Snap-on Q4 2008 Earnings Call Transcript

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2009-02-04 11:46:10.0

Tags: Analyst, Call Transcript, Earnings, Manufacturing, Seeking Alpha, Snap-On Inc.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). We will take our first question from David Leiker. Please go ahead sir.

Unidentified Analyst

This is actually Keith on the line for David. I just wanted to set off by diving into the CapEx number. If you do decide to eventually dial back on some of the things that you identified, I mean how much could that number fall versus the $75 million to $80 million guidance?

Martin Ellen

Keith, this number could fall in $20 million to $30 million range.

Nicholas Pinchuk

Right. But we're not considering dialing back at this point. I want to emphasize that.

Unidentified Analyst

Okay. And can you just elaborate some more on some of the expenses in China and Eastern Europe that are driving the year-over-year increase?

Martin Ellen

Yes. Keith in, let's just start in the quarter, we spent about $25 million and if you look at our growth investments, as I said in Belarus and Kunshan, they alone were $6 million to $7 million of the $25 million and that was somewhat accelerated from our original plan. The balance we've got still manufacturing improvements and capacity expansions going on in other plan, both in Europe and the U.S and those were another $4 million to $5 million in the quarter and then of course, you've got a base level of normal maintenance CapEx.

Unidentified Analyst

Okay. If we look at the SG&A or the operating expenses line, at a pretty sizeable year-over-year decline in the fourth quarter. Obviously, the portion of that that's related to currencies and always going to be at the same magnitude and we are not going to get the contingency adjustment again. But is there any reason to believe that sort of base pace of decline can't continue or accelerate through 2009?

Martin Ellen

No, I mean, you said the word decline. We'll continue to remind you that, again our business model as we've sort of marched towards the mid single digit operating profitability target for the entire corporation, always included a structure that had us at mid 40s gross margin, about where we are and a lower 30s SG&A which is wherein recent periods, we've been making the improvements and we are going to continue to try to hold to that, even though the top line is going to be more challenged.

Unidentified Analyst

Okay.

Nicholas Pinchuk

I think what we've said is. This is Nick, Keith, this is Nick Pinchuk.

 

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