Despite complications brought about by events in Europe, Snap-on continues to gain position and find pockets of strength that have allowed it to offset areas of external weakness. In the fourth quarter of 2011, Kenosha, WI-based Snap-on saw its net income rise 28.3 percent to $74.30 million and its total revenue grow 5.7 percent to $736.60 million. Excluding unfavorable foreign currency translation, total organic sales were up 5.9 percent.
Nick Pinchuk, chairman and CEO, characterized Snap-on’s overall market as favorable and fairly stable. “Our third-quarter sales volumes, excluding the effects of currency movements, were above the pre-recession levels of 2007 and 2008. That was the first time we could claim an overall recovery in volumes. While the fourth quarter continued that overall trend, today we’re reporting results that exceed fourth-quarter 2007 levels, which is the most appropriate pre-recession comparison,” Pinchuk told analysts on a Feb. 2 conference call. “In addition, sales increased sequentially off the third quarter, consistent with our normal seasonality. So, while Europe does pose some challenges, we’re maintaining our momentum.”
The Snap-on Tools Group had a strong quarter. Net sales climbed 9.2 percent to $292.80 million, largely because of continued higher sales in the United States. Excluding unfavorable currency translation, group organic sales increased 9.3 percent
Tools Group operating earnings rose 53.5 percent to $39.60 million, and, as a percentage of sales, operating earnings increased from 9.6 percent to 13.5 percent year-over-year. It’s worth noting that the 2010 numbers included a $4.60-million restructuring charge related to consolidating the North American tool storage production into one facility. However, while the year-over-year gain is somewhat amplified, the fourth-quarter rise to 13.5 percent still represents a 230-basis-point increase even after adjusting for the favorable restructuring compares.
“The quarter’s result, taken together with the full-year operating margin at 13.7 percent for the Tools Group, indicate clearly that the operation is showing significant positive momentum,” Pinchuk said on the call. “Given that one of our key priorities we set for ourselves years back was, in fact, strengthening the van channel, I’m encouraged that it appears to be quite robust as we enter 2012.”
The company’s Repair Systems & Information Group came through with improved, yet somewhat muted, results in the fourth quarter. Net sales increased 2.0 percent to $236.50 million largely because of higher sales from the Equipment Solutions business (which facilitates essential tool programs for OEMs) along with higher sales of diagnostics and Mitchell 1 software products to repair shops. This more than offset weaker sales to European equipment distributors. Organic sales were up 2.4 percent.
Group operating earnings rose 7.7 percent to $49.20 million, and, as a percentage of sales, increased from 19.7 percent to 20.8 percent year-over-year.