Good day ladies and gentlemen and welcome to the Snap-on Incorporated 2010 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our remarks, we will conduct a question and answer session. (Operator Instructions). As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference call, Leslie Kratcoski, Vice President of Investor Relations. You may begin your conference.

Thank you David and good morning everyone. Thank you for joining us today to review Snap-on’s first quarter 2010 results which are detailed in our press release issued earlier this morning. We have on the call today Nick Pinchuk, Snap-on’s Chief Executive Officer and Aldo Pagliari, Snap-on's recently appointed Chief Financial Officer. Nick will lead off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we’ll take your questions. As usual, we have provided slides to supplement our discussion. You can find a copy of these slides on our Investor Relations portion of our website, next to the audio icon for this call. These slides will be archived on our website along with the 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 factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. With that said, I’d now like to turn the call over to Nick Pinchuk, Nick?

Thanks Leslie. Good morning everybody. Well, we’re once again encouraged with our results. We continue to make operational gains and to strengthen our strategic position. Both have helped us to deliver the results that are improving and I say are reasonable given the extended economic challenges. Our first quarter operating margin before financial services was 11.6%, 210 basis points higher than the first quarter of last year. In fact, I think it's noteworthy that this 11.6% exceeds the first quarter record of 11.1% registered in 2008 and that was before the economic crisis. And the profits in that period were achieved at significantly higher sales levels. This shows our commitment to the Snap-on value creations processes is driving strong improvement. The financial results are testimony to power that effort. With our focus on Snap-on value creation processes, safety, quality, customer connection, innovation, rapid continuous improvement or RCI as you call it, we’re becoming a stronger company and one that's well positioned to take advantage of any recovery. And we are seeing some positive signs, some good signs in certain market. Those opportunities added momentum to the operating progress we've been achieving over the past several quarters. Aldo will take you through the financial but first, I’ll provide you with a perspective on the results, my own perspective. Regarding growth, our overall sales were up 8.6% from last year, over 4% organically excluding currency. As in the recent past, our results are mixed by geographies and by market segment. So I would say the quarter provides evidence that overall market have stabilized and are showing some signs of upward potential but because of the varying nature of the results, they’re not yet clearly rebounding. In the past, I’ve mentioned the trends in big ticket items, products with relatively higher sales value,…

Thanks Nick and good morning to everyone on the call. Our consolidated operating results are summarized on slide 6. Sales in the first quarter of $621 million increased 8.6% from first quarter 2009 levels. Without currency organic sales were up 4.1%. As Nick mentioned we are encouraged by these results and by some of the business trends experienced in the quarter. Consolidated gross profit margin of 46.3% in the quarter increased 110 basis points from last year. Savings from previous restructuring initiatives and other cost containment actions contributed about $7 million or 115 basis points in gross margin improvement. Gross margin was further aided by better sales mix particularly diagnostic and information segments which improved consolidated gross margin by another 50 basis points. Restructuring cost reduced 2010 gross margin by 40 basis points. Operating expenses of $216 million in the quarter while up $11.5 million from the prior year were favorable as a percent of sales by 100 basis points. Unfavorable currency translation as a result of the weaker dollar contributed about $7 million of the increase. In addition higher pension expense due to lower the projected asset returns in previous years related to the U.S. pension plan accounted for $5 million of the increase. First quarter 2010 results were also impacted by higher volume related expenses as well as by $3.5 million of higher mark-to-market incentive in other compensation. These year-over-year increases and operating expenses were partially offset by about $6 million in benefits from ongoing RCI restructuring and other cost reduction and cost containment actions. Restructuring costs in the first quarter of 2010 totaled $3.2 million as compared to $2 million last year. The significant portion of this quarter’s restructuring costs again occurred in the commercial and industrial or C&I segment. Financial services incurred a $1.7 million operating…

Well, that’s our prospective on the first quarter. Our commitment to the Snap-On value creation process to safety, quality, customer connections, innovations in RCI, it continues to pay off. OI was up 32% in the OI margin of 11.6% was strong compared with history on considerably lower sale. The markets have stabilized and appear to be favorably inclined although its way too early to call a clear trend. And our continued investments in the strategic customer segment, the franchisees and their technicians, the repair, the garage owners and managers, the mission critical industry and the emerging markets of Eastern Europe and Asia Pacific are all reaping benefit. The bottom-line is that because of our commitment to Snap-On value creation processes and because of our strengthening strategic position, we are confident that Snap-On is well poised to take full advantage of the recovery as it occurs. Now, I will end with a word to our franchisees and associates. I know many of you are listening to this call. The results of the quarter were encouraging. But I know that they were only made possible by your capability, by your effort and by your commitment to our team. You have my congratulation and you have my thanks. Now, I’ll turn the call over to the operator for questions. Operator?

(Operator Instructions) We will take our first question from Jim Lucas with Janney Montgomery Scott

First question with regards to currency was hoping you could just help us out with translation versus transaction. With gross profit referring to currency being favorable yet operating expenses currency being unfavorable and with the continued fluctuation in the dollar if you could give us a little bit color what are you seeing there?

Well, I can start out and may be Aldo can roll in. I think what we saw in the quarter year-over-year was positives with the Canadian dollar where we sell, we also buy some out of Canadian plans but we are positively exposed there and around the pound. And those two currencies tended to be quite favorable for us and that generated the positive events here. Going forward, we see the same events around Canada but the pound has started to weaken some we could see some headwind in that situation. If you thinking about currency in terms of translation, our translation numbers in the first quarter on sales would have been about $24 million and operating expenses would be something $6 million to $7 million on a negative basis.

Yes. That’s helpful and then starting first on the CNI side some very good color about the ongoing investments, very helpful commentary surrounding what you are seeing on the equipment and the big ticket side. Could you talk a little bit about what you are seeing in terms of re-stocking versus overall demand whether by geography or end market?

I don’t think we are seeing any restocking, stocking is through. I think people are snake bitten over the past recession. So we are not seeing any evidence in the United States where we sell through another level whether you are talking about our dealers, our franchisees or you are talking about distributors outside the United States. We are not seeing evidence of restocking. So none of that we believe is in our number. A quite a few of our businesses, for example, the industrial business is direct. So restocking would be a factor in that situation. The big question for us has always been Europe about re-stocking and de-stocking and we certainly haven’t seen any restocking in Europe. The de-stocking seems to have ended in certain parts particularly in terms of the North. The South continues to be sliding. Spain, the markets in Spain and if you look at the GDP in Spain it's still going South. So what we see is no restocking, an ending of de-stocking in the North of Europe, some minor I guess continuing weakness in the South. We just haven’t seen the markets snapped back to the point that we expect people to restock. I’m not sure when that will happen Jim. When we talk to distributors or I talk to franchisees, they all have their, to use an American expression, their Missouri head on, they’re in show me territory. So they’re going to have to see quite a bit of time go by before they’re going to enter restocking.

Okay and switching gear to the tools group. You referred to the termination is down, plans in terms of adding to the franchise count this year also, where the van count stands currently and then secondarily from a mix standpoint, could you give us anymore color of what you’re seeing on hand tools versus power tools versus storage boxes?

Yes. Van counts are pretty stable. It’s give or take 3,460 in the United States as about where it was at the end of December. Terminations are at an all-time low but you could say we’re not capturing any. We’re not increasing on that because we’re not gaining even though the termination is at an all-time low. I would add quickly though we’re being very selective of our people at the van because we had difficult experiences when we put people in vans that might have been not appropriate or not as I guess born to do that kind of business, and so we had some difficulty when they ended up having, not being successful. So we’ve been stable there. Our plans are still to expand that business and we are still continuing to working to refine our recruiting models to make sure we can move forward and build that van count. In terms of mix, our hand tools were up slightly in the quarter. Remember that hand tools never really went down very much. It was all tool storage and big ticket items. So, the mix of tool storage and diagnostic, you can pretty much say that the increases for year-over-year are rooted in tool storage and high value diagnostic units. Power tools was down slightly but that has to do more or less with the timing of model introductions.

We have David Leiker with Robert. W. Baird.

It's Keith Schicker on the line for David. I just wanted to start sequentially with the tool segment. It looks like revenue was up about $30 million sequentially; Q1 versus Q4 and operating profits split a little bit. Could you provide any color on that variance there?

Yes. Well, first of all, we had record. I believe probably an all time record OI margin in the fourth quarter for the tools group so was gain busters. So we knew we had top comparisons if you are going to go sequentially. We had our volume rise up. So we got some pop out of volume and a little bit of absorption. Much of that business was as I said before big ticket items which tend to be ironically a little lower in absorptions because there are components purchased more than a hand tool. A hand tool tends to be a big labor, big machine, high fixed cost equipment. Diagnostic tend to be component purchased and assembled. So we could get a volume push but the absorption might not be as much as you might expect if you are modeling this. We had favorable LIFO in the fourth quarter which I think we called out in our release which basically accrues to the tools group. In first quarter in a tools group, you do have a launch; we have kick off around the country. So there is a little more expense there and I think I would say that if we wanted to get jump started into the year with those big ticket items because we thought that would lead the way. So we promoted them relatively aggressively. So when you put all that together that ended up blunting some of the drop through you might expect off the volume increase.

Perfect. Yes, that's great. If we look at the commercial and industrial segment and this is a difficult question but the margin improvement there, would you attribute more of that to getting more volume running through the model or would you attribute more of the margin improvement to some of the cross section that you have taken in that part of the business?

Well, I think it's both situation. The commercial and industrial division has been throughout the years pretty much our poster child to rapid continuous improvement and we did get nice drop through on some of the volume. But you don't get that kind of popping, I think we went from 6.7% OI margin to 10.2%. I think the numbers are something like that. You don't get that just from volume. So there was good drop through because we had some nice sales and alignment and so which are high profitability product, high margin product but we also had some great RCI benefits. So I’d say both were big factors.

But wouldn't think alone one or the other.

No, I would not. They got a nice increase in volume right.

Okay

That's a good thing but the drop there was very high. So you can make the calculation based on that.

Okay and then two more quick ones here. Has there been any issues that you've had with the closure of the aerospace in Europe from a business perspective?

Yes. A couple of our guys are trapped in Paris for days and they are running out of clothes.

Okay.

We haven’t had too much. I have made this kind of a joke about it. But there are people trapped there. We had some training plan, that’s that put on hold. So that’s an issue. I don’t see us having a problem. If you look forward, we could have a problem if we ran out of things that we needed to airship. Europe would be a less of a problem then if this extended to Asia let say. To put it in perspective though we spent $90 million a year in freight, $5 million of this is air. So it’s not a huge problem for us. It could create some irritancy in certain product lines and certain places. But we don’t see it being an issue right now.

Okay and then the last one. It's still relatively early here in the second quarter but if you could just comment on some of the end market trends that you’ve seen really early in the quarter here?

Couple of things, one is that we don’t see much seasonality in our business except for the third quarter. Our third quarter tends to drop pretty much because of Europe, because of our dependence on Europe and some of the markets in United States people take the van drivers to take vacations in the third quarter from time-to-time. So, we do see weak third quarter but by and large not much seasonality going from first to second. So there is not much of a tailwind in that regard. Looking out for the future, I think I stand on what I said in my remarks. We think the markets are leaning positively but it was one quarter and in those numbers are some expansion to new adjacent segments like capturing customers in Europe for the EPC and reaching out to new OEMs and equipment sold. There is probably some market shares in our gain, in our growth number and that 4% growth number as well. So I’ve learned in the recession not to make any future calls. All I can say is the market seems to be leaning positively but I am still from Missouri that is show me. I’m looking forward for any kind of recovery. The one thing I can say is, wherever it happens we’re poised to take advantage of it.

Okay and do you think this market share gains are something that can continue or would you rule that out or how should we think about that?

I said market share. It’s always dangerous to talk about market share gains over quarter. These are simply new customers that we captured. I believe we can capture new customers though. That’s what our strategic initial is all about, that’s what penetrating the garage, a repair garage owners and managers is about. That’s what is extending the mission critical industry is about, that’s what building in emerging market is about. It is after all share gain and so we believe very strongly that we’ve taken the action in building capabilities in product lines and physical distribution to be able to take advantage in those areas which are pretty much adjacent for us as the recovery occurs.

We’ve Gary Prestopino with Barrington Research.

Seems to me just a little bit more optimism, can you express here but relative to the past conference calls I have been on Nick. But I just went through my notes. I just want to make sure you basically said that some of the big ticket items particularly in Europe you were seeing so mildly positive sales gains in tool storage diagnostics under-car is that correct?

Yes. What I said was I am seeing increases in tool storage and high value diagnostics that more refers to the United States than Europe, equipment I meant both developed markets United States and Europe.

Are these sequential or year-over-year?

They are year-over-year and for tool storage and diagnostics they are sequential. Equipment had a gain busters quarter, in the fourth quarter so I say it’s about flat.

You also mentioned that some of the more Southern European countries you are dealing with are Italy possibly Greece Marseille having issues?

Spain.

Spain. But the Northern European countries are starting to at least stabilize.

We are looking better in the North UK, Sweden; France is looking a little better for us. Spain, the reason I mentioned Spain, Gary is that SNA Europe has a significant portion of its business in Spain. It’s the leading market player in Spain and so for us Greece is kind of interesting. We sell there but it’s not such a big factor. Italy, some factor for us but Spain is a significant challenge for us and we see the Spanish market continuing downward.

Could you just remind us what your percentage of sales are to Europe and U.S. and then what would you categorize emerging? Do you have that handy?

Of the top of my head 42% outside United States, I would say is 26%, 27% in Europe. You might say Asia-Pacific 8-10%.

And in Asia-Pacific which is probably more your emerging markets?

Yes.

What did you see there is particularly?

Booming. We saw great smaller base though. When I am quoting the numbers Asia-Pacific, I am talking about Japan which is a much more stable market. But when I talk about the emerging markets of Asia-Pacific, I am talking about China, India, the ASEAN, all where we’ve been building our physical presence and expanding our product lines where we add the diagnostics in China, where we provided the ASEAN (inaudible) those business in the emerging markets of Asia were up substantially well ahead of any GDP growth in those areas. So the GDP growth is pretty robust. Now again Gary it's off a smaller base but we are pretty encouraged by that.

Okay and then last question, we are truly coming out of this worldwide recession.

I didn't say that.

What? No I am saying that. My prediction. How is the performance bid of your business line different now or coming out of this relative to where it has performed in the past recessions coming out of that? Is there any big differences that always been choppy by country or is there something that you can point to that significantly different that is giving you cause to be cautious here?

No. Actually nothing that's giving us cause to be cautious out of that. If you are asking me how I feel about this, there is a couple of things, one is I feel why we brought down our breakeven?

Right.

That's good. Secondly, okay, the recession put everybody on stall a little bit. We’ve had chance to build our strength in places. So we kept investing. So I think we are in better shape perhaps then maybe some others are because we kept investing. We didn’t take capacity out in Europe, we kept in place. Remember, we talked about that in the prior calls. We kept, because we were confident that the markets are going to come back. So I believe and we have building in Asia-Pacific well maybe this there was a tough time for some others. So building our product line for critical industries. We kept expanding our product lines throughout the recession. So I feel pretty good about the positioning. The only difference for us I’d say is that Spain, one of our markets, one of our more major markets in Europe is unusually weak. That’s about the only difference about our business versus I guess any other kind.

We have no further questions at this time, and I will turn the call back over to Leslie Kratcoski for any additional comments or closing statements.

Thanks everyone for joining us this morning. A replay will be available shortly on our website and as always we thank you for your interest in Snap-on. Have a good day.

That does conclude today’s conference and we thank you for participating.