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Letter to the Editor

Snap-on Reports EPS of $2.52 for the Full Year and $0.66 for the Fourth Quarter Before Charges and One-Time Gain

KENOSHA, Wis. -- Snap-on Incorporated, a global leader in tools, diagnostics and equipment, announced results for the fourth quarter and year 2000, including full-year record sales and segment operating earnings.

• Full-year 2000 earnings were $147.8 million, or $2.52 per share, compared with $152.9 million, or $2.60 per share, in 1999 before charges and one-time gains in both years. Net earnings in 2000 were $148.5 million, or $2.53 per share, compared with $127.2 million, or $2.16 per share, in 1999. Operating earnings from segments, excluding non-comparable items, reached a record $230.5 million in 2000.
• Net sales increased 12% to a record $2.176 billion in 2000 from $1.946 billion in 1999, reflecting a 5 percent increase in organic sales, an 11 percent contribution from the Bahco acquisition, a negative 3 percent effect from currency translation, and a negative 1 percent from discontinued activities.
• Cash generated by operations was $190.2 million in 2000 and free cash flow was $132.6 million. Improvements in working capital turnover, largely driven by reduced inventory, coupled with solid cash earnings led to record levels of free cash flow in the last two years. Consequently, in 2000, total debt was reduced by $86.5 million, and the total-debt-to-capital ratio strengthened to 39.2 percent from 43.3 percent at year-end 1999.
• Fourth-quarter earnings in 2000 were $38.2 million, or $0.66 per share, compared with $44.7 million, or $0.76 per share, in 1999, excluding the effect of non-comparable items in both years. Net fourth-quarter earnings in 2000 were $13.7 million, or $0.24 per share, compared with $27.4 million, or $0.47 per share, in 1999.
• Fourth-quarter 2000 net sales, which continued to be impacted unfavorably by currency translations, were $556.3 million compared with $566.7 million in 1999. Organic sales (adjusted for currency changes) grew 3 percent over the prior-year period.

For the fourth-quarter 2000, diluted earnings per share (excluding non-comparable items) were $0.66 per share compared with $0.76 in the 1999 period. Significant improvements in sales of tools and equipment in the vehicle-repair market, in both Europe and North America, were attained compared with the third-quarter 2000, but were negatively impacted year-over-year by unfavorable currency translations. The sequential progress was led by a year-over-year increase of 3 percent core growth in the North American dealer van business, continued steady growth in sales at Bahco and sales increases to new-car dealerships under facilitation agreements. Worldwide, organic sales (excluding currency translations) grew 2 percent in the dealer business and 4 percent in the non-dealer business.

Improvements in operating earnings from core sales growth, operating leverage on the sales growth, and streamlining benefits in European activities were more than offset by a decline in net finance income.

Snap-on strengthened its business in 2000 through successful new product introductions, net additions to the worldwide franchised dealer base, the continued benefits of actions to streamline the business and the full-year contribution of Bahco. Enhanced customer service and faster response time in its manufacturing facilities, coupled with a focused effort to reduce inventory levels, resulted in a substantial improvement in working capital productivity and strong free cash flow in 2000.

Net sales in the worldwide Snap-on Dealer Group increased 2 percent to $1.069 billion in 2000 from $1.051 billion in 1999, led by solid dealer sales in North America and a net addition of 197 dealers worldwide. Sales in the company's non-dealer business, the Commercial Tools and Equipment Group, reported a 23.7 percent increase in 2000 to $1.107 billion from $.895 billion in 1999. The increase was driven by the full-year contribution of Bahco and higher sales in the facilitation business, partially offset by unfavorable currency translations.

In the fourth quarter, Snap-on took charges totaling $38.2 million ($24.4 million after-tax or $0.42 per share), including costs to exit an unprofitable segment of the emissions testing business (prompted by changes in technology and regulations) and a small business operation in the Asia/Pacific region. The company will continue to provide customer and product support for its existing emissions-testing programs. In addition, Snap-on has reserved for legal costs including the aggressive defense and assertion of Snap-on's intellectual property. The company estimates that approximately 50 percent of the charge will be non-cash.

"Softening economic conditions suggest caution is appropriate in looking to first-half performance," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "But we are confident that 2001 overall will be a year of record sales, operating profit and earnings per share. Our guarded optimism is founded on the solid fundamentals of our core business and product portfolio, which continue to deliver value and productivity to our customers. Our priority is on growing our dealer network in 2001 and on strengthening our market positions worldwide. We will continue to focus on improving working capital management, which is expected to lead to another year of exceptional cash flow."

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