Investor Overview - Snap-on · 2020-04-30 · 3 SNAP-ON OVERVIEW Founded on innovation in 1920...

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Investor Overview

First Quarter 2020

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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 28, 2019, and under the “Caution Regarding Forward-Looking Statements” and “Risk Factors” headings in

any Quarterly Reports on Form 10-Q, which are all 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.

CAUTIONARY STATEMENT

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3

SNAP-ON OVERVIEW

▪ Founded on innovation in 1920

▪ Makes work easier for serious professionals

performing critical tasks

▪ Unique brand strength

▪ 12,800 associates worldwide

▪ Serves professionals in over 130 countries

▪ 2019 net sales: $3.7 billion

▪ NYSE: SNA / S&P 500

▪ $6.8B Market Capitalization*

▪ 3.5% Cash Dividend Yield*

»Dividends paid without interruption or

reduction since 1939

* As of April 27, 2020

44

SNAP-ON CELEBRATES MAKERS AND FIXERS

▪ We are rooted in the dignity of work

▪ We enable working men and women, the

makers and the fixers, who perform critical

tasks where the penalties for failure are high

▪ We observe work, translate the insights

gained and create solutions for serious

professionals

5

UNIQUE PRODUCTIVITY SOLUTIONS

6

UNIQUE BRAND STRENGTH

7

ORGANIZED TO REACH OUR PRIMARY

CUSTOMERS: OPERATING SEGMENTS

29%

35%

29%

7%

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

Snap-on Tools Group

(Franchised Van Business):Vehicle repair technicians

Financial

Services

2019 Revenues by Segment

8

U.S. VEHICLE AGING

DRIVES SERVICE GROWTH

4

5

6

7

8

9

10

11

12

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Average Vehicle Age - 1980-2019

2019

11.8 years

19%

16%

16%

49%

Age of U.S. Vehicles

0-3 Years 4-6 Years

7-10 Years Over 10 Years

Source: IHS Markit 2019

Age

in

Years

99

VEHICLE TECHNOLOGY AND COMPLEXITY

PROVIDES OPPORTUNITY

▪ Increasing vehicle complexity

▪ Testing, re-programming and

calibration 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

1010

The Way Forward:

Runways for

Improvement

Runways for

Growth

1111

SNAP-ON VALUE CREATION

▪ Safety

▪ Quality

▪ Customer Connection

▪ Innovation

▪ Rapid Continuous Improvement

RUNWAYS FOR IMPROVEMENT

12

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2019

89 Locations with

No Lost Time

Incidents

Safety Incident Rate

90% Reduction

Associates are 90% less likely to experience a safety incident today than in 2005

SNAP-ON VALUE CREATION:

SAFETY

1313


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

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

Frost & Sullivan – 2019 United States Automotive Technicians’ Choice: Opportunities in the Automotive Tools Market

69% 69%50%69%8% 10% 11% 8%

1414


CUSTOMER CONNECTION

▪ ~4,800 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

▪ ~3,200 vocational schools

▪ ~4,000+ annual visitors to

Snap-on’s Innovation Works

We Directly Observe

Customers and

Workplaces

1515


INNOVATION

1616


RAPID CONTINUOUS IMPROVEMENT (RCI)

Operating Margin

before

Financial Services

improved

1,250 basis points

since 2005

1717

RUNWAYS FOR GROWTH

▪Enhance the franchise network

▪Expand with repair shop

owners and managers

▪Extend to critical industries

▪Build in emerging markets

Investing in these

Strategically Decisive Areas

1818

SNAP-ON HERITAGE

Selling Great Tools Through Vans to Vehicle Technicians

1919

SNAP-ON MORE BROADLY DEFINED

Makes work easier for serious professionals

performing critical tasks in workplaces of consequence

where the costs and penalties of failure are high

2020

ENHANCE THE FRANCHISE NETWORK

▪ 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

2121

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

2222

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

2323

BUILD IN EMERGING MARKETS

▪ Create manufacturing capacity

▪ Establish distribution and

sales reach

▪ Launch new product lines

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* As adjusted to exclude certain litigation-related matters

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

NET SALES AND OI MARGIN TREND

$2.85 $2.94$3.06

$3.28$3.35

$3.43 $3.69 $3.74 $3.73

14.5%15.2%

15.8%16.6%

18.1%

19.3%

18.0%19.4% 19.2%

5%

10%

15%

20%

0.00

1.00

2.00

3.00

4.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

$ Billions

Net Sales OI Margin (Before Financial Services) - as a % of Net Sales OI Margin (Before Financial Services) - As Adjusted*

19.3%*

19.3%* 18.9%*

25

* As adjusted to exclude certain litigation-related matters, net debt items and tax changes

DILUTED EARNINGS PER SHARE

$4.71$5.20

$5.93

$7.14

$8.10

$9.20$9.52

$11.81*$12.26*

0.00

3.00

6.00

9.00

12.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

Diluted Earnings Per Share Diluted Earnings Per Share - As Adjusted*

$12.41$11.87

$10.12*

Up 2.6x since 2011

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* 2011 excludes $18 million arbitration settlement gain; including settlement gain, Financial Services operating earnings were $90.9 million

FINANCIAL SERVICES

Financial Services is both strategically important and a strong contributor to company earnings; unique

aspects of the model drive portfolio performance and differentiate from other captive credit companies

$398

$733

$935

$1,084 $1,232

$1,385

$1,591

$1,815

$2,002 $2,083 $2,139

($9.1)

$14.4 $72.9

$106.7

$125.7

$149.1 $170.2

$198.7

$217.5 $230.1

$245.9

($40)

$0

$40

$80

$120

$160

$200

$240

$280

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

H2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$ Millions

Ending gross on-book portfolio Financial Services Operating Earnings*

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INCREASED DIVIDENDS

Up 3.0x since 2011

$1.30 $1.40 $1.58

$1.85

$2.20

$2.54

$2.95

$3.41

$3.93

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

2011 2012 2013 2014 2015 2016 2017 2018 2019

13.7% quarterly dividend increase November 2019;

Dividends paid without interruption or reduction since 1939

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FULL YEAR 2019 SUMMARY RESULTS

($ in millions, except EPS) FY 2019 FY 2018 Change

Net Sales 3,730.0$ 3,740.7$ (0.3)%

Organic sales 45.4 1.2%

Currency translation (63.6) (1.7)%

Operating Earnings before Financial Services

As reported 716.4$ 726.0$

As adjusted* 704.8 721.7

Operating Margin before Financial Services

As reported 19.2% 19.4% (20) bps

As adjusted* 18.9% 19.3% (40) bps

Operating Earnings from Financial Services 245.9$ 230.1$

Operating Margin Consolidated

As reported 23.7% 23.5% 20 bps

As adjusted* 23.4% 23.4% - bps

Diluted EPS 12.41$ 11.87$ 4.5%

Adjusted diluted EPS* 12.26$ 11.81$ 3.8%

Organic sales exclude currency and acquisitions.

*As adjusted. For Non-GAAP reconciliations, visit Investors section of snapon.com


*As adjusted. See appendix for reconciliation of non-GAAP measures to GAAP counterparts.

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Q1 2020 IMPACT OF COVID-19

The challenges posed by the COVID-19 pandemic on the global economy increased significantly as the first quarter progressed, impacting Snap-on’s

sales volumes in most geographies and across a variety of customers, including those in automotive repair. In addition, under the recently adopted ASU

No. 2016-13, the impact of economic uncertainty caused by COVID-19 led to an increase of $2.6 million in the company’s credit reserve requirements for

its financial services portfolio. COVID-19 has caused disruption and volatility in the global capital markets, and has authored an economic slowdown.

In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on

group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

Although the company’s operations have been deemed essential and Snap-on is following the COVID-19 guidelines from the Centers for Disease Control

(CDC) concerning the health and safety of the company’s personnel, these measures have resulted in attenuating activity, and in some cases, required

temporary closures of certain facilities, among other impacts. The duration of these measures is unknown, may be extended and additional measures

may be imposed.

In the near term, Snap-on anticipates no improvement in the macroeconomic environment and, as a result, expects sales and credit originations in the

second quarter of 2020 to be down year over year. Snap-on does not, as a general practice, furnish quarterly sales or earnings projections. However, in

light of actions imposed by national and local governments to contain the spread of COVID-19, the company believes that its second quarter 2020 sales

and earnings will be lower than reported second quarter 2019 amounts. Snap-on is responding to the global macroeconomic challenges by deepening

its Rapid Continuous Improvement (RCI), sourcing and other cost reduction initiatives. Snap-on recorded $7.5 million of costs related to restructuring

actions, primarily in Europe, in the first quarter of 2020. Snap-on will continue to manage its cash flows and balance its capital allocation priorities,

including investments and the need for further cost reduction actions; the current economic uncertainty makes it difficult to presently predict this

balance as the company continually adjusts to the changing business environment. Snap-on expects that capital expenditures in 2020 will be in a range

of $70 million to $80 million, of which $17.2 million was incurred in the first quarter. Despite near term uncertainty, Snap-on expects to maintain focus on

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.

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Q1 2020 SUMMARY RESULTS


*As adjusted. See appendix for reconciliation of non-GAAP measures to GAAP counterparts.

($ in millions, except EPS) Q1 2020 Q1 2019 Change

Net Sales 852.2$ 921.7$ (7.5)%

Organic sales (62.7) (6.9)%

Currency translation (10.3) (1.0)%

Operating Earnings before Financial Services

As reported 138.4$ 187.4$ (25.9)%

As adjusted* 146.4 175.8 (16.7)%

Operating Margin before Financial Services

As reported 16.3% 20.3%

As adjusted* 17.2% 19.1%

Operating Earnings from Financial Services 56.9$ 62.1$

Operating Earnings

As reported 195.8$ 249.5$ (21.5)%

As adjusted* 203.3 237.9 (14.5)%

Diluted EPS 2.49$ 3.16$ (21.2)%

Adjusted diluted EPS* 2.60$ 3.01$ (13.6)%

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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 to critical industries

−Build in emerging markets

▪ Priorities for capital allocation include investing in our business (organically and

through acquisition); capital return to shareholders through both dividend and share

repurchase

▪ Targeting organic sales growth in the mid-single digits and continuing operating

margin improvement

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APPENDIX: RECONCILIATION OF

NON-GAAP FINANCIAL MEASURES

33

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FULL YEAR 2019

AS REPORTED Full Year

($ in millions, except per share data - unaudited) 2019 2018 2017

Litigation-related matters

Pre-tax benefit from legal settlements

Income tax expense related to legal settlements

Pre-tax legal charges

Income tax benefit related to legal charges

Litigation-related matters, after tax

$ 11.6

(2.9)

-

-

$ 8.7

$ 4.3

(1.1)

-

-

$ 3.2

$ -

-

(45.9)

17.5

$ (28.4)

Weighted-average shares outstanding – diluted 55.9 57.3 58.6

Diluted EPS – litigation-related matters $ 0.15 $ 0.06 $ (0.48)

Adjustments related to implementation of U.S.

tax legislation (“tax charges”)

Tax charges $ - $ (3.9) $ (7.0)


Diluted EPS – tax charges $ - $ (0.07) $ (0.12)

34


FULL YEAR 2019

AS REPORTED Full Year

($ in millions, except per share data - unaudited) 2019 2018 2017

Debt related items (“net debt items”)

Gain on settlement of treasury lock (A)

Gain on settlement of treasury lock

Income tax expense

Gain on settlement of treasury lock, after tax

$ -

-

$ -

$ 13.3

(3.3)

$ 10.0

$ -

-

$ -


Diluted EPS – gain on settlement of treasury lock $ - $ 0.17 $ -

Loss on early extinguishment of debt (B)

Loss on early extinguishment of debt

Income tax benefit

Loss on early extinguishment of debt, after tax

$ -

-

$ -

$ (7.8)

1.9

$ (5.9)

$ -

-

$ -


Diluted EPS – loss on early extinguishment of debt $ - $ (0.10) $ -

Net debt items (A + B)

Net debt items

Income tax expense

Net debt items, after tax

$ -

-

$ -

$ 5.5

(1.4)

$ 4.1

$ -

-

$ -


Diluted EPS – net debt items $ - $ 0.07 $ -

35


FULL YEAR 2019

ADJUSTED INFORMATION – NON-GAAP Full Year

($ in millions - unaudited) 2019 2018 2017

Operating earnings before financial services

As reported


As adjusted

$ 716.4

(11.6)

$ 704.8

$ 726.0

(4.3)

$ 721.7

$ 664.6

45.9

$ 710.5


as a percentage of sales

As reported

As adjusted

19.2 %

18.9 %

19.4 %

19.3 %

18.0 %

19.3 %

Operating earnings

As reported


As adjusted

$ 962.3

(11.6)

$ 950.7

$ 956.1

(4.3)

$ 951.8

$ 882.1

45.9

$ 928.0

Operating earnings as a percentage of revenue

As reported

As adjusted

23.7 %

23.4 %

23.5 %

23.4 %

22.1 %

23.2 %

36


FULL YEAR 2019

ADJUSTED INFORMATION – NON-GAAP Full Year

($ in millions - unaudited) 2019 2018 2017

Net earnings attributable to Snap-on Incorporated

As reported



Tax charges

As adjusted

$ 693.5

(8.7)

-

-

$ 684.8

$ 679.9

(3.2)

(4.1)

3.9

$ 676.5

$ 557.7

28.4

-

7.0

$ 593.1

Diluted EPS

As reported



Tax charges

As adjusted

$ 12.41

(0.15)

-

-

$ 12.26

$ 11.87

(0.06)

(0.07)

0.07

$ 11.81

$ 9.52

0.48

-

0.12

$ 10.12

Effective tax rate

As reported


Tax charges

As adjusted

23.4 %

-

-

23.4 %

24.0 %

-

(0.5)%

23.5 %

31.1 %

0.4

(0.9)%

30.6 %

37


Q1 2020

AS REPORTED 1st Quarter

($ in millions, except per share data - unaudited) 2020 2019

Charges associated with exit and disposal

activities (“restructuring charges”)

Pre-tax restructuring charges

Income tax benefits

Restructuring charges, after tax

$ (7.5)

1.5

$ (6.0)

$ -

-

$ -

Weighted-average shares outstanding – diluted 55.0 56.3

Diluted EPS – restructuring charges $ (0.11) $ -

Benefit related to the settlement of a litigation

matter (“legal settlement”)

Pre-tax legal settlement

Income tax expense

Legal settlement, after tax

$ -

-

$ -

$ 11.6

(2.9)

$ 8.7

Weighted-average shares outstanding – diluted 55.0 56.3

Diluted EPS – legal settlement $ - $ 0.15

38


Q1 2020

ADJUSTED INFORMATION – NON-GAAP 1st Quarter

($ in millions - unaudited) 2020 2019


As reported

Restructuring charges

Legal settlement

As adjusted

$ 138.9

7.5

-

$ 146.4

$ 187.4

-

(11.6)

$ 175.8

Operating earnings before financial services as

a percentage of sales

As reported

As adjusted

16.3%

17.2%

20.3%

19.1%

Operating earnings

As reported


Legal settlement

As adjusted

$ 195.8

7.5

-

$ 203.3

$ 249.5

-

(11.6)

$ 237.9

Operating earnings as a percentage of revenue

As reported

As adjusted

20.9%

21.7%

24.8%

23.6%

39


Q1 2020

ADJUSTED INFORMATION – NON-GAAP 1st Quarter

($ in millions - unaudited) 2020 2019

Net earnings attributable to Snap-on Incorporated

As reported



As adjusted

$ 137.2

6.0

-

$ 143.2

$ 177.9

-

(8.7)

$ 169.2

Diluted EPS

As reported



As adjusted

$ 2.49

0.11

-

$ 2.60

$ 3.16

-

(0.15)

$ 3.01

Effective tax rate

As reported


Legal settlement

As adjusted

24.2 %

(0.1)%

-

24.1 %

24.3 %

-

(0.1)%

24.2 %

Investor Overview - Snap-on · 2020-04-30 · 3 SNAP-ON OVERVIEW Founded on innovation in 1920...

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Transcript of Investor Overview - Snap-on · 2020-04-30 · 3 SNAP-ON OVERVIEW Founded on innovation in 1920...