Snap-on Announces First Quarter 2023 Results

Sales of $1,183.0 million up 7.8% from Q1 2022, organic sales up 10.2%;

Operating margin before financial services of 22.0% improves 170 basis points;

Diluted EPS of $4.60 increases 15.0% from Q1 2022

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 first quarter of 2023.

• Net sales of $1,183.0 million in the first quarter of 2023 represented an increase of $85.2 million, or 7.8%, from 2022 levels, reflecting a $109.2 million, or 10.2%, organic sales gain, partially offset by $24.0 million of unfavorable foreign currency translation.

• Operating earnings before financial services for the quarter of $259.8 million compared to $223.1 million in 2022. As a percentage of net sales, operating earnings before financial services of 22.0% in the first quarter improved 170 basis points from 20.3% last year.

• Financial services revenue in the quarter of $92.6 million compared to $87.7 million in 2022; financial services operating earnings of $66.3 million compared to $70.4 million last year.

• Consolidated operating earnings for the quarter of $326.1 million, or 25.6% of revenues (net sales plus financial services revenue), compared to $293.5 million, or 24.8% of revenues, last year.

• The first quarter effective income tax rate was 23.1% in 2023 and 23.7% in 2022.

• Net earnings in the quarter of $248.7 million, or $4.60 per diluted share, compared to net earnings of $217.4 million, or $4.00 per diluted share, a year ago.

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

“We’re again encouraged by our performance, achieved against the general uncertainty and turbulence of these times. Our results validate the extraordinary resilience of our critical markets and demonstrate the ongoing and upward momentum present across our operations,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Our experienced and capable team overcame the difficulties of the day, further building our strategic and tactical advantages in our product and in our brand, all while maintaining our established trajectory of continuing progress. We believe our quarter is clear testimony to the abundant opportunities along our runways for growth. Our businesses serving critical industries are well positioned to extend our activities outside the garage, and within automotive repair, we are poised to sustain our advance in that robust market, by enhancing the van channel and expanding with repair shop owners and managers. At the same time, we believe the period confirms the power of our Snap-on Value Creation Processes and our considerable capacity for improvement. Finally, I want to thank our franchisees and our associates worldwide for their valuable contributions, for their steadfast dedication, and for their unfailing confidence in our future.”

Segment Results

Commercial & Industrial Group segment sales of $363.8 million in the quarter compared to $340.1 million last year, reflecting a $36.2 million, or 11.1%, organic sales gain, partially offset by $12.5 million of unfavorable foreign currency translation. The organic increase is primarily due to gains in sales to customers in critical industries, as well as higher activity in the segment’s specialty tools and European-based hand tools businesses.

Operating earnings of $55.8 million in the period, including $2.0 million of unfavorable foreign currency effects, compared to $45.7 million in 2022. The operating margin (operating earnings as a percentage of segment sales) of 15.3% improved 190 basis points from 13.4% last year.

Snap-on Tools Group segment sales of $537.0 million in the quarter compared to $512.1 million last year, reflecting a $32.0 million, or 6.3%, organic sales gain, partially offset by $7.1 million of unfavorable foreign currency translation. The organic increase is primarily due to higher sales in the U.S. franchise operations.

Operating earnings of $131.7 million in the period, including $6.1 million of unfavorable foreign currency effects, compared to $116.0 million in 2022. The operating margin of 24.5% improved 180 basis points from 22.7% last year.

Repair Systems & Information Group segment sales of $446.6 million in the quarter compared to $398.2 million last year, reflecting a $54.4 million, or 13.9%, organic sales increase, partially offset by $6.0 million of unfavorable foreign currency translation. The organic gain includes increased sales of undercar equipment, higher activity with OEM dealerships, and higher sales of diagnostic and repair information products to independent repair shop owners and managers.

Operating earnings of $104.6 million in the period, including $0.5 million of favorable foreign currency effects, compared to $91.6 million in 2022. The operating margin of 23.4% compared to 23.0% a year ago.

Financial Services operating earnings of $66.3 million on revenue of $92.6 million in the quarter compared to operating earnings of $70.4 million on revenue of $87.7 million a year ago. Originations of $300.9 million in the first quarter increased $55.3 million, or 22.5%, from 2022 levels.

Corporate expenses in the first quarter of $32.3 million compared to $30.2 million last year.

Outlook

We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment. In 2023, Snap-on expects to make ongoing progress 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, it is projected that capital expenditures in 2023 will approximate $100 million, of which $23.0 million was incurred in the first three months of the year.

Snap-on currently anticipates that its full year 2023 effective income tax rate will be in the range of 23% to 24%.

Conference Call and Webcast on April 20, 2023, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, April 20, 2023, 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 $4.5 billion in 2022, 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 December 31, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230420005247/en/