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Letter to the Editor

Snap-on Lowers Q3 and Year 2004 Expectations

Net earnings for the third quarter of 2004 are expected to be in the range of $0.37 to $0.40 per diluted share, which compares with $0.30 per diluted share for the third quarter of 2003. Earnings for the 2004 third quarter are expected to include approximately $0.05 per share of continuous improvement costs compared to $0.16 per share in last year's third quarter.

For full-year 2004, net earnings are estimated to be in the range of $1.35 to $1.45 per diluted share. For 2003, net earnings were $1.35 per diluted share. Earnings for full-year 2004 are expected to include $0.26 per share of continuous improvement costs compared to $0.34 per share last year.

Approximately 50 percent of the reduced earnings outlook for the remainder of 2004 is due to slower-than-expected improvement in achieving cost and productivity benefits from the U.S. hand-tool plant consolidations; as well as cost increases on raw materials, particularly steel, which occurred after the mid-year price increase; and the effects of adjusting U.S. production schedules for certain product lines in the fourth quarter. Another significant factor is that the economies in Western Europe are now anticipated to be not as strong in the latter part of 2004, as had been expected earlier, causing lower-than-anticipated results for the European tool and equipment businesses in the Commercial and Industrial Group segment. Furthermore, there have been, and it is expected there will continue to be in the fourth quarter, disruptions in the U.S. dealer business as a result of the recent hurricanes in the Southern and Eastern coastal parts of the United States that have impacted customers' businesses in those areas.

Sales and earnings are benefiting from the successful launch of new handheld diagnostics and software products in the U.S. and U.K., including the new SOLUS(TM) Scanner(TM) tool, which has been well received by Snap-on dealers and vehicle-repair technicians. In addition, Snap-on expects to benefit from a lower tax rate in the third quarter, similar to that realized in the 2003 third quarter, which amounted to $0.05 per share.

Snap-on expects cash flow to remain strong for the third quarter and full year. At the end of third-quarter 2004, cash is estimated to be approximately $140 million compared with $127 million at the end of second-quarter 2004. On January 21, 2004, Snap-on announced its intention to repurchase 750,000 to 1 million shares of common stock in 2004. To date, the Company has purchased 900,000 shares. Snap-on may repurchase more than the previously announced 1 million shares before the end of 2004, pursuant to previously disclosed Board authorizations.

"As exemplified by our strong cash flow, we believe that progress toward our goals is being made. The consolidation of our U.S. hand-tool plants has been challenging, and we believe the full benefits will not be realized until the first half of 2005," said Dale F. Elliott, chairman and chief executive officer. "Despite internal and external factors that have caused us to lower our outlook for the remainder of 2004, we will remain focused on executing our Lean conversion. This continued Lean implementation, coupled with near-term action plans, such as price adjustments to address the issue of steel cost increases, we believe should give us an improved operating platform for 2005."

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