Highlights from Snap-on's 3rd Quarter Results

Here's the detail you won't find on the wire services:

Snap-on Announces Record Third Quarter 2008 Earnings
Diluted EPS of $0.94 increases 34.3% over $0.70 earned last year; Sales increase of 2.5%; Expects continued year-over-year earnings improvement for balance of 2008
Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, diagnostics, equipment, software and service solutions for professional users, today announced operating results for the third quarter of 2008.

"We are very encouraged by our third quarter results, especially given the current global economic challenges," said Nick Pinchuk, Snap-on's president and chief executive officer. "We continue to focus on fortifying our already strong business models, pursuing geographic and customer diversification, and driving our value creating processes, including innovation and rapid continuous improvement. These are the activities that have created the string of encouraging results over the last few years and we're confident they will serve us well going forward.
"The global economic challenges have made forecasting uncertain," said Pinchuk. "Snap-on, however, remains positive looking forward and believes that continued execution of our core strategies will support improved year-over-year earnings again in the fourth quarter. Finally, as we report these results, it's clear that the progress would not be possible without the dedication and support of our franchisees and associates. I thank them for their extraordinary contributions."

Highlights of Snap-on's third quarter 2008 operating results are as follows:

Net sales of $697.8 million increased $17.1 million, or 2.5%, over prior year, including $12.1 million from currency translation.
Gross profit improved to 44.7% of net sales in 2008 from 44.2% in 2007;
Operating expenses improved to 33.0% of net sales in 2008 from 34.4% in 2007.
Operating earnings of $86.4 million increased 19.3%, or $14.0 million, over prior year; currency translation contributed $0.3 million of the increase. As a percentage of revenues, operating earnings improved to 12.1% in 2008 from 10.4% in 2007. For the nine months ended September 27, 2008, operating earnings improved to 13.0% of revenues, as compared to 10.7% in the year-ago period.
Net earnings of $54.6 million increased 32.8% from $41.1 million in 2007; diluted earnings of $0.94 per share increased 34.3% from $0.70 per diluted share in 2007.
For the twelve month period ended September 2008, pretax return on invested capital was 22.0% as compared to 18.4% for the comparable 2007 period. Pretax return on invested capital is defined as earnings before interest and taxes divided by the quarter-end average of shareholders' equity and net debt.
Commercial & Industrial Group segment sales of $338.1 million were up $10.2 million, or 3.1%, from prior year.
Excluding $12.4 million of currency translation, sales declined $2.2 million year over year as continued growth in emerging markets, contributions from increased sales of power tools, higher sales of tools, kits and tool storage products to industrial customers, and continuing strong sales in our innovative, imaging aligner units were more than offset by lower sales of professional tools in Europe and by sales declines in other wheel service equipment worldwide.

Operating earnings of $40.7 million increased $8.0 million, or 24.5%, from prior year as contributions from higher pricing and savings from ongoing Rapid Continuous Improvement (RCI) initiatives were partially offset by the lower level of organic sales and commodity cost increases. As a percentage of sales, operating earnings in the quarter improved to 12.0%, as compared with 10.0% a year ago.

Snap-on Tools Group segment sales of $269.5 million increased $7.5 million, or 2.9%, from prior-year levels; currency translation contributed $0.4 million of the sales increase. Higher year-over-year sales in the company's international franchise operations were partially offset by a 0.3% decline in U.S. sales.

Operating earnings of $28.2 million were up $3.6 million from prior-year levels. Contributing to this increase were higher international sales, benefits from RCI initiatives and lower franchisee termination costs in the United States. These increases were partially offset by the impacts of a less favorable sales mix and $5.0 million of higher material and freight costs. As a percentage of sales, operating earnings in the quarter improved to 10.5%, as compared with 9.4% a year ago.
Diagnostics & Information Group segment sales of $155.1 million were up $3.1 million from prior-year levels primarily due to higher OEM program sales as a result of a new essential tool program in North America, increased sales of diagnostics products in Europe and higher sales of Mitchell1(TM) information products. These sales increases were partially offset by lower sales of diagnostics products in the United States and by lower sales at Snap-on Business Solutions, including expected lower sales from the planned exit of certain non-core product lines.
Operating earnings of $27.2 million were up $5.0 million from prior-year levels primarily due to benefits from RCI initiatives and contributions from the higher sales. As a percentage of sales, operating earnings in the quarter improved to 17.5%, as compared with 14.6% a year ago.
Financial Services operating income was $4.8 million on $18.0 million of revenue, as compared with $5.6 million of operating income on $15.8 million of revenue a year ago. Contributions from higher revenues in 2008, primarily as a result of lower market discount rates, were more than offset by higher year-over-year operating expenses, including $1.4 million of one-time, project-related costs.
Outlook
Snap-on intends to continue investing in its strategic growth initiatives aimed at expanding value provided to its traditional customers, penetrating new and adjacent segments, and extending its presence in the emerging markets of Asia/Pacific and Eastern Europe. Snap-on also expects to continue implementing its RCI and low-cost sourcing initiatives intended to provide higher levels of profitability.
Based on current expectations, Snap-on expects that its earnings for the balance of 2008 will continue to exceed 2007 levels. Additional detail about Snap-on is also available on the Snap-on Web site.

Overall, Snap-on has posted decent numbers for this tough U.S. economy. And it appears they plan to maintain current initiatives to continue their growth plans.