Snap-on Inc. has announced operating results for the first quarter of 2018.
Net sales of $935.5 million in the quarter increased $48.4 million, or 5.5 percent, from 2017 levels, reflecting a $7.2 million, or 0.8 percent, organic sales gain, $14.3 million of acquisition-related sales and $26.9 million of favorable foreign currency translation.
Operating earnings before financial services in the quarter of $177.7 million, or 19 percent of sales, compared to $170.2 million, or 19.2 percent of sales, last year.
Financial services revenue in the quarter of $83 million increased $6.2 million from 2017 levels; financial services operating earnings of $56.9 million increased $4.4 million from $52.5 million last year.
Consolidated operating earnings in the quarter of $234.6 million, or 23 percent of revenues (net sales plus financial services revenue), compared to $222.7 million, or 23.1 percent of revenues, last year.
Net earnings in the first quarter of 2018 were $163 million, or $2.82 per diluted share, compared to net earnings of $141.6 million, or $2.39 per diluted share a year ago.
“We are encouraged with our first quarter 2018 results, which were achieved despite continuing headwinds in the Snap-on Tools Group,” said Nick Pinchuk, Snap-on chairman and CEO. “Net sales growth in both the Commercial and Industrial Group and the Repair Systems and Information Group provides ongoing validation of the fundamental strength of Snap-on’s value proposition of making work easier for serious professionals and demonstrates continued progress along our defined runways for coherent growth. At the same time, year-over-year growth in earnings per diluted share reflects both the ongoing commitment to our Snap-on Value Creation Processes and the benefits for our corporation of the new tax legislation in the United States. Finally, these results would not have been possible without the dedication and capability of our franchisees and associates worldwide; I thank them for their continuing commitment and extraordinary contributions.”
Segment Results
Commercial & Industrial Group segment sales of $331.6 million in the quarter increased $32.9 million, or 11 percent, from 2017 levels, reflecting a $6 million, or 1.9 percent, organic sales gain, $13.6 million of acquisition-related sales, and $13.3 million of favorable foreign currency translation. The organic sales increase primarily includes higher sales to customers in critical industries as well as gains in the segment’s European-based hand tools business and Asia/Pacific operations, partially offset by lower sales of power tools.
Operating earnings of $46.5 million in the period increased $4.6 million from 2017 levels, and the operating margin (operating earnings as a percentage of segment sales) of 14 percent was unchanged from 2017.
Snap-on Tools Group segment sales of $404.7 million in the quarter decreased $4.7 million, or 1.1 percent, from 2017 levels, reflecting an $11.4 million, or 2.7 percent, organic sales decline, partially offset by $6.7 million of favorable foreign currency translation. The organic sales decrease includes lower sales in the company’s U.S. franchise operations, which was offset in part by gains in the company’s international franchise operations.
Operating earnings of $68.9 million in the period decreased $1.4 million from 2017 levels, and the operating margin of 17 percent compared to 17.2 percent a year ago.
Repair Systems & Information Group segment sales of $337 million in the quarter increased $18.2 million, or 5.7 percent, from 2017 levels, reflecting an $8.4 million, or 2.6 percent, organic sales gain, $0.7 million of acquisition-related sales, and $9.1 million of favorable foreign currency translation. The organic sales gain includes higher sales of diagnostic and repair information products to independent repair shop owners and managers and increased sales to OEM dealerships; sales of undercar equipment were essentially flat.
Operating earnings of $85.8 million in the period increased $6.7 million from 2017 levels, and the operating margin of 25.5 percent improved 70 basis points from 24.8 percent a year ago.
Financial Services operating earnings of $56.9 million on revenue of $83 million in the quarter compared to operating earnings of $52.5 million on revenue of $76.8 million a year ago. Originations of $247.3 million in the first quarter decreased $17.3 million, or 6.5 percent, from 2017 levels.
Corporate expenses of $23.5 million in the quarter compared to $21.1 million last year.
Outlook
Snap-on expects to make continued progress in 2018 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2018 will be in a range of $90 million to $100 million, of which $18 million was incurred in the first quarter.
As a result of the recently enacted tax legislation in the U.S., Snap-on currently anticipates that its full year 2018 effective income tax rate will be in a range of 24 to 25 percent.
