Snap On : Q3 2020 Slides

Quarterly Financial Review

Third Quarter 2020

CAUTIONARY STATEMENT

• These slides should be read in conjunction with comments from the October 22, 2020 conference call. The financial statement information included herein is unaudited.
• Statements made during the October 22, 2020 conference call and/or 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; actual results may differ materially from those described or contemplated in these forward-looking statements. Factors that may cause actual results to differ materially from those contained in the forward- looking statements, including those found in Snap-on's reports filed with the Securities and Exchange Commission, and the information under "Safe Harbor" and "Risk Factors" headings in its most recent Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q, which all are incorporated herein by reference. Snap-on disclaims any responsibility to update any forward-looking statement provided during the October 22, 2020 conference call and/or included in 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 October 22, 2020 press release and Form 8-K, which can be found on the company's website in the investors section at www.snapon.com.

2	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

Nick Pinchuk

Chairman &

Chief Executive Officer

Aldo Pagliari

Senior Vice President & Chief Financial Officer

CONSOLIDATED RESULTS - 3RD QUARTER

			2020			2019
($ in millions, except per share data - unaudited)
	$		%		$		%	Change
Net sales	$ 941.6			$ 901.8			4.4 %
➢ Organic sales		34.6							3.8 %
➢ Acquisitions		1.0							0.1 %
➢	Currency translation		4.2							0.5 %
Gross profit	$ 469.5		49.9 %	$ 448.1		49.7 %
Operating expenses		283.8		30.2 %		280.4		31.1 %
Operating earnings before financial services	$ 185.7		19.7 %	$	167.7		18.6 %	10.7 %
Financial services revenue	$	85.8			$	84.1			2.0 %
Financial services operating earnings		65.6				61.0			7.5 %
Operating earnings	$ 251.3		24.5 %	$ 228.7		23.2 %	9.9 %
Diluted EPS	$	3.28			$	2.96			10.8 %

• Gross margin of 49.9% improved 20 basis points (bps) from 49.7% last year primarily due to the impact of higher sales volumes and benefits from Rapid Continuous Improvement ("RCI") initiatives, partially offset by 50 bps of unfavorable foreign currency effects
• Operating expense margin of 30.2% improved 90 bps from 31.1% last year primarily due to the impact of higher sales volumes and savings from cost containment actions in response to COVID-19
• As a percentage of net sales, operating earnings before financial services of 19.7%, including 20 bps of direct COVID-19-related costs, and 60 bps of unfavorable foreign currency effects, improved 110 bps from 18.6% last year

6	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

COMMERCIAL & INDUSTRIAL - 3RD QUARTER

($ in millions - unaudited)		2020		2019	Change
Segment sales	$	308.4	$	335.3	(8.0)%
➢ Organic sales		(29.1)			(8.6)%
➢ Currency translation		2.2			0.6 %
Gross profit	$	114.9	$	127.0
% of sales		37.3 %		37.9 %
Operating expenses	$	71.8	$	78.7
% of sales		23.3 %		23.5 %
Operating earnings	$	43.1	$	48.3
% of sales		14.0 %		14.4 %	(40) bps

• Organic sales down $29.1 million or 8.6%
• • Decrease includes a low-teen decline in both sales to customers in critical industries and in the segment's Asia Pacific operations, while sales in the segment's European-based hand tools business were essentially flat
  • Excludes $2.2 million of favorable currency translation
• Gross margin of 37.3% declined 60 bps from 2019 primarily due to the impact of decreased sales volumes, including lower utilization of manufacturing capacity, 10 bps of direct COVID-19-related costs and 50 bps of unfavorable foreign currency effects, partially offset by material cost savings and benefits from RCI initiatives
• The operating expense margin of 23.3% improved 20 bps from last year
• Operating earnings of $43.1 million, including $0.8 million of direct COVID-19-related costs and $1.4 million of unfavorable foreign currency effects, compared to $48.3 million in 2019; operating margin of 14.0% compared to 14.4% last year

7	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

SNAP-ONTOOLS - 3RD QUARTER

($ in millions - unaudited)		2020		2019	Change
Segment sales	$	449.8	$	385.2	16.8 %
➢ Organic sales		62.8			16.2 %
➢ Currency translation		1.8			0.6 %
Gross profit	$	204.5	$	167.2
% of sales		45.5 %		43.4 %
Operating expenses	$	117.4	$	114.2
% of sales		26.1 %		29.6 %
Operating earnings	$	87.1	$	53.0
% of sales		19.4 %		13.8 %	560 bps

• Organic sales up $62.8 million, or 16.2%, primarily reflecting a mid-teen gain in the U.S. franchise operations and an approximately 20% increase in the segment's international operations
• Gross margin of 45.5%, increased 210 bps from 43.4% last year, primarily due to higher sales volumes and benefits from RCI initiatives, partially offset by 70 bps of unfavorable foreign currency effects
• The operating expense margin of 26.1% improved 350 bps from last year primarily due to the impact of higher sales volumes and savings from cost containment actions, including travel and meeting-related expenses
• Operating earnings of $87.1 million, including $0.4 million of direct costs associated with COVID-19 and $2.9 million of unfavorable foreign currency effects, compared to $53.0 million in 2019, and the operating margin of 19.4% compared to 13.8% last year

8	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

REPAIR SYSTEMS & INFORMATION - 3RD QUARTER

($ in millions - unaudited)		2020		2019	Change
Segment sales	$	317.5	$	322.7	(1.6)%
➢ Organic sales		(7.0)			(2.2)%
➢ Acquisitions		1.0			0.3 %
➢ Currency translation		0.8			0.3 %
Gross profit	$	150.1	$	153.9
% of sales		47.3 %		47.7 %
Operating expenses	$	70.0	$	70.6
% of sales		22.1 %		21.9 %
Operating earnings	$	80.1	$	83.3
% of sales		25.2 %		25.8 %	(60) bps

• Organic sales down $7.0 million
• • Lower volume includes a high single-digit decline in sales to OEM dealerships, partially offset by a low-single digit increase in sales of diagnostic and repair information products to independent repair shop owners and managers
  • Excludes $1.0 million of acquisition-related sales and $0.8 million of favorable foreign currency translation
• Gross margin of 47.3%, including 10 bps of unfavorable foreign currency effects, declined 40 bps from 47.7% last year
• The operating expense margin of 22.1%, including 10 bps of unfavorable foreign currency effects, increased 20 bps from 21.9% last year
• Operating earnings of $80.1 million, including $0.2 million of direct costs associated with COVID-19 and $0.2 million of unfavorable foreign currency effects, compared to $83.3 million last year; the operating margin of 25.2% compared to 25.8% last year

9	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

FINANCIAL SERVICES - 3RD QUARTER

($ in millions - unaudited)		2020	2019	Change
Segment revenue	$	85.8	$	84.1	2.0 %
Operating earnings	$	65.6	$	61.0	7.5 %
Originations	$	252.8	$	253.5	(0.3)%

• Originations decreased $0.7 million or 0.3%
• Average yield on finance receivables of 17.8% compared to 17.7% last year
• Average yield on contract receivables of 8.4% compared to 9.2% last year

10	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

FINANCIAL SERVICES PORTFOLIO DATA

		United States		International
	Extended			Extended
($ in millions - unaudited)		Credit		Total		Credit		Total
Gross finance portfolio	$	1,536.7	$	1,931.1	$	192.8	$	267.3
Portfolio net losses (TTM)	$	43.9	$	46.5	$	2.8	$	3.7
60+ Delinquency:
As of 9/30/20		1.5 %		1.2 %		0.6 %		0.8 %
As of 6/30/20		1.0 %		0.8 %		0.7 %		1.0 %
As of 3/31/20		1.7 %		1.4 %		0.8 %		1.0 %
As of 12/31/19		1.8 %		1.5 %		0.7 %		0.9 %
As of 9/30/19		1.7 %		1.4 %		0.7 %		0.8 %

• Gross finance portfolio of $2,198.4 million as of September 30, 2020
• • YTD portfolio growth of $59.5 million
  • Q3 portfolio growth of $25.0 million
• TTM - Trailing twelve months

11	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

CASH FLOWS

		3rd Quarter		September YTD
($ in millions - unaudited)		2020		2019		2020		2019
Net cash provided by operating activities	$	224.0	$	131.1	$	691.0	$	477.9
➢ Net earnings		184.7		169.2		432.6		536.2
➢ Depreciation and amortization		23.9		22.9		71.5		68.5
➢ Changes in deferred income taxes		(6.6)		(1.7)		(8.5)		10.7
➢ Changes in working investment		(7.2)		(64.2)		65.2		(96.5)
➢ Changes in accruals and other liabilities		5.9		(11.1)		85.2		(80.8)
➢ Changes in all other operating activities		23.3		16.0		45.0		39.8
Net increase in finance receivables	$	(11.7)	$	(15.4)	$	(68.8)	$	(63.0)
Capital expenditures	$	(10.1)	$	(29.6)	$	(39.1)	$	(77.8)
Free cash flow	$	202.2	$	86.1	$	583.1	$	337.1
Free cash flow from Operations	$	197.4	$	71.0	$	534.2	$	283.5
Free cash flow from Financial Services	$	4.8	$	15.1	$	48.9	$	53.6
Increase in cash	$	101.3	$	3.5	$	603.0	$	26.6

• Changes in working investment - Net changes in trade and other accounts receivable, inventory and accounts payable
• Free cash flow - Net cash provided by operating activities less net change in finance receivables and capital expenditures
• Free cash flow from operations - Net cash provided by operating activities, exclusive of financial services, less capital expenditures
• Free cash flow from financial services - Net cash provided by financial services operating activities, less net change in finance receivables and capital expenditures

12	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

BALANCE SHEET

	September 26,	December 28,
($ in millions - unaudited)		2020		2019
Trade & Other Accounts Receivable - net	$	618.9	$	694.6
Days Sales Outstanding		64		67
Finance Receivables - net	$	1,654.4	$	1,633.6
Contract Receivables - net	$	480.5	$	460.8
Inventory - net	$	764.4	$	760.4
Inventory turns - TTM		2.4		2.6
Cash	$	787.5	$	184.5
Total debt	$	1,449.7	$	1,149.8
Net debt	$	662.2	$	965.3
Net debt to capital ratio		15.5 %		22.1 %

13	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

RECONCILIATION OF NON-GAAPFINANCIAL MEASURES

AS REPORTED			3rd Quarter		September YTD
($ in millions, except per share data - unaudited)	2020			2019			2020		2019
Charges associated with exit and disposal
activities ("restructuring charges")
Pre-tax restructuring charges	$	-	$	-	$	(11.5)	$	-
Income tax benefits			-			-			2.2		-
Restructuring charges, after tax
$	-	$	-	$		(9.3)	$	-
Weighted-average shares outstanding - diluted			54.8		55.7		54.9		56.0
Diluted EPS - restructuring charges	$	-	$	-		$	(0.17)	$	-
Benefit related to the settlement of a litigation
matter ("legal settlement")
Pre-tax legal settlement	$	-	$	-	$	-		$	11.6
Income tax expense			-			-		-			(2.9)
Legal settlement, after tax	$	-	$	-	$	-		$	8.7
Weighted-average shares outstanding - diluted			54.8		55.7		54.9		56.0
Diluted EPS - legal settlement	$	-	$	-		$	-		$	0.15

14	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

RECONCILIATION OF NON-GAAPFINANCIAL MEASURES

ADJUSTED INFORMATION - NON-GAAP			3rd Quarter			September YTD
($ in millions - unaudited)	2020		2019				2020		2019
Operating earnings before financial services
As reported	$ 185.7	$ 167.7	$	415.7	$ 545.0
Restructuring charges	-		-			11.5		-
Legal settlement		-			-			-		(11.6)
As adjusted	$ 185.7	$ 167.7	$	427.2	$ 533.4
Operating earnings before financial services as a
percentage of sales
As reported	19.7%	18.6%			16.5%	19.6%
As adjusted	19.7%	18.6%			17.0%	19.2%
Operating earnings
As reported	$ 251.3	$ 228.7	$	595.8	$ 728.7
Restructuring charges	-		-			11.5		-
Legal settlement		-			-			-	(11.6)
As adjusted	$ 251.3	$ 228.7	$	607.3	$ 717.1
Operating earnings as a percentage of revenue
As reported	24.5%	23.2%			21.5%	24.1%
As adjusted	24.5%	23.2%			21.9%	23.7%

15	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated

RECONCILIATION OF NON-GAAPFINANCIAL MEASURES

ADJUSTED INFORMATION - NON-GAAP			3rd Quarter				September YTD
($ in millions - unaudited)			2020				2019						2020					2019
Net earnings attributable to Snap-on Incorporated
As reported	$	179.7	$	164.6	$	418.1		$	522.9
Restructuring charges, after tax			-				-				9.3				-
Legal settlement, after tax			-				-				-			(8.7)
As adjusted	$	179.7	$	164.6	$	427.4		$	514.2
Diluted EPS
As reported	$	3.28	$	2.96	$	7.62		$	9.34
Restructuring charges, after tax			-				-				0.17				-
Legal settlement, after tax			-				-				-			(0.15)
As adjusted	$	3.28	$	2.96	$	7.79		$	9.19
Effective tax rate
As reported			23.4 %			23.5 %				23.8 %			23.8 %
Restructuring charges			-				-					(0.1)%			-
Legal settlement			-				-					-				-
As adjusted			23.4 %			23.5 %				23.7 %			23.8 %

16	Q3-2020 Quarterly Review
	© 2020 Snap-on Incorporated