investor overview - snapon.com · snap-on rated most preferred brand by u.s. auto technicians ......

Investor Overview

October 2018

Information included in this presentation may contain statements, including earnings projections, that are

forward-looking in nature and, accordingly, are subject to risks and uncertainties regarding Snap-on’s

expected results. Statements made that (i) are in the future tense; (ii) include the words “expects,”

“anticipates,” “intends,” “approximates,” “plans,” “targets,” “estimates,” “believes,” 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. The company’s

actual results may differ materially from those described or contemplated in the forward-looking

statements. 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 30, 2017 and

under “Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Caution Regarding Forward-Looking Statements” in its fiscal 2018 third quarter report on Form

10-Q, which are incorporated herein by reference. Snap-on disclaims any responsibility to update any

forward-looking statement provided during this presentation, except as required by law.

This presentation includes certain non-GAAP measures of financial performance, which are not meant to

be considered in isolation or as a substitute for their GAAP counterparts. Additional information

regarding these non-GAAP measures is included in Snap-on’s Form 10-K and earnings press releases

available at snapon.com. See appendix for reconciliation of non-GAAP measures to GAAP counterparts.2

CAUTIONARY STATEMENT

3

SNAP-ON OVERVIEW

• Founded on innovation in 1920

• Makes work easier for serious

professionals performing

critical tasks

• Unique brand strength

• 12,600 associates worldwide

• Serves professionals in over

130 countries

• 2017 net sales: $3.7 billion

• NYSE: SNA / S&P 500

• $8.4B Market Cap

• 2.2% Cash Dividend Yield

– Dividends paid without

interruption or reduction

since 1939

4

SNAP-ON IS...

• Rooted in the Dignity of Work

• Driven by the Needs of the

Serious

• Guided with the Insight Shaped

by Experience

UNIQUE PRODUCTIVITY SOLUTIONS

5

UNIQUE BRAND STRENGTH

6

7

ORGANIZED TO REACH OUR PRIMARY

CUSTOMERS: OPERATING SEGMENTS

Snap-on Tools Group

(Franchised Van

Business):

Vehicle repair

technicians

Repair Systems &

Information Group

(RS&I):

Vehicle repair shop

owners and

managers

Commercial &

Industrial Group

(C&I):

Professionals in a

broad range of

critical industries

2017 revenues by segment

Financial

Services

28%

36%

30%

6%

4

5

6

7

8

9

10

11

12

13

14

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

200

7

200

8

200

9

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Average Vehicle Age - 1980-2017

8

U.S. VEHICLE AGING

DRIVES SERVICE GROWTH

Age

in

Years

201711.7 years

Source: HIS Markit 2017

Age of U.S. Vehicles

9

VEHICLE TECHNOLOGY & COMPLEXITY

PROVIDES OPPORTUNITY

• Increasing vehicle complexity

• Testing and re-programming

requirements expanding

• Repair information growing

• Vehicle repairs increasingly

require use of diagnostics

• Productive shop management

rising in importance

• Emerging vehicle

technologies create new

solution needs

Runways for

Growth

The Way Forward:

Runways for

Improvement

10

Cell DesignSafety

Quality

Customer Connection

Innovation

Rapid Continuous Improvement

11

RUNWAYS FOR IMPROVEMENT:

SNAP-ON VALUE CREATION

2017

77 Locations

with

No Lost Time

Incidents

Safety Incident Rate

92% Reduction

Associates are 92% less likely to experience a

safety incident today than in 200412

SNAP-ON VALUE CREATION:

SAFETY

Frost & Sullivan – 2017 United States Automotive Technicians’ Choice:

Opportunities in the Automotive Tools Market

Snap-on rated most preferred brand by U.S. auto technicians in multiple

product categories of the latest Frost & Sullivan survey, including:

65% 63%50%56%9% 4% 9% 9%

13


QUALITY

14


CUSTOMER CONNECTION

• ~4,900 mobile stores

• Multiple direct sales forces

• ~700,000 N. American and

European repair shops;

repair networks in emerging

markets growing rapidly

• ~1 billion repair records in

database

• ~2,500 vocational schools

• ~38,000 visitors to

Snap-on’s Innovation Works

We Directly Observe Customers and Workplaces

We Translate Insights Into Innovation15

SNAP-ON VALUE CREATION: INNOVATION

NEW PRODUCT AWARDS AND SUCCESSES

Operating margin before financial services up 1,260 bps* since 2005

16


RAPID CONTINUOUS IMPROVEMENT (RCI)

* As adjusted to exclude certain legal charges. See appendix "Reconciliation of non-GAAP Financial Measures"

for further explanation.

Investing in

These

Strategically

Decisive

Areas

17

RUNWAYS FOR GROWTH

• Enhance the franchise network

• Expand with repair shop owners

and managers

• Extend to critical industries

• Build in emerging markets

Selling Great Tools Through Vans

to Vehicle Technicians18

SNAP-ON HERITAGE

Makes work easier for serious professionals

performing critical tasks in workplaces of consequence

where the costs and penalties of failure are high

19

SNAP-ON MORE BROADLY DEFINED

20

ENHANCE THE FRANCHISE NETWORK

REACH MORE TECHNICIANS

• Maintain strong franchisee health metrics

• Enhance franchisee productivity and

improve coverage

• Maintain a growing array of new

product introductions

• Innovate the selling process with

programs aimed at amplifying the power

of the van channel

21

EXPAND WITH REPAIR SHOP

OWNERS AND MANAGERS

• Leverage deep understanding of customers

in parts and service operations

• Help shop owners and managers improve

both technical competency and business

acumen

• Grow and integrate broad capabilities

• Innovate and add new products for this

important customer group

22

EXTEND TO CRITICAL INDUSTRIES

• Serve more

places where

tasks require

repeatability

and reliability

• Build a deep

understanding

of the work

performed

• Provide

specialized

productivity

solutions for

critical tasks

23

BUILD IN EMERGING MARKETS

• Create manufacturing capacity

• Establish distribution and

sales reach

• Launch new product lines

$2.85$2.94

$3.06$3.28 $3.35

$3.43$3.69

14.5%15.2%

15.8%16.6%

18.1%19.3% 18.0%

5%

10%

15%

20%

0.00

1.00

2.00

3.00

4.00

2011 2012 2013 2014 2015 2016 2017

$ Billions

Net Sales Operating Margin Before Financial Services (as % of net sales)

*As adjusted to exclude certain legal charges. See appendix "Reconciliation of non-GAAP Financial Measures" for

further explanation.

Historical data reflects the 2018 adoption of ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715).

19.3%*

NET SALES AND OI MARGIN TREND

24

$4.71$5.20

$5.93

$7.14

$8.10

$9.20$9.52

0.00

3.00

6.00

9.00

12.00

2011 2012 2013 2014 2015 2016 2017

Diluted Earnings Per Share Adjusted Diluted Earnings Per Share

DILUTED EARNINGS PER SHARE

* As adjusted to exclude certain legal and tax charges. See appendix "Reconciliation of non-GAAP Financial Measures"

for further explanation.

$10.12*

25

26

FINANCIAL SERVICES

$398

$733

$935

$1,084

$1,232

$1,385

$1,591 $1,815

$2,002

($9.1)

$14.4 $72.9

$106.7

$125.7

$149.1

$170.2

$198.7

$217.5

($40)

$0

$40

$80

$120

$160

$200

$240

$0

$400

$800

$1,200

$1,600

$2,000

H2 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ Millions

Ending gross on-book portfolio Financial Services Operating Earnings*

* 2011 excludes $18 million arbitration settlement gain; including settlement gain, Financial Services operating

earnings was $90.9 million

Financial Services is both strategically important and a strong contributor to

company earnings; unique aspects of model drive portfolio performance and differentiate

from other captive credit companies

15.5% Quarterly dividend increase November 2017;

Dividends paid without interruption or reduction since 193927

INCREASED DIVIDENDS

$1.22 $1.30

$1.40 $1.58

$1.85

$2.20

$2.54

$2.95

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

2010 2011 2012 2013 2014 2015 2016 2017

Adjusted EPS up 17.6%*, Operating Margin before Financial

Services up 70 basis points; Organic Sales up 0.8%

Q3 2018 SUMMARY RESULTS

28

*As adjusted for tax charge in 2018 and legal charge in 2017. See appendix for reconciliation to GAAP measures

Q3 2018 Q3 2017 Change

Net Sales 898.1$ 903.8$ -0.6%

Adj. OI before financial services* 173.1$ 167.7$ 3.2%

Adj. OM before financial services* 19.3% 18.6% +70 bps

OI from financial services 59.3$ 56.0$ 5.9%

Adj. OM consolidated* 23.7% 22.8% +30 bps

Diluted EPS 2.85$ 2.29$ 24.5%

Adjusted diluted EPS* 2.88$ 2.45$ 17.6%

29

SNAP-ON INVESTMENT RATIONALE

• Executing on defined and coherent strategies

• Unique brand and value proposition - enabling progress in

workplaces of consequence…we make critical work easier

• Clear runways for improvement - Snap-on Value Creation

• Substantial runways for growth

– Enhance the franchise network

– Expand with repair shop owners and managers

– Extend in critical industries

– Build in emerging markets

• Priorities for capital allocation include investing in our business

(organically and through acquisition); capital returned to

shareholders through both dividend and share repurchase

• Targeting organic sales growth in the mid-single digits and

continuing operating margin improvement

Investor Overview

October 2018

AS REPORTED Full Year

($ in millions, except per share data - unaudited) 2017 2016

Charges related to judgments in

litigation matters that are being

appealed (“legal charges”)

Pre-tax legal charges

Income tax expense

Legal charges, net of tax

$ 45.9

(17.5)

$ 28.4

$ -

-

$ -

Weighted-average shares outstanding – diluted 58.6 59.4

Diluted EPS – legal charges $ 0.48 $ -

Charge related to implementation

of tax legislation (“tax charge”)

Tax charge $ 7.0 $ -


Diluted EPS – tax charge $ 0.12 $ -

Q4-2017 Quarterly Review

© 2018 Snap-on Incorporated

APPENDIX: RECONCILIATION OF NON-GAAP

FINANCIAL MEASURES

ADJUSTED INFORMATION – NON-GAAP Full Year


Operating earnings before financial services

As reported

Legal charges

As adjusted to exclude legal charges

$ 664.0

45.9

$ 709.9

$ 655.5

-

$ 655.5


as a percentage of sales

As reported


18.0 %

19.3 %

19.1 %

19.1 %

Operating earnings

As reported

Legal charges


$ 881.5

45.9

$ 927.4

$ 854.2

-

$ 854.2

Operating earnings as a percentage of revenue

As reported


22.0 %

23.2 %

23.0 %

23.0 %




FINANCIAL MEASURES (CONTINUED)

ADJUSTED INFORMATION – NON-GAAP Full Year

($ in millions - unaudited) 2017 2016

Net earnings attributable to Snap-on Incorporated

As reported

Legal charges, after tax

Tax charge

As adjusted to exclude legal charges and tax charge

$ 557.7

28.4

7.0

$ 593.1

$ 546.4

-

-

$ 546.4

Diluted EPS

As reported

Legal charges, after tax

Tax charge


$ 9.52

0.48

0.12

$ 10.12

$ 9.20

-

-

$ 9.20

Effective tax rate

As reported

Legal charges

Tax charge


31.1 %

0.4 %

-0.9 %

30.6 %

31.0 %

-

-

31.0 %









AS REPORTED 3rd Quarter


Adjustments related to implementation of tax

legislation (“tax charge”)

Tax charge $ (1.8) $ -


Diluted EPS – tax charge $ (0.03) $ -

Charge related to a judgement in an

employment-related litigation matter that is

being appealed (“legal charge”)

Pre-tax legal charge

Income tax expense

Legal charge, after tax

$ -

-

$ -

$ 15.0

(5.7)

$ 9.3


Diluted EPS – legal charge $ - $ 0.16





ADJUSTED INFORMATION – NON-GAAP 3rd Quarter



As reported

Legal charge

As adjusted

$ 173.1

-

$ 173.1

$ 152.7

15.0

$ 167.7

Operating earnings before financial services as a

percentage of sales

As reported

As adjusted

19.3 %

19.3 %

16.9 %

18.6 %

Operating earnings

As reported

Legal charge

As adjusted

$ 232.4

-

$ 232.4

$ 208.7

15.0

$ 223.7

Operating earnings as a percentage of revenue

As reported

As adjusted

23.7 %

23.7 %

21.2 %

22.8 %





ADJUSTED INFORMATION – NON-GAAP 3rd Quarter


Net earnings attributable to Snap-on Incorporated

As reported

Tax charge


As adjusted

$ 163.2

1.8

-

$ 165.0

$ 133.4

-

9.3

$ 142.7

Diluted EPS

As reported

Tax charge


As adjusted

$ 2.85

0.03

-

$ 2.88

$ 2.29

-

0.16

$ 2.45

Effective tax rate

As reported

Tax charge

Legal charge

As adjusted

24.0 %

(0.9)%

-

23.1 %

30.1 %

-

0.6 %

30.7 %

investor overview - snapon.com · snap-on rated most preferred brand by u.s. auto technicians ......

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