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Snap-on Reports 4.6% Organic Sales Growth

Kenosha, WI-based Snap-on Inc. ended 2013 with an encouraging fourth quarter. Net income rose 11.8 percent to $96.90 million, as net sales increased 5.9 percent to $797.50 million. Excluding $15.20 million in sales from the May 2013 acquisition of Challenger Lifts and $5.30 million in unfavorable foreign currency translation, organic sales increased 4.6 percent.

Growth in the company’s European-based hand tools business, which was up in the high single-digit range, was the biggest highlight for Snap-on in the quarter.

Snap-on Tools Group segment sales increased 9.2 percent to $351.10 million, reflecting sales gains across both the U.S. and international franchise operations. Excluding $2.90 million in unfavorable foreign currency translation, organic sales increased 10.2 percent.

Segment operating earnings increased 11.8 percent to $51 million, with operating margin rising 30 basis points to 14.5 percent

Repair Systems & Information (RS&I) segment sales rose 9.5 percent to $264.60 million in the quarter. Excluding $15.20 million in sales from Challenger and $700,000 in favorable foreign currency translation, organic sales were up 2.9 percent.

The year-over-year organic sales increase primarily reflects a mid-single-digit gain from the sale of diagnostic and information products, as well as a mid-single-digit increase in sales of undercar equipment. These gains were partially offset by slightly lower sales to OEM dealerships. It’s worth noting that this segment experienced a wind down of a large OEM essential diagnostic distribution, rather than a change in the overall macros.

Segment operating earnings increased 9.7 percent to $60.80 million, with operating margin rising 10 basis points to 23 percent.

Nick Pinchuk, chairman and CEO, told analysts on a Feb. 6 conference call that it was an encouraging quarter to end the year. He said significant progress was achieved throughout 2013 in the face of meaningful headwinds, pointing out that reduced military spending was a substantial factor in the fourth quarter, and other quarters were impacted, to varying degrees, by the military decline, as well as by weakness in Europe.

Nonetheless, Pinchuk said management is reassured by the advancements being made along each of Snap-on’s runways for growth. “Critical industries like aviation, national resources and heavy fleets posted good gains, and we’re gaining further traction,” Pinchuk said on the call. “Our new undercar plant in China came to life, providing a broader range of new products for service facilities, both in OEM dealerships, as well as the developing independent repair industry in that region. And, outside of Asia, we are building our presence in other emerging markets, such as Brazil, where, this year, we launched our first handheld diagnostic unit for automotive technicians.

“The Tools Group continues to gain position, with expanding sales and favorable franchisee metrics speaking to the improvement. RS&I made progress, serving shop owners and managers with new handhelds and enhanced repair information, increasing heavy-duty capabilities, and with an expanded undercar equipment portfolio that now includes Challenger Lifts.”            — Marc Vincent

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