Investor Overview. March 2019

Transcription

1 Investor Overview March 2019

2 CAUTIONARY STATEMENT 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 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 29, 2018, 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. 2 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.

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 2018 net sales: $3.74 billion NYSE: SNA / S&P 500 $8.5B Market Cap 2.2% Cash Dividend Yield 3 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 4

5 5 UNIQUE PRODUCTIVITY SOLUTIONS

6 6 UNIQUE BRAND STRENGTH

7 ORGANIZED TO REACH OUR PRIMARY CUSTOMERS: OPERATING SEGMENTS Repair Systems & Information Group (RS&I): Vehicle repair shop owners and managers 29% Financial Services 7% 29% Commercial & Industrial Group (C&I): Professionals in a broad range of critical industries 35% Revenues by Segment Snap-on Tools Group (Franchised Van Business): Vehicle repair technicians

8 U.S. VEHICLE AGING DRIVES SERVICE GROWTH Age of U.S. Vehicles 19% 49% 16% 16% Age in Years Average Vehicle Age Years 4-6 Years 7-10 Years Over 10 Years years 4 8 Source: IHS Markit 2018

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 9

10 The Way Forward: Runways for Improvement Runways for Growth

11 RUNWAYS FOR IMPROVEMENT SNAP-ON VALUE CREATION Founded on our mission and beliefs, these are strategic processes we use daily to create value across Snap-on, with the strategic partners we embrace and in the acquisitions we make. Safety Quality Customer Connection Innovation Rapid Continuous Improvement

12 SNAP-ON VALUE CREATION: SAFETY Safety Incident Rate 90% Reduction Locations with No Lost Time Incidents Associates are 90% less likely to experience a safety incident today than in 2005

13 SNAP-ON VALUE CREATION: QUALITY Snap-on rated most preferred brand by U.S. auto technicians in multiple product categories of the latest Frost & Sullivan survey, including: 73% 63% 55% 72% 6% 12% 10% 9% 13 Frost & Sullivan 2018 United States Automotive Technicians Choice: Opportunities in the Automotive Tools Market

14 SNAP-ON VALUE CREATION: 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 ~3,100 vocational schools ~42,000+ visitors to Snap-on s Innovation Works 14 We Directly Observe Customers and Workplaces

15 SNAP-ON VALUE CREATION: INNOVATION We Translate Insights Into Innovation: New Product Awards and Success 15

16 SNAP-ON VALUE CREATION: RAPID CONTINUOUS IMPROVEMENT (RCI) Operating margin before financial services up 1,260 bps* since * As adjusted to exclude certain items. See appendix "Reconciliation of non-gaap Financial Measures" for further explanation.

17 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

18 SNAP-ON HERITAGE 18 Selling Great Tools Through Vans to Vehicle Technicians

19 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 19

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 20

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 21

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 22

23 BUILD IN EMERGING MARKETS Create manufacturing capacity Establish distribution and sales reach Launch new product lines 23

24 NET SALES AND OI MARGIN TREND $ Billions 4.00 $ % 2.00 $2.94 $ % 15.8% $3.43 $3.69 $3.74 $2.85 $ % 18.1% 19.3% 18.0% 16.6% 20% 15% % Net Sales Operating Margin Before Financial Services (as % of net sales) Operating Margin As Adjusted* 5% 24 Historical data reflects the 2018 adoption of ASU No , Compensation - Retirement Benefits (Topic 715). * As Adjusted to exclude certain items in 2017 and In both years, Operating Margin Before Financial Services As Adjusted was 19.3%. See appendix Reconciliation of non-gaap Financial Measures for further explanation.

25 DILUTED EARNINGS PER SHARE $11.81* $10.12* $ $4.71 $5.20 $5.93 $7.14 $8.10 $9.20 $ Diluted Earnings Per Share Adjusted Diluted Earnings Per Share 25 * As adjusted to exclude certain items. See appendix Reconciliation of non-gaap Financial Measures for further explanation.

26 FINANCIAL SERVICES $ Millions $2,000 $1,591 $1,815 $2,002 $217.5 $2,083 $230.1 $240 $200 $1,600 $1,200 $800 $400 $398 ($9.1) $733 $935 $14.4 $72.9 $1,084 $106.7 $1,232 $125.7 $1,385 $149.1 $170.2 $198.7 $160 $120 $80 $40 $0 $0 H ($40) Ending gross on-book portfolio Financial Services Operating Earnings* 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 26 * 2011 excludes $18 million arbitration settlement gain; including settlement gain, Financial Services operating earnings was $90.9 million

27 INCREASED DIVIDENDS $4.00 $3.50 $3.41 $3.00 $2.95 $2.50 $2.20 $2.54 $2.00 $1.50 $1.22 $1.30 $1.40 $1.58 $1.85 $1.00 $0.50 $ % Quarterly dividend increase November 2018; Dividends paid without interruption or reduction since 1939

28 FY 2018 SUMMARY RESULTS Adjusted Diluted EPS up 16.7%* ($ in millions) FY 2018 FY 2017 Change Net Sales $ 3,740.7 $ 3, % Operating Earnings before Financial Services* $ $ % Operating Margin before Financial Services* 19.3% 19.3% Operating Earnings from Financial Services $ $ % Operating Margin Consolidated* 23.4% 23.2% Diluted EPS* $ $ % Organic sales up 0.5%; excludes $24.2 million of acquisition-related sales and $10.3 million of favorable foreign currency translation. 28 *As adjusted for certain items in 2018 and See appendix Reconciliation of non-gaap Financial Measures for further explanation.

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 to 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 29 Targeting organic sales growth in the mid-single digits and continuing operating margin improvement

30 APPENDIX: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

31 APPENDIX: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Q Quarterly Review 2018 Snap-on Incorporated AS REPORTED Full Year ($ in millions, except per share data - unaudited) Benefit related to the settlement of a litigation matter ( legal settlement ) Pre-tax legal settlement Income tax expense Legal settlement, after tax $ 4.3 (1.1) $ 3.2 $ - - $ - Weighted-average shares outstanding diluted Diluted EPS legal settlement $ 0.06 $ - Charges related to judgments in litigation matters that are or were being appealed ( legal charges ) Pre-tax legal charges Income tax expense Legal charges, after tax $ - - $ - $ (45.9) 17.5 $ (28.4) Weighted-average shares outstanding diluted Diluted EPS legal charges $ - $ (0.48) Adjustments related to implementation of tax legislation ( tax charges ) Tax charges $ (3.9) $ (7.0) Weighted-average shares outstanding diluted Diluted EPS tax charges $ (0.07) $ (0.12)

32 APPENDIX: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Q Quarterly Review 2018 Snap-on Incorporated AS REPORTED Full Year ($ in millions, except per share data - unaudited) 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 $ - - $ - Weighted-average shares outstanding diluted 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) $ - - $ - Weighted-average shares outstanding diluted 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 $ - - $ - Weighted-average shares outstanding diluted Diluted EPS net debt items $ 0.07 $ -

33 APPENDIX: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED) ADJUSTED INFORMATION NON-GAAP Full Year ($ in millions - unaudited) Operating earnings before financial services As reported Legal settlement Legal charges As adjusted Operating earnings before financial services as a percentage of sales As reported As adjusted Operating earnings As reported Legal settlement Legal charges As adjusted Operating earnings as a percentage of revenue As reported As adjusted $ (4.3) - $ % 19.3 % $ (4.3) - $ % 23.4 % $ $ % 19.3 % $ $ % 23.2 % Q Quarterly Review 2018 Snap-on Incorporated

34 APPENDIX: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED) ADJUSTED INFORMATION NON-GAAP Full Year ($ in millions - unaudited) Net earnings attributable to Snap-on Incorporated As reported Legal settlement, after tax Legal charges, after tax Net debt items, after tax Tax charges As adjusted Diluted EPS As reported Legal settlement, after tax Legal charges, after tax Net debt items, after tax Tax charges As adjusted Effective tax rate As reported Legal charges Tax charges As adjusted $ (3.2) - (4.1) 3.9 $ $ (0.06) - (0.07) 0.07 $ % - (0.5)% 23.5 % $ $ $ $ % 0.4 % (0.9)% 30.6 % Q Quarterly Review 2018 Snap-on Incorporated