KENOSHA, Wis. -- Snap-on Inc. has announced operating results for the first quarter of 2009.
Net sales of $572.6 million in the quarter declined 20.6 percent from 2008 levels; down 13.1 percent excluding foreign currency translation.
Operating earnings of $64.3 million in the quarter decreased $28.9 million from 2008 levels. Foreign currency impacts reduced 2009 operating earnings by $11 million. As a percentage of revenues, operating earnings were 10.9 percent as compared with 12.5 percent last year.
Net earnings attributable to Snap-on of $34.8 million, or 60 cents per diluted share, compared with $56.6 million, or 97 cents per diluted share, in 2008.
“Continuing difficult economic conditions further weakened customer demand in the first quarter,” said Nick Pinchuk, Snap-on president and chief executive officer. “In light of these challenges we increased our focus on rapid continuous improvement, sourcing and other cost reduction initiatives. At the same time, we moved forward during the quarter with our strategic growth investments and with our most important value creation initiatives, such as product innovation. I thank our franchisees and associates worldwide for their continuing confidence and contributions during these challenging times.”
As expected, the difficulties posed by the global economy increased significantly during the first quarter, further challenging Snap-on’s sales of big-ticket items, such as tool storage and undercar equipment, and these difficult economic conditions further extended across more industries and geographies. Slowdowns in the economies of Europe deepened, particularly in Southern Europe, further impacting volume at the company’s European-based tools business. In the near term, Snap-on anticipates no change in this environment and, as a result, expects sales and earnings in the second quarter of 2009 to be down year over year.
Snap-on is continuously responding to the global macroeconomic challenges by furthering its RCI and cost reduction initiatives. Snap-on recorded $2 million of restructuring costs in the first quarter of 2009 and now anticipates that full-year 2009 restructuring costs will be in a range of $14 million to $18 million, up from the previously communicated $12 million to $16 million. Snap-on expects restructuring costs in the second quarter of 2009 to approximate $8 million to $10 million. Snap-on is also continuing a number of its planned growth investments, including further expansion of its manufacturing capacity in China and in Eastern Europe. Capital expenditures for full-year 2009 are expected to be in a range of $60 million to $70 million, down from the previously communicated $75 million to $80 million.
The company continues to expect approximately $3 million per quarter of higher year-over-year pension expense in 2009 due to declines in pension asset values. In the first quarter, foreign currency effects reduced operating earnings by $11 million on a year-over-year basis which, at current exchange rates, could similarly impact second quarter year-over-year comparisons. Snap-on anticipates that its full-year 2009 effective income tax rate on earnings before equity earnings will approximate 33.4 percent.
In 2009, Snap-on will continue to aggressively manage the balance between investing and capturing strategic growth opportunities with the need for cost reduction actions beyond those already implemented; the current economic uncertainty makes it extremely difficult to presently predict this balance as the company continually adjusts to the challenging business environment.
