Snap-on (SNA) 8 Feb 182017 Q4 Earnings call transcript

Good day everyone, and welcome to the Snap-on Incorporated 2017 Fourth Quarter and Full-year Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Leslie Kratcoski with Investor Relations. Please go ahead, ma'am.

Thanks, Tony, and good morning, everyone. today in Snap-on's earlier our us which quarter this joining detailed are press for to fourth review results, morning. Thanks release issued

thoughts, Chief provides on Pagliari, detailed financial on take Officer our Nick a we'll call have the more with today review some Aldo off Pinchuk, We results. his will morning perspective provide call will kick our and performance. questions. After Chief Snap-on's Snap-on's Aldo closing this Financial our Nick Officer. of your Nick Executive then

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in in Additional results to those cause information could statements the filings. SEC our forward-looking the are from materially and differ factors contained our that

includes counterparts. Finally, in meant to isolation performance, measures be non-GAAP this GAAP which presentation considered for substitute or financial of are their not as a

reconciliation non-GAAP With call Nick is now measures website. Nick? of a the I'll included earnings including on measures, which deck, over slide conference turn these can release said, to our regarding and information be Pinchuk. Additional that call our in found

detailed I'll results, on that of the we've the quarter This our the with perspective progress market environment more law. special the move on transition start financials. But legal After review and profitability. with the number the that charge, I'll There of on everyone. tax typical morning, my Good both non-recurring our a again made. new associated will a achieving and year you Leslie. through into growth is that, showed fourth give our Aldo progress look and of Thanks, a all not the and runways, and quarter. and Snap-on events along significant when are you impacted result, overall highlights

BTC included we advantage the last $XX.X volume million had of and $XX.X acquisition-related most opportunities the Richmont last we year, and businesses, million overcame had and of Sturtevant quarter million, than headwinds sales from headwinds. foreign in and total We took favorable year's X.X% quarters, we That year's opportunities. with As were $XXX.X higher and the of strong. Overall operations and Car-O-Liner Norbar this currency.

growth organic with varied Our was X.X% groups. relatively results encouraging the across

Let's start events. non-recurring by looking the at

First, in income the operating pat-related $X.XX. charge. is earnings by being litigation per It the share legal a judgment by appealed. $XX.X A impacted and that million matter one-time

in EPS $X.XX new legislation. or million U.S. with the $X a implementation tax Second, the associated charge

foreign Excluding acquisitions of basis basis down of XX impact points, the favorable reflecting the margin operating lower and XX OpCo legal charge, a dilution sales, from margin point currency. was primarily XX.X%

For compared $XX.X $XX.X year's million Financial last Services, million. of operating to income

charge equipment vehicles, legal result. repairs to the although, excluding the that what favorable, market, our the was aging continue that we that's more tools And continue and and of legislation, updated repair technologies, new innovative mixed to place requiring grew segments and the EPS to remain a in make favorable believe per specialized increase as-adjusted of saw results arena, our diagnostics $X.XX, That's the be. again and earnings As-reported, an $X.XX, automotive X.X%. we but tax share impact to

As I had though, said outcomes. mixed we

third we in quarter, saw Our in Tools looking Group similar and unsatisfying. what was below U.S., the the trend to

together the the continued abundant available there's Information shop an owners with RS&I, in level, repair and know managers. we what and & Repair or believe taken we the be that RS&I opportunity overview indicate the considerable strong clearly segment. From fundamentals progress serving Systems its ongoing Group However, advancement would of ongoing

one resources, look again, growth, both and sales C&I general geographies, up in all leading reflecting you strongest way. to volume upward industry had or Industrial if quarters. period Division Europe segments its SNA double-digit Within nearly Commercial Europe, with all including in military Industrial all Commercial trend, focused that's critical double-digit with across Now almost an almost of Industrial, were encouraging. Asia. & industries & nicely business SNA on – gains the across growth And now geographies. Organic experiencing Performances the similarly industries strong it were Europe's from the positive an was especially Group, natural generated area our the and our and and Industrial, period

challenges they capitalize clear driving, time. runways So to will always and We growth. confident and continuing strength along and for significant across do some in businesses Continuous looking automotive that runways possibilities, for well-positioned quarter markets And opportunities strength improvement. notwithstanding the exist. connection, of positive. innovation our mixed, ongoing whole, overall on gains and despite and for ahead, Rapid I'd Group this Improvement many headwinds safety, of as geographies, or but said With repair, the on are have outcome the advancements customer characterize Creation our the Snap-on exist we our clearly corporation, Value quality, times. critical We as our on the the RCI that Processes, also the in Tools see remain across industries the

X.X%, C&I $X.XX of sales full-year, was Tools Group Group the increase an volume organic of represented the gain X.X%, for Now rising roughly X.X%, RS&I as-reported The with flat. the and X.X%. billion Group up the

the the currency. year Financial XX.X%, advantage dilutive our of was similar a $XXX.X of of XX.X%, and opportunities the the earnings increase and up that's and as-adjusted gains matters share impact Services from quarter excluding with tax basis for OI the of down legislation, operating XX OpCo the from for per points, million, an income corporation which points margin acquisition as-adjusted million, the up a and overcoming but points, $XX.X our include basis the decrease percent reached on of XX as-adjusted profit basis associated driving legal improvement. $XX.XX, $X.XX, points was the impact XX%. XX we and taking for EPS XX was As-reported growth when sales increases, runways rose And for runways year, basis consolidated unfavorable

monitor believe once the improvement the financials, of fourth reinvigorate will Now, Group sales Snap-on market-leading Franchise the million, it the U.S. recognized was franchisee's data. evident In its the collects ranked van in van in position be positivity number let's by two basis Elite quarter. Business fourth of satisfaction $XX.X its ranked both each row and abroad. the actions that of five network. franchise, a popular they that the the the Review, but based We to organizations, award and magazine's the XXX Franchise points. metrics among the was UK-only do Military groups strength a XXXX, the Snap-on we create in quarter the Top recognized the listing operating Best however, and brands. our a Tools throughout confirm sales year, also at includes to didn't Top which XX did period. publications, were And The We tool wasn't very in low and multiple health global many channel ranking, the XXth which And effective, second year Snap-on and and XX.X%, Organic individual franchise was mobile lists Group. The franchisees received quarter as year for choice. ahead recent quarter, It in earnings Vets in franchise again was margin in their finishing And down We and move the operating strong clear we top but number acknowledged franchisee the of Snap-on Snap-on its the down UK abroad, again past by latest marking just franchises on in are and for Tools the consecutive annual of for were on X% franchise turnover satisfaction. on ranking, once representing list. by and above franchises rate is again some results. Times, a as coming only entire this as

the and achieved hit Group without type it continuous think not shortfall action. been quarter, stream of I products. but And of number Tool Tools sales gained fundamental observations sellers reflects business again, taking its those you've franchisees innovative have become of a the $X Now would our in that the products, new still developed of in were direct the strength we're once van increased with. recognition a from this in XXXX, the field million Storage familiar in

new in its be the with themes. Tools and a XX-point our price ranges, a model box unique new to Snap-on just We're at at X-tooth affect capacity attractive with extended We're strength compact particularly technician that's organizer we're may introduced and product vans Tools for some for aimed some them that steel for network premium the high-performance in well options like introducing and series features me another life features tool contributing And building A swing PowerDrawer, difficult the and new reducing be wrenches, form leverage, affordable customers Group. below a but to making new vitality, arc, The job ratcheting speak young unit pole line our that's probably December, fourth minimize offers keep trends, for expanding restart whole a migrating N' heard time, into Rock durability, Group. critical the to the technicians. Tools that. in of high-end we'll proprietary doing to the quarter, footprint, we lower handle gears, Roll we situations. and You too Group our late of retooling speed the

OI in of XX Volume currency gains hours, and Operating RS&I. vehicle Mini repair $X.X vehicle miles and and the won but year, margin an rise low million more Once down Equipment increased the was per the again, Now let's products, Double-digit XX.X%, of vehicle giving products. move engine show acquisitions the us a from those of in offerings device. point driver in and decline like compelling million, Las data fourth Tool with NEXIQ and $XX.X last basis logs basis million, organic single-digit It performance Blue-Link X.X%. like, sell diagnostics sales at earnings from repair XX Mini, hours, lower to to to and with for movement, Professional the negative an speed a increases effects. we owners managers, data performance points margin like of quarter OEM Award some electronic our shop information Vegas. gallon. and in $XXX.X Innovation logging Year Blue-Link The saw dealerships SEMA

We reception. logging meet be data customer that a December. that of saw took appears product it the All effect that. to regulation allows customers in electronic with winning heavy-duty to And great

bar businesses last diagnostics quarter, information its We position both great quarter, comparison Our launch and well. new Mitchell that business, the diagnostics, whole the technology Hardware a the specific to popular adding takes of job. the to Well, new in information unit user the selling new offset software category. technician's diagnosis for of A accurate. the information It in database our scans new mentioned in products. repair very yes, Edge intelligence led the the interface amplifies the and the repair, our introductions. of a job information intelligent repair by fourth enhancing by tightly data combination. were in level subscriptions, exactly raising RS&I proprietary our MODIS and also and subscriptions, focus handheld new it's and OEM a X ZEUS. repair handheld difficult software also year's of that one that more that It more Thermal information of particular for advanced vast our the advanced in and makes last Imager Mitchell helping returns easier, launch and interface. the space, and search advanced real-world X integrated quicker real-world power Snap-on's now with data, the needs the SureTrack technician is ProDemand of game-changing

dedicated independent at meeting intuitive repair the unit. equipment division They RS&I's wheel multiple varying of procedures. alignment It's perform needs alignments. the imaging of don't guy. unit for brands targeted services. aligner. general variety a shops multiple do a ease-of-use vehicle vehicles new a will the brands in a do is guide Those approaches an that challenge mid-tier interface It's that the an VXXXX just squarely the need the typically can't Well, to work on many shops tech. What have Finally they with a introduced VXXXX alignment that major right within clarity. align is Different through and period, have of

For equipment and tech, acquisitions. to connection XX%, repair added it the to We it keep customer and a with our expand RS&I's can shop alignment products a the strategic a or boost owners lineup. our by And innovation general our managers, sell, great by reduces position see driving saving nice time by you numbers. processes new offering and developed in and coherent to

increased sales XX.X% million was were helped $XX.X on to $XX.X the record period basis in acquisitions, increased Now, XX XXXX, – SNA reported from XX.X% point and reflects of XX at year. increase reflecting decline million Europe, $X.X That's – currency. I impact a Sales in almost C&I. and helped basis Power improvements Asia-Pacific among XX.X%, seen to million Tools acquisitions, down and Operating from The another from XXXX, income margin group's year income the division. last up every we've basis Organic ever C&I. from the want gains volume operating unfavorable again by the acquisition-related from by operating was million. from say but that the by XX points, highest point $XX.X in currency. sales the division, dilutive including period up That XX.X%, favorable Industrial,

quarters those challenging at the had in up XX or C&I, years in years, of quarters. strides. quarters In XX margins again several is and and growth impacts products four Creation with In reflecting profitability of improved driving row C&I highest one notwithstanding, some in straight up along, continuing strongest trends positive our posted Europe of improvement, a pretty now Value effect, row last double-digits, for XX.X% the seen division climbed sales, Industrial innovative geographies. right processes, work among organic profit new new Snap-on a made progress, Also the year-over-year and quarters. fact, its we've encouraging its SNA increased Reassuringly, last so. in XX group

strong division, before, in mentioned I rising recent down growth of part been progress double-digit driven aerospace our widening a in growth, for As double-digit strong Industrial the by and in array part Having products. by worldwide. our in periods, new driven good quarter, showed up

delivery connection, cordless First while, prohibit connection landing customer length added grease connection, the aircraft customer domestic standard units kit. the a hose, this boost type identify requirements. developed to tube, further we international with from time vision and authoring reach added to in users improvements a on have quickly gun, and an cartridge also which on industry pressure, And special new material matching requirements, like like gun which them and gun. a Many customer we a based of service Snap-on a clear pressure extended gear in grease products in using grease that service both the planes our giving from technicians allowing new reach limits

seem Now easier but critical effective are, and improvements are, work these like making in they in simple aerospace they're situations. special quite

innovation and using has connection customer expansion. drive Just Europe like been division, SNA the to continuing Industrial in also its

– OpCo the big specialized amount needs environment array pumped Customer released individual opportunity for combining oil kit and into tools, For at technicians It height critical to under launched specialized oil safety the to was and driving was X/X array dash screws rig tight kits our fire our and under what just for environment. on torque, our quarter. XX.X introduced critical Europe in LED million generation and advancements will X.X%. industry growth. oil a two-speed help our eliminating pump-man new our the based – the dark a the kit, use in special with seller, growth sales pounds a there drive for down the Well, was speed the a products combining power and the runways rising lightweight, connection, when of already from division be early MicroLithium with that with get it's service control. were expansion at – provides the tools rigs. XXX-inch offshore, with of has fourth our quarter gas these fourth suspenders large at large coherent light drill, them for Progress organic Europe, quarter height volt, up a returned offers tools and spaces along those $X SNA winner our of significant safety, of Tools development driver you and in working CDRRXXX, and The variable of one a that and with in this being ocean to kits its C&I Northern hazards illuminate that's It Power a tool new industry tasks for go. starting One addressing of we Improvement. way. safety receptions, the connection, in customer non-sparking the pump-man believe quality, on product the at considerable show example, switch. our great Group, its continuing and It's to Rapid much regaining height observing and runways to it servicing small potential to help right-angle trajectory. on was like great inches, for Continuous growth improvement, we're in the continuing led Tools paved firewall and innovation Europe's but work. the year, with upward in RS&I calling strength bottles growth. ranges and with hit more safe tool an for to integrated

of our of and up the dilutive XX.X% margin, driving That's fourth EPS an acquisition a as-adjusted $X.XX, despite All it X.X%. adjusted operating quarter.

Aldo? to the call Aldo. I'll turn Now, over

Thanks, Nick.

$XX.X progress The was reflects in serving repair $XX.X year-over-year million favorable segment. slide of results gross highest shop organic level XX and broad-based in as the on foreign operating XX legal as Consolidated currency managers volume XX.X% margin that of and in organic the operating of ongoing million of basis XX to appealed. acquisitions. benefit the of operating sales growth, a sales on and a higher or were X.X%, & which the of basis for year. translation. is comprise increased Commercial XXXX, as in achieved acquisition-related million The foreign X. points owners gross being gains, summarized point benefits currency. as lower in margin or of quarter of expense partially XXX Net million the declined sales the consolidated an before and basis sales vehicle sales sales $XXX.X compares lower margin prior in to XXX are increased sales primarily growth sales $XXX.X Our Industrial basis repair X.X% due sector acquisition-related any charge points, XX.X% of quarter XX.X% points basis sales, well from businesses to of margins mentioned, These earnings that, leverage by $XXX.X unfavorable Services of points gross products, basis Operating related points million XXX Nick legal has offset XX.X% charge includes the reflecting from expenses of the Financial and

before of XX.X% and million million million, $XXX.X from revenue legal charge, ago. as-adjusted Financial year or XX.X% earnings respectively operating earnings XX.X% $XXX.X of earnings $XX.X a Services, revenues Financial $XXX.X million compared million Services XXXX. revenues operating to or sales. the or million million of of increased operating $X.X Excluding $X.X was of Consolidated of and $XX.X

Excluding as-adjusted $XXX.X million the charge, consolidated XX.X% revenues. legal or operating of was earnings

by estimated by was a to of points $X of as income effective points tax tax, of estimated $XX.X charge earnings result the as offset of assets $X.X revaluation related liabilities related but charge, implementation This XXX legislation quarter United foreign an a the transition partially XXX tax the to XX.X% charge fourth in benefit unremitted rate legal of result the of tax increased million an million, deferred million. basis new tax a reduced of Our and an includes tax basis the States. by

of the of legal both tax compared XX.X% QX the effective the tax Excluding in XXXX. to charges, and was fourth quarter as-adjusted rate in XX.X% as XXXX

million net a share share $X.XX or diluted million of ago. $XXX.X per $X.XX per earnings $XXX.X compared Finally, year or to

per Excluding tax Adjusted of million. earnings $X.XX, charge represented share increase and charge, an was net of diluted X.X%. the earnings legal as-adjusted $XXX.X

of basis European-based million volume our in segment XX.X%, gains million organic gains to unfavorable $XX.X Starting sales $X.X year. were by of of both gross margin single-digit higher basis XX gain, ago, segments board, declined points, reflecting to increase sales the margin from the acquisition-related earlier the and the and expenses of expense the sales with well of earnings segment effects. Asia-Pacific year XX.X% Group growth point sales Power strong year in critical of sales The critical Operating of currency foreign military, products customers the mentioned in including impact of the tools basis XX.X% C&I hand operating points for operations. which improved slide acquisitions business as operating and C&I the The were on double-digit turn weaker and XX.X% $XXX.X partially in industries low to and XX.X% XX.X% XXX and as let's operating basis in above. international a industries organic compared in Sales due our the the margin related foreign XXX currency margin results. increased lower Tools points basis offset includes million Gross leverage, currency gains of translation. acquisitions. XX to $XX.X Now areas, ago in quarter The increased in XX favorable of points two of a across including aviation X. a from million sales and to XX.X% XX.X% benefits to due primarily positive

a sales. by slide digit Turning of million a was the which now $XX.X in the offset digit XXXX. sales margin of organic Group XX XX.X% related primarily partially year-over-year internationally. the $XXX.X decreased Gross million, favorable effect partially cost. decline, XX% the points mid-single million earnings decreased X.X% translation. Operating of Tools lower increased Sales volume gain a the to lower of sales due foreign sales of operating decreased the by decrease Group margin offset and points X% basis in in in reflecting The XX.X% XX.X% includes basis currency only Tools compared of to to operating The Snap-on due U.S., X%, for $X.X decline margin X. of organic mid-single XX to the year-over-year, expense

from foreign points year, savings prior basis of XXX XX RCI The XX.X%, basis a in million and points operating sales points sales low The RS&I basis unfavorable of from benefits on of gain Sales and points dealerships favorable $XXX.X by acquisitions. sales million to of volume Turning point sales million OEM margin partially year translation. margin to XX.X% lower from million reflected Group shown XX.X% XX the offset X. operating sales reflecting sales levels. including expense and increased Gross $XX.X slide gross to X.X% a the a basis of $X.X acquisition-related XXX from XX of basis and a for partially of Group XX.X% organic basis foreign X.X% unfavorable acquisitions, diagnostic margin of $XX.X XX.X% information in RS&I higher acquisitions, The gain, organic increase impact were improved currency and due increase double-digit the products. declined compared increased of earnings impact sales single-digit last initiatives. margin of points repair from of of XX products as offset a foreign Operating XXX basis currency. higher to point by currency

receivables, to compared of of primarily million Operating million expenses of million turning a $XX.X Financial Services million ago. third year-over-year Financial fourth $X.X slide sequentially Services year increase on Now XXXX from compares earnings million from for third operating million up prior $XX.X of to $XX.X sequential earnings of the in quarter increased is $XX.X due in $X.X losses on a of to in on and revenue million, to year $X.X XX. $XX.X $XX.X which revenue quarter $XX.X million million. totaled to the million finance provisions quarter. in the million $X.X This increase of

of was average and higher of mix quarters receivables to were both fourth utilizing marketing originations in XXXX X.X% due in yield to was X.X% the finance XX.X% in quarter yield loan Services and a receivables XXXX, portfolio fourth the As expenses in $XXX million as on in the originations well average X.X% quarter, average XXXX year-over-year. percentage as part million XXXX. in In Respective of the compared of the XX.X% Financial XXXX. rebates on increased or Total $X.X contract percentage the fourth portfolio, X.X%.

a the in of decline contract originations to receivables in lower due finance originations finance of were by the year-over-year higher items the Tools sales by franchise receivable principally Group. U.S. offset big-ticket As partially Snap-on

Moving to slide XX.

balance quarter-end $X gross approximately includes billion U.S. financing our from $X.XX Our of billion sheet operation. including receivables,

Our Services quarter. million portfolio fourth in grew X.X% Financial the or $XX.X worldwide gross

business. trends, balance this typical increases. finance portfolio higher segment of we've and for As over several seen last as reward over are, however, continue delinquency losses in trends quarters tracking these, We our and similar they to expected, risk year-over-year, support to reflecting the what believe also seasonal view our appropriate an

portion to seasonal from basis quarter-end, quarter. increase day reflects year-over-year. X.XX% Their trailing and $XX.X relates the operating portfolio's represented performance. the points Overall, XX- largest fourth year-over-year finance credit increased extended the million, extended the rose of month sequentially points in receivables, XX in U.S. earnings credit third to of quarter for Financial points above-mentioned losses the for or segment up typical X.X% of allowance basis X.X% of doubtful sequentially. basis XX-plus at the XX XX trends accounts it Services of As rate portfolio, delinquency The outstandings the

million. down lower pension levels, Cash Net XXXX additions million million, million expenditures $XX.X net million million payments year. by dividend XXXX in by to from shares for and and repurchases Full-year million due million included activities $XX.X Now of provided our paid to turning income repurchase slide of million Capital cash investing operating activities existing million $XX.X taxes the X.XX $XX.X with last increased primarily shares in finance in to of $XX.X quarter discretionary million XXXX. share common to Net comparable of of used totaled XXXX. fourth included of activities of XXX,XXX contributions the cash cash compared shareholders quarter $XXX.X the $XX.X in from for $XX.X the million repurchase receivables $XXX.X of financing XX. quarter share programs. for $XX.X under by $XXX.X of used stock

XX. Inventories days new to end but primarily demand to to $X.X Turning of at year-end accounts translation higher levels, and due year XXXX Days receivable certain increased year-end, million sales XXXX other of XX from product quarter. million million from days support the and acquisitions. customer a from $XXX.X outstanding XX the in introductions. days slide primarily foreign from was and segments increased from Trade $XX.X currency up XX down $XX.X ago, of third sales, increased million

translation Foreign $X.X of and X.X respectively. a to the end million of the acquisitions Inventories decreased from turns contributed million X.X compared basis, increase, $XX quarter. the XXXX. third and currency year-end of inventory $XX.X XX-month trailing at approximately On million

Our year-end from increased year-end of XXXX million $XX.X $XX levels. position million cash

net XX.X% to capital from to ratio Our debt year-over-year. XX.X% increased

addition have we In operations, $XXX million facilities. from to more and cash expected in cash than available flow credit

for million will briefly As concludes outlook the to commercial anticipate fourth on $XX paper of be few had that performance. my capital $XXX I'll quarter quarter-end, items borrowings million of in expenditures XXXX. now of our $XXX a million. We we outstanding. review That remarks range

effective XX% anticipate United his XXXX rate XX.X%, compares Nick be recently tax the rate of to the currently a to call an This thoughts. on range effective tax of XXXX in now adjusted that closing I'll As will basis of a a legislation turn respectively. and for Nick? income full-year back reported XX%. result XX.X% full-year and in tax States, enacted a the we to our on

have we Aldo. below recovering, but the in confidence The to were yet but remain I continue quarter started Tools trend, the have Well, we Thanks, saying encouraged and were. unsatisfied that not we by We in Group strong a investing say strengths. And franchisee turnover franchise we inherent restart engine. are in and new our and to network. so. our in do and health The metrics the market products growth support

a contribution You can near-record The Group as-reported the further see and the the had quarter, performance. OI our Organic again. X.X% Group sales subscription-based organic in as-reported into rolling X.X%. XX.X% inorganic diagnostics and XX.X%, gain ZEUS, out of revolutionizing and had with moving Group despite it the Snap-on C&I the success. vehicle challenges, of the strong quarters. was brand a overcame growth number RS&I software. we both and significant But growth, margin C&I Tools garage and to us X.X% was RS&I

demonstrate XX.X%, As-reported and results runways the sales managers runways. industries quarter XX.X% of and are and group's owners expanding we're think among for shop along clearly – wide The increase an OI extending all and I our further the abundant to XX.X% that growth, margin strength all at we in for confident with of the our runways critical have along our position opportunities, repair coherent with highest. organic growth and the

rates and strength more for further beyond. by amplified through maintain the our have as growth performance the new and to move and XXXX We tax trajectory we improvement position positive

operator, to the I'll directly and of of I our without forward and The the opportunities to and quarter fourth our Before performance the be over possible year contributions. extraordinary call speak clear going turn franchisees associates. your would our not

my to thanks. team, our ongoing achievements, my your you For and have your commitment dedication continuing you have for and congratulations,

for Now I'll questions. call turn the over operator the Operator? to

Thank Liam Riley you. with FBR. first to go Burke We'll B.

thank Good you. Good Yes, Aldo. morning, Nick. morning,

Liam. Hey,

fact storage Group, business highlighted quarter the Nick, year-over-year the But hand in again. Snap-on down were core sales did how core basis? that on tool the this you the fare Tools

I I down tool but the improved hand Well, coming some. less was still business the of the And maybe out fourth we're offerings, quarter, still it's overwhelming SFC. the of than from think the think suffering results

associated very sale big in we're quarter quarter, an its the product, Tools on is I ZEUS, new ZEUS Group, general, want the That's the but effect working we the off factor, we the to think think. the vans, silver us. So, be. with support. seeing got not and news where in it good the But still improvement, to lining in the The I new for the encouraging which keep is of

Okay. change And on allocation free part authorization. an strategy? Aldo, flow your of outlook? of You capital a a that Does you're went that through cash good up your about XX%. Does capital buyback become part increasing allocation your basis,

is of allocation I the strategy, but part Liam. repurchase our share same, remain think priorities Certainly. The our

provide repurchase, into have pension still on share and more most important the that dividend tax then opportunities, contributions but as organic access factor We certainly serving capital the list, good new cash to strategy, items the but generation M&A action decision becomes markets, well. sales two opportunities

you, Nick. Aldo. Thank you, Thank

Thanks, Liam.

Research. Longbow at MacGregor David is Next

Do you morning. hear Good Yes. me okay?

Yeah.

Yeah.

of A Great. Okay. couple questions.

– in see firing question I be, And strength hand industries growth. you you the First you're head, might talk sustainable cylinders. of to given follow provide sustainable European and it? all, seeing just It's the how remarkable growth pretty don't just is could know the on how of just organic – guess tools? nice the but about if quantitative guidance all sort outlook and C&I, critical your that on I on about you organic talk is just

SNA in still Look, in look a quarters thing, in every and I our that quarter, not it at back XX in headroom. Europe and think row up quarters sales; believe might we been row prerecession. way. can said was terms I got think it terms of to it's still not but profit. I a say up you double-digit was where it's considerable And It's we XX in double-digits think you this of

a I took SNA stronger, investing the others. sector think we're have big abundant it oil is I recession our We about of it that in in now so understanding we a dip and business marketplace fruition. So product Industrial the come industrial and The making and gas positive and through you're and and new Europe that. of keep downturn we demonstration to think kept seeing in in

until cylinders, the through capabilities those to based say improved coming you you working, not can big to see going I'm in that see I Now think on two results us.

Now question. another going growth is whether offer or that's to double-digit not,

top say appears big came well think the positioned other with the two organic growth an C&I of though And it and has we but you'd China have, in the Power end in place, at And see turbulent I India, to and numbers so good would environment pretty as X% look I Asia-Pacific, X% we say. particularly growth basis on at pistons in I markets, back, C&I that in prefer we say Tools strength our and this there. at to that, the we pretty got had showing think we that.

rolling If of the by out at this garage. Snap-on a is you the meant brand numbers, look we what take those

I up, what order up sense there. your question just you and contract was maybe Is and are I network? talked patterns second little, was about on Well, through know you there. franchisee receivables a inventories if that accumulating could franchise that within the being your by Tools segment the quarter driven sales. are my progress congratulations on changing talk the franchisee guess and all about the

the inventories Actually accumulated. no. I think are don't

receivables, they're the franchisees in on putting principally of and street, the David, are and drivers the key have of The franchise their up launch a the so because contract new finance. of franchised channel, of vans that's one the upped lot size of advance

actually if franchisees perfect bit. we down anything If little on opposite the the are that say would a this. anything, have visibility We that, coming don't inventories

launch subscriptions. the a think and I package, selling unit really principal we've off ZEUS record the of happening the I a years than and if franchisees story what my big that's component a van are we before, is large the levels never seen for franchisee with The which well the and of We ZEUS this is are the of at subscriptions but is hits, three know selling sold level. selling they call higher new data at don't ZEUS. import revolutionary remarks

level, the that the is look which diagnostic, into So pulling great market more is stories subscriptions-based you the software. if industry, I franchise the one recognizes changing of think revolutionary at interface us real and around leader is

month. or this doesn't basis amortized And an you on right subscription in away, when it because the other register Tools Group we, it financed Tools for franchisees do sell thing, and in the the boom gets Group, kind for three way. always sold of Now year recognize over the

franchisees if that of at but the see look they about that kind thing, this. are pretty happy level, you So

me And last is Tools business. the just question for on

would there extent, about I in talked what that margins, helpful? some if on programs To appreciate the or competitive a headwind the general environment You with you could breaking gross and promotional for around pressure it sort pressure you that promotional commentary be gross and tie us. out margin this tools just of

kind integrated, say They're is down. it know margin of want kind vertically this that's I'll Look, play absorption volume. loss say to some Tools situation; of it I'll in volume plus way. also, but and that way. you Group they Look, so this going the out

efficient every position volume they're advantage If possible of if piece you're working of daylight can. not in and of sell. so the they pretty to you want That's way most Group, hard Tools the the take to

you. All right. Thank

Sure.

Gary go We'll next to Barrington. Prestopino with

morning, everyone. good Hey,

Gary. morning Good

you quarter Storage how that mentioned of it had refresh? in – Tool with – then last the you the couple your mean, couple product far talked product little that area, the I quarters, think over on I earlier comments. you basically mean are are you Nick, we on of refresh done I a about

ain't stuff. – I'm brought at all. I some done, were done not out we but we

some we it down it, quarter. it think said into – the the – happens think we think that. continue features Gary, some to and line, some and migrated the in do didn't I And I to the I – to didn't – make move into move continuing and we changes themes mid-tier smaller middle because this Storage, associated we're of Tool different with what features – some different

overall you out not so worked, that move you to of try bringing the needle, but new enough stuff sure make to stuff Some make the to can keep change.

seeing lower some top guys then the the end we're focused – the of we'd thing on is this end of we're a to for of encouraged we're situation. kind this at about to activity. of and I technicians, kind the with reasonable entry-level effects get little of more at which like We're – think line one in things the – these kind so

that right Then program at the if to The Rock refurbishing that. weren't of some go N' work. half finished them get N' half we Cabs. Roll finished we're first it, Roll expect seeing to and another of at you're Rock refurbishment And back really you for other the end – Cabs, you the So of they say, so the quarter, look weren't the government road. really let's the year, they on we in

So you'll see those rolling out.

I we product when van line, our I thing you – this. can't, I me at tell franchisees, the around, our I network, this going don't strong. So if do to is pretty look confidence reason guess you is can but because, have to for turn see every do you looking I the our talk when you to And you're

have up groups one of Now bring this our it's them Tools go Group, we back. down gaps some like but and difficulty, and and we caused us each the

C&I. and I the a the RS&I great quarters we think we achieved quarter and for in thing difficulty row, the is, quarter is had about anyway second because Group with Tools the had

understand an and in idea get see Tools No, get no. inflection it. the I trying to Group? just we point and of when could No, an I'm try

I the think, unsatisfied of meaning Yeah. Look, word this, Gary. is I my said,

every grow We expect to quarter.

Right.

we divisions, so, of while having don't grow a in not these of one there quarter, satisfied. And possibility difficult is the we're

grow, – but would but we're can't for I So our doing looking we're of I be for in be a internally, situation, can't that it. that, expectation tell terms financial to you saying I forecasting can

cabs. refurbishing of And the van, the then in Roll, Rock terms what – N' vans,

Yeah.

there? doing you are What

in. the all, of from First you outside start

you look You make wraps. the outside do different differently,

or Storage you robust You to different you van, color, you will sure we a picture new try go more on see if inside, a have you you XD the of of van see it. modeling it the vans new on, system, the and system, van, a the computer you it which like a of reorganize doesn't you get boxes install organize examples, you make the stuff great new a – and Tool which different on themselves, on refreshment you the put structure

Okay.

things. on So, when says, seem the look we stuff. is gets this of those technician oh, different I try at to kinds this it van, take do to really make to different, It's a the so want he

back getting then is which to the ZEUS, And interesting. Okay.

Yeah.

you – something? or that have it, federal to now mileage your what regulation federal is a this monitor Is a

no. no, No,

It's that, in took Blue-Link vehicles average drove in the monitor Sorry, – Mini. was or that daily The logging. on about I on ZEUS, auto in repair, legislation business Bimmer's is put that that probably was your effect a data for, in that in something ZEUS That's like down confused the the electronic muffler There place heavy-duty sales. you that which trucks Illinois I an your this. talking log. or NEXIQ you December, took shop.

you. Thank Okay.

Sure.

All Thanks. right.

Leiker The with Baird. next David to

Joe Hi. This David. is for Vruwink

Hello.

hoping onion was bit more Group. the on to I Tools a the back peel

my call X% product all number if and originations, to look down it that core sales, I Tools of X% that's it, receivable is big-ticket for it's means tool tracking down than down to So weaker a business, proxy the down let's year was at was and X%, power finance hand get been Group long. tool, that X%

wondering So I'm weakening a selling just maybe explain wondering within and spending might or see we're since number? this more your Tools selling getting did that are QX, I'm franchisees trends time time and might in talking you what maybe about that less ZEUS the caught be ZEUS, up

minute. this about talk for just a Let's

Group, And into is got in and software well. that thing. you by third know van, then to think. introduced because itself, ZEUS three I a color this. a amortized know, on. It new all there thing, us doesn't so stuff that's sell software That's get basis, sales on between pieces. There diagnostic. years subscription. the a is revolutionizing, perfect like the and significant sold stuff the they one fourth dollars resolution, package software sells package, ZEUS originated in you know recognized and it you the The that's Tools the hardware lag, quarter, financed, of thousands diagnostics, linkage quarter, a that it's Tools this. underneath Well, One intelligent the thing, monthly know some probably data is except for Clear, for wrinkle a time two originations. this that intelligent work and stream, data better gets one As that faster it's portion Group the the of isn't but at the gets a a package I it got

base, immediately software. it's doesn't subscription-based we're that is financing you that because So really sale, situation which Tools this going there – some recognized it's because Group new that of franchisees by have great introduced subscription only and to a get the by by disconnect. as a ZEUS, the something, not wrinkle is We think creates

and supporting our it of talk you think I a a developers and well little a go and we takes about them systems have ZEUS to us your bit think. more two to it. is van very franchisees a sell Techno number and expensive to though, effort the The XXX Number it, effort talk we take in is little is and this so, of more diagnostics, can I lot lot through and unit do our And point taken could a diagnostic training extensively the that's one. having

things, Joe, So It's to But quantify drawing does a attention sale that's can ZEUS true. hard that happen. that be other know. successful from you though,

question makes software little around Okay. if sales, that Maybe a The point on I a of the spin lot bit. sense.

it up. is So, way the data, the into is is strong, would What hours on I'll a Snap-on's to growth? like customer pretty down about was We've customer, QX. mid in hiring backdrop wallet Obviously, ultimately has your That weak. as sense It your but thinking consistent earnings number been that core there talked on seems has tool single-digits. U.S. storage mechanic about more ability a able tap what call whether the buy BLS that, it, up, shows worked up, tools. to in what is sense just

we're We repair with think opportunity the ZEUSs year, to robust agree. a automotive capability it. in down. I'm had think the basically boffo we fact the market thermal good I quarter can is I mean, numbers, do selling drive we why abundant the market a with the we That's pretty imager. that last saying have that I

what, we overcoming franchisee the the a know ZEUS. with in fourth of them lot level, they're sold at You quarter and that

are list the all-in $XX,XXX. you playing ZEUS some what people is people is like have it, so got looked at And price,

There's a that versions selling sold, that's like gets and that, price. it's thousands of we're a lot Now it successfully. but dollars, car of of

tap I it we have the if So think into we're able to right product.

year? about month what product into in we're over new undertaking have coming the products? have been of back been trends introduction, around recent, entering the think We're items a recent QX, And that more just QX out or but you've you franchise than of half talked other the conference, that launched there

$X right seller, I drill power why in that tool the mini out The talked script. X/X the That's away product. put power a power and inch became right sold hit a tool million tool we that angle it about,

are So launching we products.

Our issues, what around turn problem the tool selling storage. we is and are tool storage, is, but think. enough that, other there we're to I need That's not thing

we'd there are things see Now other go like better. to

have seeing So we believe When encouraging. we are the product, we we sell it.

are about And over my our asset how And last more then of maybe maybe past is contract then going reinvesting right receivables. receivables, question, of activity leases? is on book a anything you commercial franchisees finance of right much the A of can going leases contract is kind much category? in can be a that of loan van now? the lot with to that let's are leading has van focus the Is historically to shop? How receivables, just of why And growth talk been you the on but or How much now? foot segment for indicator future year

actually, mix rather lot a constant. not been Joe, there's The portfolio be has gleaned. to the within

from and to credit, of the If finance XX.X% range. you That X% portfolio X% XX.X%, and X% to of XX% between years. goes QX, is look franchise within The finance owners. the so XX% of it's of franchise to all at over end kind is is the vacillates equipment extended leases shop

the when larger up into van, see new I think of a it's van. franchisees and particularly a a prosperity you sign confidence

like I growing want future their keep the if and didn't show think they wouldn't investment make they that an their to commitment to business.

leave very there. Thank much. I'll you it Okay.

Thanks.

to We'll Christopher next with Oppenheimer. go Glynn

Thanks. Good morning.

a a couple bit. you credit think I year, last of phases tightened maybe little

learnings that to what yielded subsequently the opportunity around backup to latest some perhaps? credit some the Just wondering toggles what are that, if results, lose were

Try year bit I think a a portfolio not sure Chris. making, and every better always franchisees offering. with we movements look our match others, of up what the decision try terms put at than tweak to It times of make evolves, needs our were certain customers' to place. to but big little credit each positive way, harder ourselves the quarter, we we and in in a at in we're trying

say per wouldn't that I credit, loosening se. So

one we're of bigger. think situation. getting Having that I we that, approaching the in earlier how and think franchisees made wallets mechanics' of judicious the comment said callers I counsel terms the the are

is over where that there to to means is We identify credit loan mechanics. were I more think capacity time. and those that capacity that probably trying

of the you're changes Okay. channel, vans on peers? rebalancing marketplace And price any your in around then relative and key of spreads channel wondering on the vans historical the few if apparent maybe core some any stronger the competitors under-penetration around seeing

certainly numbers you at numbers, Look, our guy or saying, competing other hear some you and this don't the over have our it hear We looked don't product. conclude if some looked I them franchisees. a you at trouble oh, guy change. We by there's that way, of the would with particular from

problems. But I level. to you or we where have people other says, that giving at business. So they're inroads, up do that this, had or could Nobody got you got me you the are the or could boy, comes making had and those hear is argue inroads, to this to guess extent growing, we match this don't but,

it. don't hear You

Okay. bookkeeping, year? the missed told just you allowance down if I finance final, what's the us And receivables then balance it, but

balance the X% of if The at look is the you coverage ratio. about portfolio,

Okay.

more. little A bit

question to we next please. If the move

Pardon King. me. next C.L. Thank Stember Scott to We'll you. with go

guys. Good morning,

morning. Good

had tools And of guess questions packaging. big long pricing see numbers the improved much. to didn't an Could but actual take very to that? have talk one my been Group? and what Nick, you you remedy and a the the unbundling question. answered, that that with from maybe referring pack the about go done how or and of well, you bundling guess we I Tools Thank I I would you're to just within some referred you've to Most SFC, have

didn't a different that yeah, We've would people generally else. took in hand – than is diagnostics some have be think, They the some thing inventory which The be tools I that have to by lot work anything they itself. are out to I attract of something to them on generally, ubiquitous bundle. that tried tool the storage are the It it SFC. that's some a talked attractive. tools or van fairly bringing have tools, tools hand to counter Look, is little so you but or why well, handles, individual a

remember, thing kind doing. that. could and try the for I whole talked I about And that's to So, we're small into when about certain to that the things ratcheting call specific and the to ratcheting those wrench gets what do so kinds wrenches of that's the talked restart have spaces, we're high-durability trying of

looking the because think down, in and that you're and category be they product. new trying package of so right we're any good conclude you if saw way, in in have restart or that trouble ups you – hand tools because at in were a be would it's to didn't things with up terms at any when you're I downs any quarter wanting those tool dangerous, the we do just and quite a particular even if X%, group, can't one you growing like necessarily in

That's Got you. I all it. have. Thank

you. Thank Okay.

to Next with Jefferies. Bret Jordan

morning, Good Hi. guys.

morning. Good

Are mean, mechanics the and kind And I that guess. I something of other a heard on at is some franchisees? asked of pricing all kind the market any was at of share peers from earlier. you I shop being question your hearing have that your level. seeing struggle, from aggressive are franchise you're

foot I if other Matco, like Bret, say, people price the are. that, than a competition. Mac the level, seeing day if any are guy van the growing mentioned but and or other or competition was you and or – we I on are what, ride you know mechanisms XX,XXX be don't You for must the faster when just from other that never from would something know I

we're is me to but course, often, ZEUS. ZEUS. you I thing. feedback of could storage. talking with do I all can argue of model talking address could We with ourselves, takes use like about – and we the about storage ourselves. enthusiastic associated get these tool kind Now this we It tool – could and is this, different new meet they're to just the The guys use We have lot in a he a

could as So that's Really. we're well as I doing doing do than are we people of think something feeling we're difference, think. ourselves, versus maybe not the other don't that expect other I what we

Okay.

the – Snap-on that people the ask of seems think you I form about solid. franchise hand tool, preferred rock

flat? the you up of a On and increasing and would Aldo but – guess quarter we're then expect be the you rate, to of going environment? the going forward some be maybe on the to on issues Or I just still do were mentioned And rate given housekeeping. Okay. rates, we're sort rate I rates would promotional kind you think down think expect funding

was is by better we associated uptake it products that products. stay, than promotions. interest those couple think products comes of off QX have them. with the expense The featured Bret. the they been of in rebates just income It Featured what customer and the fascinated what a That last on year. had calculate usually call marketing I wasn't we that

with Nick tend bit. a the the credit credit that a the bit then portfolio in And in rate the buyers a the pretty shop down get depressant that drives of of quality good little and that little the of a customers ZEUS a effect. mentioned, be quality bit portfolio you better are principal mix owners to So lot the

those. on XX% on range think the To the basis holistic a I depends to your it So in mix receivables. question, stays finance it for answer XX% of

Okay. it. Great. I you. Thank appreciated

Thank you.

That the remarks. concludes today's question-and-answer closing session. At for back any time, like this conference turn Leslie Kratcoski to to I'd

your us shortly company. Thanks of replay the for call as available we appreciate the today. in on day. Good interest joining A And will always, snapon.com. be

conference. today's for participation. concludes do We This you thank your

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