KENOSHA, Wis. -- Snap-on said it has terminated its operating agreement with CIT, relating to the parties’ Snap-on Credit LLC joint venture.

Snap-on and CIT are partners in Snap-on Credit LLC, which provides a broad range of financial services to Snap-on’s U.S. franchisees and customers. The joint venture was established in 1999 and CIT has been the exclusive purchaser of the financing contracts originated by Snap-on Credit. Snap-on and CIT have been in ongoing discussions concerning a longer term new joint venture agreement. Both parties have agreed to continue these discussions. To the extent a mutually acceptable agreement can be reached, including CIT resolving its liquidity issues over a longer term, it is possible the parties could, at a later date, enter into a new joint venture agreement.

As a consequence of this termination, Snap-on will acquire CIT’s interest in the joint venture for approximately $8.2 million, Snap-on Credit will become a wholly owned subsidiary of Snap-on Inc., and Snap-on Credit will continue to service the existing portfolio of contracts owned by CIT. The approximate outstanding balance of this portfolio is $834 million. Snap-on has no obligation to purchase the existing portfolio of contracts owned by CIT. The operations of Snap-on Credit are expected to be uninterrupted by this event and all activities surrounding the financing of extended credit contracts to customers, leases of shop equipment and loans to franchisees will continue without change. With respect to new contract originations, Snap-on Inc. will provide the financing. Over the next twelve months, Snap-on estimates these incremental financing needs to approximate $450 million.

Snap-on said it believes it has adequate financial resources to fully provide for the financing needs of Snap-on Credit including $525 million in cash on hand as of July 4. Snap-on believes it will continue to generate free cash flow which could be deployed for financing Snap-on Credit, along with a $500 million bank credit facility, which also serves as a back-up credit facility for Snap-on’s issuance of commercial paper. There is presently no commercial paper outstanding nor any amounts outstanding under these credit facilities. Snap-on also said it believes it has further access to the public debt markets, should additional borrowings be necessary and Snap-on believes it could secure additional bank revolving credit capacity to fund Snap-on Credit should this be necessary.