Exhibit 99
Snap-on Estimates Results of $1.34 - $1.35 EPS for Full-year 2003;
Anticipates EPS of $1.80 - $2.20 for Full-year 2004
KENOSHA, Wis.--(BUSINESS WIRE)--Jan. 21, 2004--
Reports strong cash flow from operating activities - exceeded
$175 million for 2003; Signs of recovery heading into 2004;
Expects to accelerate share repurchase activity
Snap-on Incorporated (NYSE:SNA), a global leader in tools,
diagnostics and equipment, today announced expected results for the
fourth quarter and fiscal full year ended January 3, 2004. Fiscal 2003
figures discussed herein are preliminary and unaudited. Snap-on
expects to announce final results on February 4, 2004.
-- Net earnings for the fourth quarter of 2003 are expected to be
in a range of $17 million to $18 million, or $0.29 to $0.30
per diluted share, on approximately $600 million in sales. For
the year-ago period, net earnings were $33.1 million, or $0.56
per diluted share, on $549.5 million of sales.
-- Earnings in the fourth quarter were adversely impacted by
higher costs from an accelerated implementation of continuous
improvement actions, lagging improvements in the company's
economically sensitive businesses, particularly its equipment
businesses, and certain other factors affecting the
comparisons, including higher pension expense. Snap-on's
worldwide equipment business reported a $6 million decline in
operating income year over year, related primarily to its
North American collision repair business.
-- Cash flow from operating activities is estimated to be $37
million in the 2003 fourth quarter, after a voluntary pension
contribution of $78 million. Free cash flow, comprising cash
flow from operating activities less capital expenditures of
$11 million, is anticipated to approximate $26 million, which
exceeds net earnings.
-- In light of Snap-on's success in improving asset utilization
and the continued strong cash flow generated from operating
activities, Snap-on expects to accelerate its planned 2004
full-year share repurchases, and repurchase approximately
750,000 to 1 million shares.
-- Snap-on expects increased profitability and growth in 2004.
Signs of improving business conditions in certain of the
company's end-markets began to appear late in the fourth
quarter of 2003. Additionally, the company expects that
actions taken during the past year will lead to stronger
operating margins going forward, resulting in expected
earnings of $1.80 to $2.20 per diluted share for full-year
2004.
-- Net earnings for full-year 2003 are expected to be in a range
of $78 million to $79 million, or $1.34 to $1.35 per diluted
share, on approximately $2.23 billion in sales. For the
year-ago period, net earnings were $106.0 million, or $1.81
per diluted share, on $2.11 billion of sales. It is
anticipated that approximately $112 million of the
year-over-year sales increase will result from currency
translation. Cash flow from operating activities is expected
to exceed $175 million, after $92 million in pension
contributions made during 2003.
"Snap-on's strong asset utilization and cash flow exemplify the
meaningful progress we have made to improve the operating
effectiveness and financial performance of our company," said Dale F.
Elliott, chairman and chief executive officer. "However, the costs
associated with our efforts to improve our business and softness in
key end-markets, particularly those impacting the sale of the
company's capital equipment, resulted in less-than-anticipated levels
of profitability. Across Snap-on, the need to drive profitable growth
is clearly recognized as the top priority for 2004, along with
continuing to drive working investment reduction. Based upon the
accelerated actions already under way and the early signs of economic
recovery being seen, we expect to see a strong improvement in 2004."
Fourth Quarter
Net earnings for the fourth quarter of 2003 are expected to be in
a range of $17 million to $18 million, or $0.29 to $0.30 per diluted
share, on approximately $600 million in sales. For the year-ago
period, net earnings were $33.1 million, or $0.56 per diluted share,
on $549.5 million of sales. During the 2003 fourth quarter, notable
success was achieved year over year in increasing working investment
turnover and, in particular, inventory turns. However, earnings and
operating margin comparisons were impacted by:
-- Poor performance in the company's equipment businesses in the
Commercial and Industrial Group, particularly collision
repair, which resulted in an approximate $6 million decline in
operating income.
-- Approximately $12 million of higher year-over-year pretax
costs associated with continuous improvement actions to
enhance performance, including approximately $6 million in
expenses related to the previously announced closing of two
U.S. hand-tool plants.
-- Approximately $6 million pretax of higher pension, other
retirement and insurance costs.
-- In addition, it is anticipated that approximately $33 million
of the 2003 sales increase will result from currency
translation, while total net currency effects are expected to
have an approximate $2 million negative pretax impact
primarily due to the adverse margin effects on products
manufactured in Canada and Sweden.
-- The 2002 fourth quarter also included a $4.6 million pretax
benefit, or $0.05 per diluted share, largely from the
favorable resolution of a patent infringement matter net of
provisions for certain other contractual matters.
Preliminary Segment Results
In the Snap-on Dealer Group segment, operating earnings are
estimated to be approximately $14 million to $15 million on expected
total net sales, including intercompany sales, of approximately $275
million for fourth-quarter 2003, compared with $25.0 million of
operating earnings on $263.8 million of sales in fourth-quarter 2002.
In 2002, fourth-quarter results included a benefit of $2.5 million
related to the aforementioned patent resolution.
For fourth-quarter 2003, operating earnings improvements from the
increase in 2003 sales, the benefits of ongoing cost reductions and $3
million of improvement associated with the reduction in LIFO-valued
inventories were more than offset by $5 million of plant closure costs
and another $1 million in higher expenses due to production
inefficiencies and other expenses associated with the relocation of
production from the two hand-tool plants, which are anticipated to be
closed by April 2004. In addition, there were $3 million of higher
year-over-year pension, other retirement and insurance costs and $4
million of higher freight and catalog expenses.
Sales as reported by U.S. Snap-on franchised dealers to their
customers were particularly strong, increasing at a high-single-digit
rate for fourth-quarter 2003. This improvement is estimated to have
largely resulted from dealer expansions through second vans, reaching
new customers and being better able to serve existing customers.
Efforts by North American dealers in strengthening their fiscal health
through improved working investment turnover had a dampening impact on
the reported sales by Snap-on to its dealers. The soft demand for
large-platform diagnostics and equipment sold through the tech rep
organization is estimated to have resulted in a decline in sales of
those products compared to the prior year.
In the Diagnostics and Information Group segment, operating
earnings are estimated to be approximately $6 million to $7 million on
total net sales, including intercompany sales, of approximately $77
million for fourth-quarter 2003, compared with $7.6 million of
operating earnings on $78.9 million of sales in fourth-quarter 2002.
Earnings for fourth-quarter 2003 include approximately $4 million of
costs associated with continuous improvement actions, including a
write-down related to the closing of the U.S. facility that assembled
large-platform diagnostics. Savings from prior restructuring
initiatives and other continuous improvement actions, including
approximately $2 million of gains on sales of facilities, largely
offset the costs associated with this facility closure. Fourth-quarter
2002 included a $1.9 million benefit from the reversal of excess
restructuring reserves.
The slight decline in year-over-year sales is principally due to
lower intersegment sales. The growth of handheld diagnostics was
offset by the decline in large platform-based diagnostics (products
primarily sold through the Dealer Group's tech rep organization) and
the impact resulting from the transfer of certain European equipment
production to the Commercial and Industrial Group, which reduced
intersegment sales for these products.
In the Commercial and Industrial Group segment, operating earnings
are expected to be approximately $2 million to $3 million on expected
total net sales, including intercompany sales, of approximately $314
million for fourth-quarter 2003, compared with $17.4 million of
operating earnings on $275.6 million of sales in fourth-quarter 2002.
In 2002, the fourth quarter included a net benefit of $2.1 million
related to the aforementioned patent resolution, net of provisions for
certain contractual matters.
It is estimated that approximately $24 million of the 2003 sales
increase resulted from currency translation. In the fourth quarter of
2003, profitability improvements from prior restructuring activities
were more than offset by the combined margin impact of lower volumes
in certain businesses, particularly in the Group's worldwide equipment
businesses. These equipment businesses represented a $6 million
decline in operating earnings, primarily related to the collision
repair business in North America.
Additional factors that contributed to the lower fourth-quarter
operating earnings year over year were negative net currency effects
of approximately $3 million, resulting from the Group's sourcing a
significant portion of its tool and equipment products from Sweden and
Canada, and the relative strengthening of these currencies against the
dollar; approximately $3 million of higher pension, other retirement
and insurance costs and approximately $2 million associated with
higher manufacturing and inventory reduction-related costs that
exceeded LIFO-inventory benefits.
Weak economic conditions in Europe and, at the beginning of the
quarter in North America, continued to impact the sale of capital
goods equipment to vehicle repair shops and industrial tools in such
sectors as aerospace and aviation, general manufacturing and
non-residential construction. These declines were partially offset by
growth in the company's facilitation business for new vehicle
dealerships and an improving sales trend for industrial tools in North
America that began late in the quarter in certain sectors.
The ramp-up of the Technical Automotive Group (TAG) continued in
the fourth quarter, following its second-quarter launch, with sales,
sales leads and gross margins increasing sequentially compared with
the third quarter of 2003, with particular improvements being noted
late in the quarter. The positive year-end "run-rate" for sales
appears to be continuing into 2004. The change in distribution,
coupled with the sustained weak market conditions, continued to have a
negative impact on year-over-year equipment results. The TAG direct
sales group was created to enhance Snap-on's existing equipment
distribution network and improve the long-term operating margin in
that business.
Cash Flow
Cash flow from operating activities is expected to exceed $37
million in the fourth quarter of 2003 compared with $98.3 million in
fourth-quarter 2002. During the fourth quarter of 2003, Snap-on made a
voluntary pension contribution of $78 million. As a result, Snap-on
does not expect that it will need to make further contributions in
2004 or 2005, based upon current actuarial assumptions.
After payments to shareholders in the form of dividends and share
repurchases during the past year, as well as the funding of pension
obligations, the priority was to use cash flow to lower the company's
net debt position. Snap-on expects its ratio of total net debt (total
debt less cash and cash equivalents) to total invested capital (total
net debt plus shareholders' equity) to strengthen to approximately 19%
at fiscal year-end 2003 compared with 29.2% at fiscal year-end 2002,
reflecting both a decrease in net debt and an increase in
shareholders' equity, including approximately $146 million from
currency translation.
An important priority for Snap-on in improving its return on
capital has been to focus on improving its asset utilization, in
particular, by making more effective use of its investment in working
capital. The company's target is to improve its working investment
(accounts receivable plus inventories less accounts payable) turnover
to four turns by the end of 2005.
Working investment at the end of 2003 is expected to improve to
approximately $708 million compared with $755.2 million at year-end
2002 (including the negative impact of approximately $82 million in
2003 from currency translation), which equates to 3.2 turns in working
investment in 2003 compared with 2.9 turns at year-end 2002. Snap-on
expects that inventory turns, an important element in working
investment, have improved to 3.5 turns in 2003 compared with 2.9 turns
a year ago.
Because of success in improving asset utilization and
strengthening cash flow, Snap-on expects to accelerate planned 2004
share repurchases and to repurchase approximately 750,000 to 1 million
shares of its common stock. In addition, Snap-on recognizes that
dividends are another important element in total shareholder return.
Since 1939, Snap-on has paid consecutive quarterly dividends without
interruption or decline, and 2003 marked the eighth consecutive year
in which annual dividends paid per share increased.
Outlook
Snap-on will continue to emphasize the consistent and widespread
application of its Driven to Deliver(TM) strategic framework to reach
its targeted financial objectives. The company remains committed to
seeking opportunities for process improvements, through the use of
"lean" tools, that will enhance competitiveness and customer
responsiveness throughout its global organization.
Snap-on expects to record in the first quarter of 2004
approximately $15 million in further continuous improvement costs,
including approximately $8 million of costs associated with the two
aforementioned hand-tool plant closings, in order to maintain its
accelerated pace of activity. Lean and continuous improvement activity
levels will continue throughout the year, with an estimated additional
$8 million to $10 million of continuous improvement costs expected
beyond the first quarter. However, beginning in the second quarter of
2004, Snap-on expects the profit benefits from these and prior actions
to begin to exceed these costs, leading to reported net earnings that
exceed prior-year levels.
For full-year 2004, Snap-on expects continued steady growth in
demand for tools and handheld diagnostics by vehicle-service
technicians, as well as in the purchase of tools by its dealers.
Additionally, with improving signs of economic recovery in North
America, Snap-on anticipates it could achieve a modest level of sales
improvements in its more cyclical commercial and industrial
businesses. Snap-on expects full-year 2004 reported earnings to be in
the range of $1.80 to $2.20 per diluted share, including the estimated
$0.25 to $0.28 per share in costs for continuous improvement actions.
A discussion of this announcement will be webcast at 8:00 a.m. CST
today, and a replay will be available for at least 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
12,600 people worldwide.
Statements in this news release that are not historical facts,
including statements (i) that include the words "expects," "believes,"
"estimates," 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,
estimates, 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 and bases underlying such statements and the timing and
progress with which Snap-on can continue to achieve savings from its
cost reduction, continuous improvement and other Operational Fitness
initiatives; Snap-on's capability to retain and attract dealers and
effectively implement new programs; its ability to capture new
business; the success of new products and other Profitable Growth
initiatives; Snap-on's further success in scaling up its TAG
operation; Snap-on's ability to withstand external negative factors
including terrorist disruptions on business; changes in trade,
monetary and fiscal policies, regulatory reporting requirements, laws
and regulations, or other activities of governments or their agencies,
including military actions and such aftermath that might occur;
disruption arising from planned facility closures; Snap-on's ability
to grow the U.S. dealer network; differences between the actual and
estimated return on pension plan assets; and the absence of
significant changes in inflation, the current competitive environment,
energy supply or pricing, legal proceedings, supplier disruptions,
currency fluctuations or the material worsening of economic and
political situations around the world. All financial information for
fiscal 2003 disclosed herein is preliminary and unaudited.
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. Any opinions, estimates or forecasts regarding
Snap-on performance made by analysts are theirs alone and do not
represent the opinions, forecasts or predictions of Snap-on or its
management, nor does Snap-on endorse or otherwise comment on such
forecasts.
For additional information, visit www.snapon.com or please
contact:
CONTACT: Snap-on Incorporated
Media:
Richard Secor, 262-656-5561
or
Investors:
William Pfund, 262-656-6488