Snap-On Incorporated is engaged in the business of providing productivity-enhancing innovative products services and solutions. Snap-on is a global developer manufacturer and marketer of professional tools diagnostics equipment and related services marketed in numerous countries. Snap-on offers a wide range of capabilities and solutions for professional tool users in vehicle service industrial and other commercial applications worldwide. SnapOn Inc. has a market cap of $2.05 billion; its shares were traded at around $35.63 with a P/E ratio of 9.5 and P/S ratio of 0.8. The dividend yield of SnapOn Inc. stocks is 3.4%. SnapOn Inc. had an annual average earning growth of 13.1% over the past 10 years. GuruFocus rated SnapOn Inc. the business predictability rank of 2-star.
Highlight of Business Operations:Net sales in the second quarter of 2009 of $590.0 million were down $176.1 million, or 23.0%, from 2008 levels. The year-over-year sales decline reflects the impact of the ongoing global recession that continued in the second quarter of 2009. The year-over-year sales decline also included $50.2 million of unfavorable currency translation largely due to the strengthening of the dollar. Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including currency translation fluctuations. Excluding the $50.2 million of unfavorable currency translation, organic (excluding foreign currency translation effects) sales in the second quarter of 2009 declined 16.4% from 2008 levels.
Sales in the Commercial & Industrial Group of $256.4 million were down $131.3 million, or 33.9%, year over year. Excluding $33.2 million of unfavorable currency translation, organic sales in the Commercial & Industrial Group declined 25.3% year over year primarily due to the continued economic downturn. Sales in the Snap-on Tools Group of $258.3 million declined $34.5 million, or 11.8%, year over year. Excluding $12.4 million of unfavorable currency translation, organic sales in the Snap-on Tools Group declined 7.5% year over year. In the Diagnostics & Information
Gross profit in the second quarter of 2009 was $254.0 million as compared to $346.5 million in 2008. The $92.5 million decline in year-over-year gross profit is primarily due to the lower sales volumes, costs to carry excess manufacturing capacity as a result of lower production and inventory reduction efforts, $23.2 million of unfavorable currency impacts, and $5.7 million of higher restructuring costs. These year-over-year declines in gross profit were partially offset by $12.8 million of savings from ongoing efficiency and productivity (collectively Rapid Continuous Improvement or RCI) initiatives and other cost reduction activities, including benefits from restructuring and material cost reduction. As a percentage of sales, gross profit margin was 43.1% in the second quarter of 2009, as compared to 45.2% in 2008.
Operating expenses in the second quarter of 2009 were $200.3 million, as compared to $245.6 million in 2008. In addition to lower volume-related expenses, the $45.3 million reduction in year-over-year operating expenses primarily resulted from $17.2 million of benefits from ongoing RCI and other cost reduction initiatives, $13.5 million of currency translation, and lower performance-based compensation and other expenses. These year-over-year declines in operating expenses were partially offset by $3.0 million of higher pension expense as a result of declines in pension asset values and $1.0 million of higher restructuring costs. As a percentage of net sales, operating expenses were 33.9% in the second quarter of 2009, as compared to 32.1% in 2008.
Consolidated operating earnings in the second quarter of 2009 of $70.3 million declined $41.4 million, or 37.1%, from the $111.7 million achieved in the second quarter of 2008. Unfavorable currency effects contributed $10.3 million of the $41.4 million decrease in year-over-year operating earnings.
Net earnings attributable to Snap-on in the second quarter of 2009 were $37.4 million, or $0.65 per diluted share. Net earnings attributable to Snap-on in the second quarter of 2008 were $66.9 million, or $1.15 per diluted share.
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