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SnapOn Inc. Reports Operating Results (10-Q)

July 31, 2009 | About:

SnapOn Inc. (SNA) filed Quarterly Report for the period ended 2009-07-04.

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.

Read the The complete ReportSNA is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC, David Dreman of Dreman Value Management.

Rating: 3.6/5 (5 votes)

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