Friday, July 31, 2009

Snap-on Announces 2nd Qtr 2009 Results


Snap-on Announces Second Quarter 2009 Results, July 31, 2009, as reported by aftermarketNews staff.





Company says investment in strategic growth opportunities continues.

KENOSHA, Wis. -- Snap-on has announced operating results for the second quarter of 2009.
  • Sales of $590 million were up 3 percent sequentially from first quarter levels, but down 23 percent compared to last year. Without the effects of currency, sales were up 0.8 percent sequentially, but down 16.4 percent year over year.
  • Operating earnings of $70.3 million increased $6 million, or 9.3 percent, over first quarter 2009 on essentially flat sales levels as improved operating performance and higher financial services income were partially offset by $6.6 million of higher restructuring costs. As a percentage of revenues, operating earnings improved to 11.4 percent from 10.9 percent in the first quarter. Restructuring costs in the second quarter of $8.6 million reduced the operating margin by approximately 140 basis points. Operating earnings in the second quarter of 2008 were $111.7 million on significantly higher sales volumes.
  • Cash flow from operations of $155.6 million increased significantly from $14.7 million in the first quarter of 2009 and $80.5 million in the second quarter of 2008 primarily due to working capital improvements principally as a result of increased emphasis on inventory reduction.
  • Net earnings attributable to Snap-on of $37.4 million, or 65 cents per diluted share, increased $2.6 million, or 5 cents per diluted share, over first quarter 2009 levels. Net earnings attributable to Snap-on in the second quarter of 2008 were $66.9 million, or $1.15 per diluted share.
“There were a number of encouraging signs in the second quarter, particularly the sequential improvements for our Snap-on Tools and Diagnostics & Information businesses,” said Nick Pinchuk, Snap-on chairman, president and CEO. “The deepening of the recession across most European economies and the spreading of economic weakness to other industries had a more severe impact on us in the second quarter, particularly for the Commercial & Industrial Group. Nevertheless, sales and operating income for the overall corporation did improve sequentially from the first quarter. “As we said previously, we continue to drive cost-reduction initiatives, and in the second quarter took a number of actions resulting in $8.6 million of restructuring costs, with $6.7 million related to the Commercial & Industrial Group. In addition, we continue our investment in the selected strategic growth areas that we believe will be decisive in our future. As a result, we believe Snap-on is making significant quarter-by-quarter strategic progress and will emerge from this downturn in a stronger position. Going forward, we will continue to aggressively manage the balance between investing in growth opportunities and acting on rapid continuous improvement and our other value creation initiatives. In the near term, Snap-on anticipates no significant change in the economic climate. Snap-on is continuously responding to the global macroeconomic challenges by furthering its RCI and cost reduction initiatives.
In the first six months of 2009, Snap-on incurred $10.6 million of restructuring costs, including $8.6 million in the second quarter, and presently anticipates that full-year 2009 restructuring costs will be in a range of $20 million to $24 million, up from the previously communicated range of $14 million to $18 million.
Snap-on is also proceeding with several of its planned growth investments, including further expansion of its manufacturing capacity in China and in Eastern Europe, both of which are proceeding on schedule. Snap-on continues to expect that full-year capital expenditures will be in a range of $60 million to $70 million. On July 16, Snap-on terminated the financial services operating agreement that it had with The CIT Group, relating to the parties’ Snap-on Credit LLC (SOC) joint venture. Previously, the company recorded gains on contracts sold to CIT as financial services revenue. The company presently expects that operating income from financial services, which is before interest expense and which totaled $16.6 million in the second quarter of 2009, will be a loss in a range of $8 million to $10 million in each of the third and fourth quarters of 2009. Snap-on estimates that its incremental financing needs for SOC will approximate $450 million over the next 12 months. Snap-on believes that it has sufficient available cash on hand, cash flow from operating activities and available credit facilities, including access to public debt markets, to fund the financing needs of SOC.
Snap-on continues to expect approximately $3 million per quarter of higher year-over-year pension expense in 2009 due to declines in pension asset values. For the first six months of 2009, foreign currency effects reduced year-over-year operating earnings by $21.3 million, of which $10.3 million occurred in the second quarter. As a result of the above, Snap-on continues to expect that third quarter sales and earnings will be down year over year.
Snap-on is aggressively managing the balance between investing and capturing strategic growth opportunities with the need for cost-reduction actions beyond those already implemented; the current economic uncertainty makes it extremely difficult to presently predict this balance as the company continually adjusts to the challenging business environment.
These are just the highlights. You can read the entire article at www.aftermarketnews.com

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