Snap-on Updates Third-Quarter Earnings Outlook
Business Editors
KENOSHA, Wis.--(BUSINESS WIRE)--Sept. 9, 2002--
Takes actions to bolster performance in light of continued soft economy
Continues course to drive Operational Fitness and Profitable Growth
Snap-on Incorporated (NYSE: SNA), a global leader in tools,
diagnostics and equipment, today announced that it expects net
earnings to be in a range of $0.32 to $0.35 per share for the third
quarter ending September 28, 2002.
-- Economic weakness, beyond what was anticipated, resulted in
lower-than-expected sales and higher bad debts in July and
August. The expected third-quarter economic recovery is not
materializing in North America or Europe, and planned benefits
from such a recovery are now likely deferred until 2003.
-- As a result of the reduced demand, Snap-on is experiencing
lower manufacturing efficiencies and is incurring increased
expenses to align production with the reduced demand. In
addition, Snap-on continues to implement its performance
improvement initiatives and is taking steps to further control
discretionary costs.
-- Snap-on is continuing to invest in its strategic initiatives,
including innovative new products, supply chain improvements
and its "More Feet on the Street" dealer expansion program.
The combined near-term effect of these circumstances, exacerbated by
the third-quarter seasonal sales decline, is compressing margins in
the third quarter and is having a greater than expected impact on
earnings for the period.
"Our improvement efforts, notwithstanding unexpected challenges, are
reinvigorating our company," said Dale F. Elliott, chairman and chief
executive officer. "Cash flow is solid, our balance sheet is sound,
and we are doing the right things to create shareholder value over
time. We are concentrating on what we can control in a difficult
economic environment, while continuing to fund the strategic
initiatives that will support Snap-on's leadership. The implementation
of the Driven to Deliver(TM) business process will lead to a more
flexible and responsive organization, and a more profitable company in
the future."
Snap-on is driving future performance enhancements
Actions have been taken where economic weakness has slowed product demand.
Production is being aligned to current marketplace realities, and will be
adjusted as necessary for the remainder of the year.
Progress is being achieved in improving working investment turns.
This, along with continued tight control on capital expenditures, is
contributing to the solid cash flow. Near term, however, slower sales
coupled with efforts to reduce inventory are leading to temporary
margin pressure through lower manufacturing cost absorption and
unfavorable product mix.
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Additionally, in light of the continued uncertain economy, Snap-on is
tightening its receivables management and strengthening its reserve
positions.
Building on the success of its "More Feet on the Street" dealer
expansion program, Snap-on is extending lean business practices,
including a focus on working capital management, to its dealers.
Improved dealer inventory turns and receivables management are
contributing to the lower-than-planned sales volume and higher costs
for the company.
"Supporting the focus on lower working capital intensity and our
long-standing attention to customer service is the drive to install
lean business principles throughout the corporation," said Elliott.
"This is not a quick journey, and will not be turned off when economic
setbacks occur. The process, while just beginning, is expected to
substantially increase customer value and improve return on assets
over time. Employees throughout the company are being engaged in this
continuous improvement drive, focused on administrative, manufacturing
and supply chain processes worldwide."
Snap-on is maintaining focus on successfully completing its previously
announced restructuring initiatives. As planned, these actions are expected to
be completed by the end of 2002. The company currently anticipates the estimated
$40 million in savings this year will be more than offset by the impact of
lower-than-expected sales volumes, unexpected costs and higher spending to
support innovative new products and other strategic initiatives for profitable
growth.
Outlook
In view of the continued difficult economic environment, especially in
the industrial marketplace, Snap-on management believes the prudent
course is to maintain a cautious approach regarding the expected
recovery and its potential benefits.
For the fourth-quarter 2002, Snap-on expects earnings to be in a range
of $0.53 to $0.58 per share, reflecting the delayed economic recovery.
This forecast is based upon a typical seasonal increase, new products,
continued dealer expansion, reduced discretionary spending and cost
savings from previous restructuring activities.
In the third quarter of 2001, Snap-on earned $0.6 million, or $0.01
per share, on $508.1 million in net sales. Before special charges of
$23.3 million, or $0.40 per share, third-quarter earnings were $23.9
million or $0.41 per share.
In the fourth quarter of 2001, Snap-on had a loss of $17.4 million, or
$0.30 per share, on $534.6 million in net sales. Before special
charges of $47.5 million, or $0.82 per share, fourth-quarter earnings
were $30.1 million or $0.52 per share.
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A discussion of this announcement will be webcast at 9:30 a.m. CDT
today, and a replay will be available for approximately 10 days
following the call. To access the audio presentation, go to
www.snapon.com, click on the Investor Information tab at the top of
the page and then on Presentations in the menu to the left. There you
will see the link to the call. Additional detail about Snap-on is also
available on the Snap-on Web site.
Snap-on Incorporated is a leading global innovator, manufacturer and
marketer of tool, diagnostic and equipment solutions for professional
tool users. Product lines include hand and power tools, diagnostics
and shop equipment, tool storage, diagnostics software and other
solutions for vehicle-service, industrial, government and agricultural
customers, and commercial applications, including construction and
electrical. Products are sold through its franchised dealer van,
company-direct sales and distributor channels, as well as over the
Internet. Founded in 1920, Snap-on is a $2+ billion, S&P 500 company
headquartered in Kenosha, Wisconsin, and employs approximately 13,500
people worldwide.
Statements in this news release that are not historical facts,
including statements (i) that include the words "expects," "targets,"
"believes," or "anticipates" or similar words that reference Snap-on
or its management; (ii) specifically identified as forward-looking; or
(iii) describing Snap-on's or management's future outlook, plans,
objectives or goals, are forward-looking statements. Snap-on or its
representatives may also make similar forward-looking statements from
time to time orally or in writing. Snap-on cautions the reader that
these statements are subject to risks, uncertainties or other factors
that could cause (and in some cases have caused) actual results to
differ materially from those described in any such statement. Those
important factors include the validity of the assumptions set forth
above and the timing and progress with which Snap-on can continue to
achieve further cost reductions and achieve savings from its
restructuring initiatives; Snap-on's capability to retain and attract
dealers, and implement new programs; the success of new products, and
Snap-on's ability to withstand external negative factors including
terrorist disruptions on business; consequences of the change in
public accounting firms or a change in regulatory reporting
requirements; changes in trade, monetary and fiscal policies, laws and
regulations, or other activities of governments or their agencies; and
the absence of significant changes in the current competitive
environment, inflation, energy supply or pricing, legal proceedings,
supplier disruptions, currency fluctuations or the material worsening
of economic and political situations around the world.
These factors may not constitute all factors that could cause actual
results to differ materially from those discussed in any
forward-looking statement. Snap-on operates in a continually changing
business environment and new factors emerge from time to time. Snap-on
cannot predict such factors nor can it assess the impact, if any, of
such factors on Snap-on's financial position or its results of
operations. Accordingly, forward-looking statements should not be
relied upon as a prediction of actual results. Snap-on disclaims any
responsibility to update any forward-looking statement provided in
this news release.
For additional information, visit www.snapon.com
--30--bpm/cgo*
CONTACT: Snap-on Incorporated
Richard Secor (MR), 262/656-5561
or
William Pfund (IR), 262/656-6488
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