Snap-on Announces Second Quarter 2022 Results

Sales of $1,136.6 million up 5.1% from Q2 2021, organic sales up 8.4%;

Operating margin before financial services of 21.7% improves 160 basis points;

Diluted EPS of $4.27 increases 13.6% from Q2 2021

Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced operating results for the second quarter of 2022.

• Net sales of $1,136.6 million in the second quarter of 2022 increased $55.2 million, or 5.1%, from 2021 levels, reflecting an $87.6 million, or 8.4%, organic sales gain, partially offset by $32.4 million of unfavorable foreign currency translation.

• Operating earnings before financial services for the quarter of $246.6 million compared to $217.1 million in 2021. As a percentage of net sales, operating earnings before financial services of 21.7% in the second quarter improved 160 basis points from 20.1% last year.

• Financial services revenue in the quarter of $86.4 million compared to $86.9 million in 2021; financial services operating earnings of $65.3 million compared to $68.9 million last year.

• Consolidated operating earnings for the quarter of $311.9 million improved to 25.5% of revenues (net sales plus financial services revenue) as compared to $286.0 million, or 24.5% of revenues, last year.

• The second quarter effective income tax rate was 23.8% in 2022 and 23.3% in 2021.

• Net earnings in the quarter of $231.5 million, or $4.27 per diluted share, compared to net earnings of $208.0 million, or $3.76 per diluted share, a year ago.

See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales.

“We’re encouraged by our second quarter results which not only demonstrate our upward trajectory in sales, profitability and earnings, but also represent new highs achieved in these uncertain macroeconomic and geopolitical environments,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Despite the turbulence, we have consistently maintained meaningful momentum, as evidenced by our continuing sales growth over the pre-pandemic period of 2019, reaching 19.5% as reported, or 18.7% organically, in the quarter. These are interesting times, but we meet the difficulties of the day fortified by the strengths inherent in our products, our brands, and our people . . . considerable advantages that drive clear and consistent progress, even in turmoil. We believe that these powerful and singular assets will enable significant gains along our runways for growth, which combined with the improvements delivered by our Snap-on Value Creation Processes, will further extend our ongoing upward trend and will author notable advancements as we go forward. Finally, I want to thank our franchisees and associates for their ongoing contributions, for their unfailing dedication, and for their steadfast confidence in our future.”

Segment Results

Commercial & Industrial Group segment net sales of $359.1 million in the quarter compared to $350.5 million last year, reflecting a $25.3 million, or 7.6%, organic sales increase, partially offset by $16.7 million of unfavorable foreign currency translation. The organic gain is primarily due to higher activity in the segment’s European-based hand tools business and Asia Pacific operations, as well as from gains in sales to customers in critical industries.

Operating earnings of $51.7 million in the period, including $2.0 million of unfavorable foreign currency effects, compared to $55.5 million in 2021. The operating margin (operating earnings as a percentage of segment net sales) of 14.4% compared to 15.8% a year ago.

Snap-on Tools Group segment net sales of $520.6 million in the quarter compared to $484.1 million last year, reflecting a $44.2 million, or 9.3%, organic sales gain, partially offset by $7.7 million of unfavorable foreign currency translation. The organic increase is comprised of higher sales in both the U.S. franchise business and in the segment’s international operations.

Operating earnings of $124.4 million in the quarter, including $2.2 million of unfavorable foreign currency effects, compared to $103.5 million in 2021. The operating margin of 23.9% improved 250 basis points from 21.4% last year.

Repair Systems & Information Group segment net sales of $416.8 million in the quarter compared to $398.6 million last year, reflecting a $27.4 million, or 7.0%, organic sales increase, partially offset by $9.2 million of unfavorable foreign currency translation. The organic gain included higher sales of undercar equipment and increased sales of diagnostics and repair information products to independent repair shop owners and managers, while activity with OEM dealerships was essentially flat.

Operating earnings of $95.7 million in the period, including $1.2 million of favorable foreign currency effects, compared to $86.7 million in 2021. The operating margin of 23.0% improved 120 basis points from 21.8% a year ago.

Financial Services operating earnings of $65.3 million on revenue of $86.4 million in the quarter compared to operating earnings of $68.9 million on revenue of $86.9 million a year ago. Originations of $307.6 million in the second quarter increased $21.8 million, or 7.6%, from 2021 levels.

Corporate expenses in the second quarter of $25.2 million compared to $28.6 million last year.

Outlook

COVID-19 and its subsequent variants, as well as supply chain inefficiencies, continue to impact economic activity worldwide in 2022. The company believes that our markets and our operations possess and, indeed, have demonstrated considerable resilience against the impact of the virus and that there will be ongoing advancement even in the midst of the turbulence. The trajectory, however, may be uncertain due to the evolving nature of the situation.

Snap-on expects to make continued progress in 2022 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, the company anticipates that capital expenditures in 2022 will be in a range of $90 million to $100 million, of which $41.5 million was incurred in the first six months of the year. Snap-on continues to respond to the global macroeconomic challenges through its Rapid Continuous Improvement (RCI) process and other cost reduction initiatives.

Snap-on currently anticipates that its full year 2022 effective income tax rate will be in the range of 23% to 24%.

Conference Call and Webcast on July 21, 2022, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, July 21, 2022, at 9:00 a.m. Central Time, and a replay will be available for at least 10 days following the call. To access the webcast, visit https://www.snapon.com/EN/Investors/Investor-Events and click on the link to the call. The slide presentation accompanying the call can be accessed under the Downloads tab in the webcast viewer, as well as on the Snap-on website at https://www.snapon.com/EN/Investors/Financial-Information/Quarterly-Earnings.

Non-GAAP Measures

References in this release to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, expanded customer base, geographic expansion, new product development and pricing changes, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. Organic sales also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in the company’s businesses and facilitates comparisons of its sales performance with prior periods.

About Snap-on

Snap-on Incorporated is a leading global innovator, manufacturer, and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks including those working in vehicle repair, aerospace, the military, natural resources, and manufacturing. From its founding in 1920, Snap-on has been recognized as the mark of the serious and the outward sign of the pride and dignity working men and women take in their professions. Products and services are sold through the company’s network of widely recognized franchisee vans as well as through direct and distributor channels, under a variety of notable brands. The company also provides financing programs to facilitate the sales of its products and to support its franchise business. Snap-on, an S&P 500 company, generated sales of $4.25 billion in 2021, and is headquartered in Kenosha, Wisconsin.

Forward-looking Statements

Statements in this news release that are not historical facts, including statements that (i) are in the future tense; (ii) include the words “expects,” “anticipates,” “intends,” “approximates,” or similar words that reference Snap-on or its management; (iii) are specifically identified as forward-looking; or (iv) describe Snap-on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that this news release may contain statements, including earnings projections, that are forward-looking in nature and were developed by management in good faith and, accordingly, are subject to risks and uncertainties regarding Snap-on’s expected results that could cause (and in some cases have caused) actual results to differ materially from those described or contemplated in any forward-looking statement. Factors that may cause the company’s actual results to differ materially from those contained in the forward-looking statements include those found in the company’s reports filed with the Securities and Exchange Commission, including the information under the “Safe Harbor” and “Risk Factors” headings in its Annual Report on Form 10-K for the fiscal year ended January 1, 2022, which are incorporated herein by reference. Snap-on disclaims any responsibility to update any forward-looking statement provided in this news release, except as required by law.

For additional information, please visit www.snapon.com.

Non-GAAP Supplemental Data

The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on Incorporated's ("Snap-on") non-financial services ("Operations") and "Financial Services" businesses.

The supplemental Operations data reflects the results of operations and financial position of Snap-on's tools, diagnostic and equipment products, software and other non-financial services operations with Financial Services presented on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on's U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses are eliminated to arrive at the Condensed Consolidated Financial Statements.

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