Leslie H. Kratcoski - Vice President of Investor Relations Nicholas T. Pinchuk - Chairman, Chief Executive Officer and President Aldo J. Pagliari - Chief Financial Officer and Senior Vice President of Finance

David S. MacGregor - Longbow Research LLC David Leiker - Robert W. Baird & Co. Incorporated, Research Division Gary F. Prestopino - Barrington Research Associates, Inc., Research Division Richard J. Hilgert - Morningstar Inc., Research Division

Good day, and welcome to the Snap-on Incorporated 2013 First Quarter Results Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Leslie Kratcoski, VP Investor Relations. Please go ahead. Leslie H. Kratcoski: Thanks, Mary, and good morning, everyone. Thanks for joining us today to review Snap-on's first quarter 2013 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 have provided slides to supplement 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. With that, I'd now like to turn the call over to Nick Pinchuk. Nick? Nicholas T. Pinchuk: Thanks, Leslie. Good morning, everyone. As usual, I'll start out by providing my perspective on the results, on our various markets and on the highlights of the quarter. Then I'll turn the call over to Aldo for a detailed review of the financials. The results and the trends of our first quarter remained much the same as we've seen in the past few periods. We once again had solid profit gains on a sales increase that came in the face of some continuing headwinds. Our EPS in the quarter of $1.40 was up nearly 16% from last year's $1.21. Our opco operating margin was 14.5%, an increase of 120 basis points. And our operating earnings -- and operating earnings from Financial Services was $30.5 million, up $23.9 million in -- up from the $23.9 million in 2012. On a consolidated basis, the overall operating margin was 17.6%. That compares to 15.7% in last year's first quarter. Now we believe that these increased profits clearly demonstrate the benefit being driven by our Snap-on value-creation processes, the set of principles and tools we apply every day to drive improvement, with a focus on safety, quality, customer connection, innovation and rapid continuous improvement, or RCI, as we call it. They help us move down our runways for improvement, and they are driving results. Related to the sale -- related to sales, we're up in the quarter by 1.5% organically before a negative impact from foreign currency of, I guess, 60 basis points. There are, of course, always differences from period to period. But from my perspective, the big picture is similar to the last quarter. We're seeing reasonable growth in our businesses serving the Automotive Repair sector, in the Tools Group, in the Repair Systems & Information group -- or Repair Systems & Information, or the RS&I group. At the same time, there's an offset to the -- to these generally favorable conditions in those businesses due to the dual headwinds that are concentrated in Commercial & Industrial, or the C&I group. Those headwinds, restricted military spending and the overall turbulence in Europe were the principal factors in the C&I sales decline. Importantly, our balanced approach to driving advancement in those areas that we've identified as being decisive to our future overcame the headwinds and challenges. Our focus on expanding into critical industries, building in emerging markets, enhancing the franchise channel and expanding in the garage has authored ongoing year-over-year gains for the past few years despite some challenging macros. The varied opportunities -- available thoughts along those declined run rates create our ability to offset the continuing headwinds. And in this quarter, we saw particular strength in the critical industries of natural resources and aerospace, continued gains with diagnostics and repair information products to independent repair shop owners and managers, and a strong uptick in activity with automotive OEM dealerships, especially related to essential diagnostics. Now let's go on to some discussion of the segments. As I mentioned, the C&I group is where we see the largest impact from the headwinds of military spending in Europe. Similar to last quarter, those main headwinds resulted in an organic sales decrease of 6.3%. One of the highlights in the quarter, however, was the 11.5% operating margin for the group. That represents increase of 130 basis points, more than overcoming the impact from the volume shortfall, with operating improvements driven by Snap-on value creation. Speaking to that improved profit margin, our European hand tool business, SNA Europe, was a significant contributor. Over the past few years, we've dedicated a fair amount of restructuring to that operation, and those investments, along with some strong RCI activity, are paying off. SNA Europe actually raised its profits year-over-year despite high-single-digit sales -- despite the high-single-digit sales decline that was similar to last quarter. Clearly, the overall environment in Europe remains challenged. So the rise in profitability was a big help and represents great progress. Our Industrial business was -- which was once again impacted by the military contractions, saw gains in other critical industries like aviation and natural resources. Based on the domestic growth in oil and gas industry, you might imagine, we have significant potential in serving those customers. And we did see progress in that segment. We've expanded our large tool offering and developed new special tool applications, including tethered tools for use at height. And we recently kicked off a new program to call on key customers out in the oil and gas field, with large specialized trucks loaded with an array of tools specifically for those unique oil and gas applications. We're also working together with fuel service operations to outfit their maintenance trucks with the unique tool kits that match the requirements at these large sites. One more point on our efforts in oil and gas, it's a global opportunity. You can see that with some of the significant wins we had in the quarter outside the U.S., in places like Latin America and North Africa. See, overall, we can see our efforts in natural resources coming together, building traction in that important industry. We also saw a gain in the critical aviation and aerospace sector. Hereto, we have uniquely designed vans, mobile aviation technology labs calling on customers, touring the country, visiting sites, providing hands-on demonstration of our product line for those special applications, from tool control units and software, to power tools, to hand tools and specialty toolkits. Whether we access those customers with these mobile labs or with stores in MRO facilities, or with product catalogs integrated within the customer's individual purchasing systems, we are serving those customers more frequently and more effectively. And it's all driving the progress and the progress you can see in this critical sector -- in that critical sector. Finally, in C&I, I'll speak about Asia/Pacific. It was a mixed period. We were up in China across all our product lines, and in India. Elsewhere, activity was off, and we didn't get the overall increase we've normally seen across the region. But what we know and what we are confident in is that we are building both the physicals and position in the emerging markets of Asia. I've said it many times, the presence in the physicals, that's what's most important in this region. I mentioned last time, we opened a fourth plant at the Kunshan complex. This one's dedicated to under-car equipment. With those new capabilities, we're launching new lifts, both mid-tier scissors models that serve the OEM and higher-end shops across Asian markets, and lower cost two-post products that are important in the emerging markets for the developing independent repair shop segment. I was just in Asia last week and I saw some of the early production at that new factory, and the product looks great. Across Asia, we've been establishing our position with a product line at the super-premium level, growing at top-end shops. Now, as we expand with added physicals, we're able to broaden that offering to serve independent garages and larger chains with mid-tier tire changes, wheel balancers and our handheld diagnostics units, which continue, by the way, to add content and vehicle coverage. As you know, we have a state-of-the-art engineering center in Kunshan, and that team is growing, becoming better able to help localize under-car and diagnostics products. We have more local talent supporting growth in the region, with a focus on new products developed specifically for those markets. Now on to the Tools Group. Sales were up 3.7% with a 14.4% operating margin, about 20 basis points below last year, but a strong absolute level. The growth wasn't as robust as we've seen in recent periods, but it's not a surprise that the pace didn't continue. Importantly, we don't believe there's been any significant change in the overall market. Now there were a number of factors early in the period, including the lingering impact from superstorm Sandy, and perhaps some pause as the tax increases were digested at the beginning of the year. But the year-over-year comparison got better each month of the quarter, so the trends are good. The strength of our van channel is evident in the numbers and in the trends. Our franchisee health metrics continue to be favorable. The progress of our franchisee opportunity recently -- and the progress of our franchise opportunity recently received additional validation when the Franchise Business Review ranking was announced by the International Franchise Association. Snap-on was listed among the top large networks, improving our ranking again this year. The importance of this recognition is that it's based solely on franchisee satisfaction and independent survey in areas like training, support, operations and financial opportunity. We believe it's convincing testimony to the growing strength of the network. New and innovative products have been one of the keys to our progress in the Tools Group. In one recent example, we launched the FLL80 ratchet to build upon the success of our innovative extended reach line. This 3/8-inch drive ratchet has a total length of 17.5 inches. It includes the strength of our Dual 80 technology. It connects with our technicians customers for making their work easier as they face ever-growing challenges related to tighter spaces and to shrinking accessibility. That new ratchet is long. It's the longest in the industry, and it delivers superior strength and durability. It delivers the superior strength and durability always expected from Snap-on. Our great new products aren't restricted to hand tools. Just this past quarter, we took our award-winning VERUS PRO handheld unit to the U.K. It was a success in the United States, and that momentum has continued internationally where that diagnostic unit has been extremely well received. So franchisee help, survey gains, innovative new product. We believe they're all testimony to the progress that's being made in enhancing the van network, one of our strategic, decisive runways. I move now to the RS&I group. Sales in the quarter were up organically 9.3%, and the operating margin of 23% expanded by 150 basis points. Throughout last year, we spoke about the growth of our repair information and diagnostics products with independent repair shop owners and managers. That happened again this quarter. But this quarter, the overall growth rate also got a real boost by increased activity in essential diagnostic tools for OEM dealerships. For independent shops, the growth is being led by new handhelds, better and easier to use. And by Repair Information Products, helping technicians fix the car faster. One of these is the new VERUS PRO full-function unit which I just mentioned. It's just received more recognition, the Best New Product Award as voted by the -- by Automotive Service Professionals at the recent Vision Hi-Tech Training and Expo, an event which is attended by nearly 3,500 industry participants. We're building our presence in the garage, but not just at the high end or just in automotive diagnostics. This quarter, we launched with great reception our new entry-level handheld diagnostic unit, the Blue-Point MICROSCAN 3. It's an upgrade from the previous versions, and it includes a larger screen and touch capability for added efficiency. With its basic onboard scanning function, it's another great entree product, helping to make new technicians become Snap-on customers for life. And outside automotive, in heavy duty, our Pro-Link iQ Diagnostic Unit has been upgraded. Additional repair data parameters and engine test functions with expanded coverage of engines, transmissions and breaks, all while serving an ever-growing number of models and units. Outside of the independent automotive space, our Snap-on Business Solutions and equipment solutions businesses, which serve OEM dealerships, are also expanding Snap-on's presence in the garage. Just this quarter, we added a new electronic parts catalog -- we added new electronic parts catalog customers in adjacent sectors, industries like motorcycles and power sports. And this goes along with the increased essential diagnostic programs for automotive OEM dealerships that I already mentioned. When we brought together the various businesses that now comprise RS&I several years ago, we believed we could leverage their capabilities to better serve repair shop owners and managers. And progress along that runway is evident in our results. Well that's the segments. I'll conclude by sharing one final highlight. Every year in the first quarter, we hold an RCI competition that brings together teams from across the corporation to share best practices and successes in moving down our runway for improvement. In February, we had 34 teams present their story. The day always concludes with dinners -- with a dinner where awards are presented with much excitement. It's quite competitive. And this year, the champion was a team from our Kunshan facility, Kunshan, China. We believe the enthusiasm of that event, and it was evident. And the fact that a team from China was the winner is a great indicator of the depth and the reach of RCI and Snap-on. It's the foundation of our ongoing improvement, and it is strong. Well, that's our first quarter. Continuing headwinds offset by gains in important areas, diagnostics and information for repair shop owners and managers, essential tools for vehicle OEMs and dealerships and extensions in aerospace and natural resources. When paired with Snap-on value creation, the sum of it all is that opco OI is up 120 basis points, a significant and encouraging performance. Now I'll turn the call over to Aldo. Aldo? Aldo J. Pagliari: Thanks, Nick. Our first quarter consolidated operating results are summarized on Slide 6. Net sales of $741.7 million in the quarter increased 1.5% organically. Higher sales to OEM dealerships, increased sales of diagnostics and repair information products and continued higher sales of the Snap-on Tools Group more than offset lower sales to the military and ongoing weakness in Europe. Consolidated gross profit of $356.9 million increased $9.2 million from 2012 levels, and gross margin of 48.1% improved 80 basis points, largely due to savings from ongoing rapid continuous improvement, or RCI initiatives. Operating expenses of $249.1 million decreased $1.1 million, and the operating expense margin of 33.6% improved 40 basis points from 2012 levels. Total restructuring cost of $2.9 million in the quarter compared with $4 million last year. Operating earnings before Financial Services of $107.8 million increased 10.6% and, as a percentage of sales, improved 120 basis points from 13.3% last year to 14.5% this year. Operating earnings from Financial Services of $30.5 million increased $6.6 million, or 27.6% over prior-year levels. Consolidated operating earnings of $138.3 million increased 13.9% over 2012 levels, and the operating margin of 17.6% improved 190 basis points from 15.7% a year ago. Our first quarter effective income tax rate was 31.9%. We continue to expect that our full year 2013 effective tax rate will be comparable to our 2012 full year rate of 32.8%, but this quarter's rate benefited from the retroactive extension of the federal research tax credit and certain other business tax provisions included in the American Taxpayer Relief Act of 2012, which you'll recall was signed into law on January 2 of this year. Finally, net earnings in the quarter of $82.8 million, or $1.40 per diluted share, compared to net earnings of $71 million, or $1.21 per share last year, representing a 15.7% increase in diluted earnings per share. Now let's turn to our segment results. Starting with Commercial & Industrial, or C&I group on Slide 7, sales of $266.4 million were down 6.3% organically from 2012 levels. The decrease was primarily due to double-digit decline in sales to the military and a high-single-digit sales decline in our European-based hand tools business as a result of ongoing market weakness in that region. Gross profit in the C&I group totaled $99 million in the quarter, and gross margin of 37.2% improved 160 basis points, primarily due to the savings from ongoing RCI initiatives, particularly in Europe, partially offset by $2 million of higher restructuring costs. Operating expenses of $68.4 million in the quarter declined $4.4 million from 2012 levels. The operating expense margin of 25.7% increased 30 basis points from 25.4% last year, primarily due to the lower sales. This was partially offset by $3.4 million of lower restructuring costs. As a result of these factors, first quarter operating earnings of $30.6 million for the C&I segment increased $1.4 million from 2012 levels, and the operating margin of 11.5% improved 130 basis points from 10.2% last year. Turning now to Slide 8. First quarter sales in the Snap-on Tools Group of $327.3 million increased 3.7% organically, reflecting increases across both U.S. and international franchise operations. Gross profit of $143.9 million increased $4.9 million from 2012 levels, and the gross margin of 44% compared with 43.9% last year. Operating expenses totaled $96.7 million in the quarter, and the operating expense margin of 29.6% increased 30 basis points from 29.3% last year. Operating earnings of $47.2 million for the Snap-on Tools Group increased $1.1 million, and the operating margin of 14.4% compared with 14.6% last year. Turning to the Repair Systems & Information, or RS&I group, shown on Slide 9. Sales of $246.1 million increased 9.3% organically, primarily due to a double-digit gain in the sales to OEM dealerships and a mid-single-digits gain in sales of diagnostics and repair information products. Gross profit totaled $114 million in the quarter. Gross margin of 46.3% decreased 90 basis points from 47.2% last year, primarily due to a shift in the sales mix that included higher volumes of lower gross margin essential tool and facilitation products to OEM dealerships, partially offset by savings from ongoing RCI initiatives. Operating expenses totaled $57.5 million, and the operating expense margin of 23.3% improved 240 basis points from 2012 levels. Again, primarily due to contribution from sales volume leverage, including benefits from the shift in sales mix, as well as savings from ongoing RCI initiatives. First quarter operating earnings of $56.5 million for the RS&I Group increased 16.3%, and the operating margin of 23% improved 150 basis points from 21.5% last year. Now turning to Slide 10. First quarter earnings from Financial Services increased $6.6 million, or 27.6%. Originations of $171.9 million in the quarter rose 10% year-over-year. Moving to Slide 11, our quarter-end balance sheet includes $1.1 billion of gross financing receivables including $932 million from our U.S. Snap-on credit operation and $169 million from our international finance subsidiaries. In the U.S., $745 million, or 80% of the financing portfolio, relates to extended credit loans to technicians. Excluding $5.7 million of unfavorable currency impacts, our worldwide on-book financing portfolio grew approximately $23 million in the quarter. For the 2013 full year, we continue to anticipate that the gross on-book finance portfolio will increase by approximately $80 million to $90 million over 2012 year-end levels. As for finance portfolio losses and delinquency trends, these continue to be in line with our expectations. Now turning to Slide 12. Cash provided by operations of $75.7 million in the quarter increased $10.7 million from $65 million last year, reflecting higher levels of net earnings as well as net changes in operating assets and liabilities. This quarter, we made cash contributions of $5.3 million to our U.S. pension plans, including $5 million of discretionary contributions. Capital expenditures of $14.7 million in the quarter compared with capital expenditures of $21.8 million last year. For the full year, we continue to expect that capital expenditures will be in the range of $70 million to $80 million. Turning to Slide 13, days sales outstanding for trade receivables of 61 days compared to 61 days as of 2012 year-end. Inventories increased $3.1 million organically from 2012 year-end levels. And on a trailing 12-month basis, inventory turns of 3.9x were unchanged from 2012 year-end levels. Our quarter-end cash position of $213.6 million, reflects the funding of $144.4 million of new finance receivables, dividend payments of $22.1 million, share repurchases of $21.7 million in the quarter and capital expenditures of $14.7 million. These uses of cash were largely offset by cash generated from operations, including higher levels of net income and $122.5 million of cash from collections of finance receivables. Our net-debt-to-cap ratio of 29.5% compares to 29.7% at 2012 year-end. In addition to our $214 million of cash and expected cash flow from operations, we have more than $700 million in available credit facilities, and our current short-term credit rating allows us to access the commercial paper markets should we choose to do so. At quarter end, no amounts were outstanding under any of these facilities. This concludes my remarks on our first quarter performance. I'll now turn the call over to Nick for his closing thoughts. Nick? Nicholas T. Pinchuk: Thanks, Aldo. Let me just summarize my perspectives on the quarter. We had the headwinds in Europe and the military. We had gains in vehicle repair and critical industries, which more than offset the continuing challenges. But what I view as most significant is that we believe we've strengthened our position along our decisive runways, enhancing the van channel. The network is stronger, and you clearly get that impression when you meet with the franchisees. And franchisee turnover was down again. Expanding with vehicle repair shop owners and managers, our diagnostics and information products have never been more powerful or better received. Extending to critical industries, you can see our connections with aerospace and natural resources customers growing. And building in emerging markets, our fourth factory in Kunshan is coming to light, and our Asian engineering center is growing in effectiveness. Our strength increased in each of these decisive areas, and we believe it's that progress which is most important and ensures our continued advancement. This quarter also clearly demonstrated gains along our runway for improvement, progress propelled by the Snap-on value-creation processes. They have become part of our corporate everyday culture, and you can see it in the numbers, Opco operating margin of 14.5%, up 120 basis points; and EPS of $1.40, rising despite the challenges. We believe that the energy of Snap-on value creation and the strengthening of our positions in the 4 areas of strategic importance will enable our team to continue on its encouraging trend, as we move through 2013 and beyond. Now finally, before I conclude, it's appropriate that I recognize Snap-on franchisees and associates. As usual, I know many of you are listening. Your enthusiasm, your capability and your dedication made our first quarter possible. For your extraordinary contribution to our performance, you have my congratulations. And for your continuing commitment to your team, you have my thanks. Now I'll turn the call over to Mary for questions. Mary?

[Operator Instructions] And we'll take our first question from David MacGregor with Longbow Research. David S. MacGregor - Longbow Research LLC: How much forward visibility do you have on this military order book? And you'd indicated it was down double-digits. So I'm just wondering if that's kind of the pace that's expected over the balance of the year? Nicholas T. Pinchuk: Yes. But what happens is, is that the base shrinks. I think I said in the fourth quarter -- we don't have the greatest visibility. We know that the military isn't the most robust of businesses. Whether we have visibility or not, it's kind of -- you read any paper or anything like that, you see both sequestration causing uncertainty around the Department of Defense, and you see the fact that troops are coming home. The difference there is, David, is that -- and I think I did say this in the fourth -- in the last conference call, the fourth quarter is our biggest quarter, the first quarter is our next highest, and then it reduces as we go to the second and third quarter. And then the second and third quarter last year, as the world progressed, we were already seeing some sort of contraction. So contractions are liable to be big. In fact, they were a little bit bigger in the first quarter than it was on a percentage basis than the fourth quarter, but the base is smaller. So we would expect the impact to somewhat reduce -- attenuate I would say. David S. MacGregor - Longbow Research LLC: So is the -- so you're still expecting to be down maybe double-digits, but it becomes a less consequential part of the business, is what you're saying? Nicholas T. Pinchuk: Correct. And I've sized this for people. People have asked how big it is, and the -- well, we don't give guidance by segments. Or what we've said is, is that the -- it's part of the industrial business, the critical industries, which is roughly, give or take, $400 million, a little bit over $400 million business. And we've identified 5, 6 segments in that business, the critical segments in that business, and this is one of the bigger ones. So you can kind of chop them up into 5 or 6 pieces and say okay, this is one of the bigger ones, and calendarize it like I said, fourth biggest; first, next biggest; and then second and third. That kind of gives you some directional guidance, and that's what I see coming on. We don't have the greatest visibility. And any -- much of our business is in terms of backlog. So... David S. MacGregor - Longbow Research LLC: On the RS&I business, I guess it sounds like the facilitation business has come back a little bit, and that was the source of the pressure on the gross margin in that segment? Is the facilitation business back in somewhat of a permanent way now? Or how should we think about the mixed dynamics in that segment going forward? Nicholas T. Pinchuk: Yes. Let me give you a couple of thoughts. One is, strictly -- you have it right. But strictly speaking, the facilitation business in that business is sort of like a distribution business. We're speaking -- that's where we offer distribution services for OEM dealerships. You're appointed by Toyota or somebody else to kind of be their go-to supplier for a wide variety of products for the dealerships, for their dealership network. That's not what we're referring to here. We're referring to the other side of that, what we call EQS business, which is essential diagnostics, where an OEM manufacturer says I'd like to roll out either a hard tool -- I said diagnostics, but any essential tool, either a hard tool or a diagnostics, a laptop for a specific make of car -- and says, Snap-on, I'd like you to develop -- help us develop it and roll it out to our distribution -- well, help roll it out to our dealerships. And what happened here is we got a couple of those products -- we got a couple of those programs in place now that are rolling, and that nurtures this business. It does tend to be lumpy. So you can -- you get an award, it says -- some manufacturer, Rolls-Royce, says I'd like to rollout -- Rolls-Royce doesn’t have many dealerships, but let's say Toyota or somebody, says I'd like you to roll out to my dealerships, and you do it and it takes you 5 quarters. And then there's no -- there isn't a program, so you have to replace it with another program. So it can be lumpy. Overlaid on top of that, though, David, is whether the OEMs themselves are feeling robust or more favorable. And I think -- actually, I think the 2013 forecast in North America are for what? Must be a 5% increase in the auto industry? So a 15.1% to 15.7% or something like that? So I mean, it’s a small increase. So I think they're a little bit more positive here. So we're seeing little positive news there. Plus, on top -- overlaid on top of this lumpy business. Did that help you a little bit? David S. MacGregor - Longbow Research LLC: Okay. The last question -- yes, that does help. Last question, I guess, just pertains to possible acquisitions. And I guess the question is… Nicholas T. Pinchuk: What acquisition? Say that again, please. David S. MacGregor - Longbow Research LLC: Yes. The last question just has to do with acquisitions, and I guess the question is just how much leverage would you be willing to undertake in support of an acquisition? Nicholas T. Pinchuk: Oh, I don't know if I'm -- I don’t know if I want to necessarily speak about that on a call or in this kind of situation. I'd just offer that -- if you look at our… David S. MacGregor - Longbow Research LLC: Because I'm just wondering if there was softening [ph]. Nicholas T. Pinchuk: Credit [indiscernible] and you look at our operating business, we had quite a bit of powder available. So I think that's sufficient to say that. I think those questions, David, always depend on the particular opportunity that's there. It's kind of a happenstance. One of the things -- we have capability in-house who knows how to acquire, because we have people who have experience in this. We have -- I know we have a great integration team available. We are reviewing an ongoing list of possibilities, and we know we have ammo. So I think we would adjust to any kind of situation. So I wouldn't want to pen myself in, in that regard.

And we'll take our next question from David Leiker with Baird. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Couple of things. Let's start with the Tool business. And Nick, you had -- and Aldo, you had talked about carryover impact from Sandy and payroll tax increase having an impact. Can you characterize on an exit rate what type of growth you might have been seeing? And I don't want to get bogged down in monthly numbers at all, but were you 0 to 3 to 6? Or some characterization there of how you ended... Nicholas T. Pinchuk: I don't want to speak like that, but I would -- it's hard for me to characterize, but let me try it this way. You and I have talked, spoken many times about this, and I think I've said on every conference call that we have had over the last -- I don't know, more than 2 years, when the Tools Group is rolling double-digits, I have cautioned everyone that I don't think that continues. I think we hold to our 4% to 6%, but then there's the question of how fast is the deceleration. Right? I think. And I think everybody recognized that it probably can't grow at double-digits forever, and so how does that transition occur? And that was the $64,000 question. And I think, given -- I would just talk -- and this is speculation and so on, but I would say if we didn't see the lingering effects of Sandy, which we know is a factor, because we know Middle Atlantic was down and there were other places in the regions that were down, but if we didn't see that and if we didn't see what I would consider -- I can't document this, but what seemed to be a pause associated with -- it might have been the payroll tax, it might have been other things around -- it was kind of like a boundary layer when we went over '12 to '13. I think, we would have seen a more cushioned deceleration, let's say. If that helps. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Okay. So do you think we're… Nicholas T. Pinchuk: More expectable, would have been more expectable. I think people had certain expectations around those things, and I think this would have been a decelerated quarter. But it would have been more cushions, less abrupt. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Okay. And what kind of numbers did you see in the U.S. versus the international markets for the business? Nicholas T. Pinchuk: Well, the U.S. -- international was below the -- I mean, international was above the U.S., because the U.S. is where we saw the impact of Sandy and the -- but the international business was also decelerated somewhat as well. So I mean, they were -- but generally, the U.S. was down more than -- decelerated faster than international. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: So from your perspective then, it sounds like we've, more quickly than expected guidance to sport a 5% or 4% to 6% kind of range going forward? Nicholas T. Pinchuk: Well, I don't want to say that I expected that. I mean, I don't -- I never knew how we would go into that. I'd simply say that I think we have an event. We had some boundary layer conditions at the end of last year and certainly the beginning of -- mostly the beginning of this year that tended to what I want to say steepen or heighten the deceleration. And I still think 3.7% isn’t chopped liver, I would offer. And so we are not -- if I look at the 4% to 6% myself, I would say look, we always said we'd grow at 4% to 6% over time. We said 3.7% is reasonably inside -- a standard deviation of that, so it’s the kind of variation you'd see around those numbers. So I'm not so surprised about the 3.7%. I'm simply offering that in this particular period, if we didn't have the boundary layer, we probably would have seen somewhat softened -- a softer change. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then on the RS&I side, when you look at the minority interest there at Mitchell 1, I'm suspecting that Mitchell 1 was a very strong performer there for you? Nicholas T. Pinchuk: Yes, it was. It was. Great performance, yes. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Is that something that's tied to these roll out on the essential diagnostics? Or is that something more structural that can grow faster? Nicholas T. Pinchuk: No. Mitchell one -- let me just parse between these 2 things. I mean, make my comment about Mitchell 1. Mitchell 1 has been actually part of our -- been a good success story for some time, and it expanded that success in the first quarter. And that is not related to the essential diagnostics. Essential diagnostics is with OEM dealerships. This is fundamentally with independent dealerships, and they just seem to be growing their position with independent dealerships. They're getting better at what they do, and the dealerships are recognizing it and they're embracing it more. Now when you talk about the minority interest there's a special wrinkle -- that I might want Aldo to comment... Aldo J. Pagliari: Yes, David. Aldo. Just -- you're correct that Mitchell 1 was a larger contributor, and 15% of Mitchell 1 is owned by outside parties. So there's a little bit more of an elimination in equity earnings for that. You'll also recall that in Q4, Snap-on divested a non-strategic entity. It was a legacy investment that was part of the ProQuest acquisition. So the earnings from that are no longer in equity earnings. So that also accounts for that lower amount that you see. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: And then on Mitchell 1, just one more item there, has this been driven by a change in the product, upgrading in the product offering, or more effective marketing? Or just normal market recognition over time? Nicholas T. Pinchuk: Actually, I'd say both. I think we did change the product. I want to say 6, 7 months ago, we changed to ProDemand. We changed to ProDemand, which was an upgrade, kind of a new model, if you will, of repair information. A lot better navigation, same great database that's wider than anybody else and terrific, but also better navigation. People really have appreciated that. And so that's one. Two, is our marketing has been better. We've driven customer connection into Mitchell 1 pretty effectively. So they're out constantly. They've got a pretty robust process, looking at the field and getting feedback saying, how can we improve? So they've kind of got this ongoing improvement activity that's actually, I think, pretty good for a software business, that's overlaying on top of the sort of upgrades and the software. They're actually improving it based on what the customers are telling them, and we never had that before. So we're doing better at that. And then thirdly, we're expanding a little bit our reach into heavy duty and other places. So we've got a couple of other non-automotive segments in there. So all 3 of those things are in a cocktail, and it's been doing pretty well. And when it came together this quarter with the sort of diagnostic information products, the repair shop owners and managers that went up and we paired it with a pretty robust quarter for -- we've been kind of carrying the OEM dealerships for several quarters. You might remember, last year's numbers were like 0.5, 2.9, 2.7 in RS&I. Now we're up pretty well because we've got -- we're hitting on more like oil cylinders. We're still carrying 25% of European business with that business. And one of the things that happened was that SBS, the parts catalog business, got out from under the consolidation of the dealerships. That was an ongoing tail. We were even receiving some of the impact last year. That stopped now. So that's back to some upward movement.

And we'll take our next question from Gary Prestopino with Barrington Research. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: Nick, can you -- when did you start seeing this military business slide? I'm trying to get at -- where are we at? Are we at the anniversary... Nicholas T. Pinchuk: No, we started to see it, I think -- I wanted to see -- we started to see it sort of in the middle of the second quarter, third quarter last year, like mostly the third quarter, we started to see it roll. Third quarter was weak, but it was a smaller base. It makes -- I don't think it made scrutiny in the third quarter even though it wasn't good for us. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: So really, the fourth quarter year-over-year, we should see -- that's where it kind of anniversaries then, right? Nicholas T. Pinchuk: Third quarter, I'd say, too. I'd say. But the fourth quarter, clearly the big anniversary. So -- yes, that's right. That's right. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: Have you been seeing the declines increase quarter-over-quarter or… Nicholas T. Pinchuk: Yes, it increased some, but not -- I would -- arithmetically, it's a greater increase in the second quarter as a percent of a smaller base than the fourth quarter, but I would tend to say that's within the range of government work. You know what I mean? In the range of a variation that you might see on this kind of thing. So I guess it's pretty much the same decline. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: Okay. And then last question is, is the portfolio built to the point now where it's going to really mimic the growth in the Tools Group? Aldo J. Pagliari: Yes. This is Aldo, Gary. I think you have that correct. There's still a small piece of tailwind that we'll pick up from CIT, but as you can see on the chart, the extended credit portfolio owned by CIT and managed by us is down to less than $10 million. So going forward, it'll mirror the growth in Snap-on Tools. But just recollect that it -- Tools, the portfolio underwrites more big ticket items. So within the Tools Group you can sometimes get a little bit of variation in the amount of big-ticket items that they sell as opposed to the lower-priced items which tend to be underwritten by the franchisees themselves. So you get a little bit of noise quarter-to-quarter. But long run, it should move in concert.

And we'll take our next question from Richard Hilgert with Morningstar. Richard J. Hilgert - Morningstar Inc., Research Division: Just wanted to ask a little bit more about the margins in the C&I Group for the quarter. Looking back over the past year, we've been in that mid-11% range since the quarter of last year, but the first quarter of last year it was a lot lower. Was there anything special in that first quarter a year ago that had the margins down? Nicholas T. Pinchuk: No, I don't think so. I think generally, we tend to get seasonality around first -- at different quarters. We don’t have great seasonality in sales. But sometimes, you'll get OI seasonality because of -- as you open up a year, you'd be spending on kick-off type things. So you get out, you have distributors, you have people you meet, you have new programs, and you tend to roll them out at the first of the year. So often time, that's an overhang on these -- of those types of quarters. I'm not saying it happens every year, but it happened in many years at C&I, because I used to run C&I. So we think what happened in the C&I is this. You've got what? Is it 130 basis points up? And I'd say, what, 40 basis points is due to lower restructuring. And then I think you can put down the rest to RCI. And the reason there is, is because when you've got a division that's having difficulty on sales, like SNA Europe or -- you tend to be -- put your nose to the grindstone at this stuff, even though it's a way of life. Every place in the corporation, they tend to push hard. You tend to spend restructuring money, and we're seeing that come to fruition. And so we really think that the quarter we see in C&I is -- really reflects to a large degree, the improvement in productivity that we're seeing around, because there is spending associated with this ongoing, associated with the first quarter. So I don't think there was anything special last time. Richard J. Hilgert - Morningstar Inc., Research Division: The volume operating leverage, obviously with revenues being down 7%, one might not expect you to attain the same kind of operating leverage that we saw in the last 3 quarters of last year. But yet you were still able to do that. How much -- if you didn't have that year-over-year difference in your operating leverage, what kind of margin improvement could we have expected? Nicholas T. Pinchuk: I'm not sure. Let me just say -- let me just try to answer your question this way. Look, this is a relatively complex landscape as you know. As I know you know our company, and it is complex. So it's hard to say with definitive -- make a definitive statement on any particular quarter, no matter what you see. But the thing is, is that you -- we have said that if the sales were flat, just flat, we could keep raising operating margins through the effect of our Snap-on value creation. We're confident of that. And this quarter, what we saw on the 120 basis points of improvement was 10 points of restructuring, favorability; 20 points of mix, because RS&I was up and C&I was down, so there were more different profitabilities; and then the rest you can roll up to RCI, which is associated with that. So you can expect us to try to -- not in any one particular quarter, you might not be able to see it. But over time, you'll see an overlay, and you can look back and see it. You can look back and see it. So we have operating improvement every quarter. I think -- I hope that answers your question. Richard J. Hilgert - Morningstar Inc., Research Division: To some degree. I mean, I was looking for -- well, operating leverage was this kind of a negative impact. But because of RCI, we had this much positive impact. But that's okay. I'm [indiscernible]. Nicholas T. Pinchuk: [indiscernible] how much. I hate to pin myself down on operating leverage. I mean, associated with volume? Yes, I don't like to say it -- I don't like to give you any particular number about that, but you can be sure that if we get -- as we get higher volume, we do get some operating leverage. Richard J. Hilgert - Morningstar Inc., Research Division: Right. Okay. With respect to Europe, at some point, with new car sales being down as much as they are and looking like we're going to have a 6th straight year of significant decline over there, at some point, the aftermarket has to pick back up because people are just going to have to be fixing their cars if they're going to keep them longer. Have you seen any of that yet? Or when are you expecting something like that to start occurring over there? Nicholas T. Pinchuk: I'm out of the business of predicting where Europe is going. I think I predicted that it was at the bottom like 2 years ago or something. So I don’t know. But look, I think this, is that Europe was down again for us. Our hand tool business in Europe was down, what, high single-digits, and it was down sort of low double-digits the last time. And we're not all in auto. We're in other businesses. So it's a broad base. Industry, construction, agriculture, a lot of other things. So it's a cocktail of things. I don't know in general when Europe will come back, but I'm confident -- we're pretty confident it will, and we're -- actually, we're pretty positive about this. We think this is one of the hidden gems about Snap-on because what you've got here is you've got a business which is improving its operational fitness. Profit is up when sales are down almost double digits, and yet we know that our customers are out there. We know that our customers still are remaining. So when the Europe comes back, we figure we're going to do pretty well on that. Okay? Richard J. Hilgert - Morningstar Inc., Research Division: Yes, very good. On Financial Services, you're getting to the point where you're pretty much up to speed with respect to mimicking the tools as you mentioned earlier in the call. I was curious, is there any other opportunities with your Financial Services that you might be interested in pursuing in terms of providing credit services in other areas? Nicholas T. Pinchuk: No. we have said -- I think we have said that our Financial Services is hand-in-glove with our Tools Group -- with our own operations. So we view it as limited to the strategic support of Snap-on operations. We don't view it as a sort of a credit company that provides services to other things, which aren't associated with the rest for the business. We see it as financing our customers and our products and our franchisees, that's it.

And we'll take our last question from David Leiker with Baird. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Nick, just one last item here. You talked about China and how you're expanding your product range there. What portion of your product offering do you think you have available in China, Southeast Asia to deliver into the market today? Nicholas T. Pinchuk: I would say we have 1/3 right now. Maybe 40%, that kind of thing. Maybe 1/3. You mean in terms of our overall product line? You mean in terms of the overall Snap-on product line? Is that what... David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Yes. Nicholas T. Pinchuk: Yes. I'd say about 1/3. We have entries in virtually every category, maybe less than 1/3. Maybe 1/4 actually. So let's say 1/4 to 1/3, we are -- but we have pretty comprehensive activity. We're putting our toe in a lot of places. But our product line is quite narrow in each -- is more narrow than we have in other places, simply because you've got to start from 0, and you're trying to build up. And so that's an important thing. And a lot of this is learning the specific characterizations -- character of the customers. Not China, but just -- as we roll out into new markets like China or aerospace, you have to learn. I was just in an aerospace facility down in Indianapolis recently, and it's interesting to walk the floor of that place, 800 technicians, and you realize how different it is than vehicle -- this was our money. It was vehicle -- different from vehicle repairs. Some of the tools are held centrally. Some of them are done -- owned by each technician. The technicians don't necessarily do the same thing, so they need a different set of tools. But one thing is in common, is that they all like Snap-on. I ran into a number of technicians that said -- we had just entered this place. We started to sell there only like 3 or 4 months ago. It's part of the reason why our aerospace is up. And they said "We're glad you're here." The same kind of thing happens in China. You're constantly understanding where the customer base is, what they want and adjusting the product line and then trying to Asian-ize the product line to this. So it's an ongoing process. And I would say, we've got about 25% now. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: And do you think it's -- how much of your product offering do you think you could put there? Could it be 100%? Or is it only half of it? Nicholas T. Pinchuk: A version of a lot of it. I can't say. But nothing -- unfortunately, probably nothing goes exactly. We have to make changes to almost everything, and that's what we call Asianization. That's why the product line -- I think one of the mistakes people make is they try to sell what they have. And it doesn't really work. It works at the top end. That's how you enter. We entered with the top end with the super-premium brand, we're selling to the best people, and then what happens -- when you have to deal with the other people, you actually have to make products that they might want and that they -- that fit their actual situations. For example, garages in China are lot -- a lot of the garages in China are a lot smaller. So things like your under-car equipment have to be configured for that. Now it's got the same base, the same actual function, but the physicals, the geometries of it have to change. Now that might not be a tough engineering move, but it has to happen. First, you have to realize it's needed; and secondly, then you have to execute it. So we're constantly doing that. That's why I'm so excited about the engineering center. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: And then the last item, just following on, on that, what about your geographic footprint in Asia, Southeast Asia? Is that -- how much more work is there to build that out like you wanted to be? Nicholas T. Pinchuk: It's a lot more work in China and India. We've got a lot more work there. I think -- we could tick off the countries, I think we have more work in Indonesia. We have more work in the Philippines. We're pretty good in Korea, Singapore, Taiwan, Hong Kong, Malaysia, Thailand. Those places were okay. The other places, we've got more -- a lot more work to do. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: So you're still very early in this whole revenue stream coming out of Asia? Nicholas T. Pinchuk: Sure. Yes. And not to mention, the repair wave is just starting to rise.

And that does conclude today's question-and-answer session. I'd like to turn the call over for any closing remarks back over to Leslie Kratcoski. Please go ahead. Leslie H. Kratcoski: Yes. Just thanks, everyone, for joining us on the call today and for your interest in Snap-on. A replay of the call will be available shortly on snapon.com. And good day. Thanks.

And that does conclude today's conference. Thank you for your participation.