Quarterly Financial Review

Transcription

1 Quarterly Financial Review Third Quarter 2013 Q Quarterly Review 2013 Snap-on Incorporated October 17, 2013

2 Cautionary Statement These slides should be read in conjunction with comments from a conference call held on October 17, The financial statement information included herein is unaudited. Statements made during the October 17, 2013 conference call and/or information included in this presentation may contain statements, including earnings projections, that are forwardlooking in nature and, accordingly, are subject to risks and uncertainties regarding Snap-on s expected results; actual results may differ materially from those described or contemplated in these forward-looking statements. Factors that may cause actual results to differ materially from those contained in the forward-looking statements are detailed in the corresponding press release and Form 8-K and in Snap-on s recent 1934 Act SEC filings, which are incorporated herein by reference. Snap-on disclaims any responsibility to update any forward-looking statement provided during the October 17, 2013 conference call and/or included in this presentation, except as required by law. 2

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4 Nick Pinchuk Chairman and Chief Executive Officer Q Quarterly Review 2013 Snap-on Incorporated October 17, 2013

5 Aldo Pagliari Senior Vice President and Chief Financial Officer Q Quarterly Review 2013 Snap-on Incorporated October 17, 2013

6 Consolidated Results 3 rd Quarter ($ in millions, except per share data - unaudited) $ % $ % Change Net sales Organic sales Acquisition Currency translation $ (7.3) $ % 4.7 % 2.2 % (1.1)% Gross profit Operating expenses $ % 33.6 % $ % 34.3 % Operating earnings before financial services $ % $ % 15.7 % Financial services revenue Financial services operating earnings $ $ % 13.3 % Operating earnings $ % $ % 15.1 % Net earnings Diluted EPS $ 84.6 $ 1.43 $ 74.1 $ % 13.5 % Organic sales (excluding $15.6 million of sales from the Challenger acquisition and $7.3 million of unfavorable currency) up 4.7% Gross margin of 48.4% improved 60 basis points (bps) primarily due to savings from ongoing Rapid Continuous Improvement ( RCI ) initiatives Operating expenses up $8.8 million; operating expense margin improves 70 bps to 33.6% Operating earnings before financial services increased $15.1 million and operating margin improved 130 bps to 14.8%; financial services operating earnings of $31.6 million up $3.7 million or 13.3% Restructuring charges of $1.7 million in 2013 versus $2.3 million in

7 Commercial & Industrial 3 rd Quarter ($ in millions - unaudited) Change Segment sales Organic sales Currency translation Gross profit Operating expenses Operating earnings $ (2.5) (2.7) $ % $ % $ % $ (1.9)% (0.9)% (1.0)% $ % $ % $ % 7.8 % Organic sales down $2.5 million or 0.9% Continued lower sales to the military coupled with a slight sales decrease in the segment s European-based hand tools business Gross margin improved 110 bps to 38.1% primarily due to savings from ongoing RCI initiatives, particularly in Europe Operating expense margin of 25.0% improved 10 bps from 2012 levels primarily due to lower restructuring costs Operating earnings of $36.0 million increased $2.6 million and the operating margin of 13.1% improved 120 bps 7

8 Snap-on Tools 3 rd Quarter ($ in millions - unaudited) Change Segment sales Organic sales Currency translation Gross profit Operating expenses $ (4.0) $ % $ % $ % 9.5 % (1.4)% $ % $ % Operating earnings $ % $ % 4.2 % Organic sales up $29.0 million, or 9.5%, reflecting sales increases across both the company s U.S. and international franchise operations Gross profit of $142.8 million up $11.5 million from 2012; gross margin of 42.8% up 30 bps Operating expenses increased $9.8 million primarily due to higher volume-related and other expenses, including focused investment in growth initiatives aimed at enhancing the franchise network Operating earnings of $41.9 million increased $1.7 million; the operating margin of 12.6% compares with 13.0% a year ago 8

9 Repair Systems & Information 3 rd Quarter ($ in millions - unaudited) Change Segment sales Organic sales Acquisition Currency translation Gross profit Operating expenses Operating earnings $ $ % $ % $ % $ % 6.7 % 7.0 % 0.1 % $ % $ % $ % 17.0 % Sales up $30.7 million, or 13.8%, including $15.6 million of sales from the Challenger acquisition Organic sales up $14.9 million or 6.7% Higher sales of diagnostics and repair information products to repair shop owners and managers and increased sales to OEM dealerships Gross profit increased $11.3 million; gross margin of 46.2% down 130 bps primarily due to the impact of lower margin Challenger products partially offset by savings from ongoing RCI initiatives Operating expense margin of 23.3% improved 190 bps primarily due to benefits from sales volume leverage, including sales of Challenger products that have a lower operating expense ratio, and contributions from RCI initiatives Operating earnings of $57.9 million increased $8.4 million; the operating margin of 22.9% improved 60 bps 9

10 Financial Services 3 rd Quarter ($ in millions - unaudited) Segment revenue $ 45.1 $ 40.5 Operating earnings $ 31.6 $ 27.9 Originations $ $ Operating earnings up $3.7 million, or 13.3%, primarily due to continued growth of the financial services portfolio and higher average yields Originations increased 14.2% Average yield on finance receivables of 17.4% vs. 17.1% in 2012 Average yield on contract receivables of 9.6% vs. 9.5% in

11 Financial Services Portfolio Data ($ in millions - unaudited) Snap-on Credit (SOC) (United States) Extended Credit Total International Finance Subsidiaries Extended Credit Gross on-book finance portfolio $ $ 1,023.2 $ $ CIT receivables managed by SOC $ 3.3 $ 28.1 On-book and managed portfolio net losses (TTM) $ 16.9 $ 18.4 $ 1.3 $ Delinquency: As of 9/30/13 As of 6/30/13 As of 3/31/ % 1.1 % 1.3 % 1.0 % 0.9 % 1.1 % 0.6 % 0.6 % 0.9 % Total 0.5 % 0.6 % 0.9 % Gross on-book portfolio of $1,205.1 million compares to $1,084.3 million as of 2012 year end Anticipated gross portfolio increase of approximately $135 million for full-year 2013 TTM Trailing twelve months 11

12 Cash Flow ($ in millions - unaudited) Net cash provided by operating activities Net earnings Depreciation and amortization Changes in deferred income taxes Changes in working investment Changes in all other operating activities 3rd Quarter September YTD $ (8.1) (32.2) 18.2 $ (20.3) (6.4) $ (46.6) (6.6) $ (22.5) (39.8) Net increase in finance receivables $ (34.3) $ (28.0) $ (108.7) $ (97.2) Capital expenditures $ (19.3) $ (19.7) $ (50.7) $ (59.5) Acquisition - - $ (38.2) - Free cash flow $ 30.7 $ 22.0 $ $ 69.7 Free cash flow from Operations $ 58.1 $ 50.7 $ $ Free cash flow from Financial Services $ (27.4) $ (28.7) $ (87.5) $ (84.1) Increase (decrease) in cash $ 7.8 $ 2.5 $ (32.0) $ (9.5) Changes in working investment Net changes in trade and other accounts receivable, inventory and accounts payable Free cash flow Net cash provided by operating activities less net change in finance receivables and capital expenditures Free cash flow from operations Net cash provided by operating activities, exclusive of financial services, less capital expenditures Free cash flow from financial services Net cash provided by financial services operating activities less net change in finance receivables and less capital expenditures 12

13 Balance Sheet ($ in millions - unaudited) Trade & Other Accounts Receivable - net Days Sales Outstanding Finance Receivables - net Contract Receivables - net Inventory - net Inventory turns - TTM Cash Total debt Net debt Net debt to capital ratio September 28, 2013 $ $ $ $ $ $ $ % December 29, 2012 $ $ $ $ $ $ $ % 13