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.
Nicholas Pinchuk Elected Chairman
Also this week, Snap-on announced that Nicholas Pinchuk, currently president and chief executive officer, has been elected chairman by the company’s board of directors. Pinchuk succeeds Jack Michaels, who is leaving Snap-on’s board of directors upon the expiration of his term on April 23.
"We are extremely pleased to have Nick as Snap-on’s chairman, president and chief executive officer, and look forward to him continuing to build on the foundation he has laid during his past seven years with the company," said W. Dudley Lehman, chairman of the company’s Corporate Governance & Nominating Committee. "Nick’s election as chairman is a further indication of the board’s confidence in his leadership."
"I feel extraordinarily privileged to be part of the Snap-on team. We’ve made substantial progress over the last few years, and I look forward to continuing that work with the support of the board, our associates, our franchisees and all of our company’s stakeholders," said Pinchuk. "We thank Jack Michaels for his special leadership and significant contributions to the Snap-on family."
Pinchuk joined Snap-on in 2002 as senior vice president and president of Snap-on’s Worldwide Commercial and Industrial Group. He was named president and chief operating officer in April 2007, when he was also appointed to Snap-on’s board of directors. In December 2007, he was named president and chief executive officer. Prior to joining Snap-on, Pinchuk served in several executive operational and financial management positions at United Technologies Corp. Before United Technologies, he held various financial and engineering positions at the Ford Motor Co. He also served as an officer in the United States Army.
Pinchuk is a member of the board of directors of Columbus McKinnon Corp. He received master and bachelor of science degrees in Engineering from Rensselaer Polytechnic Institute and an MBA from Harvard.
