Sales of $1,102.5 million up 6.2% from Q3 2021, organic sales up 10.4%;

Operating margin before financial services of 20.3% improves 90 basis points;

Diluted EPS of $4.14 increases 16.0% from Q3 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 third quarter of 2022.

• Net sales of $1,102.5 million in the third quarter of 2022 increased $64.8 million, or 6.2%, from 2021 levels, reflecting a $103.9 million, or 10.4%, organic sales gain, partially offset by $39.1 million of unfavorable foreign currency translation.

• Operating earnings before financial services for the quarter of $223.5 million compared to $201.3 million in 2021. As a percentage of net sales, operating earnings before financial services of 20.3% in the third quarter improved 90 basis points from 19.4% last year.

• Financial services revenue of $87.3 million in the quarter was unchanged from 2021; financial services operating earnings of $66.4 million compared to $70.6 million last year.

• Consolidated operating earnings for the quarter of $289.9 million, or 24.4% of revenues (net sales plus financial services revenue), compared to $271.9 million, or 24.2% of revenues, last year.

• The third quarter effective income tax rate was 21.6% in 2022 and 23.7% in 2021.

• Net earnings in the quarter of $223.9 million, or $4.14 per diluted share, compared to net earnings of $196.2 million, or $3.57 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 third quarter as it further demonstrates the momentum we’ve maintained in sales, in profitability, and in earnings throughout these ongoing periods of varied turbulence,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Achieved despite the uncertainties, we believe this period’s performance confirms the resilience of our markets, reflects the considerable capabilities of our experienced team, and illustrates the diverse opportunities along our runways for growth, as evidenced by our continuing sales gains over the pre-pandemic levels of 2019, reaching 22.3% as reported, or 22.8% organically. At the same time, we continue to leverage our Snap-on Value Creation Processes to maintain and further extend our ongoing advantages in our people, in our brands and, importantly, in our products. In that regard, we were again honored with awards from both Motor Magazine and Professional Tool & Equipment News, reflecting our strong commitment to customer connection and exhibiting our ability to translate the insights gained into the winning innovations that helped drive our significant progress. Finally, I want to thank our franchisees and associates for their notable contributions, for their unwavering dedication, and for their firm confidence in the abundant prospects that mark our future.”

Segment Results

Commercial & Industrial Group segment net sales of $356.8 million in the quarter compared to $351.4 million last year, reflecting a $26.2 million, or 7.9%, organic sales gain, partially offset by $20.8 million of unfavorable foreign currency translation. The organic increase is primarily due to higher activity in the segment’s Asia Pacific operations and specialty tools business, as well as from gains in sales to customers in critical industries.

Operating earnings of $52.3 million in the period, including $2.1 million of unfavorable foreign currency effects, compared to $53.6 million in 2021. The operating margin (operating earnings as a percentage of segment net sales) of 14.7% compared to 15.3% a year ago.

Snap-on Tools Group segment net sales of $496.6 million in the quarter compared to $471.4 million last year, reflecting a $34.1 million, or 7.4%, organic sales gain, partially offset by $8.9 million of unfavorable foreign currency translation. The organic increase is comprised of higher sales in the U.S. franchise business, partially offset by a decrease in the segment’s international operations.

Operating earnings of $102.2 million in the quarter, including $4.2 million of unfavorable foreign currency effects, compared to $98.2 million in 2021. The operating margin of 20.6% compared to 20.8% last year.

Repair Systems & Information Group segment net sales of $414.0 million in the quarter compared to $364.4 million last year, reflecting a $60.8 million, or 17.2%, organic sales increase, partially offset by $11.2 million of unfavorable foreign currency translation. The organic gain included higher activity with OEM dealerships, increased sales of undercar equipment, and higher sales of diagnostics and repair information products to independent repair shop owners and managers.

Operating earnings of $95.4 million in the period, including $0.6 million of favorable foreign currency effects, compared to $83.3 million in 2021. The operating margin of 23.0% compared to 22.9% a year ago.

Financial Services operating earnings of $66.4 million on revenue of $87.3 million in the quarter compared to operating earnings of $70.6 million on revenue of $87.3 million a year ago. Originations of $300.2 million in the third quarter increased $30.9 million, or 11.5%, from 2021 levels.

Corporate expenses in the third quarter of $26.4 million compared to $33.8 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 $61.5 million was incurred in the first nine 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 October 20, 2022, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, October 20, 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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