Exhibit 99
Snap-on Announces 2006 First-quarter Results
KENOSHA, Wis.--(BUSINESS WIRE)--April 28, 2006--Snap-on
Incorporated (NYSE:SNA), a global leader in professional tools,
diagnostics and equipment, today announced 2006 first-quarter results.
-- Net earnings for the first quarter of 2006 increased 23.5% to
$22.1 million from $17.9 million a year ago. Diluted earnings
per share were $0.37 this year compared with $0.31 a year ago.
-- Operating earnings increased 14.9% to $39.4 million from $34.3
million in the prior year. The operating margin on total
revenues improved to 6.5% from 5.6% a year ago.
-- Net sales were $593.5 million in the first quarter of 2006
compared to $598.7 million in the prior year. Sales increased
by $9.8 million, or 1.6%, due to higher volume and pricing,
which was more than offset by $15.0 million of currency
translation.
"Our first-quarter performance demonstrates that Snap-on
associates are executing on the initiatives announced earlier this
year to improve customer satisfaction, strengthen our brands and
operations, push savings to the bottom line and grow financial
returns," said Jack D. Michaels, Snap-on chairman, president and chief
executive officer. "We are making progress against our strategic
priorities and see substantial long-term opportunity for profitable
growth."
Segment Results
Snap-on Tools Group (formerly the Snap-on Dealer Group) operating
earnings were $18.2 million on segment sales of $248.7 million in the
first quarter of 2006, compared with $18.1 million of operating
earnings on $255.8 million of segment sales in the first quarter of
2005.
Operating earnings as a percentage of sales increased to 7.3% in
the first quarter of 2006 compared with 7.1% in 2005. Savings and
enhanced productivity from rapid continuous improvement actions,
higher selling prices and a favorable product mix more than offset the
lower sales volume and higher planned costs associated with efforts to
improve U.S. manufacturing flexibility. Operating earnings in 2006
were also impacted by $4.5 million of higher year-over-year production
and material costs, including steel, and $2.3 million of higher
promotional costs, including an extensive update of the Snap-on
catalog. Operating earnings in the first quarter of 2005 included $3.0
million of costs related to the termination of a supplier
relationship.
Sales in the first quarter of 2006 decreased by $7.1 million year
over year, including $2.9 million from unfavorable currency
translation. Sales in North America were down 1.8% year over year. A
1.5% increase in Snap-on's U.S. sales per franchisee was more than
offset by a 2.5% reduction in the number of U.S. franchisees during
the quarter. This decrease in franchisees was anticipated as a
consequence of the strategic initiatives being implemented in 2006 to
improve the franchise system.
Commercial and Industrial Group operating earnings were $23.1
million on segment sales of $287.2 million in the first quarter of
2006 compared with operating earnings of $11.0 million on $293.8
million of segment sales in the first quarter of 2005.
Operating earnings as a percentage of sales increased to 8.0% in
the first quarter of 2006 compared with 3.7% in 2005. The significant
increase in year-over-year operating earnings reflects the impact of
substantial cost reductions, including $8.4 million from on-going
rapid continuous improvement initiatives, and consolidation and other
strategic efforts to increase production and sourced materials from
lower-cost regions and facilities. Improved product sales mix, as well
as benefits from higher year-over-year selling prices, more than
offset planned spending to expand our sales presence in emerging
growth markets. The profitability of the worldwide equipment business
demonstrated substantial year-over-year earnings growth, reflecting
its continuing cost improvement efforts and technology-driven sales
gains in its wheel service product lines.
First-quarter 2006 sales growth in emerging markets and higher
sales of hand tools for industrial applications were more than offset
by $10.8 million of unfavorable currency translation. Sales volume of
worldwide vehicle-service equipment was up slightly year over year.
Diagnostics and Information Group operating earnings were $10.3
million on segment sales of $119.2 million for the first quarter of
2006 compared with $9.3 million of operating earnings on $114.4
million of segment sales in the first quarter of 2005.
Operating earnings as a percentage of sales increased to 8.6% in
the first quarter of 2006 compared with 8.1% in 2005. The benefit of
higher sales and improved productivity from rapid continuous
improvement initiatives led to the increased earnings and a higher
operating margin year over year.
Sales increases of $6.6 million year over year, largely due to
higher OEM facilitation actions and increased sales of Mitchell1(TM)
information products, were partially offset by $1.8 million of
unfavorable currency translation.
Financial Services operating earnings were $2.0 million on $11.2
million of revenue in the first quarter of 2006 compared with $4.3
million of operating earnings on $14.1 million of revenue in the first
quarter of 2005. The decrease in operating earnings primarily reflects
the impact of lower net interest spreads, partially offset by higher
originations.
Corporate general expenses were $14.2 million in the first quarter
of 2006 compared with $8.4 million a year ago. Increased expenses in
2006 include $5.3 million of higher insurance, health care and other
costs. Higher expenses were also incurred in 2006 related to
performance compensation and adjustments on liability-based awards,
including $2.0 million from the adoption of Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards No.
123(R) "Share-Based Payment."
Cash flow from operating activities improved to $27.5 million in
the 2006 first quarter compared with $19.3 million for the year-ago
period. This cash flow was used to fund $10.7 million of capital
expenditures, as well as $26.0 million for share repurchases and $15.8
million for shareholder dividends. At quarter end, cash and cash
equivalents increased to $182.9 million compared with $170.4 million
at year-end 2005. Total debt was $228.2 million at quarter end
compared with $226.5 million at year-end 2005.
Outlook
Snap-on will continue to emphasize the implementation of its 2006
strategic priorities, including focused innovation on product and
process improvements, its growth initiatives in emerging markets, and
its actions to further enhance value and service to Snap-on's
franchisees and customers. While Snap-on is encouraged by the progress
in its key initiatives and with the improvement in first-quarter
earnings performance, the Company is still early in the implementation
phase of its 2006 strategic initiatives and certain key
transformational changes are planned for the second and third quarters
of 2006.
First-quarter 2006 earnings exceeded expectations provided at the
beginning of 2006. Snap-on continues to believe that operating
earnings for the Commercial and Industrial and the Diagnostics and
Information Groups will improve for the year, even as the businesses
continue to invest and progress on their key initiatives to support
sustainable profitable growth: expansion in Asia and other emerging
markets, and focused innovation on new technology and
information-based products.
The Snap-on Tools Group plans to continue to invest in its
initiatives to improve service and value to its franchisees and
customers, enhance sales and profitability of its franchisees, improve
and transform its manufacturing supply chain to a lower cost, market
demand replenishment system, and extend Snap-on brands and product
lines into targeted underdeveloped market segments. The expected costs
to enhance field support and for other franchise system initiatives,
previously believed to cost up to $15 million, are now expected to
cost $5 million to $7 million, of which approximately $1 million was
incurred in the first quarter. This lower level of spending
contributed to the higher-than-expected earnings in the first quarter.
Snap-on continues to believe that customer service and supply chain
initiatives, along with new marketing programs, will require spending
of $8 million to $10 million in 2006, as originally anticipated, with
a significant portion of this spending expected to occur in the third
quarter. Progress is on track and is expected to continue to show
positive momentum through the remainder of 2006, although the Company
continues to believe the Snap-on Tools segment will experience a
year-over-year decline in 2006 operating earnings.
The Financial Services segment is expected to continue to be
challenged by higher interest rates, and therefore its operating
results for the full year are estimated to be lower than the results
achieved a year ago.
A discussion of this release will be webcast at 10:00 a.m. CDT
today, and a replay will be available for at least 10 days following
the call. To access the Webcast, visit www.snapon.com, click on
Snap-on Corporate and then on Investor Events in the drop-down menu
under Investor Information. 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, diagnostics 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 $2.4 billion, S&P 500
company headquartered in Kenosha, Wisconsin, and employs approximately
11,600 people worldwide.
Important information about forward-looking statements
Statements in this news release that are not historical facts,
including statements (i) that include the words "expects," "plans,"
"targets," "estimates," "believes," "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 within the meaning of the Private
Securities Litigation Reform Act of 1995. Snap-on cautions the reader
that any forward-looking statements included in this release that are
based upon assumptions and estimates were developed by management in
good faith and 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.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results or regarded as a representation by the
company or its management that the projected results will be achieved.
For those forward-looking statements, Snap-on cautions the reader that
numerous important factors, such as those listed below, as well as the
risk factors discussed in Snap-on's Form 10-K filing dated February
21, 2006, and Form 8-K filing dated July 27, 2005, could affect the
company's actual results and could cause its actual consolidated
results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, Snap-on.
These risks and uncertainties include, without limitation,
uncertainties related to estimates, statements, assumptions and
projections generally, and the timing and progress with which Snap-on
can attain savings from cost reduction actions, including its ability
to implement reductions in workforce, achieve improvements in the
company's manufacturing footprint and greater efficiencies in its
supply chain, and enhance machine maintenance, plant productivity and
manufacturing line set-up and change-over practices, any or all of
which could result in production inefficiencies, higher cost and lost
revenues. These risks also include uncertainties related to Snap-on's
capability to implement future strategies with respect to its existing
businesses, refine its brand and franchise strategies, retain and
attract franchisees, further enhance service and value to franchisees
and thereby enhance their sales and profitability, introduce
successful new products, as well as its ability to withstand
disruption arising from natural disasters, planned facility closures
or other labor interruptions, litigation challenges and external
negative factors including significant changes in the current
competitive environment, inflation, interest rates and other monetary
fluctuations; and the various potential impacts of legal proceedings
and/or settlements, terrorist disruptions on business, and energy and
raw material supply and pricing (primarily steel and fuel), including
the impact of higher fuel prices on franchisees' operations. Snap-on
disclaims any responsibility to update any forward-looking statement
provided in this release.
For additional information, visit www.snapon.com.
SNAP-ON INCORPORATED
Consolidated Statements of Earnings
(Amounts in millions, except per share data)
(unaudited)
Three Months Ended
-------------------------
April 1, April 2,
2006 2005
------------ ------------
Net sales $593.5 $598.7
Cost of goods sold (333.2) (341.8)
------------ ------------
Gross profit 260.3 256.9
------------ ------------
Financial services revenue 11.2 14.1
Financial services expenses (9.2) (9.8)
------------ ------------
Operating income from financial services 2.0 4.3
Operating expenses (222.9) (226.9)
------------ ------------
Operating earnings 39.4 34.3
Interest expense (4.4) (5.9)
Other income (expense) - net (1.2) (0.9)
------------ ------------
Earnings before income taxes 33.8 27.5
Income tax expense (11.7) (9.6)
------------ ------------
Net earnings $22.1 $17.9
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Earnings per share:
Basic $0.38 $0.31
Diluted $0.37 $0.31
Weighted-average shares outstanding:
Basic 58.2 57.8
Effect of dilutive options 0.9 0.5
------------ ------------
Diluted 59.1 58.3
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SNAP-ON INCORPORATED
Supplemental Segment Information
(Amounts in millions)
(unaudited)
Three Months Ended
-------------------------
April 1, April 2,
2006 2005
------------ ------------
Net sales:
Snap-on Tools Group $248.7 $255.8
Commercial and Industrial Group 287.2 293.8
Diagnostics and Information Group 119.2 114.4
------------ ------------
Segment net sales 655.1 664.0
Intersegment eliminations (61.6) (65.3)
------------ ------------
Total net sales $593.5 $598.7
Financial services revenue 11.2 14.1
------------ ------------
Total revenues $604.7 $612.8
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Operating earnings:
Snap-on Tools Group $18.2 $18.1
Commercial and Industrial Group 23.1 11.0
Diagnostics and Information Group 10.3 9.3
Financial Services 2.0 4.3
------------ ------------
Segment operating earnings 53.6 42.7
Corporate (14.2) (8.4)
------------ ------------
Operating earnings $39.4 $34.3
Interest expense (4.4) (5.9)
Other income (expense) - net (1.2) (0.9)
------------ ------------
Earnings before income taxes $33.8 $27.5
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SNAP-ON INCORPORATED
Consolidated Statements of Cash Flows
(Amounts in millions)
(unaudited)
Three Months Ended
-------------------------
April 1, April 2,
2006 2005
------------ ------------
Operating activities
Net earnings $22.1 $17.9
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 12.0 13.5
Amortization of other intangibles 0.5 1.1
Stock-based compensation expense 3.3 -
Deferred income tax provision (2.9) -
Loss (gain) on sale of assets (0.7) 0.7
Loss (gain) on mark to market for cash
flow hedges 0.1 (0.3)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (27.0) (17.4)
(Increase) decrease in inventories (9.6) (14.1)
(Increase) decrease in prepaid and other
assets (14.3) 14.2
Increase (decrease) in accounts payable 26.6 9.1
Increase (decrease) in accruals and other
liabilities 17.4 (5.4)
------------ ------------
Net cash provided by operating activities 27.5 19.3
Investing activities
Capital expenditures (10.7) (9.2)
Proceeds from disposal of property and
equipment 2.5 3.0
------------ ------------
Net cash used in investing activities (8.2) (6.2)
Financing activities
Net increase in short-term borrowings 6.0 1.3
Purchase of treasury stock (26.0) (7.7)
Proceeds from stock purchase and option
plans 25.4 6.5
Excess tax benefits from stock-based
compensation 3.4 -
Cash dividends paid (15.8) (14.5)
------------ ------------
Net cash used in financing activities (7.0) (14.4)
Effect of exchange rate changes on cash and
cash equivalents 0.2 (3.3)
------------ ------------
Increase (decrease) in cash and cash
equivalents 12.5 (4.6)
Cash and cash equivalents at beginning of
period 170.4 150.0
------------ ------------
Cash and cash equivalents at end of period $182.9 $145.4
============ ============
Supplemental cash flow disclosures
Cash paid for interest $(7.1) $(10.4)
Net cash refunded (paid) for income taxes (4.2) 6.2
SNAP-ON INCORPORATED
Consolidated Balance Sheets
(Amounts in millions)
(unaudited)
April 1, December 31,
2006 2005
------------ ------------
Assets
Cash and cash equivalents $182.9 $170.4
Accounts receivable - net of allowances 513.7 485.9
Inventories 293.4 283.2
Deferred income tax benefits 73.0 76.3
Prepaid expenses and other assets 71.8 57.1
------------ ------------
Total current assets 1,134.8 1,072.9
Property and equipment - net 291.6 295.5
Deferred income tax benefits 60.9 57.8
Goodwill 402.4 398.3
Other intangibles - net 64.6 64.0
Pension assets 20.6 20.6
Other assets 97.1 99.3
------------ ------------
Total Assets $2,072.0 $2,008.4
============ ============
Liabilities
Accounts payable $162.2 $135.4
Notes payable and current maturities
of long-term debt 31.0 24.8
Accrued benefits 34.8 35.4
Accrued compensation 54.0 62.2
Franchisee deposits 42.0 44.4
Deferred subscription revenue 28.9 26.6
Income taxes 40.9 33.1
Other accrued liabilities 163.0 144.2
------------ ------------
Total current liabilities 556.8 506.1
Long-term debt 197.2 201.7
Deferred income taxes 72.5 75.3
Retiree health care benefits 90.8 90.8
Pension liabilities 97.5 92.7
Other long-term liabilities 80.3 79.6
------------ ------------
Total Liabilities 1,095.1 1,046.2
------------ ------------
Shareholders' Equity
Common stock 67.1 67.0
Additional paid-in capital 115.6 113.3
Retained earnings 1,150.1 1,143.8
Accumulated other comprehensive income
(loss) (53.1) (56.6)
Grantor Stock Trust at fair market value (91.8) (120.3)
Treasury stock at cost (211.0) (185.0)
------------ ------------
Total Shareholders' Equity 976.9 962.2
------------ ------------
Total Liabilities and Shareholders'
Equity $2,072.0 $2,008.4
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CONTACT: Snap-on Incorporated
Richard Secor (Media), 262-656-5561
William Pfund (Investors), 262-656-6488