Good day, ladies and gentlemen, and welcome to the Snap-on Second Quarter 2020 Results Investor Conference Call. Please note that today's call is being recorded. And at this time, I would like to turn the conference over to Sara Verbsky, VP of Investor Relations. Please go ahead.

Thank you, Kathy, and good morning, everyone. Thank you for joining us today to review Snap-on's Second Quarter 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 Chief Financial Officer. Nick will kick 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've provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in our webcast viewer as well as on our website, snapon.com, under the Investors section. 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 the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes 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, including a reconciliation of non-GAAP measures, is included in our earnings release and in our conference call slides on pages 14 through 16. Both can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Before we get going, I want to thank the members of the Snap-on team. It's clear in this turbulence that they are among the special contributors who keep society intact when our days are dark. And in that essential challenge, we're prioritizing the health, safety, and well-being of our associates, franchisees, customers, and communities. Working from home, and when that's not possible, and there are a number of those instances, distancing using personal protective equipment, cleaning, deep and often staggering shifts and breaks, paying quick attention to symptoms and pursuing contact tracing. We worked hard to stay safe. But throughout this time, we're also investing in a continuing stream of essential new products. We've also invested in a continuing stream of essential new products, reinforced our brand and strive to maintain our team. The people of Snap-on are a great advantage. We're working hard to preserve them in the turbulence, and we'll continue to do so. For our franchisees, we're active in helping, reaching out on a regular basis to understand their needs and those of their customers. When the virus passes, we know there'll be even more opportunities. We want our associates and our franchisees at full strength to capitalize on the possibilities. We now project that the virus plays out in three phases: First, the initial shock. A substantial interruption of activity at both the franchisee and the customer level. This was evident in late March and in April; second, a combination period. As operations and individuals develop more and more ways to safely pursue their opportunities against the COVID-19 environment. In fact, we appear to be seeing that effect through May, June, and onward. And of course, we've actively participated in that process, broadcasting best practices, working hard to accelerate the comeback. Finally, the third phase, psychological recovery. Following a return to normal, customers will need to regain confidence in the future before they resume full buying participation. And in that recovery, we see great opportunities. As driving is restored, it becomes even more popular, even more essential. This overall construct represents what we consider to be the general shape of the way forward. It does represent a continuing upward trend, but the slope of the ascension isn't clear. And of course, the psychological recovery phase will be greatly influenced by the ongoing evolution of the virus. Nobody knows the future for sure, but we are encouraged by what we've seen so far. Looking back, April was the nacre. But as the quarter progressed, we showed continual recovery. Our businesses did learn to better accommodate the pandemic. Both sales and profitability improved sequentially in May and in June. Although the virus is still with us, it appears that the situation may be evolving just as we projected. As we said at the end of April, the impact of COVID-19 varies across our operating landscape. Asia remains virus challenged. Japan, South Korea, and China do appear to have weathered the worst, but Southeast Asia and India are still in deep turbulence. And in Europe, the overall economic weakness present before the pandemic in combination with the virus has made for the deepest distress of all. Beyond geographic differences, we're also seeing that our face-to-face businesses, the mobile vans and the direct sales forces are faring somewhat better compared with other models. Snap-on's traditional strength, personal selling appears to be an effective foundation for limiting the difficulty. In that way, we believe we have the resilience and resources to weather this challenge as Snap-on has so many times in the past. Actually, over the years, we've seen this movie before – natural disaster, Superstorm Sandy, Hurricane Harvey, Katrina, and the Great Recession of 2009 – and each time we learned to accommodate and emerge stronger and we've taken the lessons of those disruptions and applied them with positive effect to this time of the virus. I love to say this: Snap-on has paid a dividend every quarter since 1939, and it's never reduced it and this quarter was no different. That record stands as evidence of our ongoing resistance to challenge. And beyond just maintaining, we believe our continuing investment in new products and our franchisees and in our team in the midst of the storm will once again make us stronger as the environment recovers. We do believe in the opportunities going forward and because of that, we're keeping our focus on Snap-on value creation, safety, quality, customer connection, innovation and rapid continuous improvement. That emphasis is particularly evident in customer connection and innovation. We're continuing with a stream of new products. We believe the green shoots of accommodation and psychological recovery will grow and we're going to be ready. Well, that's the overview. Now let's turn to the results. Second quarter, as reported sales were $724.3 million, down 23.9%, including $14.4 million or a 120-basis-point impact from unfavorable foreign currency and an organic sales decline of 22.9%. From an earnings perspective, OpCo OI for the quarter was $91.1 million, including $5.8 million of direct costs associated with the virus, $4 million of restructuring, principally focused on Europe, and $3.8 million of unfavorable foreign currency effects compared to $189.9 million in 2019. Optical operating margin was 12.6%, and at the as-adjusted level, excluding restructuring charges, was 13.1%. For financial services, operating income of $57.6 million was down from last year's $60.6 million. Overall, EPS on an as-reported basis was $1.85 compared to $3.22 last year. Excluding the restructuring charges, the as-adjusted EPS was $1.91. Well, those are the overall numbers. Now let's turn to the groups. In C&I, volume in the second quarter of $261.9 million, including $6.9 million of unfavorable foreign currency, was down versus last year's $335 million, primarily on double-digit declines in all of the segment's operations, reflecting the effect of COVID-19 operations, and the ongoing economic weakness in Europe. From an earnings perspective, C&I operating income of $22.9 million decreased $26 million, including $3 million of virus-related costs, $2 million of restructuring, and $1.9 million of unfavorable foreign currency effects. There was a clear point of light in C&I. Our direct sales to customers in the critical industries, though still down, were less affected than other areas across the group. Military and international aviation continue to register growth. And heavy truck, as you might expect, was down, but was reasonably resilient while other segments such as oil and gas and education, no surprise, experienced substantial contraction due to lower student activity. But we do remain confident and committed to extending in the critical industries, and we do see a growing opportunity there moving forward. Speaking of the future, let's talk about creating new products. Just this quarter, we introduced another one of our great 14.4 volt units. The new CTS 825 quarter inch Hex Cordless screwdriver. Our brushless powertrain enables higher torque, more run time, and longer motor life. The driver has a nine-position clutch providing just the right amount of torque for the job, all packaged with a dual range gearbox and a built-in brake that prevents this power tool from throwing fasteners; that's a significant safety feature. The new screw gun also features an ergonomically designed cushioned grip handle for great comfort and twin LED lights to clearly illuminate the work area. After only a couple of months, it's already essential where work is critical. It was launched in April, a tough month, but it's already one of our hit million-dollar products, a significant success. C&I, navigating the turbulence of customer connection and innovation, serves the essentials. Now on to the Tools Group. Sales were $323.3 million in the quarter, reflecting a $79.2 million organic decline along with $3.3 million of unfavorable foreign currency. The operating earnings were $38.4 million, including $1.9 million of virus-related costs, $1.1 million of unfavorable foreign currency, and $600,000 of restructuring charges compared to $71.3 million recorded in 2019. The Tools Group was a clear demonstration of both the COVID trajectory across our business and of the strength and resilience of our direct face-to-face model. As the virus rose in late March and April, the network was shocked individually and collectively. The impact varied by region, but all geographies were affected. April was the deepest. However, moving from that point, our franchisees in collaboration with the Snap-on team found increasingly effective ways to accommodate the pandemic and pursue their essential support. Each subsequent month, the vans have shown significant gains. In fact, the Tools Group sales in June were down just 3.1%, up nicely after a tough start to the quarter. The ongoing accommodation shows that the direct interface with our customers is dramatically highlighting the bond that Snap-on has always had with working men and women through thick and thin. Many franchisees report that the relationships forged during the pandemic have never been stronger. There's nothing like working together in difficulty, and we believe this bodes really well for our market position and for capturing future opportunities. So despite the virus, we're quite positive about our business, and this view is clearly reflected outside Snap. In fact, once again this year, we're being recognized in the top 50 of Entrepreneur Magazine's annual best of the best franchises. The entrepreneur ranking rates 500 companies on cost, size, growth, franchise support, brand power, financial strength, and organizational stability. We again scored highest in the Tool Distribution category, a distinction we've held for quite some time. As we move forward, our associates and franchisees are clearly becoming more effective against the wind; it’s a continuing process born out of the Snap-on team working and developing action plans, sharing best practices for safe selling, supporting with tailored promotions, and launching targeted promotions. This process has been successful in hurricanes, recessions, and the threats of 9/11, and it's working again. And of course, the effort also includes a healthy array of innovative new products to solve critical operations. Everybody knows we have great ratchets, and guided by uninterrupted customer connection, we've been expanding that powerful lineup. Almost every quarter, and we did it again when we introduced the XFR704 12-point Flank Drive Double Flex Ratcheting Box Wrench Set. Now that's a mouthful, but this unit has a lot to offer. It combines a 180-degree flexible head with our narrow width and low-height design, allowing work in the tightest of spaces. Our patented ratcheting gear utilizes Dual 80 technology, minimizing swing arc and making jobs in restricted areas even easier. Our unique yoke/tang configuration provides the strongest and most durable flex head anywhere. The new four-piece set is built in our Elizabethton, Tennessee plant right here in the USA. I was just there again, and I can testify; the Snap-on people in that plant are a special team turning out great products, and even in the current environment, technicians have noticed, driving the Flex to 704 on its way to being another million-dollar product. Well, that's the Tools Group, accommodating the pandemic, furthering innovation, and strengthening for the future. Now let's speak of RS&I. The RS&I group finished the quarter with $245 million in sales, including $4.8 million of unfavorable foreign currency and $2.3 million from recent acquisitions; that level compared to $348.9 million recorded last year. The lower volumes reflected a decline of over 30% in activity associated with vehicle OEM projects and in the capital-like spending relating to our undercar equipment operations, both areas that were deeply attenuated with the uncertainty. Sales of diagnostics and repair information products to independent shops were also negatively impacted but to a lesser degree; garages continue to subscribe and invest in meeting new repair challenges, as people need fixing even in a pandemic. RS&I operating earnings of $50.6 million decreased by $38 million, including $1.4 million of European-focused restructuring, $800,000 of unfavorable foreign currency, and $700,000 of direct COVID costs. So while the overall group was impacted, information-based operations were not as effective, and new products were a driver in that. Once again, we generated repair excitement with innovations like the latest enhancements to our Mitchell One ProDemand repair information system, which, in response to the needs of large national account customers, now includes a range of vehicle lift points in its quick reference menu. The new ProDemand links directly to vivid vehicle illustrations, which identify designated lifting points as well as listing all the important manufacturer-recommended safety procedures. You see, technicians are in a hurry and sometimes fail to follow the correct lift procedures. Injuries and vehicle damage can follow. But those who have our ProDemand system can now find the critical lift information only one click away from the home screen. It's a significant convenience and a clear safety enhancement. Also, in the quarter, we launched our e-Technician 2.0 designed specifically for heavy-duty trucks. It's the most comprehensive and powerful diagnostic software in the market. It provides the data and support required to stay competitive in today's trucking industries. Heavy-duty diagnosis was never this good. The e-Technician 2.0 combines extensive coverage from everything from commercial vehicles to light and medium-heavy-duty trucks, diagnostic capability for an expanded array of engines, transmissions, brakes, body and chassis systems, and more. The new 2.0 also adds a cloud-based, fleet-wide vehicle history, giving users access to every diagnostic session for every vehicle in their fleet regardless of location. Snap-on continues to show the way in truck repair, and e-Technician 2.0 is another step along that path. We're confident in the strength of our RS&I group, and we keep driving to expand its position with repair shop owners and managers, making work easier with great new products even in the days of the virus. Well, that's the second quarter, the Snap-on second quarter. We are moving to accommodate into what we believe will be psychological recovery, keeping our teams safe as we pursue the essential, applying the lessons of our experience, helping our customers, our franchisees, and our team weather the difficult days. And build the capability to operate in the virus environment, driving month-by-month improvement, engaging the power of our direct selling capabilities, being confident in our future opportunities now amplified by the virus, pursuing Snap-on value creation, all to not only weather the turbulence but to emerge stronger and ready to take full advantage when the days are clear. Now I'll turn the call over to Aldo for a detailed discussion of the financials.

Thanks, Nick. Our consolidated operating results are summarized on slide six. Net sales of $724.3 million in the quarter compared to $951.3 million last year, reflecting a 22.9% organic sales decline, $14.4 million of unfavorable foreign currency translation and $2.3 million of acquisition-related sales. The organic sales decrease primarily reflected the impact of the COVID-19 pandemic, with sales declines in all three operating segments. In the quarter, while there was some variability from location to location, the declines in Europe were more pronounced. As anticipated, with government measures in place throughout the world, sales in the month of April were heavily impacted and were down significantly on a year-over-year basis. As locations began to reopen and as our operations and those of our franchisees adjusted to the virus environment, which included accommodations for various government-imposed restrictions, we began to see sequential improvements in activity as we moved through May and June. Similar to last quarter, we accrued for restructuring costs associated with certain of our European-based operations. During the second quarter, we recorded $4 million of such costs which were reflected in each of our operating segments. Additionally, in the quarter, we've identified $5.8 million of direct costs associated with COVID-19. These costs include direct labor and under-absorption associated with temporary factory closures, wages for quarantined associates, event cancellation fees as well as other costs to accommodate the current enhanced health and safety environment. Consolidated gross margin of 47.1% compared to 49.8% last year. The 270 basis point decrease primarily reflects the impact of the lower volumes, including costs to maintain manufacturing capacity and worker skill sets, 40 basis points of direct costs associated with COVID-19 and 30 basis points of restructuring costs. The decreases were partially offset by savings from RCI initiatives. The operating expense margin of 34.5% increased 470 basis points from 29.8% last year. This increase primarily reflects the impact of lower sales as well as 40 basis points of direct COVID-19 related costs and 20 basis points from restructuring actions. These items were partially offset by savings from cost containment actions in response to the lower volume. Operating earnings before financial services of $91.1 million, including $5.8 million of direct costs associated with COVID-19, $4 million of restructuring costs and $3.8 million of unfavorable foreign currency effects compared to $189.9 million in 2019. As a percentage of net sales, the operating margin before financial services of 12.6% compared to 20% last year. Excluding the restructuring charges, operating earnings before financial services were $95.1 million or 13.1% of sales, decreased 49.9% from 2019 levels. Financial services revenue of $84.6 million in the second quarter of 2020 compared to $84.1 million last year, while operating earnings were $57.6 million compared to $60.6 million in 2019, primarily reflecting a $3 million increase in provisions for credit losses. Consolidated operating earnings of $148.7 million, including $5.8 million of direct COVID-related costs, $4 million of restructuring charges, and $4.1 million of unfavorable foreign currency effects compared to $250.5 million last year. As a percentage of revenues, the operating earnings margin of 18.4% compares to 24.2% last year. On an adjusted basis, excluding restructuring, operating earnings of $152.7 million or 18.9% of revenues decreased 39% from 2019 levels. Our second quarter effective income tax rate of 24.1%, including a 20 basis point increase from the restructuring charges compared to 23.6% for the second quarter of last year. Finally, net earnings of $101.2 million or $1.85 per share, including a $0.06 charge for restructuring compared to $180.4 million or $3.22 per share a year ago. Excluding the restructuring charges, net earnings as adjusted were $104.5 million or $1.91 per share. Now let's turn to our segment results. Starting with the C&I group on slide seven. Sales of $261.9 million compared to $335 million last year, reflecting a 20.22% organic sales decline and a $6.9 million of unfavorable foreign currency translation. The organic decrease includes mid-teen declines in both sales to customers in critical industries and in the power tools operation. Across the critical industries, gains in sales to various government-related agencies were more than offset by declines in natural resources, including oil and gas, as well as the lower technical education sales with the latter being impacted by school and campus closures. Gross margin of 34.4% decreased 420 basis points year-over-year, primarily due to the impact of decreased sales, including lower utilization of manufacturing capacity, as well as 80 basis points from $2 million of restructuring charges, 70 basis points of direct costs associated with COVID-19, and 50 basis points of unfavorable foreign currency effects. These decreases were partially offset by material cost savings and benefits from the company's RCI initiatives. The operating expense margin of 25.7% increased 170 basis points from 24% last year, primarily due to the lower sales and 50 basis points of direct COVID-19 related costs. These items were partially offset by savings from cost containment efforts. Operating earnings for the C&I segment were $22.9 million, including $3 million of direct COVID-19 related costs, $2 million of restructuring charges, and $1.9 million of unfavorable foreign currency effects compared to $48.9 million last year. The operating margin of 8.7%, including the 80 basis point charge for restructuring compared to 14.6% a year ago. Turning now to slide eight. Sales in the Snap-on Tools group of $323.3 million compared to $405.8 million in 2019, reflecting a 19.7% organic sales decline and $3.3 million of unfavorable foreign currency translation. The organic sales decrease reflects a mid-teen decline in our U.S. franchise operations and a nearly 40% decline in the segment's international operations. As Nick mentioned, sales in our direct customer-facing businesses like Snap-on Tools had the most dramatic year-over-year decreases in April, with notable sequential improvements in activity in May and June. Gross margin of 41.7% declined 340 basis points, primarily due to the impact of lower sales volumes, including costs to maintain manufacturing capacity as well as 30 basis points of direct costs associated with COVID-19, and there were 20 basis points of unfavorable foreign currency effects. The operating expense margin of 29.8% increased from 27.5% last year, primarily due to the impact of the lower sales, with 30 basis points of direct COVID-19 related costs and 20 basis points from $600,000 of restructuring charges. These costs were partially offset by savings from cost containment actions. Operating earnings for the Snap-on Tools group were $38.4 million, including $1.9 million of direct COVID-19 related costs, $1.1 million of unfavorable foreign currency effects, and $600,000 of restructuring charges compared to $71.3 million last year. The operating margin of 11.9% compared to 17.6% a year ago. Turning to the RS&I group shown on slide nine. Sales of $245 million compared to $348.9 million a year ago, reflecting a 29.5% organic sales decline and $4.8 million of unfavorable foreign currency translation, partially offset by $2.3 million of acquisition-related sales. The organic sales decline includes a mid-teens decrease in sales of diagnostic and information products to independent repair shop owners and managers as well as declines of over 30% in both sales of undercar equipment and sales to OEM dealerships. The lower sales of undercar equipment include significantly lower sales of collision repair products, while lower sales to OEM dealerships largely reflect decreases in OEM facilitation projects. Gross margin of 47.4% improved 110 basis points from 46.3% last year primarily due to the impact of reduced sales and lower gross margin businesses and savings from RCI activities. The operating expense margin of 26.7% increased from 20.9% last year, primarily due to the lower sales and 50 basis points from $1.4 million of restructuring charges partially offset by savings from RCI and other cost containment actions. Operating earnings for the RS&I group were $50.6 million, including $1.4 million of restructuring charges, $700,000 of direct COVID-19 related costs, and $800,000 of unfavorable foreign currency effects compared to $88.6 million last year. The operating margin of 20.7% compared to 25.4% a year ago. Now turning to slide 10. Revenue from financial services of $84.6 million compared to $84.1 million last year. Financial services operating earnings of $57.6 million compared to $60.6 million in 2019. Financial services expenses of $27 million increased $3.5 million from last year's levels, primarily due to $3 million of higher provisions for credit losses as compared to 2019. The second quarter of 2019 included lower provisions as a result of non-recurring favorable loss experience at that time. As a percentage of the average portfolio, financial services expenses were 1.3% and 1.1% in the second quarters of 2020 and 2019 respectively. The average yield on finance receivables was 17.6% in the second quarters of both 2020 and 2019. The respective average yield on contract receivables was 8.2% and 9.1%. The lower yield on contract receivables in the second quarter of 2020 primarily reflects the impact of approximately $20 million of lower interest business operation support loans for our franchisees. These loans were offered during the second quarter to help accommodate franchisee operations in dealing with the COVID-19 environment. Total loan originations of $255.8 million decreased $7.6 million or 2.9% and included an 8.5% decrease in originations of finance receivables. This decline in finance receivables was partially offset by a 26.1% increase in originations of contract receivables resulting from the business operations support loans offered to franchisees mentioned earlier. Moving to Slide 11. Our quarter-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our U.S. operation. Our worldwide gross financial services portfolio increased $54.3 million in the second quarter. Collections of finance receivables in the quarter of $166.8 million compared to collections of $191.6 million during the second quarter of 2019. This year's quarter reflected the greater use of deferred payment plan sales programs and short-term payment relief or forbearance to some of our franchisees' qualifying customers. Similar to the trends elsewhere in our business, we saw the greatest number of requests for payment relief on extended credit or finance receivables in April. This lessened in May, and as of the end of June, forbearance was granted for approximately 2.5% of the portfolio. Historically, those accounts having forbearance terms are below 1% of the finance receivable portfolio. Trailing 12-month net losses on extended credit or finance receivables of $50.4 million represented 2.93% of outstandings at quarter end, down six basis points sequentially. The 60-day plus delinquency rate of 1% for U.S. extended credit is down 40 basis points from a year ago. This improvement primarily reflects the aforementioned programs which took place during the quarter, as well as the effective credit and collection practices executed by Snap-on and our franchisees throughout this period. Total charge-offs within the quarter totaled $15.1 million as compared to $14.9 million during the second quarter of 2019. Now, turning to slide 12. Cash provided by operating activities of $253.6 million in the quarter increased $108.1 million from comparable 2019 levels, primarily reflecting net changes in operating assets and liabilities, including $61.5 million in lower tax payments, $75.7 million in decreases in working investment, partially offset by lower net earnings. Net cash used by investing activities of $45.6 million included net additions to finance receivables of $35 million and capital expenditures of $11.8 million. In the quarter, our total free cash flow or cash flow from operating activities less capital expenditures in the net change in finance receivables was $206.8 million. This reflected an improvement of $118.3 million from last year, representing 195% of net earnings. Net cash provided by financing activities of $289.5 million included proceeds from the April sale of $500 million of 30-year senior notes, partially offset by $148.1 million of repayments of notes payable and other short-term borrowings, and cash dividends of $58.7 million. While there were no repurchases of common stock under our existing share repurchase programs during the quarter, as of quarter-end, we had remaining availability to repurchase up to an additional $334.4 million of common stock under existing authorizations. Turning to slide 13. Trade and other accounts receivables decreased $131.1 million from 2019 year-end. Days sales outstanding of 59 days compared to 67 days at 2019 year-end. This reflected a reduction in days outstanding across all of our operating segments. Inventories increased $23.6 million from 2019 year-end, primarily to support the critical industries. On a trailing 12-month basis, inventory turns of 2.3 compared to 2.6 at year-end 2019. Our quarter-end cash position of $686.2 million compared to $184.5 million at year-end 2019. Our net debt to capital ratio of 17.9% compared to 22.1% at year-end 2019. In addition to cash and expected cash flow from operations, we have more than $800 million in available credit facilities. As of quarter-end, there were no outstanding amounts under the credit facility, and there were no commercial paper borrowings outstanding. Despite the uncertainty in the current environment, we believe we have sufficient available cash and access to both committed and uncommitted credit facilities to cover expected funding needs in both the near-term and a long-term basis. That concludes my remarks on our second quarter performance. I'll now briefly review a few updated outlook items. Given the improving trends experienced in the second quarter in the near-term, we believe there will be continued sequential improvements reflecting increasing levels of accommodations to the virus-related environment. However, we cannot provide assurance on the rate of progress due to the uncertain and evolving nature and duration of the pandemic. We anticipate that capital expenditures will be in a range of $75 million to $85 million as compared to our prior estimate of $70 million to $80 million. Additionally, we continue to anticipate that our full year 2020 effective income tax rate will be in a range of 23% to 25%. I'll now turn the call back to Nick for his closing thoughts.

Thanks, Aldo. The Snap-on second quarter, sales were down. Of course, we don't like it. But the OpCo margin was 12.6%, 13.1% as adjusted, approaching the mid-teen level that we long-held as an aspirational target. EPS of $1.91 as adjusted, also down but still higher than any quarter before the end of 2014. The numbers are decreased, but we believe they demonstrated significant resilience and perhaps the greatest withering of our time. You see we have seen this movie before, and that experience helped guide us through the depth of the shock and onto the continuing positive trajectory of accommodation. April was dark. But the rise from that point was evident across the corporation from operation to operation. The tools group demonstrated the value of our direct model, with sales in June coming within 3.1% of last year's level. The future is not known. What we believe our learning and accommodation assure is that we won't get shocked again, and any future impact will be attenuated. And looking at the way the virus has affected everyday life, we believe abundant opportunities are emerging for Snap-on in the recovery. It appears that vehicles are going to be even more important. You can see it already in China and in the U.S. Northeast, and that's music to our ears. We are preparing, launching new products, enhancing our brand, reinforcing our franchise network, and maintaining the capabilities of our team. All of this represents a cost in the turbulence, but it ensures that we'll be fully enabled and stronger when opportunities arise. We believe what we're doing in these days of the virus will position Snap-on for continuing growth, increasing profitability, and ongoing prosperity for years to come. Before I turn the call over to the operator, I'll once again speak to our Franchisees and Associates. It has never been clearer that all of you are extraordinary people, playing a very special role in our world. For your ongoing success in surviving the shock and accommodating the turbulence, you have my congratulations for your significant contributions in maintaining our society; you have my admiration. And for your unfailing belief in the future of our enterprise, you have my thanks. Now I'll turn the call over to the operator.

Certainly. Thank you. We'll go first to Scott Stember with C.L. King.

Good morning and thanks for taking my questions.

Good morning, Scott.

Nick, you gave a lot of good color on what's happening at recovery within the businesses. It seems like the Tools Group is probably experiencing the greatest recovery. Maybe talk about RS&I and C&I, how the cadence of sales recovery and how we could expect the quarter coming up.

Sure. While we don't provide guidance, I can say that generally, we're seeing a positive trend across most of our operations from April through June. I highlighted the Tools group because they particularly excelled during this time, but there were improvements in all areas. Specifically, in industrial, the direct selling segment showed notable progress. Overall, in C&I, we saw some encouraging signs. However, in RS&I, sales were down approximately 29.8% as reported, with adjusted figures around 29.5% or 29.4%. The variability in vehicle OEM projects makes it challenging to predict future performance. The equipment business is currently selling to smaller businesses that need a psychological boost to regain the confidence to invest in our capital-light projects. Additionally, there is a significant psychological factor among dealerships regarding new car sales, which influences their investment decisions in used cars and repairs. If dealerships decide to invest more in those areas, we could see a positive shift in those businesses.

Got it. And moving over to the financial services side, your originations were really not down all that much. But I guess that was explained by loans to the franchisees. Maybe just talk about the health of the franchisees and what you're seeing at the repair shop level.

Yeah. Look, I was just out with some franchisees last week, and they seem pretty strong. I mean, and I talked to a lot of them on the phone these days since I can't travel as much as I used to around the country. And they seem quite positive. I would say that the originations - one of the things I will tell you that I think speaks volumes is we talked about the recovery, the accommodation of the Tools Group as shown in the 3.1%. Well, I'll tell you that in the quarters through this period, the sales off the van could be viewed as our work better than our sales to the bands. So fundamentally, what you see a little bit in that origination situation is some of our franchisees selling out of their inventory, big-ticket items, particularly tool storage, which they tend to happen in and inventory to try to accommodate the taste of the technicians. And therefore, you see that, but we see it as a great thing. Because fundamentally, the sales off the van are outpacing. The sales of the Tools Group showed a combination.

So that being said, the sale in June, if you were down only modestly sell in, are you saying you were off the van in June?

I didn't say anything. I said it was better than the 3.1%. That's what I said. I said it was significantly better. But that's what I'm willing to say in this situation. It clearly is what leads to the originations.

Got it. Good enough. Thanks for taking my questions.

And now we'll take a question from Gary Prestopino of Barrington Research.

Hey, Good morning everyone.

Hi, Gary.

A couple of questions here, Nick. First of all, are all your markets now open, especially on the van side, I mean, are you able to sell in the Northeast some of these areas…

Oh, yes. Everything is open. There is much less variation now in terms of opening. When the virus hit, there were variations between regions. In the Northeast, there was a lot of reduced activity compared to the Southwest, where the differences weren't as pronounced but still noticeable. Now those regions have come closer together. Canada, for a time, was struggling significantly, and so was the U.K. However, all those areas have started to stabilize. There are still some minor differences between them, but not enough to be concerning in this situation. Activity is returning, and this has been happening throughout the quarter at varying levels as part of the adjustment process.

Okay. And then you keep mentioning or you mentioned opportunities for your company, given this COVID-19 situation. I mean, are those opportunities really stemming from the fact that cars are getting older and that thought process or the thematic thought process is that more individuals are going to want to own cars rather than taking public transportation? Are there other areas where you're looking to capitalize that you didn't really talk about?

I believe those are the two main points I want to address. First, cars are aging, and this trend will likely continue with the current lower sales figures. As cars get older, driving patterns change, and with the pandemic, many people have been hesitant to rely on public transportation. We've noticed a rise in driving, particularly in places like China and the Northeast, where people prefer not to use subways or other shared transport due to potential issues. Additionally, with commercial real estate declining in cities and a shift towards suburban living, we anticipate an increase in driving. Finally, this pause provides an opportunity for new technologies, such as advanced driver assistance systems, which align with our more complex products and could lead to a rise in electric vehicle sales. We've developed a specialized kit with 53 tools specifically for electric vehicles, ensuring we're prepared for their market rollout.

Okay. And then my last question, if you want to answer this. I'm just trying to get an idea. I mean, you said that sequentially, there was an improvement in sales throughout the quarter. Are you still seeing – did you still see a sequential improvement at the early part of Q3? I realize the seasonality there.

We don't give guidance. And look, Q3 is a squarely quarter. However, so therefore, you've got vacations in Europe. You got the SFC, you got a lot of things floating through there. However, I did say, May, June onwards, that's about what I'm willing to say.

Okay. That’s fine. Thank you.

Sure.

And now we have Christopher Glynn of Oppenheimer.

Nick, just to press on your willingness tolerance there a little bit more. Was the May-June onward dynamic for RS&I and C&I material or negligible?

Material. I don't want to overanalyze these matters. As I've mentioned, no one can predict the future. However, I believe we are better equipped to handle disruptions because of our adjustments, and I don't think we will face another shock. If the world improves, we may benefit even more. We anticipate continued progress and believe that our adjustments will help us navigate the environment more effectively. The future trajectory is uncertain, and I've already noted the third quarter is. But, as I said, I am optimistic about what I see.

Okay. And then you've had some restructuring. You may have some temporary cost actions going away. Is there a way to think about sequential leverage on whatever uptick we choose to model?

Well, we have had restructuring because it was in – it's mostly focused on Europe. I think, six-tenth of this times $4 million is kind of in North America and the two, or not necessarily. It's kind of European focused, we'd say, mostly in general. We'd say that because while we saw we've been watching Europe evolve for a while and seeing the weakness of the economics. So we've been prepared for this, and raising through RCI or capacity. So we can deal with higher volumes with less in Europe. That's why we have this restructuring. I would say this only. There's a lot, I think, implicit in us saying we are investing in products, enhancing our brand and maintaining our team. That means we're holding the people because we actually believe that our people are capable. I don't know about other people, but we think these people are hard to duplicate. So we're holding on to them for dear life.

Okay. And last one for me. On SFC, I'm wondering if it's – some of the charge-offs were relatively light in the quarter, considering all that's going on. You talked about some consolidations. Are there any implications for the back half, did some of the mechanical calc of provisioning kind of get deferred in this dynamic? Or is it kind of a more continuity?

Look, I'll just say this, Chris. I feel better now than I did in the prior call in April. I feel better now. And I'll let Aldo comment.

Yes. Chris, I'd just say that just to refresh everyone's memory, Q2 typically does see seasonal improvement as you progress from Q1. It's a period of time when people get their tax refunds, and obviously, we probably got a little bit of a bump up with stimulus checks coming in. But a reminder, not everybody got their tax refund yet because if you didn't submit your tax return electronically, you're still probably having it being reviewed by the IRS. So there might be some tailwind that still occurs in Q3 from tax refunds. Having said that, the deferred payment programs forbearance help a bit with the calculation, so if you look at the progress from Q1 to Q2, normally, we expect a 10 to 20 basis point sequential improvement. This time, we saw 70, and year-over-year, it was better by 40. I'd say, if you look year-over-year, there's probably 20, 30 basis points associated with the fact that you have deferred programs. So by definition, customers on deferral couldn't be delinquent. So that will go away a bit. So I think you'll get more traditional levels. But geez, it looks a lot like a natural disaster from our history in the rearview mirror so far. So we'll see how the remainder plays out. It's still a pretty volatile environment. But like I said, we're pleased with the charge-offs in the quarter.

Thanks.

And now we'll go to David MacGregor of Longbow Research.

Yes, good morning everybody.

Hi, David.

Good morning. I wondered just for the sake of clarity rather than trying to fumble through a bunch of numbers, but just for the sake of clarity, can you just say what the originations would have been excluding the loans to the franchisees?

Well, the contract receivables were up 26% in the quarter. So that's clearly broken out, if at contract receivables. So as Nick has mentioned, EEC was down 8.5%, David.

Right. All right. Maybe I'll take that up with the offline. I just want to make sure we're getting to an accurate number here. And then can you quantify the extent of the return from…

To make it easy, the loans to the franchisees have nothing to do with EC. It has nothing to do with EC at all. So the EC originations…

I understand that. I'll take it up with the offline, if that's okay. Returns, I wonder if you could quantify the extent of the returns in the quarter and the extent, I know they're treated as a contra revenue account. So the extent to which they were a headwind for Tools Group organic growth?

I don't think there was anything notable in the quarter in that regard. From our perspective, it was just a regular quarter in terms of the returns, which we tend to look at. So I mean, I think that our guys didn't necessarily flush a lot back into the system more than they do in any regular quarter, there's some back and forth. But that didn't affect things in this situation.

Our franchisees, we think, are in pretty good shape.

Well, I guess that was my next question is just, I mean...

No, I think some people might assume that franchisees are on hold or experiencing issues, but that's not the case. In fact, there's been a record low for loans.

And could you clarify that for me, the record, what's the…

Parents came way down at the end of the quarter.

Okay. And then, I guess, overall, I wanted to ask about franchisee creditworthiness because this whole slowdown in mid-April came right after the regional kickoffs when you guys would have had a really high level of inventory, which makes it a little surprising to hear that you didn't see any kind of inflection in returns. But that being the case, how do you feel about creditworthiness overall right now?

Well, I – we think – actually, we think they're in pretty good shape. I mean, the sales off the van are, I think when you look at them from a year-over-year point of view and you look at them for this situation, they describe what I talked about in terms of shock accommodation. And as I said, they are pacing ahead of the Tools Group. So that's a pretty positive from a quantitative point of view. From a qualitative point of view, when you talk to a broad group of them, you get some very positive feedback in terms of, of course, I'm the CEO. So maybe I do get feedback. But you hear experiences, and when I'm in the garages, the garages seem to be working. Yes, technicians dipped in the shock, but they came back pretty quickly, and the garages are humming; every garage I was at, the parking lot from garage was marked.

Do you think there's going to be any need for any route consolidation?

No, I don't think so. But you look at everything, David, but I don't think so. I don’t think so.

And we'll go on to our next question… And next question will come from Bret Jordan of Jefferies.

Hey. Good morning, guys.

Hi, Bret.

Good morning.

A question on inventory, I guess. You commented that turns were down to 2.3 times to support critical industries. And I guess the longer-term trend has gone from north of 4% to north of 2%. Is there something structurally different in the working capital model? Or what you're committing to for the critical industry customers as far as holding inventory? And I guess, can you give us sort of an idea what kind of product profile this is that's building in the inventory?

Yes, Bret. Aldo. Certainly, we are continuously adding products that cater to the critical industry. There are unique requirements. Sometimes they're lower volumes, so it doesn't have the same level of addition as when a new product is introduced to the Tools Group. But if you want to be a serious player in oil and gas and natural resources and aviation, there are certainly unique products that do not sell into the mechanic space that you have to have there. So we've been doing that as well. In addition, there's a lot of projects that we call kitting activity, and that array in kitting activity, as an example, you might have 100 different items in the kit. As you stage it as you prepare for it, it requires higher levels of inventory as you prepare and wait for other incoming items because not everything comes from a Snap-on facility. Oftentimes, the military or an aviation customer might like certain things that do not come from Snap-on, and they want that kitted in a rate with a tool storage cabinet that we might prepare for them, and we have a variety of different products that do that. And therefore, accommodating those requests forced us to expand both floor space and inventory when it comes to these things, and we like that business.

Okay. Is there sort of a target turns number, I guess, ex-COVID, where the sales obviously evaporated, but is there a ballpark we should be shooting for as far as that number?

We think it could be better. We don't have an exact target that I'm going to delineate here today, but we think it could be better. I mean, obviously, the current situation puts a depressant on turnover tactics. But we've been getting a pretty good return on our inventory and in a low-interest rate environment, we're more than willing to make investments in inventory, if we truly believe it will generate incremental sales.

We don't see inventory necessarily as an independent variable, but we like to see a return on it. If we get a return on it, we're happy.

Okay. And then one question, I guess, the franchise event that usually is held in August, I assume, is probably not as live. Are you going to do anything sort of virtually? Or would there be any sales promotion to offset what would have been the get together?

Yes, we have an event planned. We will be broadcasting live from our IdeaForge in Kenosha. This virtual event aims to create selling opportunities and allow participants to view new products, similar to the experience franchisees have when they visit locations like Florida and tour the football field. While we won’t hold it in August as usual, we expect to schedule it around the same time in that month. The focus is to provide franchisees with an opportunity to explore new products. However, we won’t be able to offer as much training or cultural bonding as occurs during in-person gatherings, but we will still host a replacement event.

Okay. Great. Thank you.

Okay.

And now we'll go to Ivan Feinseth of Tigress Financial Partners.

All right. Thank you for taking my questions. How are you guys doing?

Safe.

The average age of vehicles on the road has now reached a record high of nearly 12 years. Do you monitor this to see how vehicle aging affects your sales, or do you notice an increase in tool sales when new car sales rise, which would reduce the average age?

We don't have a direct relationship to new car sales. It's the aging of the vehicles, and it's the changing of the vehicles that drives our requirements. We can be indirectly affected by a downturn. And what are they going to sell? $12 million this year, $11.5 million, which is a downturn. And the psychological impact on dealerships and the OEMs themselves can ripple through some of that project business or some of the willingness of the dealerships to embark on capital projects. But it isn't a direct relationship, where aging of the vehicles and the new technologies in the vehicles require our direct relationships, requiring technicians to deal with either more volume or newer types of systems where they have to have different tools.

One of the remarkable aspects of the pandemic is that the CEO of Polaris noted earlier this week that they are seeing unmatched demand for off-road vehicles and motorcycles. This has surprisingly led to significant sales increases for products like wave runners, ATVs, side-by-sides, and even motorcycles. Despite a challenging quarter for Harley, I believe they will rebound and show growth as well. How do you or your franchisees address the mechanical needs in that area? Additionally, many of these locations are facing a shortage of mechanics.

Sure. There has been a long-standing shortage of mechanics in many areas. Currently, about 77,000 mechanics graduate annually from technical schools, but they require an annual salary of $105,000 by retirement. This shortage has persisted for some time. Our franchisees operate in several of these regions. We believe there are significant opportunities ahead. In the United States, there are 1.3 million technicians, but we are currently only serving 850,000 of them. Some technicians work in areas like off-road vehicles, which we may not be reaching. We see potential in this sector, especially as people may shift towards RVs and similar vehicles instead of using collective transportation. We feel optimistic about these developments and are confident in our prospects.

RV and ATV sales are thriving, indicating a strong interest in all forms of personal transportation. Used car sales are also performing exceptionally well. Although new car production was temporarily hindered by the pandemic, I anticipate a rebound. People leaving urban areas and working from home are likely to seek personal transportation options like cars, boats, and ATVs, which will increase demand. This raises the question of whether there will be a focus on creating specialized tools for these types of vehicles. Additionally, I have one more question for you.

That's right.

53 specific tools for EVs. Can you give us some idea of what specific EV tool would be?

A great category includes what we refer to as insulating tools. These tools are designed to protect users while working under an electric vehicle. We have a variety of these tools that create insulation between the user and the point of contact, which we believe will be very effective in this context. Additionally, we offer tools that address specific mechanisms in electric vehicles. As you mentioned, there are numerous opportunities for us, and we view change as beneficial, anticipating that it will drive advancements in this area.

I love it. Thanks again. Stay well.

Good to hear from you.

Good to talk with you. You too.

Take care.

And now that does conclude today's question-and-answer session. I would like to turn things back to Sara Verbsky for any additional or closing comments.

Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap-on. Good day.

And with that, ladies and gentlemen, that does conclude today's call. We'd like to thank you again for your participation. You may now disconnect.