Snap-on Announces Third Quarter 2012 Results

Snap-on Announces Third Quarter 2012 Results

Diluted EPS of $1.26;
Sales, excluding foreign currency effects, up 4.6%


KENOSHA, Wis.--(BUSINESS WIRE)-- Snap-on Incorporated (NYS: 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 2012.

  • Sales of $711.6 million increased $14.4 million, or 2.1%, from 2011 levels; excluding $16.6 million of unfavorable foreign currency translation, organic sales increased 4.6%.

  • Operating earnings before financial services of $96.2 million, including $12.2 million of higher year-over-year stock-based, mark-to-market expense, compares to $94.3 million last year.

  • Financial services operating earnings of $27.9 million increased $7.1 million from 2011 levels, reflecting the growth of the on-book finance portfolio.

  • Consolidated operating earnings of $124.1 million improved to 16.5% of revenues (net sales plus financial services revenue) as compared to $115.1 million, or 15.8% of revenues, last year.

  • Net earnings of $74.1 million, or $1.26 per diluted share, compares with net earnings of $67.8 million, or $1.16 per diluted share, last year.

"We believe our third quarter results demonstrate continued progress along our defined runways for coherent growth: enhancing the franchise network, expanding in the vehicle repair garage, extending into critical industries and building in emerging markets," said Nick Pinchuk, Snap-on chairman and chief executive officer. "These results also underscore the way in which our commitment to the Snap-on Value Creation processes drives ongoing improvement 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, we are honored to have been recognized again in 2012 by both MOTOR Magazine and Professional Tool & Equipment News with multiple awards for Snap-on products in each publication. 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 $280.4 million in the third quarter increased $2.1 million, or 0.8%, from 2011 levels; excluding $8.8 million of unfavorable foreign currency translation, organic sales increased 4.0%.

Operating earnings of $33.4 million in the period increased $3.8 million, or 12.8%, from 2011 levels and the operating margin (operating earnings as a percentage of segment sales) of 11.9% increased from 10.6% a year ago.

Snap-on Tools Group segment sales of $308.8 million in the third quarter rose $29.2 million, or 10.4%, from 2011 levels; excluding $1.6 million of unfavorable foreign currency translation, organic sales increased 11.1%.

Operating earnings of $40.2 million in the period increased $4.6 million, or 12.9%, from 2011 levels and the operating margin of 13.0% improved from 12.7% a year ago.

Repair Systems & Information Group segment sales of $222.0 million in the third quarter decreased $0.6 million from 2011 levels; excluding $6.5 million of unfavorable foreign currency translation, organic sales rose 2.7%.

Operating earnings of $49.5 million in the period increased $5.8 million from 2011 levels and the operating margin of 22.3% increased from 19.6% a year ago.

Financial Services operating earnings were $27.9 million on $40.5 million of revenue in the third quarter of 2012, as compared to operating earnings of $20.8 million on $32.7 million of revenue a year ago.

Corporate expenses of $26.9 million increased $12.3 million from prior-year levels primarily due to $12.2 million of higher stock-based (mark-to-market) expense. As a result of changes in the company's quarter-end stock price, operating expenses in the third quarter of 2012 included $4.4 million of mark-to-market expense, while operating expenses in the third quarter of 2011 were partially offset by $7.8 million of mark-to-market benefit.

Outlook

Snap-on expects to continue with its planned strategic investments to enhance its mobile tool distribution network, expand in the vehicle repair garage, extend to critical industries and build in emerging markets. As a result of these initiatives, Snap-on anticipates that capital expenditures in 2012 will be in a range of $75 million to $80 million, of which $59.5 million was spent in the first nine months of 2012. Snap-on anticipates that its full year 2012 effective income tax rate will approximate 33.2%.

Conference Call and Webcast October 18, 2012, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, October 18, 2012, 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 and supporting materials, 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, aerospace, agriculture, construction, government and military, mining, natural resources and power generation. 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 contains 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, 2011, 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 visitwww.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,

Oct. 1,

Sept. 29,

Oct. 1,

2012

2011

2012

2011

Net sales

$

711.6

$

697.2

$

2,184.7

$

2,117.6

Cost of goods sold

(371.2

)

(367.9

)

(1,146.7

)

(1,115.5

)

Gross profit

340.4

329.3

1,038.0

1,002.1

Operating expenses

(244.2

)

(235.0

)

(739.7

)

(721.7

)

Operating earnings before financial services

96.2

94.3

298.3

280.4

Financial services revenue

40.5

32.7

118.4

88.8

Financial services expenses

(12.6

)

(11.9

)

(41.0

)

(38.0

)

Operating earnings from financial services

before arbitration settlement

27.9

20.8

77.4

50.8

Arbitration settlement

-

-

-

18.0

Operating earnings from financial services

27.9

20.8

77.4

68.8

Operating earnings

124.1

115.1

375.7

349.2

Interest expense

(13.6

)

(15.1

)

(41.4

)

(47.7

)

Other income (expense) - net

(0.2

)

(1.7

)

(0.5

)

-

Earnings before income taxes and

equity earnings

110.3

98.3

333.8

301.5

Income tax expense

(34.9

)

(30.5

)

(108.4

)

(97.5

)

Earnings before equity earnings

75.4

67.8

225.4

204.0

Equity earnings, net of tax

1.0

2.0

2.5

3.7

Net earnings

76.4

69.8

227.9

207.7

Net earnings attributable to noncontrolling interests

(2.3

)

(2.0

)

(6.4

)

(5.7

)

Net earnings attributable to Snap-on Inc.

$

74.1

$

67.8

$

221.5

$

202.0

Net earnings per share attributable to Snap-on Inc.:

Basic

$

1.27

$

1.16

$

3.81

$

3.47

Diluted

1.26

1.16

3.77

3.44

Weighted-average shares outstanding:

Basic

58.3

58.2

58.2

58.2

Effect of dilutive options

0.6

0.5

0.6

0.5

Diluted

58.9

58.7

58.8

58.7

SNAP-ON INCORPORATED

Supplemental Segment Information

(Amounts in millions)

(unaudited)

Three Months Ended

Nine Months Ended

Sept. 29,

Oct. 1,

Sept. 29,

Oct. 1,

2012

2011

2012

2011

Net sales:

Commercial & Industrial Group

$

280.4

$

278.3

$

850.3

$

830.4

Snap-on Tools Group

308.8

279.6

950.4

860.6

Repair Systems & Information Group

222.0

222.6

675.5

684.1

Segment net sales

811.2

780.5

2,476.2

2,375.1

Intersegment eliminations

(99.6

)

(83.3

)

(291.5

)

(257.5

)

Total net sales

$

711.6

$

697.2

$

2,184.7

$

2,117.6

Financial Services revenue

40.5

32.7

118.4

88.8

Total revenues

$

752.1

$

729.9

$

2,303.1

$

2,206.4

Operating earnings:

Commercial & Industrial Group

$

33.4

$

29.6

$

95.4

$

90.4

Snap-on Tools Group

40.2

35.6

130.8

118.9

Repair Systems & Information Group

49.5

43.7

150.3

135.5

Financial Services*

27.9

20.8

77.4

68.8

Segment operating earnings

151.0

129.7

453.9

413.6

Corporate

(26.9

)

(14.6

)

(78.2

)

(64.4

)

Operating earnings

$

124.1

$

115.1

$

375.7

$

349.2

Interest expense

(13.6

)

(15.1

)

(41.4

)

(47.7

)

Other income (expense) - net

(0.2

)

(1.7

)

(0.5

)

-

Earnings before income taxes

and equity earnings

$

110.3

$

98.3

$

333.8

$

301.5

* For the nine month period ended October 1, 2011, Financial Services operating earnings included an $18.0 million

pretax arbitration settlement gain from a second quarter 2011 arbitration settlement.

SNAP-ON INCORPORATED