Snap-on Announces Third Quarter 2016 Results

Snap-on Incorporated, a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, has announced operating results for the third quarter of 2016.

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KENOSHA, Wis. —  Snap-on Incorporated, a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, has announced operating results for the third quarter of 2016.  

  • Net sales of $834.1 million increased $12.6 million, or 1.5%, from 2015 levels; excluding $9.7 million of unfavorable foreign currency translation and $1.1 million of acquisition-related sales, organic sales increased $21.2 million or 2.6%.  (See “Non-GAAP Measures” below for a definition of, and further information on, organic sales.) 
  • Operating earnings before financial services of $157.6 million increased 140 basis points to 18.9% of sales as compared to $143.6 million, or 17.5% of sales, last year.  
  • Financial services operating earnings of $50.6 million increased $7.1 million, or 16.3%, from 2015 levels; financial services revenue of $71.6 million increased 17.2% from 2015 levels. 
  • Consolidated operating earnings of $208.2 million improved to 23.0% of revenues (net sales plus financial services revenue) as compared to $187.1 million, or 21.2% of revenues, last year.  
  • The third quarter effective income tax rate was 31.2% in 2016 and 31.6% in 2015.  
  • Net earnings of $131.7 million, or $2.22 per diluted share, compared to net earnings of $116.8 million, or $1.98 per diluted share, a year ago. 

“We believe Snap-on’s third quarter results, including a 12.1% increase in diluted earnings per share and continued growth in organic sales, confirm our success in serving serious professionals performing critical tasks and in leveraging our Snap-on Value Creation Processes,” said Nick Pinchuk, Snap-on chairman and chief executive officer.  “The 140 basis point improvement in operating margin before financial services reflects our ability to drive ongoing improvements in safety, quality, customer connection and rapid continuous improvement.  In the third quarter, we again received recognition for several of our new products with awards from both MOTOR Magazine and Professional Tool & Equipment News, providing further evidence of the winning innovation that results from actively connecting with customers and furthering our deep understanding of their work.   Finally, these results would not have been possible without the dedication and capability of our franchisees and associates worldwide; I thank them for their extraordinary commitment and ongoing contributions.”

Segment Results

Commercial & Industrial Group segment sales of $289.3 million in the quarter increased $0.8 million, or 0.3%, from 2015 levels.  Excluding $3.5 million of unfavorable foreign currency translation, organic sales increased $4.3 million, or 1.5%, primarily due to higher sales in the segment’s European-based hand tools business and in the segment’s power tools and Asia/Pacific operations; organic sales to customers in critical industries were essentially flat.     

Operating earnings of $43.7 million in the period, including $0.3 million of favorable foreign currency effects, increased $2.4 million from 2015 levels, and the operating margin (operating earnings as a percentage of segment sales) of 15.1% improved 80 basis points from 14.3% a year ago.   

Snap-on Tools Group segment sales of $397.2 million in the quarter rose $16.6 million, or 4.4%, from 2015 levels.  Excluding $4.6 million of unfavorable foreign currency translation, organic sales were up

$21.2 million, or 5.6%, reflecting similar sales increases in both the company’s U.S. and international franchise operations.     

Operating earnings of $64.6 million in the period, including $3.2 million of unfavorable foreign currency effects, increased $8.3 million from 2015 levels, and the operating margin of 16.3% improved 150 basis points from 14.8% a year ago.  

Repair Systems & Information Group segment sales of $286.1 million in the quarter rose $3.2 million, or 1.1%, from 2015 levels.   Excluding $2.8 million of unfavorable foreign currency translation and $1.1 million of acquisition-related sales, organic sales increased $4.9 million, or 1.7%, primarily due to higher sales of diagnostic and repair information products to independent repair shop owners and managers; sales of both undercar equipment and sales to OEM dealerships were essentially flat.  

Operating earnings of $71.8 million in the period, including $1.1 million of unfavorable foreign currency effects, increased $2.1 million from 2015 levels, and the operating margin of 25.1% improved 50 basis points from 24.6% a year ago.  

Financial Services operating earnings of $50.6 million on revenue of $71.6 million in the quarter compared to operating earnings of $43.5 million on revenue of $61.1 million a year ago.

Corporate expenses of $22.5 million in the quarter decreased $1.2 million from $23.7 million last year, primarily due to lower pension expense. 

Outlook 

Snap-on expects to make continued progress during the balance of 2016 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 also in adjacent markets, additional geographies and other areas, including in critical industries, where the cost and penalties for failure can be high.  In pursuit of these initiatives, Snap-on now anticipates that capital expenditures in 2016 will approximate $80 million, of which $56.6 million was incurred through the end of the third quarter. Snap-on presently expects that its full year 2016 effective income tax rate will be slightly below its full year 2015 rate.

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