Good day ladies and gentlemen and welcome to the 2008 second quarter results conference call hosted by Snap-on Incorporated. (Operator instructions) I would now like to introduce your host for today’s conference, Mr. Martin Ellen, Chief Financial Officer. Mr. Ellen you may begin your conference.

Good morning everyone. Thank you for joining us today to review Snap-on’s second quarter 2008 results. By now you should have seen our press release issued this morning. Despite challenges in both the US economy and commodity price inflation we believe that our second quarter results continue to demonstrate the soundness of our business model and the progress that is being made in many of our core operating and growth initiatives. We will discuss these with you today. Joining me is Nick Pinchuk, Snap-on’s President and CEO. Nick will kick off our call this morning with his perspective on our strategic achievements. I will then provide a review of our financial results and afterward we will take your questions. Consistent with past practice we will use slides to help illustrate our discussion. You can find a copy of these slides on our website next to the audio icon for this call. These slides will be archived on our website along with a transcript of today’s call. Any statements made during this call relative to management’s expectations, estimates, or beliefs or otherwise state management’s or the company’s outlook plans, or projections are forward-looking statements and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. This call is copyrighted material by Snap-on Incorporated. It is intended solely for the purpose of this audience. Therefore it cannot be recorded, transcribed or re-broadcast by any means without Snap-on’s express permission. With that said I will now turn the call over to Nick.

Thanks Martin, for those of you following the slides my comments start on slide number five. You know I think we can say that the second quarter for Snap-on was another encouraging period. I believe it represents further and clear evidence of our continuing progress. Sales were up 7.6%, earnings per share grew almost 28% and our operating margin reached 14.2%. That’s up 220 basis points over last year’s second quarter. So needless to say it’s a positive result. And that’s I think particularly true given the increasing economic challenges we see in the environment today. I’m going to be landscaping that progress in more detail but before I go further, I want to thank our associates and our franchisees. Your considerable capability and your extraordinary effort made these results possible. My congratulations and my thanks to all of you. I feel fortunate to be part of your team. So let’s review the second quarter, its clear every day that these can be uncertain times. We are reminded of that almost every newscast, but against these difficulties we believe Snap-on has considerable offsets; a growing global position with strength in Europe and North America, an expanding presence in emerging markets, a diverse set of customers from automotive repair to aerospace to natural resources. Those are industries that follow a varied set of macros. We’re also well positioned with almost legendary brands and for a number of quarters we’ve demonstrated a continuing capability of creating strong value through relentless and repeatable innovation, fairly passionate customer care and of course, rapid continuous improvement. Those are strategic advantage and capabilities that are quite valuable especially in the uncertain environment we face today. And our second quarter was a demonstration of those strengths. To detail some of the progress we are growing globally. Snap-on…

Thanks Nick, turning to slide nine net sales of $766 million in the quarter increased $54 million or 7.6%. Currency translation contributed 4.5%. Strong growth contributions this quarter came from sales of tools and equipment to commercial and industrial customers worldwide, emerging market growth, and increased sales of higher margin diagnostics and information products. Sales in our international franchise operations also increased, up 18.2% without currency. Given the economic headwinds in the US our franchisee sales were down 4.1% particularly in sales of big ticket tool storage and other products. As in prior quarters or OEM essential tool and facilitation business experienced $13 million of lower sales due to the lapping of certain 2007 OEM programs. This negative OEM comparison reduced our global growth rate by 2%. Consolidated gross profit of $346.5 million was up $24.1 million compared to the second quarter of 2007. The gross profit margin of 45.2% was relatively flat compared to last year. Pricing improvements and benefits from RCI initiatives covered steel, freight and other product cost inflation. Offsetting these improvements in gross margin was the less favorable sales mix in the Snap-on tools group. In addition lower restructuring of $5.7 million benefited the gross margin. Operating expenses of $245.6 million in the quarter were up $5.5 million from 2007 including $9 million of unfavorable currency translation, $1.7 million of inflationary cost increases and $1.2 million of higher restructuring costs. These increases were partially offset by $3.9 million of lower franchisee termination costs and $3.5 million of benefits from RCI initiatives. As a percent of sales operating expenses improved 160 basis points to 32.1% in the second quarter as compared to 33.7% last year. In our financial services segment operating income improved $5.7 million primarily reflecting lower market interest rates. Operating earnings of $111.7 million for…

Thanks Martin, our second quarter did have some challenges; economic headwinds yielding a softness in big ticket sales in the US, commodity cost increases and the wind down of the OEM essential tools programs. Despite that we did have an encouraging period. Our growth strategies reaching globally and expanding in critical industries that value productivity, those initiatives served us well. And the performance was also an indication that the Snap-on way of creating value in our space, relentless innovation and rapid continuous improvement helped us overcome the difficulties of the day. As for the rest of the year we know our businesses are not immune to economic conditions but we believe our model is well balanced, spread across many geographies and varied and significant customer bases. We are confident that our improvement processes can create substantial value even in difficult environments. Going forward then we remain positive. This corporation has strong positions, robust business models, extraordinary brands, a diverse customer base, and a great team of associates and franchisees. Yes there are bumps in the road but we continue to believe that considerable runway remains and Snap-on is well positioned to take full advantage. Now we’ll take any questions.

(Operator Instructions) Your first question comes from the line of David Leiker – Robert W. Baird David Leiker – Robert W. Baird: I know you don’t give specific guidance and in your conversation you—in your comment at the end you didn’t really talk about your outlook for—the economic outlook for your end markets and some of those that Nick mentioned and whether you think those—just what your assumptions are for going forward.

I think we see issues but we believe we can manage them affectively. I think I said on prior calls that we expect our volume growth to be in the mid single-digit range and that is roughly what we have in this quarter and we expect our earnings growth to be 15% plus quarter-by-quarter and we see nothing that should discourage us from that. David Leiker – Robert W. Baird: As we are listening to earnings calls here this week, we’re hearing a lot of talk about pretty meaningful weakness in the European market particularly construction end markets, economic activities clearly slow here in the US, doesn’t seem to be getting better, Europe seems to be getting worse, the Asian market seems to be weakening, so in that context with what you’ve done in the first half of the year, it seems like the second half of the year has more challenges then what you’ve experienced here in Q2.

You’re correct that major economies in Europe are showing a slowdown, clearly we talked about the issues affecting the automotive sector and really the impact on our customers in terms of their spending habits the point is we’re pretty diversified globally, we’re still seeing growth opportunities in all of these markets and I think as we’ve said in the past we see a lot of market sectors within these economies that were relatively un-penetrated by us in the past so there’s a lot of business out there for us and that’s why we are focusing for example in natural resources and in aviation and some of those other sectors in the commercial side whereas Nick said in the US alone, notwithstanding the economic climate in the US sales improved 25%. Now we’re not communicating that we expect continued 25% growth quarter-over-quarter in the US industrial business, so its sometimes misleading to try to take a macro picture and somehow try to translate it directly into our micro performance because we do see pockets of opportunity and really on a global basis.

Regarding Europe, yes as I said the European economies are slowing down but we tend to be strong in Spain and that’s led the slowdown. So the first and second quarter our businesses took one of the biggest hits associated with the slowdown. A quarter of our business is in Spain and Europe and that, I don’t know if you’ve been following that but the construction market in Spain imploded and a lot of the industrial indexes and consumer spending have followed along and we weathered that. So we’re not so—we see some back off in Europe but we’re not so negative about that. The United States of course there are the challenges, fuel prices are probably the biggest thing but if you look back in history what you’ll find is, is that as fuel prices have increased still our vans have seemed to weather pretty well. In 1978 the last time the fuel prices moved in this kind of level, van sales went up reasonably well each year. So we’re not too daunted by this. We think our models are resistant. Then as Martin said, and I think it maybe is not always clear, we have not mined the industrial business as we might have. We like to say we’re finally realizing that we can bring the Snap-on brand out of the garage and that’s what you’re seeing in terms of this 25% growth. It’s not so much capturing more business with existing customers, it’s reaching out to new customers and with that 500 manned direct sales force which is pretty large as direct sales forces go in this sector, we feel pretty confident that that can keep going. David Leiker – Robert W. Baird: As we look at energy costs and clearly you were able to offset it for yourself here in terms of Snap-on energy costs, but if you look at the dealer, how big is fuel as a part of his costs and do you see dealers drive fewer miles making fewer stops in environments like this?

Let me not get into specifics but let’s say if the diesel price goes up $1.00 that adds about roughly $0.90, that adds about $100.00 a week—just under $100.00 a week to their gas expenses and we figured out how to offset that with our RCI. We’ve got programs to try to do that and we’re continuing to do more of that. One of the things we’re doing really is turning the RCI engine focused on the franchisees. And as you might expect these are small businessmen, they all do things somewhat differently in a lot of ways and there’s a lot of opportunity to improve there. So we feel pretty positive about the value of rapid continuous improvement and in some of our innovation processes and bringing down their costs at least for the foreseeable future and keeping them even. Now of course it’s a struggle each quarter, we have to work pretty hard at that. But we feel positive about it. David Leiker – Robert W. Baird: I don’t think you gave a specific number but your sales of your US dealers were down 4%, how is your dealer performance to the end market?

The reported sales are down 4% and as we’ve communicated in past calls we didn’t touch on it in our formal remarks, if you eliminate some of the factors that don’t necessarily give you a good indication of sort of flow through the stores for example, the variation in year-over-year sales comparisons for the effect of the one-time sales on the convert trial franchisees to full franchisees which again for the reasons Nick cited, were less this year then last year, you actually take the 4% down to about a negative 1%. We did get some pricing which would make the volume there a little lower then 1% and then if you disaggregate that further across our Snap-on product as compared to our mid tier and RWD you’d find that we had growth in both mid tier and RWD but again a decline in the Snap-on branded products and particularly the higher ticket products that Nick mentioned.

Your next question comes from the line of Jim Lucas – Janney Montgomery Scott Jim Lucas – Janney Montgomery Scott: Pricing overall in the quarter what was that for you?

Pricing overall in the quarter was about 1%--$9 million roughly. Jim Lucas – Janney Montgomery Scott: When you look at these un-penetrated markets taking the Snap-on brand beyond the garage, today if I remember correctly non-automotive markets represent about 28%, and is there a way that you could provide a little more granularity of that 28% what the end market exposure is in terms of whether its aviation, energy, etc.

We could think about doing that on a future call, I can tell you that I can granulize the growth rates, the aerospace business grew about 29% in the quarter. Natural resources grew 26%, that kind of thing. Some of those businesses were lower; the vocational training business grew between 5% and 10% so somewhat lower so there’s some of the balance you see in some of those specific markets. The base markets grew at about 11%.

You know our business; SNA Europe sells predominantly outside automotive, that’s increasingly a global business with respect to a number of their important products including hacksaws and band saws because that’s increasingly being penetrated in Asia. Nick talked about some of the focused markets which are really serviced by our US industrial business and that business today is, the size is approaching 20% of the segment so we’ve got very high growth and opportunity in that portion of the CNI segment. A lot of our Asian business as you know is—there’s automotive end market in that but there’s quite a bit of non-automotive as well. Automotive concentration as you know is predominantly the entire DNI segment as well as the Snap-on tools plus you have equipment. And then the under car equipment business which is roughly a quarter of the CNI segment.

I think one of the things you can think of is that the Snap-on US van business now is between 25% and 30% of our overall business. So we’re substantially less dependant on that particular business then we have been in the past. That’s one of the overall messages we have here. Jim Lucas – Janney Montgomery Scott: You had made a comment about the hacksaw manufacturing transition from Sweden to China and you had referenced a tough transition, could you expand a little bit there?

When I said tough I don’t want to imply that we had necessarily problems but I think through bitter tears I’ve learned the difficulty of projecting a state of the art technology thousands of miles. And so I think we approached it with the idea it was going to be daunting. The technology we’re using in China in fact is an evolution of what had been used in Sweden so we fundamentally used the Sweden operation as a base, developed a new technology there in terms of machining these hacksaw blades, ordered the products and then started them up in China without having an exact copy base operations in Sweden. So what we have in China today is a hacksaw blade that is manufactured in a more efficient process and is manufactured to higher standards then the particular model that had been manufactured in Sweden at that time. So that’s what I meant by the tough transition. We really didn’t have any major disruptions or anything like that. It was in fact completed on time, on cost and we’re pretty much at sell out right now so we’re looking at expanding. Jim Lucas – Janney Montgomery Scott: Finally if we look in the remarks its clear the diversification of the portfolio is paying very big dividends in these times, when we look at the margin performance particularly in CNI and DNI in the quarter we’re getting into unchartered territory from what we’ve seen from Snap-on historically and with CNI in particular can you talk about where that business can go longer term?

I think we believe it will be in the strong mid teens. That’s where we believe it will be. I think it’ll end between 15% and 20% over time. I think we’re discovering things about CNI that we didn’t quite realize. When I ran CNI I don’t think I fully envisioned the runway that’s in the industrial business. We believe this to be a tremendous opportunity and it dawns on us like I tried to communicate in my call is that we are uniquely positioned with the technical knowledge imbedded in that sale force and we have a product that critical buyers value and want. In the past we thought of ourselves as being in the garage. That’s one. Two we understand we have a technical advantage in equipment in our imaging technology. We’re pushing that advantages and the people down there are quite technically enabled and we’re pushing the technical advantage and at the same time our costs are being driven down. The cost of the new model are terrific and yet the benefits to the customer are better then any competition. So we feel pretty good about that. And then SNA Europe is a story of just continual improvement because they had a good business in Baco in tools and we put them together and there’s constant potential for improvement and they’re contiguous to the eastern European markets. When you put all the together I see them going to 15% to 20% in between there someplace. Jim Lucas – Janney Montgomery Scott: DNI in terms of, it would seem that ProQuest is having a very pronounced impact in terms of the overall increased profitability of that segment, when we look at the margin potential of that business especially once these OEM contracts lap and we’ve got some top line to leverage what can that business look like?

I think we feel pretty positive about our positions. We really have two positions in DNI, one is with independent car repair people, the Mitchell and the diagnostics business are fairly strong and our data content is stronger then anybody else in the industry. No one can get better data on wide range of products then we can provide. So we have a great position there. And ProQuest gave us a—greatly expanded our position with OEM dealerships. And ProQuest is fulfilling all our targets when we made the acquisition. Its base business, the electronic parts catalogue business is on target. Its synergies which I think we had for $4 million or $5 million this year are happening so we see that business being, I guess I wouldn’t want to comment on the total number but I see it being somewhat stronger then the other businesses because I think we have some pretty proprietary advantages in that area.

Let me just add because we’ve talked in the past about margin expectations for the company as a whole and years ago we talked about a 13% number for 2010, we said earlier we were ahead of that and we were charging to 15% by 2010 and the mix of that would have put as you know diagnostics and information at the high teens or so, then tools and then commercial industrial and I think the one thing we’re seeing is improving commercial industrial margin expansion beyond what maybe we would have thought just a short while ago. And I think if you put that mix together you can easily see how we can get a 15% overall corporate margin.

Your next question comes from the line of Alexander Paris – Barrington Research Associates Alexander Paris – Barrington Research Associates: Could I just ask about your restructuring cost, you had mentioned $5 million in the CNI segment is that where most of it was?

Yes last year we had some major restructuring, some very large formal restructuring in Europe. We closed our [Enchoping] plant and moved it into Spain and moved some production into Spain and others into Eastern Europe and China. So that was driving a big piece of that. Alexander Paris – Barrington Research Associates: And that $13 million to $16 million for 2008 most is that is in the CNI?

Some of it is, its spread across the segment but CNI would still have the majority of it.

I want to point out that the reduction doesn’t necessarily mean we’re not doing improvement activities. We are constantly spending money on improvement activities that don’t meet the formal description of our classification around restructuring so I think if anything, what you’ve seen this year is a little bit of a migration from the big bang items like Johnson City and [Enchoping] closing which happened last year to more individual items that just don’t meet the classification and restructuring and are being spent in the operations and absorbed and not called out as restructuring. And we’re seeing that benefit in terms of the performance improvements year-over-year. Alexander Paris – Barrington Research Associates: So in 2009 would you expect that to be lower or higher, I’m getting at that as a measure of your discovery of additional opportunities for improving efficiency, is that running down a little bit, you’re getting to the point where you found a lot of the big improvement potential?

First of all we don’t have a clear view yet on 2009 but I think as Nick said at some point the major actions in terms of the major plant consolidations are fairly well behind us and I don’t think anybody would have expected us to spend the $20 million or $25 million a year indefinitely that had been our history so I think you’re now starting to see the decline reflecting just what Nick said which is as he said a lot of the big bangs are behind us. We continue to look for improvements every day and some of those will result in restructuring but I don’t think any of us thought we would spend $20 million to $25 million a year. There’s just not that many plants to consolidate and other physical improvements to be made where a lot of those charges result. Alexander Paris – Barrington Research Associates: But it sounds like you’re switching the emphasis of that going forward to the Snap-on tool part of the business.

We’re switching it there and everywhere. I don’t want anybody to think, we’re doing more RCI every day and I think that’s coming through clearly in the numbers particularly this quarter so don’t read the trend in restructuring spending as any indication as to the level of RCI activity because that would not be correct. Alexander Paris – Barrington Research Associates: It has been an important part of your upside operating leverage as you’ve been showing particularly when the sales growth was a little slower.

That’s true but if you look at commercial industrial for example if you adjust for currency and lower restructuring they still grew at 30% year-over-year so that’s still pretty good performance leverage I think—without that adjustment. I think it would be wrong to think that we are switching our emphasis to the tools group in any way. Simply this, when you close a major plant in Europe its big bucks and so when you don’t do that it tends to reduce your numbers somewhat. I would think that I would see us spending $10 million to $15 million for awhile because we do see continual opportunities going forward. Its just that we also are seeing the small opportunities as well and one of the things that happens with this rapid continuous improvement that I found here is that when you first start it you kind of tend to focus on the big opportunities but as it tends to wend its way through the organization those kernels of improvement that are down in various departments and locations find opportunities to improve. And we’re seeing some of that this year. So even with lower restructuring spending we’re seeing substantial performance improvement. Alexander Paris – Barrington Research Associates: There were a lot of questions on Europe and you did the major restructuring in 2007 do you still see currently and going forward more benefits leveraging benefits still to be seen from the major restructuring that you already had?

Yes sir. We haven’t seen it all. I can assure you. Alexander Paris – Barrington Research Associates: And you talked about being hit in Spain and Italy is pretty weak too--

Italy is pretty weak but we’re not that—Italy is a big country but not so strong for us. Spain is a strong country for us. So the fact that Spain was on the leading edge of some weakness in the economics gave us a problem and we overcame it. Alexander Paris – Barrington Research Associates: In the tool business Snap-on tool van business it sounds like your weakness more is due to capital spending decisions on big tool storage and diagnostics, but I would expect that your hand tool business would have held up better particularly you’ve got higher on time delivery which probably should have added to sales and you had RWD that should still be adding to sales growth, is there something I’m missing there?

No, our hand and power tool business which is the productivity improvement business held up pretty well. Its just we took a pretty big ding in the tool storage and the big ticket items. To me its pretty logical is that what happens is, is that you know the guys decide well its tougher times, its uncertain times, maybe I’ll get along without that toolbox. But they do buy our wrenches. And they do buy our power tools, particularly the power tools, the power tools had a dynamite quarter. So what you’re seeing coming out of that same store sales is just the balance of that mix. Alexander Paris – Barrington Research Associates: So that would imply then that it’s the tech reps who maybe sell even more expensive equipment directly to the dealers then that should have been very weak then.

Yes that was somewhat weaker yes. We do have some less expensive diagnostics which go through that channel and they sold pretty well.

Your final question is a follow-up from the line of David Leiker – Robert W. Baird David Leiker – Robert W. Baird: In your commercial business how are the equipment sales going for the auto repair market?

Well equipment sales, up slightly but not like we’d like it. It’s being hurt by the capital expenditures restructuring so in the quarter it was up very slightly. David Leiker – Robert W. Baird: You would expect that to slow down though with this capital spending, or not.

I don’t think so, I think—I have confidence in our technology. We think we can instigate replacement because our technology is better. I think it was up, excluding currency, equipment was up 2% or 3%. That’s what I mean by slightly. David Leiker – Robert W. Baird: So only on facilitation business, where does that stand right now in terms of size and—is there more there to run off, I know you made the comment that the impact is going to be more moderate.

For the first half of this year we had a negative comparison of $19 million mostly because of the one major program in the US and the program in Europe, as I said in my prepared remarks we expect the comparison to be substantially more favorable and I’ll interpret that to mean sort of a flattish comparison with respect to EOM programs. David Leiker – Robert W. Baird: What’s the size of this business now?

The size of this business now again if you sort of look at their core business the ongoing business, exclude the programs it’s a business that will run $30 million to $35 million a quarter that’s without the program business. I can look over this year and last year and tell you that you can have quarters in the program business in the $5 million range and believe it or not you can have program quarters of $25 million at least in terms of the last couple of years, that’s the kind of variation extremes you can see.

With regard to that business the facilitation business I think you understand is kind of the base, the programs—we see a couple of programs coming on that we feel pretty optimistic about in that area so its not like we think that business is a bad business or anything or we’re thinking about pulling back on that just because the two programs have wound down. We just didn’t do the best job of getting programs in the pipeline to make up for those two or three contracts that are causing some disruption now. David Leiker – Robert W. Baird: Are there any changes in the competitive landscape that you’re seeing these days, overall?

No I don’t think so. I think though that we are seeing—with regard to the equipment business we are seeing the winning of our technology. We are starting to see a substantial improvement in the wheel service area in terms of alignment, and in terms of balancers and tire changers such that we believe we are gaining substantial share in that area. That’s one. Two, I think you’d have to conclude that we’re gaining share however you contrive share in the industrial segment. It’s kind of hard to do that because it’s such a large segment. So we’re pushing people out in that segment and we’re winning against some of our major competitors there. So those two businesses I think we’re seeing a pretty good improvement in our position. David Leiker – Robert W. Baird: Do you think in the dealer hand tool business share is going up or down?

Our data says that our share is flat in the quarter but I think we’ve learned to keep our powder dry about that and to take a look at it on an annual basis as opposed to a quarterly basis because of the imprecision of the reporting. David Leiker – Robert W. Baird: Where are you in your rollout and penetration of the RWS and the mid tier product lineups, how long does that continue to be a positive for you?

Well I think for some time, for the foreseeable future because we keep adding to that lineup our franchisees as we talk to our franchisees, and we’re bringing the franchisee group together in Las Vegas again this year, I think we’ll have two-thirds of the US franchisees in Las Vegas with us, and we get ideas from them about adding lineup to the RWD product lines so I’m not sure we’re going to see that abate for awhile. It may reduce in terms of numbers, amount of increase, but I’m not sure we’re going to see the growth abate or go away. David Leiker – Robert W. Baird: And what about in the mid tier products?

Mid tier was up about a percent this year, maybe a half a percent, I would say maybe another three-quarters of improvement in that area—I mean three fiscal quarters of expansion in that area and we’ll be finished. David Leiker – Robert W. Baird: Can you talk about the credit environment and what you’re seeing, what your customers are seeing?

I assume you’re referring to our Snap-on credit business; the portfolio there actually is performing still very well. We watched delinquencies closely and if you go over the last year actually our 30 plus delinquencies are actually only up about three basis points from September. They were actually higher in December and they’ve actually come down since December both in terms of 30 plus delinquent accounts and 60 plus delinquent accounts. The portfolio still performs very, very well.

As an outsider who came to this business that portion of the business only 18 months ago, I’m pretty pleased with what I see. I think our sound bite is we’ve been in this kind of business for a long time and so we’ve been able to manage what ordinary people would say might be not necessarily the best credit risks and we’ve managed it well and our businesses have actually improved in quarter-to-quarter in terms of delinquencies that when the rest of the world has gotten worse. David Leiker – Robert W. Baird: And you’re not really putting loans out there that are worth more then the product you’re selling either.

No I don’t think so, but we have a terrific touch with the customer.

At this time we have no further questions; I would like to turn the conference back over to Mr. Ellen for any addition or closing remarks.

Thank you everyone for joining us this morning. We thank you for your interest in Snap-on. Good day.