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, announced 2018 operating results for the fourth quarter and full year.
- Net sales of $952.5 million in the quarter were down $22.1 million, or 2.3 percent, from 2017 levels, reflecting a $5.4 million, or 0.6 percent, organic sales decline and $17.1 million of unfavorable foreign currency translation, partially offset by $0.4 million of acquisition-related sales.
- Operating earnings before financial services for the quarter were $182.1 million, or 19.1 percent of sales. This compared to $158.0 million, or 16.2 percent of sales, in the fourth quarter of 2017. The 2018 operating earnings before financial services included a $4.3 million benefit from the settlement of an employment-related litigation matter that was being appealed; excluding the legal settlement, operating earnings before financial services, as adjusted, in the fourth quarter of 2018 were $177.8 million, or 18.7 percent of sales. The 2017 operating earnings before financial services included a $30.9 million charge for a patent-related litigation matter that is being appealed; excluding the legal charge, operating earnings before financial services, as adjusted, in the fourth quarter of 2017 were $188.9 million, or 19.4 percent of sales.
- Financial services revenue of $82.7 million in the fourth quarter of 2018 increased $2.8 million from 2017 levels; financial services operating earnings of $56.1 million increased $1.7 million from $54.4 million last year.
- Consolidated operating earnings in the quarter totaled $238.2 million, or 23.0 percent of revenues (net sales plus financial services revenue), which compared to $212.4 million, or 20.1 percent of revenues, in the fourth quarter of 2017. Excluding the legal settlement in 2018 and the legal charge in 2017, consolidated operating earnings, as adjusted, of $233.9 million, or 22.6 percent of revenues, compared to $243.3 million, or 23.1 percent of revenues, respectively.
- The fourth quarter 2018 effective income tax rate of 22.0 percent compares to 33.0 percent in 2017. In 2017, the fourth quarter effective income tax rate was reduced by 120 basis points as a result of the legal charge and increased by 360 basis points as a result of a $7.0 million charge related to the implementation of new tax legislation in the U.S. (the “tax charge”). Excluding the legal and tax charges, the fourth quarter 2017 effective tax rate, as adjusted, was 30.6 percent.
- Reported net earnings in the fourth quarter of 2018 were $175.0 million, or $3.09 per diluted share, compared to reported net earnings of $129.5 million, or $2.24 per diluted share, a year ago. Excluding the legal settlement in 2018, and the legal and tax charges in 2017, net earnings, as adjusted, were $171.8 million, or $3.03 per diluted share, in 2018, and $155.6 million, or $2.69 per diluted share, last year.
- Full year net sales of $3,740.7 million increased $53.8 million, or 1.5 percent, from 2017 levels, reflecting a $19.3 million, or 0.5 percent, organic sales gain, $24.2 million of acquisition-related sales and $10.3 million of favorable foreign currency translation. Full year net earnings of $679.9 million, or $11.87 per diluted share, compared to net earnings of $557.7 million, or $9.52 per diluted share, last year. In 2018, excluding the first quarter net debt items related to the issuance and extinguishment of debt, the fourth quarter legal settlement and the full year $3.9 million tax charge related to newly issued guidance associated with U.S. tax legislation, net earnings, as adjusted, were $676.5 million, or $11.81 per diluted share. In 2017, excluding the third and fourth quarter legal charges and the fourth quarter tax charge, net earnings, as adjusted, were $593.1 million, or $10.12 per diluted share. The adjusted earnings per diluted share of $11.81 in 2018, increased 16.7 percent versus the prior year, as adjusted.
At the beginning of fiscal 2018, Snap-on adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires changes be applied retrospectively; as such, certain prior year amounts have been adjusted to reflect this adoption and conform to the 2018 presentation.
“We’re encouraged by the strengthening of our product lines and by our unique position with customers, serving as the underpinning of our overall earnings growth,” says Nick Pinchuk, Snap-on chairman and chief executive officer. “Despite near-term challenges in a variety of environments, we continue to see clear progress on a number of our runways for growth and improvement including: the Commercial & Industrial Group extending its penetration of critical industries; the building of our activity in emerging markets like India; and the continuing recovery in our U.S. van channel. We believe Snap-on’s value proposition of making work easier for serious professionals remains strong and effective in vehicle repair and our other end markets, and we believe we have abundant opportunity to further strengthen our position along our runways for growth and to engage our runways for improvement, the Snap-on Value Creation Processes, continuing our positive trajectory as we move through 2019 and beyond. Finally, our progress would not have been possible without the capability and commitment of our franchisees and associates, and I thank them for their contributions and for their dedication.”