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 Leiker - Robert W. Baird & Co. Incorporated, Research Division David S. MacGregor - Longbow Research LLC Gary F. Prestopino - Barrington Research Associates, Inc., Research Division Liam D. Burke - Janney Montgomery Scott LLC, Research Division Adam Brooks - Sidoti & Company, LLC Richard J. Hilgert - Morningstar Inc., Research Division Sarah Hunt - Alpine Woods Capital Investors, LLC

Good day, and welcome to the Snap-on 2013 Second Quarter Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Leslie Kratcoski. Please go ahead, ma'am. Leslie H. Kratcoski: Thanks, Melanie, and good morning, everyone. Thanks for joining us today to review Snap-on's second 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 the 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 said, I'd now like to turn the call over to Nick Pinchuk. Nick? Nicholas T. Pinchuk: Thanks, Leslie. Good morning, everybody. I'll start off today with the highlights of our second quarter. I'll cover the general environment, then I'll discuss some of the progress down our runways for both growth and improvement. Aldo will then provide a detailed review of the financials. Much as we've seen over the past several quarters, we were again able to overcome the substantial headwinds to post solid sales and profit gains. Our organic sales increased 3.1% from last year's level, with opco operating income rising to $117.8 million or 15.4% of sales, and Financial Services contributed an additional $30.6 million, up $5 million from last year. It all added up to a consolidated operating margin equal to 18.4% of revenues and EPS -- and an EPS of $1.50, which is up more than 15% from last year's $1.30. Now there are a couple of items in this year's year-over-year comparison that should be noted. First, last year's results were impacted by a relatively high restructuring charge, which included $6.8 million for pension settlement at our now closed Canadian tool storage facility. Also this year, we incurred $4.4 million in higher stock-based and mark-to-market cost that was primarily related to our recent share price increase and to more participation in our long-standing employee and franchisee stock purchase program. But even after adjusting for these 2 items, we believe that the year-over-year comparisons represent encouraging progress. Related to our quarterly sales of $764.1 million, in addition to the 3.1% organic increase, we also had $8.5 million or 120 basis-point contribution from our recent acquisition of Challenger Lifts. Along with a negative 70 basis-point impact from foreign currency, the total result was an overall sales increase of 3.6%. Now at a macro level, we haven't seen much change in the external environment from the last 2 quarters. Our Tools Group and our Repair Systems and Information, or RS&I group, both which primarily serve the automotive repair sector, are showing mid to high single-digit volume gains. However, those increases and the generally favorable market environments in those automotive-related segments are somewhat offset by Commercial & Industrial, or the C&I group. You may remember that the businesses in C&I are where we feel the brunt of our major headwinds and the overall unevenness in the world economies. You see it continuing this quarter mainly with softness in Europe and the impact on SNA Europe; our hand tool business is based in that region, and in reduced military spending driven by troop withdrawals and budgetary constraints. So there are challenges, but as I see it, there's also further progress. We do believe that this quarter's results clearly demonstrate the benefits of and the balance inherent in the strategies we're pursuing as we proceed down our runways for both growth and improvement. For growth, we've identified 4 areas that are critical to our future: enhancing the franchise channel; expanding in the garage; building in emerging markets; and expanding into critical industries. And again this quarter, strategic progress in those areas more than offset the impact of the external headwinds. Let me focus for a moment on customer connection and innovation. These are 2 key components of Snap-on value creation and they're helping drive our growth. Just this past quarter, Snap-on was again recognized for innovation when Professional Tools and Equipment News, or PTEN, recognized us with their top Innovation Awards in 5 categories. I've mentioned some of these products in the past, and I'll highlight a few more now on the heels of their wins. In the tool storage category, Snap-on was recognized for our diagnostic mobile workstation. It's a complete diagnostic and information system packaged in a secure, fully enclosed unit that's on wheels, so it can easily be moved around the garage, going right to where the work needs to be done. The station was designed for use with our VERDICT handheld unit. It provides custom foam cutouts for organization of accessories, a mounting place for a monitor and plenty of storage space for other tools. Another of these award-winning products was the AC Touchless Wheel Clamp. This unique design allows alignment techs to securely clamp the tire in one single and fast motion without touching the rim. Now today, that's important because cars -- today's cars have ever more varied and sensitive and expensive rims. People worry about rim damage, this fixes it. And lastly, of these recent winners -- and lastly, of the recent winners, I'll mention the BK8000 wireless digital inspection scope. This tool provides the technician with the ability to visually inspect areas that are normally inaccessible but are important to see, like under the dash, behind the engine block, inside the transmission housing or engine. And has a screen that's 40% larger than the competition, touch interface, rechargeable aluminum -- lithium batteries, and more memory than ever before for digital video. This scope is a worthy winner of this award and is a popular seller. One important additional fact that I think everybody should know or recognize is that the PTEN award -- about the PTEN award, is that they're voted on by actual users. So the Snap-on products selected as innovation leaders were chosen by a panel that included active technicians and shop owners, those who will actually use the product. We believe that customer connection is a big advantage for Snap-on. With our 4,800 franchisees around the world, hundreds of direct salespeople, calling on 600,000 repair shops and many more critical work sites, we have great insight in the products that will make work easier for professionals. The PTEN awards, selected by the same professionals, are evidence that customer connection innovation are advantages for Snap-on and you can see it in the results. Now demonstrating our balance between growth and improvement, we also saw stronger operating performance in the quarter. In fact, the opco operating margin of 15.4% recorded in the period does represent a new level. You see everyday, we're applying the elements of Snap-on value creation: safety, quality, customer connection, innovation and Rapid Continuous Improvement, or RCI. It's a focus that moves up along the runways for improvement and the gains can be seen not just in those areas benefiting from our increased volume, but other places. In fact, maybe more telling, even though C&I group was down in sales this quarter, it still achieved a 12.6% operating margin. The impact of the sales decline was checked and limited. That's Snap-on value creation. Speaking of C&I -- I'll move to a discussion of each of our segments. C&I sales of $266.2 million were down 5.4% organically, with an additional 70 basis-point drop from currency. Operating income was of $33.6 million, actually was up, as I said, a reasonable job eliminating the impact from the drop in volume. For the group, there really wasn't much change from last quarter's sales picture. Year-over-year activity comparisons were about what we've seen in the past. SNA Europe was down, high-single digits overall, but their profits were up, the benefits of RCI and the restructuring actions we've taken in prior periods. And as expected, military was down again, big double digits. So the headwinds and trends remained about the same, with the normal period-to-period variation seen across individual markets. In short, our overall view and outlook remains the same. The military decline did more than offset gains in -- elsewhere in industrial business. Remember, this is the business that's primarily focused on extending the Snap-on reach in the critical industries, places like aviation, mining and oil and gas. In the past, I've spoken of expanded product line to serve customers in those critical industries, and we continue to have successes with new customers and products. One highlight this quarter was strong gains with international aerospace customers. We're reaching more maintenance, repair and overall facilities around the globe. And that extension is aided by new products like our control tech, electronic torque wrench, patented technology to achieve the fastest and most accurate torque and angle combo in a single motion; added durability, important for the critical industry environment; an audible indicator; a vibrating handle; an LED display, all to alert the technician as the proper torque is achieved and bring him right in on target. And it incorporates Snap-on's dual 80 technology, providing more precise yet stronger ratcheting. It just launched, just launched this past quarter, and it's being well received by professionals across the critical industries. One more point, one last point, remember that C&I is where we have our primary effort to penetrate emerging economies. These geographies were much as we saw in the first quarter, with India, the Philippines, Turkey and Russia, being particularly positive this quarter. So we'd continue to build position and make progress along that decisive runway. Let's move to the Tools Group. Organic sales were up 7%, an encouraging volume gain. The operating margin of 15.7% in the quarter represents a new high for the group and compares to 13.7% recorded last year. Now you remember, that there were higher restructuring charges in the second quarter of 2012, $6.9 million of which was in the Tools Group mainly for the Canadian pension settlement. I also mentioned the franchisee stock purchase plan. This quarter, we had $1.8 million higher cost associated with that plan in the Tools Group. These 2 items impact the year-over-year comparisons. But adjusting each, but adjusting each year for the 2 items, this year's operating margin of 16.3% would compare to last year's at 15.8%, still strong growth. Big-ticket sales were -- for the Tools Group, big-ticket sales were significant growth drivers in this period. Diagnostics and tool storage units, those products were strong. We believe, it's important for us, because we believe that big-ticket activity provides meaningful evidence of the financial well-being of our customers, and it's a good barometer on the overall health of the auto repair sector. And those sales, those big-ticket sales are being supported by Snap-on Credit. It's an important advantage for us. Not only is Credit helping to drive big-ticket activity in North America, but we're now extending some of that advantage in the international van operation. The well-established programs and expertise we've developed here are being applied to our advantage in places like the U.K. and Australia, improving service, increasing customer satisfaction and driving more growth. Tools Group performance was also driven by customer connection and innovation. 3 of the 5 PTEN Innovation Award winners are sold by our franchisees. And our many more new products like the innovative S6810 impact flip socket, an 8-millimeter and 10-millimeter hex on the same tool, saving technicians' valuable time and moving today's underbody panels that have dozens of different, different-in-size fasteners, a process required even for routine repair and maintenance. This tool is a big saver. Or products like our new digital display circuit testers that provide the technicians with a no-guess voltage rather than having to estimate it based on bulb brightness, we took technology and features from a more advanced multimeter and applied it to a common handheld tester. Now it sounds simple but since April, we've sold tens of thousands of them, well over $1 million in value. The group's performance testifies that we are progressing along the strategic runway of enhancing the van channel. You can see it in the franchisee health metrics, sales up, franchisee turnover down, trends positive. So based on the second quarter, the Tools Group appears to be hitting on a lot of cylinders. Now for RS&I. A total sales of 8.7 -- a total sales increase of 8.7%, which is made up of an organic rise of 4.9% and additional -- and an additional contribution of 380 basis points from the acquisition of Challenger Lifts, and a 40 basis-point impact from unfavorable foreign exchange. The operating margin was a strong 23%. We continue to see strength in our business providing independent shops with diagnostics and repair information, and in serving OEM dealerships with essential hard and diagnostics tools and with electronic parts catalogs. Gains in those businesses drove RS&I growth in spite of flat sales for undercar equipment, a product line that has been impacted by the decline in Europe where we have a relatively large position. Obviously, one of the big highlights for RS&I this quarter was the Challenger Lift acquisition in mid-May. We're excited to add Challenger to our portfolio, a well-established brand, a complementary product line. We believe that the acquisition is a step along our path of coherent growth. It will broaden our product line and help us to better serve customers who are repair shop owners and managers. Moving away from undercar equipment. Snap-on's presence is expanding in other parts of the garage and here too the gains are driven by an ever-growing offering of innovative and new products, like entry-level diagnostics. Earlier this year, we launched the successful MICROSCAN 3 and ETHOS Plus in North America, basic diagnostics. Now in the second quarter, we rolled them out internationally in the U.K. They're quite -- and they're quite popular, and these are important entrée products introducing technicians to Snap-on capability, creating customers for life who transition into utilizing our full diagnostics line up. Mitchell 1, our repair information business, has also been launching new products to serve the important medium- and heavy-duty truck market. Our new truck labor estimating product, we believe the most complete such database available for estimating truck repair, has been well received and adds to our already strong and growing line up in that segment. It's clear to us that we're gaining traction with truck repair shop owners and managers. You can see it with this new estimating product and it's evidenced with our truck repair information offering, which registered a 25% increase in customers since this time last year. So that's the highlight to our quarter: advancements along our runways for growth and for improvement; continued expansion with strength in the Tools Group and RS&I, overcoming the external challenges in C&I and its headwinds; and better performance, Snap-on value creation driving improvements, higher profitability across the corporation despite the challenges. Now I'll turn the call over to Aldo before making a few closing comments. Aldo? Aldo J. Pagliari: Thanks, Nick. Our second quarter consolidated operating results are summarized on Slide 6. Net sales of $764.1 million in the quarter increased 3.6% from 2012 levels, on an organic basis, sales increased 3.1% excluding the $8.5 million of sales from Challenger Lifts and an unfavorable $4.7 million impact from foreign currency translation. The year-over-year organic sales increase primarily reflects continued higher sales in the Snap-on Tools Group, along with higher sales to OEM dealerships, and increased sales of diagnostics and repair information products. These sales increases more than offset lower sales to the military and lower sales in our European-based hand tools business. Consolidated gross profit of $373.2 million increased $23.3 million from 2012 levels. Gross margin of 48.8% improved 140 basis points, largely due to lower restructuring costs, as well as savings from ongoing Rapid Continuous Improvement, or RCI initiatives. Operating expenses of $255.4 million increased $10.1 million, primarily due to higher volume-related expenses and $4.4 million of increased stock-based and mark-to-market expenses. The operating expense margin of 33.4% compared with 33.2% last year. Restructuring costs in the quarter totaled $1.8 million. Last year, restructuring costs totaled $10.2 million and included $6.8 million for the settlement of a pension plan following the 2011 closure of our Newmarket, Canada facility. As a result of these factors, operating earnings before Financial Services of $117.8 million increased 12.6%, and as a percentage of sales improved 120 basis points from prior year levels. Operating earnings from Financial Services of $30.6 million increased $5 million or 19.5% over prior year levels. Consolidated operating earnings of $148.4 million increased 14% over 2012 levels, and the operating margin of 18.4% improved 170 basis points from 16.7% a year ago. Our second quarter effective income tax rate was 32.5%. We continue to expect that our full year 2013 effective tax rate will be comparable to our 2012 full year rate of 32.8%. Finally, net earnings in the quarter of $88.4 million or $1.50 per diluted share compared to net earnings of $76.4 million or $1.30 per share last year, representing a 15.4% increase in diluted earnings per share. Now let's turn to our segment results. Starting with the Commercial & Industrial, or C&I group, on Slide 7. Sales of $266.2 million were down 5.4% organically from 2012 levels, primarily due to a 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 economic weakness in that region. Gross profit in the C&I group totaled $105.4 million in the quarter. Gross margin of 39.6% improved 280 basis points from 36.8% last year, primarily due to savings from ongoing RCI initiatives, particularly in Europe, and lower restructuring costs. Operating expenses of $71.8 million in the quarter were essentially flat with prior year levels. The operating expense margin of 27%, however, increased from 25.2% last year, primarily due to lower sales. As a result of these factors, second quarter operating earnings of $33.6 million for the C&I segment increased $800,000 from 2012 levels, and the operating margin of 12.6% improved 100 basis points from 11.6% last year. Turning now to Slide 8. Second quarter sales from the Snap-on Tools Group of $346.2 million increased 7% organically, reflecting increases across both our U.S. and international franchise operations. Gross profit of $152.9 million increased $15.9 million from 2012 levels, primarily due to $6.8 million of lower restructuring costs. The gross margin of 44.2% in the quarter increased 200 basis points from 42.2% last year. Operating expenses of $98.4 million in the quarter increased $5.9 million from 2012 levels, primarily due to higher volume-related costs and $1.8 million of increased stock-based and mark-to-market expenses associated with our franchisee stock purchase plan. The operating expense margin was 28.5% in both the second quarters, 2013 and 2012. As a result of these factors, operating earnings of $54.5 million for the Snap-on Tools Group increased $10 million from prior year levels, and the operating margin of 15.7% increased 200 basis points from 13.7% last year. Turning to the Repair Systems & Information, or RS&I group, shown on Slide 9. Sales of $246.2 million increased 8.3% from 2012 levels, including $8.5 million of sales from the recent acquisition of Challenger. Excluding the Challenger sales and unfavorable foreign currency translation, organic sales in the quarter increased $11.1 million or 4.9%, primarily due to a high single-digit gain in sales to OEM dealerships and a mid single-digit gain in sales of diagnostics and repair information products. Gross profit totaled $114.9 million in the quarter. The gross margin of 46.7% decreased 110 basis points from 47.8% last year, primarily due to a shift in sales mix that included higher volumes of lower gross margin products, including the higher sales of essential tool and facilitation products to OEM dealerships and sales from the Challenger acquisition. These gross margin decreases were partially offset by continued savings from ongoing RCI initiatives. Operating expenses totaled $58.2 million in the quarter, and the operating expense margin of 23.7% improved 110 basis points from 2012 levels, primarily due to contributions from sales volume leverage including the effects from the sales mix shift discussed above and savings from ongoing RCI initiatives. Second quarter operating earnings of $56.7 million for the RS&I group increased $4.5 million from prior year levels, and the operating margin was 23% in both the second quarters of 2013 and 2012. Now turning to Slide 10. In the second quarter, earnings from Financial Services increased $5 million or 19.5%, and originations of $203.1 million rose 15.7% year-over-year. Revenues in the quarter increased $4.6 million, primarily due to continued growth of the on-book finance portfolio and higher average yields. The average yield on finance receivables of 17.4% in the quarter increased 30 basis points from 17.1% last year, and average yield on contract receivables of 9.6% in the quarter increased 20 basis points from 2012 levels. Moving to Slide 11. Our quarter end balance sheet includes approximately $1.15 billion of gross financing receivables, including $976 million from our U.S. Snap-on Credit operation and $169 million from our international finance subsidiaries. In the U.S., $785 million or 80% of the financing portfolio relates to extended credit loans to technicians. Year-to-date, our worldwide on-book financing portfolio grew approximately $61 million. For the 2013 full year, we anticipate that the gross on-book finance portfolio will increase by approximately $100 million over 2012 year-end levels. As for finance portfolio losses and delinquency trends, these continue to be in line with our expectations. I'll also note that the CIT-owned portfolio, which continues to be managed by Snap-on Credit, is down to $35 million with the extended credit portion at $5 million. Now turning to Slide 12. Cash provided by operations of $110.1 million in the quarter increased $18.4 million from $91.7 million last year. This quarter we made cash contributions of $10.4 million to our U.S. pension plans, including $10 million of discretionary contributions. Also in the quarter, in investing activities, cash of $52.5 million was used to support a net increase in finance receivables. Capital expenditures of $16.7 million in the quarter compared with capital expenditures of $18 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 was unchanged from 2012 year-end levels. Excluding the impact of currency, inventories increased $25 million, including inventories from the Challenger acquisition. On a trailing 12-month basis, inventory turns of 3.8x compared with 3.9x at year end. Our quarter end cash position of $174.7 million reflects the year-to-date net funding of $74.4 million of finance receivables, share repurchases of $62.1 million, dividend payments of $44.4 million and the acquisition of Challenger for $38.2 million, as well as capital expenditures of $31.4 million. These uses of cash were largely offset by cash generated from operations, including higher levels of net income. Our net debt-to-capital ratio of 29.9% compares to 29.7% at 2012 year end. In addition to our $175 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 ratings allow 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 second quarter performance. I'll now turn the call over to Nick for his closing thoughts. Nick? Nicholas T. Pinchuk: Thanks, Aldo. Our second quarter was encouraging. The Tools Group growing and getting stronger, franchisee health metrics trending positive, new products creating excitement across our customer base, volume up 7%, profits continuing their rise to 15.7%. C&I, challenged by ongoing headwinds but offsetting the impact of the volume decrease with strong operating performance. Sales were down but profits were up, with an OI margin at 12.6%. And RS&I, expanding with repair shop owners and managers, independent and OEM dealerships, maintaining encouraging levels of profitability, organic growth at 4.9% and profits at 23%, a coherent acquisition focused on repair shop owners and managers, brought onboard with positive effects. Overall, we believe the quarter's performance offers abundant evidence that the Snap-on future is playing out growth and improvement. And we believe we'll continue to advance along those 2 broad runways as we move forward throughout the year and into 2014. Before I close, I recognize that the encouraging results of the second quarter would not have been possible without our extraordinary franchisees and associates. Once again, I know many of you are listening to this call, so for the success and progress you've achieved, you have my congratulations. And for your contribution, commitment and support, you have my thanks. Now I'll turn the call over to the operator. Operator?

[Operator Instructions] We'll take our first question from David Leiker from Baird. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Another continued progress here towards your goal ultimately, you're doing a great job. A couple of things here. As we look at C&I business, can you give us any color on the sequential performance there? I mean I understand the year-over-year, but are you seeing things stabilize when you look at it relative to Q1? Or are we still declining? Nicholas T. Pinchuk: No, I think, you're looking at similar -- I think we would characterize it as not congruent but similar to Q1. I think I said in Q1 that the military would -- military still down big time, but it's operating on a somewhat lower base and that's the primary difference between the 6%. I think it was down 6.3% year-over-year in the first quarter. It's down, what, 5.4% in this quarter. That's the major player. You got some goes ins and goes outs in terms of, okay, from critical industries, one critical industry is up in the first quarter, and the stars are maybe mining in the second quarter, things like that. You got those things up and down. And then in Asia/Pacific, in the emerging markets you got, including Eastern Europe, you got some ups and downs in markets, but pretty much the same stuff. We are seeing another constant, though. A positive constant is that the effects of Snap-on value creation, I think, are working pretty well. And I think sequentially, the sales aren't much different but the profitability is higher. So that's looking pretty good. Whether we look at it sequentially or year-over-year, you can see the effects of Snap-on value creation working through, and you can see it actually, very dramatically in Europe, where the sales are down again high single-digits and the profits are up. So sort of a similar quarter for us. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: And that well, too, for European tool business as well, that that is stabilizing here sequentially? Nicholas T. Pinchuk: Yes, I'd say it's not decelerating downwards, yes, right, like it has been for a while. It's sort of stabilizing. We're not seeing worse news. I think that's a fair statement, yes. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: And then as we look at the tool business and you've had some great initiatives here over the last several years that drive productivity and sell more products to the van channel, it sounds like your starting to take that into your international market. Can you talk where you are in the timeline of that and whether we could see a similar response in those international markets that we've seen in the U.S. markets in recent years? Nicholas T. Pinchuk: It's very early days in that regard, so -- because the international markets are -- the vans are -- even though we kind of say the vans -- we talk about them as vans, the vans in England are slightly different than the vans in Australia, that are slightly different than the vans in U.S. So we're very early days in that. So I think you just got to stay tuned in that regard. Our van -- we're still building the marketing efforts. You can see, written on the face of the Tools Group financials, we're still spending more on marketing. For example, I think we've got, what is it, 42 Rock N' Roll vans now and that's up, and we're going to like 51 by the end of the third quarter. And we've got a new van called the techno-van [ph] . This is a -- remember that Rock N' Roll Cab Express was focused on tool storage so that it could kind of aid selling and tool storage where we have these new vans, 4 of them on the road now, which talk about diagnostics. Particularly the big-ticket diagnostics. You get on this thing, it's got flat screens all over the place. It allows the customer to kind of -- the shop owner or the technician to kind of work the thing on a big 16 by 9 screen so it's dramatic for them, and shows them all the features of the diagnostics. It's working pretty well for us. We have 4 of them now, we're going to, I think, about 10 by the end of the third quarter.

We'll go next to David MacGregor with Longbow Research. David S. MacGregor - Longbow Research LLC: Great quarter, Nick. Nicholas T. Pinchuk: Thank you. It's a -- I think this is a -- the OI margin was a high watermark -- the EPS is the high watermark. But you kind of -- when you're moving upwards, you kind of expect to have a high watermark every year. So... David S. MacGregor - Longbow Research LLC: A few questions for you, but before I ask my questions, I guess, the first one is just, once upon a time, 15% was kind of the target margin and I'm just wondering if at some point, we'll see a comfortable sort of talking about the next leg of your growth. Nicholas T. Pinchuk: Yes, okay, I know. But before we get overheated about the 15%, remember that I kind of said mid-teens, but for like a year. So I kind of think it's more or less a year. And I'll point out to everybody, like I do every second quarter call, that our third quarter has some seasonal issues to -- seasonal -- and I don't want to say issues, but seasonal headwinds in terms of the vacations in Europe, and the van drivers have got to take vacations some time, and they usually do it in the third quarter. So our third quarter is usually, I'm not saying -- I'm not forecasting bad news or anything. I'm just saying it's more imprecise and more capricious than other quarters. And I think if you look over history, it's usually our weaker quarter. So you kind of got to look at it over a full year basis. David S. MacGregor - Longbow Research LLC: Okay. First question, just on the tools business, you talked about the strength in big ticket. That 7% organic growth, is there some way we could sort of bifurcate that between ticket and transaction? What was the growth from the average ticket? Nicholas T. Pinchuk: I don't really want to get into it in that granularity. I'll just tell you that big ticket was substantially, well, bigger than the 7%. It was quite strong. But I don't want to tie myself to that wheel of explaining big ticket and small ticket in every quarter because there's a lot of variation. But I will tell you that we -- and the reason why I don't know if you recall this, but the reason why we focus on big ticket is we learned that it is an indicator of weakness of the economics in the marketplace because during the recession, we saw some really weak numbers in big ticket, people demurred or they decided not to purchase and the fact that we're seeing this makes us feel pretty good about the marketplace. David S. MacGregor - Longbow Research LLC: Can you say what big ticket represents as a percentage of the segment? Nicholas T. Pinchuk: Well, I don't know if I have that number actually, but I think you could say like between tool storage and big ticket diagnostics, my ballpark sausage math would say like a quarter, something like that. David S. MacGregor - Longbow Research LLC: Or 25%? Nicholas T. Pinchuk: Yes. David S. MacGregor - Longbow Research LLC: But -- no, that's helpful, that's helpful. Nicholas T. Pinchuk: Of course, that's not [ph] detailed, but I'd say around that number. David S. MacGregor - Longbow Research LLC: And could you -- last quarter, you talked about sort of the 3-month pattern within the quarter. I wonder if I could get you to just address that again this quarter, how the 3-month pattern played out. Did you see strength at the end of the quarter, that was June... Nicholas T. Pinchuk: 3-month -- well, we always see a little bit of strength at the end of the quarter. I don't know, I've been in business decades and I see this everywhere. And so you always see that kind of thing at the end of the quarter. But I'll tell you, it's what -- I wouldn't say it didn't happen like the first quarter. Remember what I said in the first quarter, I think, that I said the first quarter was dominated by the idea that things were very weak in the first couple of weeks of 2013. I think it had to do with uncertainty around sequestration and the -- what with the Social Security tax increase and the changes in the tax rates, and I think we've found that our customers were afflicted by the bad -- their perceived bad news for breakfast they were seeing every morning, and then we saw a build through the quarter. I'm not sure people thought -- kind of believe me, but I think this played out in the second quarter. Our Tools Group growth was at 3.5% or so on, or 3 and change in the first quarter, but we said it was stronger at the end, and I -- that growth carried on into the second quarter. But I wouldn't say in the second quarter, it was to the same extent as the first quarter. We didn't have some terrible time and then move on toward the end of the quarter. David S. MacGregor - Longbow Research LLC: Sounds like it was more linear. I wanted to ask... Nicholas T. Pinchuk: Yes. And I'll remind you that we -- despite the fact we got 7%, we always say that we've grown at 4% to 6% organically in the Tools Group, is towards the bottom of that. David S. MacGregor - Longbow Research LLC: Right. So then on the RCI achievements, can you just talk about how much RCI contributed to the quarter? Nicholas T. Pinchuk: Well, I can talk about it in terms of -- I mean, let's not talk about in terms of OI or something like that. But let's say, if you look at our margin improvement, 120 basis points, right, you could say 110 of that is restructuring, sure, but there was the stock plan that cost you 50, 60 basis points. Challenger has a weaker profitability than average, that's a 10 and 40 for market. So you put those kind of negatives together, it's about 100. Between volume and RCI, you got another 110 positives. So I'd say RCI is 80, 90 basis points of positiveness. David S. MacGregor - Longbow Research LLC: Was it fair to say most of that was in Europe? Nicholas T. Pinchuk: A lot of it was in Europe, but I would say that we had good progress in a lot of different places. Our RS&I, which is not -- is only 25% Europe, had good RCI. And Tools Group made some RCI contributions, too, if you peel their results, you'd find it. So I think we saw it everywhere but more in Europe, to a greater degree in Europe. David S. MacGregor - Longbow Research LLC: Last question, though -- if you take the industrials business out of C&I and isolate that, so excluding Europe and excluding Asia and just talking about your critical industries, you obviously had a negative comp, a big negative comp in the military business. It sounds like mining was good. If you view those as a portfolio of businesses it sounds like they were up year-over-year. Can you talk about the extent to which they were up year-over-year, and the extent to which they... Nicholas T. Pinchuk: I would just say they were up single digits year-over-year, if you take out the U.S. Military. You saw it, we got good news in mining, the international business, we're finding we're reaching out. The cool thing about that is we're now seeming to be able to project ourselves better in that business even to the international businesses, so we felt okay about that. I just want to clarify one thing, I'm sitting here thinking, what -- your question about big ticket, were you asking the total corporation or Tools Group? David S. MacGregor - Longbow Research LLC: I was thinking about Tools Group but any way you care to describe it [ph]... Nicholas T. Pinchuk: Okay, I mean, I -- sorry, I gave you the total corporation. The Tools Group is more like 35%, 35% and change, yes, 35% to 40%, or something like that.

We'll go next to Gary Prestopino with Barrington Research. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: You were talking a lot about new products, that's all good. Are you kind of accelerating some new product introductions as you're growing here? I mean, you always had a goal of 40 new products with $1 million of sales or more. Has that been accelerated? Nicholas T. Pinchuk: Yes, it is. We're getting better at it. That's a simple point. I think our customer connection and our innovation, I think you've been to our Innovation Works, you can see where we -- we take customer observation up close to design and it's all part of Snap-on Value Creation Processes, but it didn't take -- Snap-on knew how to develop new products before, of course, and we had the idea of being in the workplace and observing it. But now we've boiled it down to repeatable and reliable processes and we get better at that. So we're getting better at documenting what we see, in other words, determining a sense of the practical, what's needed in the workplace. And then we're adding higher -- I don't want to say high tech because a lot of people have this stuff, but for us higher tech stuff like X-ray refractometers, and electron microscopes, and more use of finite element analysis, so we model in 3D printers, and that stuff. So we're sort of upgrading our engineering capability to more than it's ever been before. I'm not saying it's anything better than anybody else, but upgrading of where we had, and it's coming together for more new products. And I think I said that last year our new products, our hits that were $1 million sellers, were 6x or 7x what they were in 2006. So we're rolling out new products. And then I'll tell you what, this is an important thing because I was just on a van the other day, and I'm up here in Wisconsin, and a guy gets on the van and he says -- this is a guy who has been working for 25 years, the techs working on transmissions and I remember the guy's name, but I won't say it on the phone, is in our auto up here. And he says, jeez, I've got a huge number of ratchets, but look at these new ratchets, they're going to help me and save me a lot of time. So he bought 2 new ratchets, even though we had like 15 or 16 ratchets already. And so that's an important characteristic of our growth scenario, is that cars keep changing. And the faster we can bring out new cars guided by customer connection -- new products, new tools guided by customer connection, the better we grow, the more share we take. That was a good example of it the other day, and we're doing more of that. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: Good. Good to hear. And then can you maybe just talk about Europe in terms of -- you had always said the Southern tier was weak, the Northern tier was holding its own. Are you seeing the Northern tier kind of slip here, talking about France, Germany? Lower [ph] countries? Nicholas T. Pinchuk: Yes, France. I don't like to hear the word France, makes me -- gives me headache now these days. It wasn't so good last quarter. So France, yes, you're right. I mean, I think -- I don't want to overplay Southern Europe. I mean, Southern Europe is getting so small for us. It's getting a lesser and lesser factor, but Southern Europe was down but the core Europe, France, was down pretty -- was week this quarter. Benelux was weak. Germany was a little better, the U.K. was better, Sweden was weaker. In general, you're right. If you talk about year-over-year comparison, South got a little better, the core got a little worse, the periphery was good. So like I said, we feel good about Europe because -- about our SNA Europe business because one, we're not taking capacity down yet we're finding RCI improvements. We're finding productivity improvements so we have higher profitability on lower sales; and two, we haven't dismantled the value-creating nature of the business because anybody who has money that is in the periphery, places like Russia and Northern Africa and so on, and the Middle East, they're buying. So that's an endorsement that what's happening in Europe was still pretty strong, they're just waiting for the markets to come back. Gary F. Prestopino - Barrington Research Associates, Inc., Research Division: So the last question would be in terms of the emerging markets. You'd always said that that was 5% to 10% of sales. I would assume that that's trending closer to the 10%? Or has it exceeded that? Nicholas T. Pinchuk: It's over 10% now. It's over -- it's just over -- it's a slice over 10%. Of course, you realize our numbers aren't that precise and so on and all these, but it's over 10%. So we're moving upwards.

We'll go next to Liam Burke with Janney Capital Markets. Liam D. Burke - Janney Montgomery Scott LLC, Research Division: Nick, you talked about the profitability step-up in the C&I segment in Europe. Looking at the critical industries business without Europe, do you still see a gross margin step-up as well in the rest of the segment? Nicholas T. Pinchuk: Yes, you see productivity improvements, of course. We spend in that segment to try to extend into Europe, for example. The idea, I think in my remarks, I talked about international aviation business as you know. And so if you just strip back the core business, you'll like the profitability of it. On the other hand, we have, like in the Tools Group, we have an overlay of spending to talk about penetration, but still I like the profitability of the business. Liam D. Burke - Janney Montgomery Scott LLC, Research Division: Okay. And you made the Challenger acquisition this quarter. Is the pipeline continuing to be healthy there on the acquisition front? Nicholas T. Pinchuk: Sure. Yes. I mean, I think it's -- the Challenger is a great poster child for the type acquisition we'd make, not necessarily the size, although it's not a bad -- we like that size, but it doesn't mean we wouldn't do bigger, but it's right down our wheelhouse, we think, about giving us more to sell to one of our key customer bases. So we have a series of acquisitions that we keep looking at and Challenger was, I guess, the first one we've done in a while after the, I guess, credit company. I like to say the credit company being an acquisition, given that it was $800 million or so. And yes, we have a pipeline. We continue to work on it.

We'll take our next question from Adam Brooks with Sidoti & Company. Adam Brooks - Sidoti & Company, LLC: Just a few quick questions here. Given your performance in C&I in the last few quarters, do you have a more optimistic view on the long-term margin? Can we get to that mid-teen range just within the segment, or has nothing really changed and this is kind of what you've been expecting? Nicholas T. Pinchuk: I'm not quite sure. Let me try to answer what I think you asked me. I see this as a mature, a mid-teens -- I think I've always said, how I've done this, I've said, look we're going to the mid-teens, the components of that will be the RS&I group up around the 20s, the Tools Group kind of around the mid-group and C&I hanging around a little bit below that, but not -- but approaching mid-teens, and I have full confidence that that's the case. I mean, C&I, we're kind of happy about the C&I quarter. The 12.6% is pretty strong if you look at historical performance of C&I, and yet it's taken all these hits from the headwinds. I mean, that's headwinds city for us. You got Europe. You've got the military. It's a tougher place to be these days but they perform pretty well. So I see them moving on up. I'm not saying next quarter or something like that, but I just think the opportunities are very clear and we're confident in those businesses. Adam Brooks - Sidoti & Company, LLC: Okay, and then maybe just a little bit on Challenger now that you have it under your belt just for a few months, maybe some color on any opportunities that you see now, anything that's gotten you a little bit more excited. Nicholas T. Pinchuk: Look, I think, funny, when you acquire somebody, all of a sudden when you're touring these garages, you start noticing the names on the list more, and I was just, like I said, I was on a truck the other day, and it seemed like every garage had Challenger Lifts and I know that's not the case. They're not the largest lift manufacturer. So I think, one, talking to technicians, I found that it has a -- it reinforced my idea of great reputation. That's one thing. Secondly, we have opportunities to roll that business out into international. It's not an international business now, but we have equipment selling in international markets in Europe and in particularly Asia, so we're very excited about the opportunity to take that product portfolio and spread it into those places. And it's pretty important about emerging markets because you see, emerging markets they're building new brick and mortar all the time around auto repair garages, and the first thing that gets thought of when you're putting brick-and-mortar in your automotive repair garages is the lift. So if you have a strong line up there, it gives you a leg up in selling. We like that. So we're pretty excited about it. Adam Brooks - Sidoti & Company, LLC: And do you think now, being under the Snap-on umbrella, you can bring the margins up on that business? Or are they where you think they're going to be? Nicholas T. Pinchuk: I mean, I hope we can bring the margins up. I think we -- that's why we have Snap-on value creation. We think Snap-on value creation is safety, quality, customer connection, innovation and Rapid Continuous Improvement, imprinted on any operation makes it better. So one of the things we've always said about our, I think, have said about our acquisition strategy, is we acquire somebody coherent, so we get the synergies around sort of strategic alignment. It helps us with our customer base. But that doesn't diminish the idea that we have opportunities to make almost any operation better. We're confident of that.

We'll go next to Richard Hilgert with Morningstar. Richard J. Hilgert - Morningstar Inc., Research Division: Over in Europe, I was wondering if you could talk a little bit about, since that market is down as much as it is, what's your experience with the franchisees over there? How do you motivate the group? Are you seeing many of them fold up? And also curious about, are you seeing many of the independent mechanic shops closing up, too? Nicholas T. Pinchuk: Okay. Let's talk about this. Europe is a little bit bifurcated. Let me kind of give you the landscape, remind you of the landscape a little bit. The franchisees, overwhelmingly in Europe, are concentrated in England because our van business mostly works where technicians own their own tools. So the places -- the place in Europe where they own their own tools is the U.K. That business has not been as affected by the downturn. It's had its weak moments but it isn't as -- it didn't have as much problems as the other businesses. And so, therefore -- having said that, though, we have worked very hard to make sure that our franchisee population stays the same. So the franchisee, we haven't seen any huge downturn in the franchisees in the U.K. And so that's maintained robust. We have some vans in places like Germany and Netherlands, but they're not really that weak -- they're not really that big. Most of the business in Europe is the direct and distributor business which we sell through SNA Europe and our other divisions, not the Tools Group division. And you remember that C&I is 33% Europe, RS&I is 25% Europe. They're way above the Tools Group. And so those businesses have been impacted. But they're broader-based and not just -- C&I is the -- the C&I business is another -- is an industry and culture and a lot of other different things. Now what we've noticed is, in Europe, that our customers we sell to distributors, our customers have not gone away. So it appears to us that the base, the customer base, is still intact. So the long and short of this is, I guess the long and short of my answer, is that we don't see any deterioration in the opportunity in Europe. We see the customer base still there. We believe the morale of our people are still pretty high because there's nothing like seeing your sales down and your profits up. You feel pretty good about it, so they feel strong. And because we believe in the opportunities going forward, it's why through all this restructuring, through all the RCIs, through all the restructuring we did in Europe, we didn't take out any capacity. That's one thing we demanded in terms of the restructuring plan. We demanded that no capacity go out. We reduced based on being able to do the same with more during this period. So I hope that answers your question. Richard J. Hilgert - Morningstar Inc., Research Division: Okay. U.K., new car sales are actually up there versus the rest of the Europe which has been down most of the year. So I would imagine that you're still seeing fairly good business in the U.K. then? Nicholas T. Pinchuk: Yes. The U.K -- look, the Tools Group was up, I think, about the same internationally as it was in the U.S. But the U.K. might have been at the, like at the lower end of that, but still up pretty good, like 4%, 5%, something like that. So still, I think, good. Richard J. Hilgert - Morningstar Inc., Research Division: Okay. All right. On the CapEx, you've been running -- the run rates have been pretty low compared to what the full year expectation is. It's been 1.8%, 1.9% for the first and second quarters, percent of revenue, and your full year run rate is -- the $70 million, $80 million comes out to something like maybe 2.3% to 2.6% of revenue. We're going to see the third quarter and the fourth quarter being high 2%, low 3% spend? Nicholas T. Pinchuk: Yes, I suppose. Look, I don't actually think of it that way. I kind of think that we're thinking about -- we have, what, 31.5% or so year-to-date. So okay, I think we still like a 70 to 80 number. There's a lot of variation from quarter to quarter on these things. And I still think the 70 number -- 70 to 80 is a decent number to forecast. So if that means going up in the second half, yes [ph] . Richard J. Hilgert - Morningstar Inc., Research Division: Is there anything in particular in the second half of the year in terms of capital spending, any one big project or something that's ramping up? Nicholas T. Pinchuk: No. I don't think... Aldo J. Pagliari: It's fairly broad-based. We have investments both in the U.S. and the international arena earmarked for the second half. It's pretty broad-based. Richard J. Hilgert - Morningstar Inc., Research Division: Okay. Yes, and then one last question. A large part of your success is your ability to bring out new product and be in tune with what the market needs, having new technologies or having new tools that meet a certain criteria that the market wants. And I was curious to know, do you have any kind of information or analysis on, say, the percentage of your product portfolio that is new over a certain time frame? Nicholas T. Pinchuk: I do not. I think, look, everybody has a different view of this. But for me, I don't like -- I'm not a big fan of that metric. The metric we like is, and now I'll tell you why we like it, is a tool that sells $1 million in the first year. And the reason is because when you ride these vans, what you see is a new tool, the guys get on the van and get excited. And okay, they buy the new tool but then they buy a whole bunch of other stuff, too. So it drags other products with it. So for us it's a matter of not how many new products there are, but how many exciting new products or how many products make the hit parade. That's what I was talking to Gary Prestopino before, and so that's what we measure. And as I said, the number of new products last year that sold over $1 million in the first year, and we're pretty strict about this, was up 6x to 7x from 2006. So our innovation process and our customer connection process are improving. It's our life blood. Because if you think about this, we guarantee a lot of our tools for life, so how is it we have a business? And the reason is is because the guy needs, instead of 16 ratchets, he needs 18, because the cars change. That's the biggest driver in our business and that fits in with this innovation. And so, we seem to be doing better on that. So the metric I like to offer is, tools over $1 million, and that was over 50 last year. Richard J. Hilgert - Morningstar Inc., Research Division: Okay. Over 50 last year? Nicholas T. Pinchuk: Yes, over 50, you got it [ph]. Richard J. Hilgert - Morningstar Inc., Research Division: In 2012? Okay. Nicholas T. Pinchuk: 2012, yes.

And we'll take our next question from Sarah Hunt with Alpine. Sarah Hunt - Alpine Woods Capital Investors, LLC: Quick -- a couple quick questions for you. One, you mentioned that you were doing fairly well with auto OE repair shops. So are you taking share from somebody? Or is that market just getting better? Nicholas T. Pinchuk: I think you would have to say some of both. We'd like to think we're taking share. It's hard -- Sarah, it's hard to assess share in this space because we're basically 65,000 SKUs. Okay, if you add 3,000 more, is that taking share? I don't know. You see what I mean? And so, I think we do believe, though, our sales are getting better in these shops, we're selling more to each individual shops, the franchisees and the individual sales. Franchisees are selling more, the individual salesmen are selling more. So we believe we're taking some share. Sarah Hunt - Alpine Woods Capital Investors, LLC: Okay. And then the next question is on interest rates. So we've seen a lot of movement in the last 4 weeks or so, based on various interpretations of what the Fed is going to do. For your own financing piece of the business, how rapidly do you need to or have to adjust as interest rates change? Or how are you looking at that now that you've got the finance portfolio as internal? Aldo J. Pagliari: Sarah, this is Aldo. I think that actually we have a little bit of a headroom, I believe, in the interest rate arena. And the reason I say that is our finance receivables and contract receivables tend to be of relatively high interest rates in the market, reflective of the credit profile of the customers that we serve. And our philosophy is we finance the credit company long. And what I mean by that, if you look at our pro forma statements that are attached to the earnings release, we use the Snap-on average all in debt expense rate and that's at about 5.6% more or less at the end of June. So we don't use floating rate debt to really finance the receivable portfolio. And if today, if we had issued 10-year paper as an example, I'm guessing the rate would be about 3.6-ish, somewhere around that neighborhood. So you'd see, we still have 200 basis points of headroom before I think that our cost of funds would start to impact squeezing the spread of what we charge customers and what we pay. Sarah Hunt - Alpine Woods Capital Investors, LLC: Okay, and that would really be a temporary, I'm guessing sort of a temporary issue, if rates are going up. I mean, unless they're steadily going up and you're chasing it, I would think that you're probably -- that, that would -- as rates go up, that gets reflected on what you charge folks. Is it not? Aldo J. Pagliari: Sure, it would be. I think it would be a little bit of a lag effect because in some situations that we do charge rates that are sometimes the highest rates allowed by law depending on the circumstances and the profile of the customer, and those laws change probably on a lag basis, I'm going to guess, versus the open free-market rates.

And there are no further questions at this time. Leslie H. Kratcoski: So this is Leslie Kratcoski. I'd just like to thank everyone for joining us today on the call and, as always, for your interest in Snap-on. A replay of this will be available shortly on snapon.com. Thanks a lot, and have a great day.

This does conclude today's call. We thank you for your participation.