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SnapOn Inc. Reports Operating Results (10-Q)

July 28, 2010 | About:
Barel Karsan

10qk

18 followers
SnapOn Inc. (SNA) filed Quarterly Report for the period ended 2010-07-03.

Snapon Inc. has a market cap of $2.62 billion; its shares were traded at around $45.28 with a P/E ratio of 18.2 and P/S ratio of 1.1. The dividend yield of Snapon Inc. stocks is 2.6%. Snapon Inc. had an annual average earning growth of 10% over the past 10 years.SNA is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, Pioneer Investments, John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Sales in the Commercial & Industrial Group of $258.7 million in the second quarter of 2010 were up $46.6 million, or 22.0%, from 2009 levels; excluding $0.9 million of unfavorable currency translation, organic sales increased 22.5%. Sales in the Snap-on Tools Group of $264.5 million increased $21.9 million, or 9.0%, from 2009 levels; excluding $2.8 million of favorable currency translation, organic sales increased 7.8%. Sales in the Repair Systems & Information Group of $205.9 million increased $7.9 million, or 4.0%, from 2009 levels; excluding $1.4 million of unfavorable currency translation, organic sales increased 4.7%.

Gross profit in the second quarter of 2010 was $303.8 million as compared to $254.0 million in 2009. The $49.8 million gross profit increase is primarily due to the higher sales volumes, $6.8 million of savings from ongoing efficiency and productivity (collectively, Rapid Continuous Improvement or RCI) initiatives and other cost reduction activities, including benefits from restructuring actions, $5.1 million of favorable currency effects and $3.1 million of lower restructuring costs. The year-over-year gross profit comparison also benefited from favorable manufacturing utilization as a result of increasing production levels; in the second quarter of 2009, the company incurred costs to carry excess manufacturing capacity, primarily in Europe, as a result of lower production and inventory reduction efforts. As a percentage of sales, gross margin of 46.9% in the second quarter of 2010 increased 380 basis points (100 basis points equals 1.0 percent) as compared to 43.1% in 2009.

Operating expenses in the second quarter of 2010 were $224.8 million as compared to $200.3 million in 2009. The $24.5 million increase in year-over-year operating expenses includes $14.0 million of higher long-term and current year performance-based incentive compensation expense as a result of the companys improved year-over-year operating performance, increased volume-related expenses, $3.1 million of higher pension expense, largely due to lower than projected asset returns in previous years related to the U.S. pension plan, and higher stock-based expense. These increases were partially offset by $2.5 million of benefits from ongoing RCI, restructuring and other cost reduction initiatives and $2.5 million of lower restructuring costs. As a percentage of sales, operating expenses were 34.7% in the second quarter of 2010 as compared to 34.0% in 2009.

Consolidated operating earnings in the second quarter of 2010 of $80.7 million increased $10.4 million, or 14.8%, from the $70.3 million achieved in the second quarter of 2009, despite $14.9 million of lower year-over-year operating earnings from financial services. The $10.4 million increase in year-over-year consolidated operating earnings includes $4.9 million of favorable currency effects.

Sales in the Commercial & Industrial Group of $505.7 million for the first six months of 2010 increased $72.5 million, or 16.7%, from 2009 levels; excluding $8.0 million of favorable currency translation, organic sales increased 14.6%. Sales in the Snap-on Tools Group of $513.0 million increased $43.3 million, or 9.2%, from 2009 levels; excluding $12.9 million of favorable currency translation, organic sales increased 6.3%. Sales in the Repair Systems & Information Group of $408.0 million increased $22.9 million, or 5.9%, from 2009 levels; excluding $4.3 million of favorable currency translation, organic sales increased 4.8%.

Operating expenses in the first six months of 2010 were $440.7 million, as compared to $404.7 million in 2009. In addition to higher volume-related and other expenses, the $36.0 million increase in year-over-year operating expenses includes $14.8 million of higher long-term and current year performance-based incentive compensation expense as a result of the companys improved year-over-year operating performance, $8.1 million of higher pension expense, largely due to lower than projected asset returns in previous years related to the U.S. pension plan, $7.2 million of unfavorable currency effects and $4.6 million of higher stock-based expense. These increases were partially offset by $8.9 million of benefits from ongoing RCI and other cost reduction activities, including benefits from restructuring and cost containment actions, and $2.2 million of lower restructuring costs. As a percentage of sales, operating expenses were 34.7% in the first six months of 2010 as compared to 34.8% in 2009.

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