Founded in 1920, Snap-on Inc. (SNA, Financial) is a $3.3 billion, S&P 500 company, headquartered in Kenosha, Wisconsin. It is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education.
Fourth-quarter results
- Sales of $857.4 million in the quarter increased $59.9 million, or 7.5%, from 2013 levels; excluding $21.5 million of unfavorable foreign currency translation and $5.7 million of acquisition-related sales, organic sales increased 9.8%.
- Operating earnings before financial services of $145.2 million in the quarter improved to 16.9% of sales as compared to $123.6 million, or 15.5% of sales, last year.
- Financial services operating earnings in the quarter were $42.2 million on revenues of $59.4 million; originations of $232.2 million in the quarter increased $34.6 million from 2013 levels.
- Consolidated operating earnings of $187.4 million in the quarter improved to 20.4% of revenues (net sales plus financial services revenue) as compared to $156.6 million, or 18.5% of revenues, last year.
- The effective income tax rate was 32.1% in the fourth quarters of both 2014 and 2013.
- Fourth quarter 2014 net earnings of $116.2 million, or $1.97 per diluted share, compared to net earnings of $94.5 million, or $1.60 per diluted share, a year ago.
- Full year 2014 sales of $3,277.7 million increased 7.2% from 2013 levels; excluding $37.0 million of acquisition-related sales and $25.3 million of unfavorable foreign currency translation, organic sales increased 6.9%. Full year 2014 net earnings of $421.9 million, or $7.14 per diluted share, compared to net earnings of $350.3 million, or $5.93 per diluted share, last year.
“Our fourth quarter results, including a 9.8% organic increase in net sales, a 140 basis point improvement in operating margin before financial services and a 23.1% gain in diluted earnings per share, represent an encouraging finish to 2014,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “For the full year, despite headwinds, we achieved a 6.9% growth in organic sales and a 20.4% increase in diluted earnings per share, once again confirming the strength of Snap-on’s value proposition to make work easier for serious professionals performing critical tasks in workplaces of consequence. In 2015, we believe we will continue to reach more and more of these professionals by advancing further along each of our runways for a coherent growth while, at the same time, making ongoing operating progress through our Snap-on Value Creation Processes in the areas of safety, quality, customer connection, innovation and rapid continuous improvement. As always, I thank our franchisees and associates for their significant contributions to our team. Without their capability and commitment, these results would not have been possible.”
Segment results
Commercial & Industrial Group segment sales of $298.2 million in the quarter increased $15.0 million, or 5.3%, from 2013 levels. Excluding $11.9 million of unfavorable foreign currency translation, organic sales increased $26.9 million, or 9.9%, primarily due to higher volume with customers in critical industries as well as increased sales in the segment’s European-based hand tools and Asia/Pacific operations.
Operating earnings of $40.5 million in the period increased $3.4 million from 2013 levels, and the operating margin (operating earnings as a percentage of segment sales) of 13.6% improved 50 basis points from 13.1% a year ago.
Snap-on Tools Group segment sales of $387.5 million in the quarter rose $36.4 million, or 10.4%, from 2013 levels, reflecting sales increases in both the company’s U.S. and international franchise operations. Excluding $4.5 million of unfavorable foreign currency translation, organic sales increased 11.8%.
Operating earnings of $63.9 million in the period increased $12.9 million from 2013 levels, and the operating margin of 16.5% improved 200 basis points from 14.5% a year ago.
Repair Systems & Information Group segment sales of $282.8 million in the quarter increased $18.2 million, or 6.9%, from 2013 levels. Excluding $5.7 million of acquisition-related sales and $5.5 million of unfavorable foreign currency translation, organic sales increased $18.0 million, or 6.9%, primarily due to higher sales of undercar equipment, increased sales to OEM dealerships and higher sales of diagnostic and repair information products to independent repair shop owners and managers.
Operating earnings of $65.2 million in the fourth quarter of 2014 increased $4.4 million from 2013 levels, and the operating margin of 23.1% improved 10 basis points from 23.0% a year ago.
Financial Services operating earnings of $42.2 million on revenue of $59.4 million in the quarter, compared to operating earnings of $33.0 million on revenue of $47.4 million a year ago.
Corporate expenses of $24.4 million in the quarter compared to expenses of $25.3 million last year.
Outlook
In 2015, Snap-on expects to make continued progress along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair but also in adjacent markets, additional geographies and other areas, including in critical industries where the cost and penalties for failure can be high. Through continued deployment of its Snap-on Value Creation Processes, Snap-on also anticipates making further progress in 2015 in the areas of safety, quality, customer connection, innovation and rapid continuous improvement. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2015 will be in a range of $80 million to $90 million. Snap-on also anticipates that its full year 2015 effective income tax rate will be at or below its 2014 full year rate.
To end
SNA has posted strong fourth quarter earnings. It is expected to grow further after this. Investors may consider adding this company to their kitty. This company is exhibiting bullish behavior and is a buy. It is focusing on emerging markets and curtailing costs. With these initiatives, it will continue to march forward.
(Source: Company’s Website)
