Snap-on Announces Third Quarter 2019 Results

Published

Q3 2019 diluted EPS of $2.96, up 3.9% from Q3 2018, and up 2.8% from Q3 2018 adjusted diluted EPS; Reported net sales of $901.8 million up 0.4%; Organic net sales up 1.4%

KENOSHA, Wis.--(BUSINESS WIRE)-- 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 2019.

  • Net sales of $901.8 million increased $3.7 million, or 0.4%, from 2018 levels, reflecting a $12.5 million, or 1.4%, organic sales increase and $2.9 million of acquisition-related sales, partially offset by $11.7 million of unfavorable foreign currency translation.
  • Operating earnings before financial services for the quarter of $167.7 million, or 18.6% of sales, including $4.4 million of unfavorable foreign currency effects, compared to $173.1 million, or 19.3% of sales, in 2018.
  • Financial services revenue of $84.1 million in the third quarter of 2019 increased $2.1 million from 2018 levels; financial services operating earnings of $61.0 million increased $1.7 million from $59.3 million last year.
  • Consolidated operating earnings for the quarter of $228.7 million, including $4.7 million of unfavorable currency effects, compared to $232.4 million last year. As a percentage of revenues (net sales plus financial services revenue), consolidated operating earnings were 23.2% and 23.7% in the third quarters of 2019 and 2018, respectively.
  • The effective income tax rate of 23.5% in the quarter compared to 24.0% last year. In 2018, the effective income tax rate included a charge of 90 basis points, or $1.8 million, related to the implementation of U.S. tax legislation (the “tax charge”). Excluding the tax charge, the 2018 effective tax rate, as adjusted, was 23.1%.
  • Net earnings of $164.6 million, or $2.96 per diluted share, compared to $163.2 million, or $2.85 per diluted share, a year ago. Excluding the above-mentioned tax charge, net earnings, as adjusted, were $165.0 million in 2018, or $2.88 per diluted share.

See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales and measures, as adjusted, excluding the tax charge.

“Our third quarter results were encouraging, demonstrating overall organic growth and clear and positive progress with customers across our U.S. operations. Despite ongoing headwinds related to challenged geographies and to unfavorable currency, we believe the overall macro-environment for vehicle repair and critical industries generally remains favorable and affords ongoing opportunities,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Through our Snap-on Value Creation Processes, the quarter saw continued strengthening of our product lines, matching the increasing complexity of workplace tasks and reinforcing our commitment to making work easier for serious professionals. Along those lines, Snap-on again was honored to receive product awards from both MOTOR Magazine and the Professional Tools & Equipment News. We believe this recognition confirms Snap-on’s success in connecting with customers and translating that insight into decisive innovations. Finally, our results are only possible with the significant effort and contributions from our franchisees and associates, and I thank them for their capability and their dedication.

Segment Results

Commercial & Industrial Group segment sales of $335.3 million in the quarter increased $5.1 million, or 1.5%, from 2018 levels, reflecting a $9.5 million, or 2.9%, organic sales gain and $1.1 million of acquisition-related sales, partially offset by $5.5 million of unfavorable foreign currency translation. The organic sales increase includes higher sales in the segment’s specialty tools and European-based hand tools businesses, as well as increases with customers in critical industries.

Operating earnings of $48.3 million in the period, including $0.7 million of unfavorable foreign currency effects, compared to $53.0 million in 2018, while the operating margin (operating earnings as a percentage of segment sales) of 14.4% compared to 16.1% a year ago.

Snap-on Tools Group segment sales of $385.2 million in the quarter decreased $4.6 million, or 1.2%, from 2018 levels, reflecting a $1.3 million, or 0.3%, organic sales decline and $3.3 million of unfavorable foreign currency translation. The organic sales decrease includes lower sales in the segment’s international operations, partially offset by higher sales in the United States.

Operating earnings of $53.0 million in the period, including $2.7 million of unfavorable foreign currency effects, decreased $6.3 million from 2018 levels, and the operating margin of 13.8% compared to 15.2% last year.

Repair Systems & Information Group segment sales of $322.7 million in the quarter increased $8.3 million, or 2.6%, from 2018 levels, reflecting a $10.1 million, or 3.2%, organic sales gain and $1.8 million of acquisition-related sales, partially offset by $3.6 million of unfavorable foreign currency translation. The organic sales increase includes higher sales to OEM dealerships and increased sales of diagnostics and repair information products to independent repair shop owners and managers, partially offset by lower sales of undercar equipment.

Operating earnings of $83.3 million in the period, including $1.0 million of unfavorable foreign currency effects, increased $2.6 million from 2018 levels, and the operating margin of 25.8% compared to 25.7% a year ago.

Financial Services operating earnings of $61.0 million on revenue of $84.1 million in the quarter compared to operating earnings of $59.3 million on revenue of $82.0 million a year ago. Originations of $253.5 million in the third quarter decreased $13.5 million, or 5.1%, from 2018 levels.

Corporate expenses of $16.9 million in the quarter compared to $19.9 million last year.

Outlook

Snap-on expects to make continued progress through the remainder of 2019 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 in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2019 will be in a range of $95 million to $105 million, of which $77.8 million was incurred in the first nine months of the year.

Snap-on currently anticipates that its full year 2019 effective income tax rate will be comparable to its full year 2018 effective tax rate of 24.0%.

Conference Call and Webcast on October 17, 2019, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, October 17, 2019, 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 https://www.snapon.com/EN/Investors/Investor-Events and click on the link to the call. 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 at https://www.snapon.com/EN/Investors/Financial-Information/Quarterly-Earnings.

Non-GAAP Measures

References in this document to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. The company’s organic sales disclosures also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in our businesses and facilitates comparisons of our sales performance with prior periods.

For the nine months ended September 28, 2019, the company is including operating earnings before financial services, consolidated operating earnings, net earnings, diluted earnings per share and its effective tax rate, all as adjusted to exclude the impact of an $11.6 million benefit ($8.7 million after tax) from a legal settlement that occurred in the three months ended March 30, 2019.

For the three and nine months ended September 29, 2018, the company is including net earnings, diluted earnings per share and its effective tax rate, all as adjusted, to exclude the impact of $1.8 million and $3.9 million of charges, respectively, related to the implementation of U.S. tax legislation. In addition, for the nine months ended September 29, 2018, the company is including net earnings and diluted earnings per share, both as adjusted to exclude a net gain of $5.5 million ($4.1 million after tax) associated with a treasury lock settlement gain of $13.3 million related to the issuance of debt, partially offset by a $7.8 million expense related to the early extinguishment of debt.

Management believes that these are unusual events and therefore the non-GAAP financial measures adjusted to exclude them provide more meaningful year-over-year comparisons of the company’s 2019 operating performance. For a reconciliation of the adjusted metrics, see “Reconciliation of Non-GAAP Financial Measures” below.

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 and support its franchise business. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.7 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 December 29, 2018, 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
September 28, September 29, September 28, September 29,

2019

 

2018

 

2019

 

2018

 
Net sales

$

901.8

 

$

898.1

 

$

2,774.8

 

$

2,788.2

 

Cost of goods sold

 

(453.7

)

 

(444.2

)

 

(1,381.3

)

 

(1,375.6

)

Gross profit

 

448.1

 

 

453.9

 

 

1,393.5

 

 

1,412.6

 

Operating expenses

 

(280.4

)

 

(280.8

)

 

(848.5

)

 

(868.7

)

Operating earnings before financial services

 

167.7

 

 

173.1

 

 

545.0

 

 

543.9

 

 
Financial services revenue

 

84.1

 

 

82.0

 

 

253.8

 

 

247.0

 

Financial services expenses

 

(23.1

)

 

(22.7

)

 

(70.1

)

 

(73.0

)

Operating earnings from financial services

 

61.0

 

 

59.3

 

 

183.7

 

 

174.0

 

 
Operating earnings

 

228.7

 

 

232.4

 

 

728.7

 

 

717.9

 

Interest expense

 

(12.0

)

 

(12.4

)

 

(36.9

)

 

(38.0

)

Other income (expense) – net

 

2.8

 

 

(1.0

)

 

6.4

 

 

1.2

 

Earnings before income taxes and equity earnings

 

219.5

 

 

219.0

 

 

698.2

 

 

681.1

 

Income tax expense

 

(50.4

)

 

(51.5

)

 

(162.9

)

 

(164.9

)

Earnings before equity earnings

 

169.1

 

 

167.5

 

 

535.3

 

 

516.2

 

Equity earnings (loss), net of tax

 

0.1

 

 

(0.1

)

 

0.9

 

 

0.7

 

Net earnings

 

169.2

 

 

167.4

 

 

536.2

 

 

516.9

 

Net earnings attributable to noncontrolling interests

 

(4.6

)

 

(4.2

)

 

(13.3

)

 

(12.0

)

Net earnings attributable to Snap-on Inc.

$

164.6

 

$

163.2

 

$

522.9

 

$

504.9

 

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

$

2.99

 

$

2.90

 

$

9.47

 

$

8.95

 

Diluted

 

2.96

 

 

2.85

 

 

9.34

 

 

8.78

 

 
Weighted-average shares outstanding:
Basic

 

55.0

 

 

56.3

 

 

55.2

 

 

56.4

 

Effect of dilutive securities

 

0.7

 

 

1.0

 

 

0.8

 

 

1.1

 

Diluted

 

55.7

 

 

57.3

 

 

56.0

 

 

57.5

 

SNAP-ON INCORPORATED
Supplemental Segment Information
(Amounts in millions)
(unaudited)
 
 
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,

2019

 

2018

 

 

2019

 

2018

 
Net sales:
Commercial & Industrial Group

$

335.3

 

$

330.2

 

$

992.8

 

$

999.6

 

Snap-on Tools Group

 

385.2

 

 

389.8

 

 

1,201.2

 

 

1,206.4

 

Repair Systems & Information Group

 

322.7

 

 

314.4

 

 

999.5

 

 

994.5

 

Segment net sales

 

1,043.2

 

 

1,034.4

 

 

3,193.5

 

 

3,200.5

 

Intersegment eliminations

 

(141.4

)

 

(136.3

)

 

(418.7

)

 

(412.3

)

Total net sales

$

901.8

 

$

898.1

 

$

2,774.8

 

$

2,788.2

 

Financial Services revenue

 

84.1

 

 

82.0

 

 

253.8

 

 

247.0

 

Total revenues

$

985.9

 

$

980.1

 

$

3,028.6

 

$

3,035.2

 

 
Operating earnings:
Commercial & Industrial Group

$

48.3

 

$

53.0

 

$

143.7

 

$

148.5

 

Snap-on Tools Group

 

53.0

 

 

59.3

 

 

191.5

 

 

207.2

 

Repair Systems & Information Group

 

83.3

 

 

80.7

 

 

255.5

 

 

255.2

 

Financial Services

 

61.0

 

 

59.3

 

 

183.7

 

 

174.0

 

Segment operating earnings

 

245.6

 

 

252.3

 

 

774.4

 

 

784.9

 

Corporate

 

(16.9

)

 

(19.9

)

 

(45.7

)

 

(67.0

)

Operating earnings

$

228.7

 

$

232.4

 

$

728.7

 

$

717.9

 

Interest expense

 

(12.0

)

 

(12.4

)

 

(36.9

)

 

(38.0

)

Other income (expense) – net

 

2.8

 

 

(1.0

)

 

6.4

 

 

1.2

 

Earnings before income taxes
and equity earnings

$

219.5

 

$

219.0

 

$

698.2

 

$

681.1

 

SNAP-ON INCORPORATED
Condensed Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
 
 
September 28, December 29,

2019

 

 

 

2018

 
Assets
Cash and cash equivalents

$

167.5

 

$

140.9

 

Trade and other accounts receivable – net

 

684.8

 

 

692.6

 

Finance receivables – net

 

533.5

 

 

518.5

 

Contract receivables – net

 

102.7

 

 

98.3

 

Inventories – net

 

753.5

 

 

673.8

 

Prepaid expenses and other assets

 

105.9

 

 

92.8

 

Total current assets

 

2,347.9

 

 

2,216.9

 

 
Property and equipment – net

 

511.8

 

 

495.1

 

Operating lease right-of-use assets

 

52.4

 

 

-

 

Deferred income tax assets

 

54.4

 

 

64.7

 

Long-term finance receivables – net

 

1,084.7

 

 

1,074.4

 

Long-term contract receivables – net

 

348.6

 

 

344.9

 

Goodwill

 

920.1

 

 

902.2

 

Other intangibles – net

 

225.2

 

 

232.9

 

Other assets

 

51.3

 

 

42.0

 

Total assets

$

5,596.4

 

$

5,373.1

 

 
Liabilities and Equity
Notes payable

$

232.3

 

$

186.3

 

Accounts payable

 

205.8

 

 

201.1

 

Accrued benefits

 

46.8

 

 

52.0

 

Accrued compensation

 

66.1

 

 

71.5

 

Franchisee deposits

 

76.8

 

 

67.5

 

Other accrued liabilities

 

362.3

 

 

373.6

 

Total current liabilities

 

990.1

 

 

952.0

 

 
Long-term debt

 

947.5

 

 

946.0

 

Deferred income tax liabilities

 

45.8

 

 

41.4

 

Retiree health care benefits

 

29.9

 

 

31.8

 

Pension liabilities

 

115.3

 

 

171.3

 

Operating lease liabilities

 

34.3

 

 

-

 

Other long-term liabilities

 

108.3

 

 

112.0

 

Total liabilities

 

2,271.2

 

 

2,254.5

 

 
Equity
Shareholders' equity attributable to Snap-on Inc.
Common stock

 

67.4

 

 

67.4

 

Additional paid-in capital

 

374.5

 

 

359.4

 

Retained earnings

 

4,668.3

 

 

4,257.6

 

Accumulated other comprehensive loss

 

(543.9

)

 

(462.2

)

Treasury stock at cost

 

(1,262.5

)

 

(1,123.4

)

Total shareholders' equity attributable to Snap-on Inc.

 

3,303.8

 

 

3,098.8

 

Noncontrolling interests

 

21.4

 

 

19.8

 

Total equity

 

3,325.2

 

 

3,118.6

 

Total liabilities and equity

$

5,596.4

 

$

5,373.1

 

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
 
Three Months Ended
September 28, September 29,

2019

 

2018

Operating activities:
Net earnings

$

169.2

 

$

167.4

 

Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation

 

17.4

 

 

17.0

 

Amortization of other intangibles

 

5.5

 

 

6.2

 

Provision for losses on finance receivables

 

11.4

 

 

12.1

 

Provision for losses on non-finance receivables

 

5.7

 

 

3.9

 

Stock-based compensation expense

 

4.6

 

 

8.0

 

Deferred income tax benefit

 

(1.7

)

 

(2.8

)

Loss on sales of assets

 

0.2

 

 

0.6

 

Changes in operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable

 

(12.3

)

 

(17.4

)

Increase in contract receivables

 

(15.9

)

 

(23.4

)

Increase in inventories

 

(44.5

)

 

(24.8

)

(Increase) decrease in prepaid and other assets

 

10.0

 

 

(7.5

)

Decrease in accounts payable

 

(7.4

)

 

(0.2

)

Decrease in accruals and other liabilities

 

(11.1

)

 

(9.3

)

Net cash provided by operating activities

 

131.1

 

 

129.8

 

 
Investing activities:
Additions to finance receivables

 

(197.0

)

 

(206.8

)

Collections of finance receivables

 

181.6

 

 

184.1

 

Capital expenditures

 

(29.6

)

 

(29.9

)

Acquisitions of businesses, net of cash acquired

 

(29.6

)

 

-

 

Disposals of property and equipment

 

(0.1

)

 

(0.2

)

Other

 

(2.1

)

 

4.2

 

Net cash used by investing activities

 

(76.8

)

 

(48.6

)

 
Financing activities:
Net increase in other short-term borrowings

 

65.1

 

 

38.1

 

Cash dividends paid

 

(52.3

)

 

(46.1

)

Purchases of treasury stock

 

(59.7

)

 

(85.7

)

Proceeds from stock purchase and option plans

 

1.6

 

 

25.8

 

Other

 

(4.2

)

 

(3.4

)

Net cash used by financing activities

 

(49.5

)

 

(71.3

)

 
Effect of exchange rate changes on cash and cash equivalents

 

(1.3

)

 

-

 

Increase in cash and cash equivalents

 

3.5

 

 

9.9

 

 
Cash and cash equivalents at beginning of period

 

164.0

 

 

112.3

 

Cash and cash equivalents at end of period

$

167.5

 

$

122.2

 

 
Supplemental cash flow disclosures:
Cash paid for interest

$

(21.4

)

$

(21.9

)

Net cash paid for income taxes

 

(48.3

)

 

(50.7

)

SNAP-ON INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
 
Nine Months Ended
September 28, September 29,

2019

 

2018

Operating activities:
Net earnings

$

536.2

 

$

516.9

 

Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation

 

52.2

 

 

52.0

 

Amortization of other intangibles

 

16.3

 

 

19.2

 

Provision for losses on finance receivables

 

35.8

 

 

41.5

 

Provision for losses on non-finance receivables

 

14.4

 

 

9.4

 

Stock-based compensation expense

 

18.7

 

 

22.6

 

Deferred income tax provision (benefit)

 

10.7

 

 

(6.9

)

Loss on sales of assets

 

0.8

 

 

0.7

 

Loss on early extinguishment of debt

 

-

 

 

7.8

 

Changes in operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable

 

(8.4

)

 

(26.5

)

Increase in contract receivables

 

(12.9

)

 

(27.9

)

Increase in inventories

 

(97.3

)

 

(49.3

)

Increase in prepaid and other assets

 

(17.0

)

 

(1.1

)

Increase in accounts payable

 

9.2

 

 

25.2

 

Decrease in accruals and other liabilities

 

(80.8

)

 

(35.0

)

Net cash provided by operating activities

 

477.9

 

 

548.6

 

 
Investing activities:
Additions to finance receivables

 

(628.1

)

 

(643.5

)

Collections of finance receivables

 

565.1

 

 

564.0

 

Capital expenditures

 

(77.8

)

 

(68.5

)

Acquisitions of businesses, net of cash acquired

 

(38.9

)

 

(3.0

)

Disposals of property and equipment

 

0.3

 

 

0.3

 

Other

 

(1.3

)

 

1.3

 

Net cash used by investing activities

 

(180.7

)

 

(149.4

)

 
Financing activities:
Proceeds from issuance of long-term debt

 

-

 

 

395.4

 

Repayments of long-term debt

 

-

 

 

(457.8

)

Repayment of notes payable

 

-

 

 

(16.8

)

Net increase in other short-term borrowings

 

46.9

 

 

0.9

 

Cash dividends paid

 

(157.6

)

 

(138.9

)

Purchases of treasury stock

 

(167.2

)

 

(184.4

)

Proceeds from stock purchase and option plans

 

26.2

 

 

54.1

 

Other

 

(18.5

)

 

(19.6

)

Net cash used by financing activities

 

(270.2

)

 

(367.1

)

 
Effect of exchange rate changes on cash and cash equivalents

 

(0.4

)

 

(1.9

)

Increase in cash and cash equivalents

 

26.6

 

 

30.2

 

 
Cash and cash equivalents at beginning of year

 

140.9

 

 

92.0

 

Cash and cash equivalents at end of period

$

167.5

 

$

122.2

 

 
Supplemental cash flow disclosures:
Cash paid for interest

$

(44.8

)

$

(49.7

)

Net cash paid for income taxes

 

(140.5

)

 

(148.1

)

Non-GAAP Supplemental Data

The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on Incorporated's ("Snap-on") non-financial services ("Operations") and "Financial Services" businesses.

 

The supplemental Operations data reflects the results of operations and financial position of Snap-on's tools, diagnostic and equipment products, software and other non-financial services operations with Financial Services on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on's U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses were eliminated to arrive at the Condensed Consolidated Financial Statements.
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
 
 
Operations* Financial Services
Three Months Ended Three Months Ended
September 28, September 29, September 28, September 29,

2019

 

2018

 

2019

 

2018

 
Net sales

$

901.8

 

$

898.1

 

$

-

 

$

-

 

Cost of goods sold

 

(453.7

)

 

(444.2

)

 

-

 

 

-

 

Gross profit

 

448.1

 

 

453.9

 

 

-

 

 

-

 

Operating expenses

 

(280.4

)

 

(280.8

)

 

-

 

 

-

 

Operating earnings before financial services

 

167.7

 

 

173.1

 

 

-

 

 

-

 

 
Financial services revenue

 

-

 

 

-

 

 

84.1

 

 

82.0

 

Financial services expenses

 

-

 

 

-

 

 

(23.1

)

 

(22.7

)

Operating earnings from financial services

 

-

 

 

-

 

 

61.0

 

 

59.3

 

 
Operating earnings

 

167.7

 

 

173.1

 

 

61.0

 

 

59.3

 

Interest expense

 

(11.9

)

 

(12.3

)

 

(0.1

)

 

(0.1

)

Intersegment interest income (expense) – net

 

17.3

 

 

16.8

 

 

(17.3

)

 

(16.8

)

Other income (expense) – net

 

2.9

 

 

(1.0

)

 

(0.1

)

 

-

 

Earnings before income taxes and equity earnings

 

176.0

 

 

176.6

 

 

43.5

 

 

42.4

 

Income tax expense

 

(39.2

)

 

(40.7

)

 

(11.2

)

 

(10.8

)

Earnings before equity earnings

 

136.8

 

 

135.9

 

 

32.3

 

 

31.6

 

Financial services – net earnings
attributable to Snap-on

 

32.3

 

 

31.6

 

 

-

 

 

-

 

Equity earnings (loss), net of tax

 

0.1

 

 

(0.1

)

 

-

 

 

-

 

Net earnings

 

169.2

 

 

167.4

 

 

32.3

 

 

31.6

 

Net earnings attributable to noncontrolling interests

 

(4.6

)

 

(4.2

)

 

-

 

 

-

 

Net earnings attributable to Snap-on

$

164.6

 

$

163.2

 

$

32.3

 

$

31.6

 

 
* Snap-on with Financial Services on the equity method.
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Statements of Earnings
(Amounts in millions)
(unaudited)
 
 
Operations* Financial Services
Nine Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,

2019

 

2018

 

2019

 

2018

 
Net sales

$

2,774.8

 

$

2,788.2

 

$

-

 

$

-

 

Cost of goods sold

 

(1,381.3

)

 

(1,375.6

)

 

-

 

 

-

 

Gross profit

 

1,393.5

 

 

1,412.6

 

 

-

 

 

-

 

Operating expenses

 

(848.5

)

 

(868.7

)

 

-

 

 

-

 

Operating earnings before financial services

 

545.0

 

 

543.9

 

 

-

 

 

-

 

 
Financial services revenue

 

-

 

 

-

 

 

253.8

 

 

247.0

 

Financial services expenses

 

-

 

 

-

 

 

(70.1

)

 

(73.0

)

Operating earnings from financial services

 

-

 

 

-

 

 

183.7

 

 

174.0

 

 
Operating earnings

 

545.0

 

 

543.9

 

 

183.7

 

 

174.0

 

Interest expense

 

(36.7

)

 

(37.7

)

 

(0.2

)

 

(0.3

)

Intersegment interest income (expense) – net

 

52.8

 

 

52.9

 

 

(52.8

)

 

(52.9

)

Other income (expense) – net

 

6.5

 

 

1.1

 

 

(0.1

)

 

0.1

 

Earnings before income taxes and equity earnings

 

567.6

 

 

560.2

 

 

130.6

 

 

120.9

 

Income tax expense

 

(129.1

)

 

(133.7

)

 

(33.8

)

 

(31.2

)

Earnings before equity earnings

 

438.5

 

 

426.5

 

 

96.8

 

 

89.7

 

Financial services – net earnings
attributable to Snap-on

 

96.8

 

 

89.7

 

 

-

 

 

-

 

Equity earnings, net of tax

 

0.9

 

 

0.7

 

 

-

 

 

-

 

Net earnings

 

536.2

 

 

516.9

 

 

96.8

 

 

89.7

 

Net earnings attributable to noncontrolling interests

 

(13.3

)

 

(12.0

)

 

-

 

 

-

 

Net earnings attributable to Snap-on

$

522.9

 

$

504.9

 

$

96.8

 

$

89.7

 

 
* Snap-on with Financial Services on the equity method.
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Balance Sheets
(Amounts in millions)
(unaudited)
 
 
Operations* Financial Services
September 28, December 29, September 28, December 29,

2019

 

2018

 

2019

 

2018

 
Assets
Cash and cash equivalents

$

167.3

$

140.5

$

0.2

$

0.4

Intersegment receivables

 

13.9

 

15.1

 

-

 

-

Trade and other accounts receivable – net

 

684.1

 

692.1

 

0.7

 

0.5

Finance receivables – net

 

-

 

-

 

533.5

 

518.5

Contract receivables – net

 

6.5

 

6.6

 

96.2

 

91.7

Inventories – net

 

753.5

 

673.8

 

-

 

-

Prepaid expenses and other assets

 

105.4

 

100.2

 

8.7

 

0.5

Total current assets

 

1,730.7

 

1,628.3

 

639.3

 

611.6

 
Property and equipment – net

 

510.1

 

493.5

 

1.7

 

1.6

Operating lease right-of-use assets

 

50.8

 

-

 

1.6

 

-

Investment in Financial Services

 

336.2

 

329.5

 

-

 

-

Deferred income tax assets

 

34.9

 

45.8

 

19.5

 

18.9

Intersegment long-term notes receivable

 

733.3

 

701.3

 

-

 

-

Long-term finance receivables – net

 

-

 

-

 

1,084.7

 

1,074.4

Long-term contract receivables – net

 

15.3

 

11.9

 

333.3

 

333.0

Goodwill

 

920.1

 

902.2

 

-

 

-

Other intangibles – net

 

225.2

 

232.9

 

-

 

-

Other assets

 

61.5

 

51.9

 

0.2

 

0.1

Total assets

$

4,618.1

$

4,397.3

$

2,080.3

$

2,039.6

 
Liabilities and Equity
Notes payable

$

232.3

$

186.3

$

-

$

-

Accounts payable

 

204.3

 

199.6

 

1.5

 

1.5

Intersegment payables

 

-

 

-

 

13.9

 

15.1

Accrued benefits

 

46.8

 

52.0

 

-

 

-

Accrued compensation

 

62.7

 

66.8

 

3.4

 

4.7

Franchisee deposits

 

76.8

 

67.5

 

-

 

-

Other accrued liabilities

 

342.4

 

355.4

 

28.1

 

26.1

Total current liabilities

 

965.3

 

927.6

 

46.9

 

47.4

 
Long-term debt and intersegment long-term debt

 

-

 

-

 

1,680.8

 

1,647.3

Deferred income tax liabilities

 

45.8

 

41.4

 

-

 

-

Retiree health care benefits

 

29.9

 

31.8

 

-

 

-

Pension liabilities

 

115.3

 

171.3

 

-

 

-

Operating lease liabilities

 

33.0

 

-

 

1.3

 

-

Other long-term liabilities

 

103.6

 

106.6

 

15.1

 

15.4

Total liabilities

 

1,292.9

 

1,278.7

 

1,744.1

 

1,710.1

 
Total shareholders' equity attributable to Snap-on

 

3,303.8

 

3,098.8

 

336.2

 

329.5

Noncontrolling interests

 

21.4

 

19.8

 

-

 

-

Total equity

 

3,325.2

 

3,118.6

 

336.2

 

329.5

Total liabilities and equity

$

4,618.1

$

4,397.3

$

2,080.3

$

2,039.6

 
* Snap-on with Financial Services on the equity method.
SNAP-ON INCORPORATED
Reconciliation of Non-GAAP Financial Measures
(Amounts in millions, except per share data)
(unaudited)
 
 
 
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,

2019

 

2018

 

2019

 

2018

AS REPORTED
 
Benefit related to the settlement of a litigation
matter ("legal settlement")
Pre-tax legal settlement

$

-

$

-

 

$

11.6

 

$

-

 

Income tax expense

 

-

 

-

 

 

(2.9

)

 

-

 

Legal settlement, after tax

$

-

$

-

 

$

8.7

 

$

-

 

 
Weighted-average shares outstanding - diluted

 

55.7

 

57.3

 

 

56.0

 

 

57.5

 

 
Diluted EPS - legal settlement

$

-

$

-

 

$

0.15

 

$

-

 

 
Debt-related items ("net debt items")
Gain on settlement of treasury lock (A)
Gain on settlement of treasury lock

$

-

$

-

 

$

-

 

$

13.3

 

Income tax expense

 

-

 

-

 

 

-

 

 

(3.3

)

Gain on settlement of treasury lock, after tax

$

-

$

-

 

$

-

 

$

10.0

 

 
Weighted-average shares outstanding - diluted

 

55.7

 

57.3

 

 

56.0

 

 

57.5

 

 
Diluted EPS - gain on settlement of treasury lock

$

-

$

-

 

$

-

 

$

0.17

 

 
Loss on early extinguishment of debt (B)
Loss on early extinguishment of debt

$

-

$

-

 

$

-

 

$

(7.8

)

Income tax benefit

 

-

 

-

 

 

-

 

 

1.9

 

Loss on early extinguishment of debt, after tax

$

-

$

-

 

$

-

 

$

(5.9

)

 
Weighted-average shares outstanding - diluted

 

55.7

 

57.3

 

 

56.0

 

 

57.5

 

 
Diluted EPS - loss on early extinguishment of debt

$

-

$

-

 

$

-

 

$

(0.10

)

 
Net debt items (A + B)
Net debt items

$

-

$

-

 

$

-

 

$

5.5

 

Income tax expense

 

-

 

-

 

 

-

 

 

(1.4

)

Net debt items, after tax

$

-

$

-

 

$

-

 

$

4.1

 

 
Weighted-average shares outstanding - diluted

 

55.7

 

57.3

 

 

56.0

 

 

57.5

 

 
Diluted EPS - net debt items

$

-

$

-

 

$

-

 

$

0.07

 

 
Adjustments related to implementation of tax
legislation ("tax charge")
Tax charge

$

-

$

(1.8

)

$

-

 

$

(3.9

)

 
Weighted-average shares outstanding - diluted

 

55.7

 

57.3

 

 

56.0

 

 

57.5

 

 
Diluted EPS - tax charge

$

-

$

(0.03

)

$

-

 

$

(0.07

)

 
SNAP-ON INCORPORATED
Reconciliation of Non-GAAP Financial Measures (continued)
(Amounts in millions, except per share data)
(unaudited)
 
 
 
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,

2019

 

2018

 

2019

 

2018

ADJUSTED INFORMATION - NON-GAAP
 

1

)

Operating earnings before financial services
As reported

$

167.7

 

$

173.1

 

$

545.0

 

$

543.9

 

Legal settlement

 

-

 

 

-

 

 

(11.6

)

 

-

 

As adjusted

$

167.7

 

$

173.1

 

$

533.4

 

$

543.9

 

 
Operating earnings before financial services
as a percentage of sales
As reported

 

18.6

%

 

19.3

%

 

19.6

%

 

19.5

%

As adjusted

 

18.6

%

 

19.3

%

 

19.2

%

 

19.5

%

 

2

)

Operating earnings
As reported

$

228.7

 

$

232.4

 

$

728.7

 

$

717.9

 

Legal settlement

 

-

 

 

-

 

 

(11.6

)

 

-

 

As adjusted

$

228.7

 

$

232.4

 

$

717.1

 

$

717.9

 

 
Operating earnings as a percentage of revenue
As reported

 

23.2

%

 

23.7

%

 

24.1

%

 

23.7

%

As adjusted

 

23.2

%

 

23.7

%

 

23.7

%

 

23.7

%

 

3

)

Net earnings attributable to Snap-on Incorporated
As reported

$

164.6

 

$

163.2

 

$

522.9

 

$

504.9

 

Legal settlement, after tax

 

-

 

 

-

 

 

(8.7

)

 

-

 

Net debt items, after tax

 

-

 

 

-

 

 

-

 

 

(4.1

)

Tax charge

 

-

 

 

1.8

 

 

-

 

 

3.9

 

As adjusted

$

164.6

 

$

165.0

 

$

514.2

 

$

504.7

 

 

4

)

Diluted EPS
As reported

$

2.96

 

$

2.85

 

$

9.34

 

$

8.78

 

Legal settlement, after tax

 

-

 

 

-

 

 

(0.15

)

 

-

 

Net debt items, after tax

 

-

 

 

-

 

 

-

 

 

(0.07

)

Tax charge

 

-

 

 

0.03

 

 

-

 

 

0.07

 

As adjusted

$

2.96

 

$

2.88

 

$

9.19

 

$

8.78

 

 

5

)

Effective tax rate
As reported

 

23.5

%

 

24.0

%

 

23.8

%

 

24.6

%

Tax charge

 

-

 

 

-0.9

%

 

-

 

 

-0.5

%

As adjusted

 

23.5

%

 

23.1

%

 

23.8

%

 

24.1

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191017005159/en/

Investors: Sara Verbsky 262/656-4869 Media: Samuel Bottum 262/656-5793

Source: Snap-on Incorporated

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