Services revenue   61.1     53.6     177.2     155.5  
Total revenues $ 882.6   $ 859.9   $ 2,678.3   $ 2,575.8  
 
Operating earnings:
Commercial & Industrial Group $ 41.3 $ 40.8 $ 127.5 $ 118.1
Snap-on Tools Group 56.3 49.5 184.1 159.2
Repair Systems & Information Group 69.7 63.3 201.3 186.0
Financial Services   43.5     37.7     125.2     106.9  
Segment operating earnings 210.8 191.3 638.1 570.2
Corporate   (23.7 )   (23.0 )   (80.6 )   (72.9 )
Operating earnings $ 187.1 $ 168.3 $ 557.5 $ 497.3
Interest expense (13.0 ) (12.7 ) (38.9 ) (39.1 )
Other income (expense) - net   (0.5 )   (0.9 )   (1.9 )   (0.7 )
Earnings before income taxes
and equity earnings $ 173.6   $ 154.7   $ 516.7   $ 457.5  

 
 
SNAP-ON INCORPORATED
Condensed Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
         
 
October 3, January 3,
2015 2015
 
Assets
Cash and cash equivalents $ 119.2 $ 132.9
Trade and other accounts receivable - net 571.2 550.8
Finance receivables - net 430.4 402.4
Contract receivables - net 86.1 74.5
Inventories - net 527.7 475.5
Deferred income tax assets 102.2 101.0
Prepaid expenses and other assets   116.1     121.5  
Total current assets 1,952.9 1,858.6
 
Property and equipment - net 413.2 404.5
Deferred income tax assets 88.8 93.2
Long-term finance receivables - net 734.2 650.5
Long-term contract receivables - net 261.0 242.0
Goodwill 798.7 810.7
Other intangibles - net 195.4 203.3
Other assets   47.2     47.3  
Total assets $ 4,491.4   $ 4,310.1  
 
Liabilities and Equity
Notes payable $ 73.6 $ 56.6
Accounts payable 178.1 145.0
Accrued benefits 48.7 53.8
Accrued compensation 87.2 99.2
Franchisee deposits 72.1 65.8
Other accrued liabilities   325.8     298.3  
Total current liabilities 785.5 718.7
 
Long-term debt 864.1 862.7
Deferred income tax liabilities 161.0 159.2
Retiree health care benefits 39.2 42.5
Pension liabilities 175.9 217.9
Other long-term liabilities   86.9     83.8  
Total liabilities   2,112.6     2,084.8  
 
Equity
Shareholders' equity attributable to Snap-on Inc.
Common stock 67.4 67.4
Additional paid-in capital 293.7 254.7
Retained earnings 2,891.2 2,637.2
Accumulated other comprehensive loss (322.2 ) (248.2 )
Treasury stock at cost   (569.1 )   (503.3 )
Total shareholders' equity attributable to Snap-on Inc. 2,361.0 2,207.8
Noncontrolling interests   17.8     17.5  
Total equity   2,378.8     2,225.3  
Total liabilities and equity $ 4,491.4   $ 4,310.1  

 
 
SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
         
Three Months Ended
October 3, September 27,
2015 2014
Operating activities:
Net earnings $ 119.9 $ 106.4

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 14.5 13.6
Amortization of other intangibles 6.0 6.1
Provision for losses on finance receivables 8.0 6.4
Provision for losses on non-finance receivables 2.9 4.1
Stock-based compensation expense 6.7 8.6
Excess tax benefits from stock-based compensation (0.9 ) (0.7 )
Deferred income tax benefit (9.3 ) (0.3 )
Changes in operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable (18.0 ) (25.7 )
Increase in contract receivables (21.8 ) (17.8 )
Increase in inventories (31.3 ) (29.1 )
Decrease in prepaid and other assets 10.4 3.1
Increase (decrease) in accounts payable 7.8 (1.8 )
Increase in accruals and other liabilities   18.8     15.1  
Net cash provided by operating activities 113.7 88.0
 
Investing activities:
Additions to finance receivables (213.2 ) (178.6 )
Collections of finance receivables 157.3 142.8
Capital expenditures (18.5 ) (22.3 )
Acquisitions of businesses (13.1 ) 0.3
Disposal of property and equipment 0.1 0.1
Other   0.5     1.1  
Net cash used by investing activities (86.9 ) (56.6 )
 
Financing activities:
Proceeds from short-term borrowings 5.5 4.9
Repayments of short-term borrowings (3.2 ) (1.6 )
Net increase in other short-term borrowings 11.6 9.4
Purchases of treasury stock (14.7 ) (5.0 )
Cash dividends paid (30.8 ) (25.6 )
Proceeds from stock purchase and option plans 3.2 1.8
Excess tax benefits from stock-based compensation 0.9 0.7
Other   (3.4 )   (6.1 )
Net cash used by financing activities (30.9 ) (21.5 )
 
Effect of exchange rate changes on cash and cash equivalents   (1.3 )   (1.0 )
Increase (decrease) in cash and cash equivalents (5.4 ) 8.9
 
Cash and cash equivalents at beginning of period   124.6     115.8  
Cash and cash equivalents at end of period $ 119.2   $ 124.7  
 
Supplemental cash flow disclosures:
Cash paid for interest $ (23.8 ) $ (23.3 )
Net cash paid for income taxes (57.8 ) (48.0 )

 
 
SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
         
Nine Months Ended
October 3, September 27,
2015 2014
Operating activities:
Net earnings $ 356.1 $ 313.4

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 42.7 40.6
Amortization of other intangibles 18.4 18.4
Provision for losses on finance receivables 22.4 19.8
Provision for losses on non-finance receivables 10.8 10.7
Stock-based compensation expense 29.8 27.3
Excess tax benefits from stock-based compensation (14.9 ) (10.3 )
Deferred income tax benefit (6.2 ) (3.1 )
Loss on sale of assets 0.3 0.2
Changes in operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable (44.8 ) (61.7 )
Increase in contract receivables (31.5 ) (31.7 )
Increase in inventories (67.1 ) (57.5 )
Increase in prepaid and other assets (28.0 ) (32.2 )
Increase in accounts payable 35.6 16.6
Increase in accruals and other liabilities   28.5     50.2  
Net cash provided by operating activities 352.1 300.7
 
Investing activities:
Additions to finance receivables (629.2 ) (549.2 )
Collections of finance receivables 476.6 425.1
Capital expenditures (64.3 ) (63.3 )
Acquisitions of businesses (13.1 ) (41.3 )
Disposal of property and equipment 0.5 0.6
Other   (2.3 )   0.9  
Net cash used by investing activities (231.8 ) (227.2 )
 
Financing activities:
Repayment of long-term debt - (100.0 )
Proceeds from short-term borrowings 7.1 4.9
Repayments of short-term borrowings (4.8 ) (1.6 )
Net increase in other short-term borrowings 16.8 43.2
Purchases of treasury stock (101.6 ) (67.5 )
Cash dividends paid (92.5 ) (76.8 )
Proceeds from stock purchase and option plans 39.7 30.8
Excess tax benefits from stock-based compensation 14.9 10.3
Other   (10.7 )   (9.0 )
Net cash used by financing activities (131.1 ) (165.7 )
 
Effect of exchange rate changes on cash and cash equivalents   (2.9 )   (0.7 )
Decrease in cash and cash equivalents (13.7 ) (92.9 )
 
Cash and cash equivalents at beginning of year   132.9     217.6  
Cash and cash equivalents at end of period $ 119.2   $ 124.7  
 
Supplemental cash flow disclosures:
Cash paid for interest $ (49.2 ) $ (51.1 )
Net cash paid for income taxes (124.2 ) (135.9 )

 
 
SNAP-ON INCORPORATED
Supplemental Consolidating Data - Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
                 
 
Operations* Financial Services
Three Months Ended Three Months Ended
October 3, September 27, October 3, September 27,
2015 2014 2015 2014
 
Net sales $ 821.5 $ 806.3 $ - $ -
Cost of goods sold   (414.6 )   (412.4 )   -     -  
Gross profit 406.9 393.9 - -
Operating expenses   (263.3 )   (263.3 )   -     -  
Operating earnings before financial services 143.6 130.6 - -
 
Financial services revenue - - 61.1 53.6
Financial services expenses   -     -     (17.6 )   (15.9 )
Operating earnings from financial services   -     -     43.5     37.7  
 
Operating earnings 143.6 130.6 43.5 37.7
Interest expense (12.9 ) (12.6 ) (0.1 ) (0.1 )
Intersegment interest income (expense) - net 15.8 14.1 (15.8 ) (14.1 )
Other income (expense) - net   (0.5 )   (0.8 )   -     (0.1 )
Earnings before income taxes and equity earnings 146.0 131.3 27.6 23.4
Income tax expense   (43.8 )   (39.7 )   (10.1 )   (8.7 )
Earnings before equity earnings 102.2 91.6 17.5 14.7
Financial services - net earnings
attributable to Snap-on Inc. 17.5 14.7 - -
Equity earnings, net of tax   0.2     0.1     -     -  
Net earnings 119.9 106.4 17.5 14.7
Net earnings attributable to noncontrolling interests   (3.1 )   (2.7 )   -     -  
Net earnings attributable to Snap-on Inc. $ 116.8   $ 103.7   $ 17.5   $ 14.7  
 
*Snap-on Inc. with Financial Services on the equity method.
Transactions between the Operations and Financial Services businesses 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
Nine Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
2015 2014 2015 2014
 
Net sales $ 2,501.1 $ 2,420.3 $ - $ -
Cost of goods sold   (1,265.1 )   (1,247.3 )   -     -  
Gross profit 1,236.0 1,173.0 - -
Operating expenses   (803.7 )   (782.6 )   -     -  
Operating earnings before financial services 432.3 390.4 - -
 
Financial services revenue - - 177.2 155.5
Financial services expenses   -     -     (52.0 )   (48.6 )
Operating earnings from financial services   -     -     125.2     106.9  
 
Operating earnings 432.3 390.4 125.2 106.9
Interest expense (38.6 ) (38.6 ) (0.3 ) (0.5 )
Intersegment interest income (expense) - net 46.5 41.4 (46.5 ) (41.4 )
Other income (expense) - net   (1.9 )   (0.6 )   -     (0.1 )
Earnings before income taxes and equity earnings 438.3 392.6 78.4 64.9
Income tax expense   (133.1 )   (120.7 )   (28.8 )   (23.9 )
Earnings before equity earnings 305.2 271.9 49.6 41.0
Financial services - net earnings
attributable to Snap-on Inc. 49.6 41.0 - -
Equity earnings, net of tax   1.3     0.5     -     -  
Net earnings 356.1 313.4 49.6 41.0
Net earnings attributable to noncontrolling interests   (8.8 )   (7.7 )   -     -  
Net earnings attributable to Snap-on Inc. $ 347.3   $ 305.7   $ 49.6   $ 41.0  
 
*Snap-on Inc. with Financial Services on the equity method.
Transactions between the Operations and Financial Services businesses 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
October 3, January 3, October 3, January 3,
2015 2015 2015 2015
 
Assets
Cash and cash equivalents $ 118.7 $ 132.8 $ 0.5 $ 0.1
Intersegment receivables 19.7 16.0 - -
Trade and other accounts receivable - net 571.0 550.5 0.2 0.3
Finance receivables - net - - 430.4 402.4
Contract receivables - net 7.9 7.6 78.2 66.9
Inventories - net 527.7 475.5 - -
Deferred income tax assets 84.3 85.4 17.9 15.6
Prepaid expenses and other assets   120.9   125.5   1.3   0.9
Total current assets 1,450.2 1,393.3 528.5 486.2
 
Property and equipment - net 412.3 403.4 0.9 1.1
Investment in Financial Services 235.7 218.9 - -
Deferred income tax assets 88.5 92.9 0.3 0.3
Intersegment long-term notes receivable 314.7 232.1 - -
Long-term finance receivables - net - - 734.2 650.5
Long-term contract receivables - net 12.7 12.8 248.3 229.2
Goodwill 798.7 810.7 - -
Other intangibles - net 195.4 203.3 - -
Other assets   52.5   50.9   1.1   1.0
Total assets $ 3,560.7 $ 3,418.3 $ 1,513.3 $ 1,368.3
 
Liabilities and Equity
Notes payable $ 73.6 $ 56.6 $ - $ -
Accounts payable 177.5 144.7 0.6 0.3
Intersegment payables - - 19.7 16.0
Accrued benefits 48.6 53.8 0.1 -
Accrued compensation 84.2 95.2 3.0 4.0
Franchisee deposits 72.1 65.8 - -
Other accrued liabilities   271.6   285.0   60.3   18.2
Total current liabilities 727.6 701.1 83.7 38.5
 
Long-term debt and intersegment long-term debt - - 1,178.8 1,094.8
Deferred income tax liabilities 161.0 158.6 - 0.6
Retiree health care benefits 39.2 42.5 - -
Pension liabilities 175.9 217.9 - -
Other long-term liabilities   78.2   72.9   15.1   15.5
Total liabilities   1,181.9   1,193.0   1,277.6   1,149.4
 
Total shareholders' equity attributable to Snap-on Inc. 2,361.0 2,207.8 235.7 218.9
Noncontrolling interests   17.8   17.5   -   -
Total equity   2,378.8   2,225.3   235.7   218.9
Total liabilities and equity $ 3,560.7 $ 3,418.3 $ 1,513.3 $ 1,368.3
 
*Snap-on Inc. with Financial Services on the equity method.
Transactions between the Operations and Financial Services businesses were eliminated to arrive at the consolidated financial statements.

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