Snap-On Stock

Good day, and welcome to the Snap-on Incorporated 2026 Second Quarter Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the call over to Sara Verbsky, Vice President, Investor Relations. Please go ahead.

Thank you, Cole, and good morning, everyone. We appreciate you joining us today as we review Snap-on's second quarter results, which are detailed in our press release issued earlier this morning. We have on the call 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 the financial results. After Nick provides some closing thoughts, we'll take your questions.

As usual, we provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. The slides will be archived on our website along with the transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward-looking statements and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings.

Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. This was some quarter that Snap-on executes even in a blizzard and that our operations represent a clear incredible beacon to showing a continuing path for a positive trajectory as we go forward. Quarter, I'd say, was marked with the ongoing momentum of more green shoots, progress against the world. I mean this is a turbulent time. I don't know, I'm not sure I've seen more elements of uncertainty packed into a single quarter, Ukraine, inflation, fluctuating tariffs, restructured supply chains and now piling on the impasse with Iran. It's really something.

But Snap-on shook it all off, punching right through the difficulties of the [ parts ] with emphasis, fortified by the inherent -- and that was because we were fortified by the inherent and enduring positive our markets, the rising complexity of vehicles, the aging car park, the growing demand for precision and customization in critical industries and the rise of technology software that makes the special and proprietary more powerful. And you put all of that together with our decisive advantages in product and brands and people, amplify it with our Snap-on value creating processes, driving improvements, it makes for a powerful combination that creates an encouraging quarter and a very promising future, so it was.

Now I'll take you through, and hit some of the highlights and giving you my perspectives on what it all means. And Aldo will give you a detailed review of the financials. So let's start with the results.

I believe they testified to all that I just said, second quarter as reported sales were $1,235.1 million, up $55.7 million or 4.7%, including $11.5 million from the recent additions of Hi-Force and Diesel Laptops. $8.7 million of favorable foreign currency translation and an organic gain of 3%. The opco operating margin or opco operating income or OI we'll call it from now on, was $268 million. And the opco operating margin for the quarter was 21.8% compared to the 22% last year, down slightly but still strong, especially in this environment. The gross margin was an attention-getting 51.4%, 90 basis points higher than last year.

So the overall story of the period was an encouraging performance overcoming the cost pressures and funding the investments for the future. For FinCo, the OI was $67.5 million versus the $68.7 million in 2025. And when you combine that with our opco OI, it resulted in a consolidated operating margin of 25.2%. And EPS was $4.96, up $0.24 or 5.1%, another positive. So those are the numbers. Now let's turn to the market.

Vehicle repair is still a great place to be. Cars and trucks are essential parts of our lives. But keeping them on a road, it's more and more of a challenge. The parc is getting older every day. The models are getting more complex with each new launch. And so I would say this is -- I've said it before, I think this is the golden age of vehicle repair and the numbers tell the story, spending on repair, technician hours worked and mechanic wages are all up. So the garages are pumping and the techs remain cash rich. But in this environment, they still remain confidence poor. The uncertainty hasn't gone away. A single scan of morning news will tell you that.

So our customers, the technicians remain reluctant to take on longer-term obligations on big ticket purchases. Tool storage volume and the associated originations are still down. But the mechanics need to meet the rising complexity. So our pivot to quicker payback items is working. Overall volumes are up. You see the technicians really are a great segment, resilient and period by period, that's what's playing out in the Tools Group. Recently, just to sort of anecdotal, just recently, I had the opportunity to visit franchisees in the field, speak with some shop owners and technicians, and I'll tell you, I came away more convinced than ever that this is a great place to be. The franchisees were pumped and excited about their current prospects and very optimistic about their future.

The independent shop owners, they can only talk about how to get more technicians. They wanted as many as they could find. And the tech said they were slammed, telling me that repairs are getting way more difficult, especially troubleshooting and accessing and repairing -- troubleshooting, accessing and repairing newer systems. Getting better. That means complexity is only going to get worse from a repairability level, getting better access in tight quarters to speed their work was high on their list and we're putting them right on target. One tech said, I have my new -- we brought out this new power tool, the NanoAxcess. You can put it in your pocket. He said, I have my new NanoAxcess Power Tool. The other day, it helped me shave 90 minutes off a repair. We need more tools like that. Snap-on speeds the work and shows everyone I'm a serious professional. There was music to my ears because this is who we are in what we do.

We go to work where the work is happening. We observe the tech. We identify the toughest and most complex tasks, and we develop customized solutions that make -- that make the work easier, faster and more productive. And the techs line up to gain that advantage. One of the reasons why the pivot is working. The other side of auto repair is where the Repair System & Information Group or RS&I operates. It's where we're expanding our presence with repair shop owners and managers, increasing and enabling our broad array of products, all to help the garages meet the broader challenges of today's vehicles.

The acquisition of Diesel Laptops, given our team more to sell in the heavy-duty arena is a great example of that effort. We like RS&I's potential to moving forward. The repair shop footprint is changing and upgrading, both at dealerships and independent shops, and RS&I is making the most of that trend with proprietary data-driven solutions that are the engines behind our intelligent diagnostics software and our Mitchell 1 software offerings. Right now, independent shops are -- but for right now, independent shops are continuing to invest in adopting products that expand their capabilities.

For example, this quarter, our new ACV cycling machine aligned with the refrigerants used in modern vehicles and at the same time, offer new autonomous features that boost shop productivity. The new design helps garages drive more repair orders and it was quite popular with the independents. Now for our OEM dealers, there's some hesitancy for capital expenditures. Owners and managers know they need upgrades to match the new model, but a lot of them are keeping their powder dry, waiting to take their lead from the manufacturers. And the automakers have slowed their program launches. So the dealer side of the business is in a low spot.

Having said that, RS&I understands the market, and it has an unrivaled product portfolio that is unique and positioned to take full advantage of the segment as it evolves. Now let's speak to the world outside the garage in critical industries. This is -- where commercial and industrial operates -- commercial and industrial C&I group operates. This is our business with the largest international presence, serving the critical and the essential where the penalty for failure is high and that world is advancing, adopting new technologies and creating systems that are more and more sophisticated. It's an environment where the appetite for precision and customization is growing every day. And C&I is right on that trend. Sales were up big across a number of sectors and geographies at C&I. The critical industries are booming and our custom-built kits aimed at specific challenges are in strong demand. This is also the time for -- and it's also a time for our specialty torque division because the rise of automated systems requires tighter tolerances. And so our expanding torque operation can fill that bill exactly from large hydraulic and tensioning systems to lower-force applications where speed and control are challenging like in our Mountz acquisition, which we acquired a couple of years ago and challenging and essential.

Snap-on increasingly has the product lines to cover the waterfront and meet the growing trend for precision. For the international landscape outside the garage, the Asia Pacific and European operations rebounded nicely and stabilized against the backdrop of a still ever-changing supply chain. And that or Snap-on is advantaged by making in the markets where we sell and by our 36 factories around the world, giving us considerable flexibility. Those strengths were clearly in play in this quarter, and the C&I results are a dramatic confirmation. So overall, in both vehicle repair and critical industries, the quarter demonstrates the strong resilience of our markets and our significant ability to take advantage. The period also shows the power of Snap-on value creation processes, safety, quality, customer connection, innovation and rapid continuous improvement in RCI, and it all came together, creating popular new products and continuing improvements. I mean gross margins are up 90 basis points, that's the macro overview.

Now let's move to the segments. I think we'll start with C&I. Sales were $394.8 million (sic) [ $395.8 million], an increase of $48 million or 13.8%. Now that includes $6.8 million from our Hi-Force acquisition, $2.5 million of favorable foreign currency and an organic gain of 11%, 11%. Now hearing that, there's only one reasonable thing to say, boom shakalaka. Tell me we love it. I'll tell you, there are gains and improvements all across the business, double-digit increases in Asia Pacific, in the European hand tools business in specialty torque and power tools, [ woosaa ] The demand for custom kits and precision torque and innovative power tools is strong, what we always said would happen. Finally, the Industrial business was up mid-single digits, but that includes continued weakness in the military sector, which somewhat attenuated as a demonstration of considerable strength. And I mean considerable strength in heavy-duty natural resources and in both the U.S. and international aviation.

From an earnings perspective, C&I operating income was $66.5 million, improved $19.6 million or 41.8% yes, 41.8%. And the operating margin, it was a new record, 16.8%, 330 basis points above last year. And the gross margin in the midst of material cost inflation and inflation, it was 42.6%. That's up 260 basis points over last year. We said Snap-on could extend out of the garage, and it's doing just that, and it's doing it profitably. Innovative new products from our Murphy, North Carolina were a major driver of that. One example was our all-new CTR829. That's a 1/4-inch drive 14.4 volt ratchet with an extra long wrench, stretching out 11 inches to reach into those isolated spaces. It's a little brother of the previously launched 3/8-inch model, but that doesn't mean it's weak. I mean this baby produces 40-foot pounds of torque and operates at 400 RPMs, all out of a small compact frame that [ houses ] a bright LED ring, illuminating the workspace.

Now techs can reach further under the dash in between fenders and engaging bolts with ease. And when they hit the paddle trigger, boom, the 829 makes a quick work of the task, reach, power and speed. It's a winning tool, and I'll tell you the techs say it so. During the quarter, we also released the new 3/8-inch digital torque wrench. Remember I said precision is important. The ATEC 135, it's the latest entry on our already popular ATEC product line. And it's loaded with popular features that make a difference, easy navigation, a durable housing, compact head design and incredible precision. It was designed in our city of industry facility in California, and it offers a new color display, a brilliant screen that provides -- it's a brilliant screen that provides better viewing from any angle and makes a crystal clear image is important even in direct sunlight.

And the unit it boasts 135-foot pounds of torque, and it's the biggest in the wrench industry. The 135 is another tool that makes torque tasks much easier. Precision torque is on the rise, and Snap-on is leading the way. C&I, significant growth across the global footprint. Sales up 13.8%, 11% organically, the second straight quarter of big increases in sales and operating income of 16.8%, a 330 basis points improvement, a C&I all-time record. The Snap-on brand is extending out of the garage to serve the critical and C&I is the rocket ship that's making it so.

So now let's turn to the Tools Group. Group sales were $508.8 million, up organically 3%. The green shoots continue increases in both the U.S. and international operations, pivoting to quicker payback items, the power tools and the torque wrenches in their lineup. Operating income was $115.1 million compared to $116.7 million last year. The operating margin was a respectable but still down 22.6%, volumes were strong, but they were driven from products made by the other Snap-on divisions, like the aforementioned power tools and torque, where strong corporate margins for those tools as a whole are shared across the operations, making the Tools Group margins thinner.

The group's stronger sales this quarter were part of the pivot to match the customers' changing preferences. I guess it's not changing now. They've been there for a little while and launching products that simplify some of the nonstandard solutions that challenge repair on modern cars. Actually, when I was talking to the techs, they talked about this. quite effusively. They said, "Oh, we love your product that attacks some of the special and more difficult tasks we have." For instance, something as simple as removing a lug nuts can evolve into a thorny procedure. Several OEMs put chrome covers on the wheel nuts for appearance. So these caps often swell and deform from exposure to moisture or you're around here corrosion in harsh winters. When that happens, traditional sockets won't fit and valuable garage time is wasted cutting that material away, all for a very routine procedure.

So seeing the problem, we developed a 7-piece drive socket set that has in between metric sizes from 16.5 millimeters to 22.5 millimeters, providing just enough change, change in size to provide -- to fit the task and providing solid engagement, enabling rapid improvement and driving a quick repair. I know it seems trivial, but it's a manufacturing challenge to make these special sockets that was accommodated by the unique flexibility of our Milwaukee plant, and it was a tremendous hit with the tech. It's quickly become one of our $1 million hit products. We also received -- we also introduced -- we also recently introduced a 7-piece Swivel Torx Impact Flank socket set. It's ideal for difficult jobs where techs have to access high-strength Torx fasteners in tight and obstructed areas.

That's a combination that's quite common in European high-performance vehicles, places like Volkswagen, Audi steering columns, BMW caliper brackets, Mercedes front brake calibers and Jaguar driveshafts. And the design is equipped with a laser-welded swivel joint offering up to 30 degrees of flex, enabling a power tool to operate quite effectively in confined spaces by offsetting its position and still getting to the fastener. That makes the repair -- all this makes the repair possible without time-consuming disassembly.

The set was just introduced, and it's clear that tech are big fans once again. So that's the Tools Group, growing against the winds of uncertainty, pivoting to faster payback items, observing work and developing solutions that solve the complex. But now let's turn to RS&I. Sales in the quarter were $480.3 million, up 2.5%, including $4.7 million from the Diesel Laptops acquisition and $3.8 million in favorable foreign currency translation.

Organic sales were up slightly over last year. Momentum in our diagnostics and undercar equipment for independent garages was attenuated by lower volumes in the OEM dealership segment. Operating earnings in the quarter were $115.1 million compared to $119.8 million last year. The group's operating income OI margin was 24% versus the 25.6% last year, down, but still strong. And what that decrease represents the effect of higher sales in lower-margin equipment products and ongoing investments in our proprietary database, advancing with our large language models, an effort that we know will all pay dividends going forward. The independent shops were the bright spot.

And a big reason was the recent launch of our APOLLO handheld diagnostic unit. It's a new entry point for those for detects wanting the power of intelligent diagnostics at a moderate cost. But the phrase entry level doesn't do it justice. The APOLLO has features that a number of great features, the full power of our industry-leading proprietary information, expansive manufacturer and model coverage, Fast-Track Intelligent Diagnostics for guided workflow and our SureTrack database powered by 660 billion vehicle events and 3.4 billion repair records. APOLLO. It's whip-smart, but it's also easy with improved display visibility and extended battery life and wireless connection to the vehicle, so text can roam freely in the bay without being tethered in the driver's compartment.

And the increased storage makes it clearly faster. So the new APOLLO, it's a winning combination, smarter, easier and faster. Sales of the van were strong and the momentum is an important thing. After the launch, the momentum remains robust. Well, that's RS&I, powerful hardware and software, differentiated by proprietary data with more speed and more accuracy than ever before. Wielding new products to conquer the complex repairs of today's cars. So that's Snap-on's second quarter.

Overall sales, $1,235.1 million, an all-time record for the second quarter. Organic sales up 3%. Gross margin, 51.4%, up 90 basis points, powerful. The C&I Group, organic sales up 11%, gross margin up 260 basis points and the operating margin up 320 basis points, up, up, up, gangbusters. It's a great quarter, C&I. The Tools Group organic sales up 3%, the pivot working against the uncertainty. Gross margin is strong. RS&I, organic sales up slightly. But as reported but the as-reported number setting a new record for overall sales in the second quarter, profits down, but still quite strong. In the overall corporation, EPS of $4.96, up $0.24 versus last year.

Snap-on was rolling down our runways for growth, enhancing the van channel to pivot to work, expanding repair shop owners and managers, strengthening our proprietary advantages and extending to critical industries, taking Snap-on out of the garage with emphasis and profitability. It was another encouraging quarter.

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

Thanks, Nick. Our consolidated operating results for the second quarter are summarized on Slide 6. Net sales of $1,235.1 million in the quarter represented an increase of 4.7% from 2025 levels, reflecting a 3% organic gain, $11.5 million of sales from the acquisitions of Hi-Force Hydraulic Tools and Diesel Laptops that occurred during that period and $8.7 million of favorable foreign currency translation. Sales in our commercial and industrial sector or the C&I Group were up double digits versus last year with progress made across North America, Asia and in Europe.

In our automotive repair market, sales gains were achieved through our franchise van channel in the United States as well as international. Consolidated gross margin of 51.4% compared to 50.5% in the second quarter last year. The improvement of 90 basis points primarily reflected the benefit of increased volume and savings from the company's RCI initiatives. Operating expenses as a percentage of net sales of 29.6% rose from 28.5% in 2025, primarily due to increased personnel and other costs as we continue to invest in support of our brand and our business opportunities.

Operating earnings before financial services of $268.9 million in the quarter compared to $259.1 million last year. As a percentage of net sales, operating margin before financial services of 21.8% compared to 22% reported in 2025. Financial services revenue of $99.7 million in the second quarter compared to $101.7 million last year, while operating earnings of $67.5 million compared to $68.2 million in 2025. Consolidated operating earnings of $336.4 million compared to $327.3 million last year. As a percentage of revenues, the operating earnings margin of 25.2% compared to 25.5% in 2025. Our second quarter effective income tax rate was 21.9% in 2026 and 22.5% last year.

Net earnings of $260.6 million or $4.96 per diluted share compared to $250.3 million or $4.72 per diluted share in 2025, reflecting a 5.1% increase in earnings per share. Now let's turn to our segment results for the quarter. Starting with the C&I Group on Slide 7. Sales of $395.8 million rose $48 million as compared to 2025 levels, reflecting an 11% organic gain, $6.8 million of acquisition-related sales and $2.5 million of favorable foreign currency translation. The organic volume improvement includes advancements in our Asia Pacific and European-based hand tools businesses, which have better tailored their cross-border supply chain activities in response to the current trade environment.

The group also benefited from double-digit gains in our specialty torque and power tools operations. Sales to customers in critical industries rose mid-single digits in the period, led by robust activity in international and U.S. aviation and including gains in heavy-duty fleets and technical education. Shipments serving military applications remain attenuated both in the quarter and year-to-date.

Gross margin improved 260 basis points to 42.6% in the quarter from 40% last year, mostly due to the increased sales and savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 25.8% in the quarter improved 70 basis points from last year, primarily reflecting the higher sales volumes. Operating earnings for the C&I Group of $66.5 million compared to $46.9 million in 2025, and the operating margin of 16.8% improved 330 basis points from last year.

Turning now to Slide 8. Sales in the Snap-on Tools Group of $508.8 million compared to $491 million last year, reflecting a 3% organic sales gain and $2.9 million of favorable foreign currency translation. The organic increase was due to low single-digit gains both in the United States and in the segment's international operations. Activity in the quarter included higher sales of featured new items, including those in the power tools, air conditioning service and diagnostics product lines. As a reminder, the Tools Group serves as a distributor for these products, which are made by our C&I and RS&I groups.

Gross margin of 48% in the quarter compared to 48.3% last year. The 30 basis point decline primarily reflected a year-over-year shift in product mix, partially offset by savings from the segment's RCI initiatives. Operating expenses as a percentage of sales was 25.4% compared to 24.5% in 2025. The increase was due to higher personnel, freight and other costs. Operating earnings for the Snap-on Tools Group of $115.1 million compared to $116.7 million in 2025. The operating margin of 22.6% compared to 23.8% last year.

Turning to the RS&I Group shown on Slide 9. Sales of $480.3 million compared to $468.6 million a year ago, reflecting a $3.2 million organic gain, $4.7 million of acquisition-related sales and $3.8 million of favorable foreign currency translation. On an organic basis, low single-digit increases in undercar equipment and in sales of diagnostics and repair information products to independent repair shop owners and managers were mostly offset by decreased activity with OEM dealerships. Gross margin for the RS&I Group of 46.3% decreased 50 basis points from last year, primarily reflecting higher sales of lower gross margin products.

Operating expenses as a percentage of sales of 22.3% compared to 21.2% in 2025. The increase was due to higher personnel and other costs, expanded technology investments as well as 20 basis points from the recently completed acquisition of Diesel Laptops. Operating earnings of $115.1 million compared to $119.8 million last year. The operating margin of 24% compared to 25.6% reported in 2025. Now turning to Slide 10. Revenue from financial services of $99.7 million decreased $2 million from last year, primarily due to lower interest income resulting from a year-over-year decrease in the size of the average finance receivable portfolio in the period. Financial service expenses of $32.2 million decreased from $33.5 million in 2025, mostly due to $1 million of lower provisions for credit losses.

As a result, Financial Services operating earnings were $67.5 million compared to $68.2 million last year. In the second quarter, the respective average yields on finance receivables were 17.6% and 17.5% in 2026 and 2025, while the average yields on contract receivables were 9% in 2026 and 9.1% in 2025. Total loan originations of $281 million in the second quarter represented a decrease of $12 million or 4.1% from 2025 levels. Originations of extended credit loans were $237.6 million in the period, reflecting a decrease of $5.9 million or 2.4% from last year.

Moving to Slide 11. Our quarter end balance sheet includes approximately $2.5 billion of gross financing receivables with $2.1 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 1.7% is down 10 basis points from the second quarter of 2025. Additionally, the rate is down 20 basis points from last quarter.

Trailing 12-month net losses for the overall extended credit portfolio of $71.9 million represented 3.7% of outstandings at quarter end, down sequentially from 3.75% in the first quarter of this year. We believe that these portfolio performance metrics are encouraging considering the current environment. Now turning to Slide 12. Cash provided by operating activities of $271.5 million in the quarter compared to $237.2 million last year. Net cash used by investing activities of $195.1 million mostly reflected business acquisitions during the quarter of $154 million net of cash acquired, consisting of $99.1 million for Diesel Laptops and $54.9 million for Hi-Force.

Additionally, the company incurred $23.1 million in capital expenditures. Net cash used by financing activities of $185.8 million included cash dividends of $126.4 million and the repurchase of 241,000 shares of common stock for $91.4 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $485.5 million of common stock under existing authorizations.

Turning to Slide 13. Trade and other accounts receivable of $942.2 million represented an increase of $60.8 million from 2025 year-end levels, mostly due to higher sales and $12.2 million from acquisitions. Days sales outstanding were 70 days at the end of the second quarter and 67 days at 2025 year-end. Inventories, including $17.6 million from acquisitions, increased by $20.1 million from 2025 year-end. On a trailing 12-month basis, inventory turns of 2.4 were the same in both periods. Our quarter end cash position of $1,644.7 million compared to $1,624.5 million at the end of 2025.

That concludes my remarks on our second quarter performance. I'll now review a few outlook items for the remainder of 2026. With respect to corporate costs, we currently believe that expenses will approximate $28 million for each of the remaining 2 quarters of 2026. As a reminder, in the third quarter of 2025, our diluted earnings per share of $5.02 included a $0.31 nonrecurring onetime benefit from an RS&I group legal settlement. We expect that capital expenditures for the year will be approximately $100 million, and we currently anticipate that our full year 2026 effective income tax rate will approximate 22%.

I'll now turn the call back to Nick for his closing thoughts. Nick?

Thanks, Aldo. That's the second quarter. Continuing momentum in the midst of extreme turbulence. Do you use an ancient reference now suddenly contemporary. It feels like we're moving between the sill of international conflicts and the [ Charybdis ] of supply chain revisions. And although it's challenging, we are making headway. And so it is. C&I is coming into its own. Sales up organically 11%. Gross margin, 42.6%, up 260 basis points; OI 16.8%, an all-time high.

C&I on a trend, demonstrating that opportunities in rolling the Snap-on brand out of the garage are substantial, as we always said that Tools Group sales up 3% organically. The momentum continues and the green shoots grow and RS&I sales up 2.5% as reported, up 0.7% organically, robust with independents, impacted by the OEM doldrums. OI margins, 24%, down but still strong, all while managing the turbulence and funding increased investments. And it all came together for the corporation. Sales up 4.7% as reported, 3% organically. Gross margins 51.4% and OI margin 21.8%, both robust.

The results taken individually or collectively are marked by momentum, strength and continuing green shoots. It was an encouraging quarter. And we believe it speaks volumes about the possibilities of our path. These are exceedingly turbulent and interesting times, yet our markets remained quite resilient, both vehicle repair and critical industries, anchored in the essential nature of the task, activities that are needed, come what may. And the quarter showed we can participate fully in that resilience, wielding our decisive advantages in product, brand and in people. Product. We really do make critical tasks easier. You heard that echoed in the great new offerings we just discussed.

Brand. Snap-on really does define the professional, like no other brand. You can hear it in the voices of the techs we visited, and people. The Snap-on team really is uniquely capable, deeply experienced and relentlessly committed to achieve. You can see it in the engagement day after day. And with the opportunities of our resilient markets and the power of our advantage, we are confident, confident in our belief that we will extend our progress, maintain it even in the turbulence and drive a positive trajectory on through the year and well beyond.

Before I turn the call over to the operator, I'll speak directly to our franchisees and associates. You are those who really do make a difference. Snap-on's storied past, exciting now and promising future is rooted in your commitment. For the enthusiasm you bring to our enterprise every day, you have my admiration. For the success you've achieved this encouraging quarter, you have my congratulations. And for the unfailing dedication to our -- you hold to our team and the firm conviction you have in our days and decades ahead for our enterprise, you have my thanks.

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

[Operator Instructions]

And our first question today will come from David MacGregor with Longbow Research.

I want to start off by just asking about the gross profit upside in C&I, up 220 basis points. How much of that do you think was mix driven versus maybe other factors?

260 basis points, by the way. I might quibble a little bit.

Is it 260?

It is 260, yes, approximately.

I know my numbers. But anyway, the -- yes, 260, not so much, not so much. I mean the thing is the tools -- the highest profitability business, which is the critical industries industrial business was the business that grew mid-single digits. So grew below the average. And so that's far and away the most profitable. What happened then you had movements upwards in a lot of those businesses because they brought -- a couple of them brought out great new product, particularly power tools and torque. Torque day has come, so they're making hay while the sun shines here. And then you had recovery in Asia Pacific and SNA Europe where you got good absorption in that situation. So I think that were the factors.

Okay. It seems like there was probably a pretty good pull-through to the Snap-on Tools segment on some of these bigger ticket items like diagnostics and maybe specialty torque. But the originations were down 4%. Do you think the franchisees are just restocking in these items, which would be a little surprising ahead of the SFC, but what's your perspective?

No, I don't know. Look, I think this -- if you step back and you look at what happened, there was pull-through. I think you have to parse between torque and diagnostics because torque isn't that big in origination products. So you kind of have to take that -- I would diminish that in the mix. So you're talking about diagnostics versus tool storage. Diagnostics was up nicely, but tool storage was down. And tool storage is a bigger piece of the pie. So when it's down, there's more volume flowing through there. So that's what happens in origination.

Now originations, what were they down a couple, 3 points, something like that, small, low single digits. So it was slightly more -- less originations year-over-year than last time, but not so big a change. I don't think we're surprised by it too much. I'm not sure -- and to answer your question directly, I'm not sure you can read too much into that in terms of stocking.

Okay. And then I think we've talked in the past about you increasing your in-sourcing since the whole tariff sort of situation developed. Can you talk about the extent to which that may have helped you on the margin side this quarter?

Well, yes, I can't give you any direct numbers, but one of the things I did -- well, you heard the 14.4-volt ratchet and that we launched that. And our whole 14.4-volt line had been made in [ Kunshan ] and was eating for a period of time, a lot of margins, a lot of tariffs. So we don't have that many tariffs. We have some of them. And so we brought that whole line home, and we're able to start sourcing again with more volume in Murphy, which is the power tools plant, and that started to help us. n

Same kind of things happening in torque. We're doing that in torque. So it's really up and down. Diagnostics was ahead of the curve on that. They were already bringing stuff home. So they had the thing established. So they didn't get much out of this in terms of -- even though they did a great job of avoiding any kind of tariff entanglements. So I think you saw good news in both power tools and torque and the numbers show it. They're up -- their profitability is up considerable number of basis points.

Okay. Last question for me is just on gross margins in RS&I and in Snap-on Tools were down year-over-year. And I realize there's some mix discussion there as well. I'm just wondering, Aldo had characterized the gross margins as having benefited from RCI. I'm just wondering at what point you need to lean more aggressively into the market on pricing in order to protect these margins.

I don't know. Look, yes, I could do that. I'm not so anxious to do that. The gross margin, look, Dave, the gross margin in Tools Group is down 30 basis points. So 90 of those basis points was an OE margin deterioration, how much they were down in the quarter. The 22.6% was down 120 basis points. So we didn't think gross margins were that much out of whack in the Tools Group. Now you always have more pricing you want to do. I don't like that. I like to beat it with RCI and sourcing changes, especially in this environment.

Plus actually, I like to hammer it with good new tools. The big thing about the margin deterioration in the Tools Group was it was principally tieable to the fact that all the big hits this quarter were made by somebody else. So they had to share the margins. That's really the cadence of the Tools Group. Actually, I'll tell you, we haven't seen a quarter quite this dominant for the other products. They all came out with hits. They sold -- I didn't mention Polartek, the air conditioning, but that's made by the RS&I business, and that was shared through the Tools Group. So that's really it. Tools Group margins aren't much of a concern for us.

And our next question will come from Christopher Glynn with Oppenheimer.

Just want to use kind of storage as kind of a barometer for discussing the market for SOT. So storage had a really nice quarter last quarter, seemed to be some optimism it would hold. But maybe the first quarter was just a little bit of isolated success that sort of defied the characterization of the market as fast payback. Do I have that right, would you say?

Yes, sort of -- I mean, I think in the first quarter, we launched that special semi-quincentennial boxes that gave some [indiscernible] to tool storage. So I really believe we only made like 1,776 of them. They were numbered. People were crawling over each other to get them. And so I think that overcame the reticence. People saw it as a once-in-a-lifetime opportunity to get them. So they kind of overcame the reticence. So you saw some of that. I think -- look, I think this quarter, I think this uncertainty is about the same.

I don't know if you want to play the uncertainty game, you could have said in the first quarter, things were rolling along. Maybe you saw uncertainty was a little weaker and then you poured the oil of Iran on top of it. So maybe you saw some -- a little bit more reinforcement of the uncertainty. Although we didn't think we saw it in our numbers. We think it's about the same. So the first quarter, we chalked up, Chris, to some incandescent new product that you can only get once in a lifetime.

Got it. Great. Semi-quincentennial, I like that turn of phrase there. I do -- in fact, on the C&I, APAC and Europe, really pretty encouraging there and the volume leverage, definitely notable. So I appreciate your comments that, that business is on a trend that's about as far as you go in terms of forecasting. So I appreciate that. Anything interesting to say about market share in APAC and Europe?

No. I think -- look, I think it's a little -- we certainly -- if you were in ordinary times, I think we had a number -- we don't like to talk about market share. It's pretty squishy for us actually.

I'm asking anyway.

I know you are. Look, I think the rebound in Europe, though, for our hand tools business, our hand tool-based business was large enough, so you would start thinking you must have made some gains in ordinary times. In these times, I don't know. You don't know. I mean I think as Europe is up and down, the markets are positive quarter, certain markets are positive 1 quarter and then it shifts. So I think it's very difficult to predict. What we do know is we seem to be getting more efficacious. So that's good. Same thing happened in Asia actually.

Okay. What do you mean by more efficacious?

Well, I think our product lines are getting stronger. I think we like the product lines is getting stronger, and I think we are having more direct customization in Europe and other places, same in Asia. So that's working pretty well. In Asia, we're selling more of what we call premium tools, which are Snap-on tools, which are pretty good. And we have some of the intelligent boxes moving around there.

Okay. Great. I appreciate that color. Last one, RS&I margin, first half run rate is a step down from what I'd call the normal 25%, 26% range, and you've called out the investments in technology. So just curious if we should think of these maybe sub-normalized run rates as kind of the near-term picture continuing? Or do you see some lift into the second half...

I don't know, it's hard for me to say. I think we've had 3 quarters of about the same sales growth in RS&I actually. For government work, you could say that. And so -- and in that situation, the OE with the investments in people and our technology and so on starts to rein pretty well. To put it in perspective, RS&I was down 160 basis points, but 50 of it was in gross margin, 110 was in OE. So if you want to talk about going forward improvement, I think you concentrate on the 50 basis points in gross margin, not so much the OE.

And our next question will come from Scott Stember with ROTH.

So questions on some of the green shoots that you've talked about last quarter heading into this quarter. It seems like there's some higher ticket items related to new products that are doing well in tools. Yet tool storage is still soft. Just net-net, just trying to get a sense of how much of the growth that we're seeing right now in tools is pivot driven? And how much of it is a potential falling in demand for some of these higher ticket items outside of tool storage?

I don't know. Look, I think that's hard to say. I do believe that the products are helping the pivot. So you've got power tools and you've got certainly torque. And so part of the pivot, Scott, is to enhance those product lines, and you are seeing the fruits of that enhancement play out in the market. And that's the biggest piece of the increase. The other piece of the increase is you had a good quarter for APOLLO, it was very appealing. So it had -- APOLLO traditionally, if you really have expertise, APOLLO traditionally doesn't launch as well as the other diagnostics because at a lower price point and still it's expensive. It's at an entry level for intelligent diagnostics.

But this one did -- so we're encouraged by the big launch, and that wouldn't have been the pivot. That would have come out come hell or high water, whether we're pivoting or not. But the growth in tools in power tools and torque are clearly pivot items. And so you would have -- I would say you could say 2/3 of the growth or more was the pivot.

Got it. And then moving over to C&I. Obviously, a lot of good stuff going on, but there's been some noise made about your guys' opportunity within the current AI data center build-out. Can you maybe talk about that a little? Have you seen anything? And if not, just maybe talk about some of the green shoots that you see there?

Scott, I told myself I wasn't going to mentioned the word data center on this call because I thought it was shameless. But we did have a pretty good order serving some of the data centers, which we expect to drive going forward and expand because the data centers, I think we'll get more business there, but one business that seems to be heating up now is low precision torque. This is the Mountz product line, which we acquired it for.

And that's selling the data centers in quite big proportion. So part of the increase in C&I was that particular business. It drove -- when I said appetite for precision, I meant big equipment in a lot of different places, aircraft and so on, but I also meant data center.

I'm glad I asked.

I just want to mention it because I -- it'd be too humiliating to say it again.

Got it. And then just last, you guys called out increased personnel expense across the board or at least in a couple of the segments. Is that more driven to growing the business? Or is there anything else there?

No. We're looking to grow the business. Sometimes when you look at these things, you say, geez, maybe if I could put a little more energy at the point of attack in certain places, it's going to break through some of the bonds. And we did some of that in the Tools Group and in the RS&I group. So that's why you see some of their OE up, the personnel costs there.

And our next question will come from Gary Prestopino with Barrington Research.

Most have been answered. But I wanted to ask about Diesel Laptops. Was this acquisition, does this give you your first foray into the Class 8 truck business for -- with a database like that?

It gives us our first database in that area in terms of -- it provides database. But we have positions in some of the bigger products in places like [ Nexi ] and some of our other, but this one greatly enhances it. It's got -- you're talking about distribution and data that's in both of the situations. So we like it from that perspective. Really, what we're talking about here is we think that Diesel Laptops are a big -- a good opportunity for us, and we haven't mined it as comprehensively as other places.

So this was a way to bulk up our offerings where Diesel Laptops has a lot of good relationships with the diesel customers with those big truck customers. And it does have a database, which provides you the beginnings of trying to do just what we did for cars only in trucks.

Okay. And you mentioned it added about $2.7 million of sales this quarter, I think, in your narrow guidance.

I don't know if anybody said that. I think -- I don't think we said how much it would add, but -- it's $4.7 million I knew that number. I wasn't sure that I was authorized to say it. Gary, you know anything?

I'm sorry, there was a lot of people talking about it. Somebody said $4.7 million.

$4.7 million.

Gary, it's Aldo. Just remember, it was only a partial month. It was only in our results for a partial month in the month of June.

Yes. That's what I'm kind of getting at what kind of contribution it would make to the top line. And I would assume it's somewhat margin accretive.

Yes. Wow, it's EPS accretive. It's margin accretive, not margin accretive.

And our next question will come from Bret Jordan with Jefferies.

Nick, on your shop tours, I think you talked about the golden age vehicle repair. Could -- do you have any color as to what the contribution of car count versus price is in sort of the underlying industry growth? Are these shop owners you talked to saying they're seeing more traffic? Or is it a lot of pricing benefit of...

Well, I think, look, Bret, it seems like it's -- of course, it's a windshield survey. But the technicians I talked to said the word they used was slammed. So they acted like they were busy. I'm not sure the car count is the operative thing. I don't even know if you can tie it to pricing because there's one other factor. How complicated is each repair. Repairs per vehicle are getting more complicated. So I don't think -- I don't know if you can say that's price -- I'm sure there's pricing.

But I think what we're hearing is everything these days has alternate ideas. I mean, I think the whole idea I saw something the other day like one of the car lines has a brake system where without a special tool that we provide, you have to dismantle the brakes to get to the bolts to make the repair. And so that adds a lot of time. And so I think this kind of inconvenience is spread throughout the vehicles. And the OEMs are not doing a good job of repairability. And so I think that's adding cost. So I'm not sure which it is.

Similar question on the OEM side since you called out the dealers as a weaker section. Is that driven by individual dealer sentiment? Or is there sort of direction from the OEMs as far as -- is it driven by their creation of demand for more complex tools and diagnostics. So is it OE-driven softness? Or is it dealer rooftop-driven softness?

I think it's hard to pinpoint, but I think it's like this. The OEMs have stopped launching programs have reduced I say stopped, but it substantially reduced. They were launching a lot of them. They kind of pulled them into the market around electric vehicles. And then kind of -- I think if you write off $53 billion, it kind of daunts you on this kind of thing. And so I think they took a pause on this because the regrouping -- my view is the regrouping to have a future product line that adjusts for that difficulty or the hole that electric vehicles might have made.

And therefore, you see those. You're not getting as many programs, and that affects us because we enable the programs. So that drives some of our volume down. And then the other place is I do believe when we talk to the dealerships, this is a time for them that's a little uncertain. What are the cars, what are the new cars they're going to get? I'm not sure they know. And so I think that creates a little bit of uncertainty psychologically. They know they want to -- so I think they're kind of waiting a little bit. Now what I've said, I think, is that the -- our idea about weakness in OEMs doesn't mean that the dealers are so bad. It's that the dealers in combination with the OEMs backing down on programs have created, I would call, a flat spot in our sales.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Sara Verbsky for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Okay. Thank you, David, and welcome to our Snap-on fireside discussion here for those listening in. And Nick, thanks for joining our conference and great to see you, and I hope the one-on-ones in small groups are going well. And this is made for people newer to the stock or just looking to listen in a bit. So I always appreciate the opportunity to pick and choose the questions.

Just to start off, in case there's some newer people on the line. Just curious if you could lay out the kind of broad strokes of Snap-on's business model, the market positions and the competitive distinctions and challenges. I think people understand the Vans franchise. We've seen them our whole lives, but that's just one aspect.

Yes. Look, I think you said it well there, Chris, is that you know us very well, of course. But look, I think Snap-on started out in a kind of van business. And it developed the art of calling on technicians, the guys who actually toil the wrenches to the point and selling them wrenches through these vans directly. And today, we have 3,400 vans, and we sell directly to those -- we call on about 1 million technicians. But that was a narrow description of what Snap-on actually does.

Actually, Snap-on operates effectively in the critical. It's principal value-creating mechanism. What we do everywhere is we are at the -- we try to be in the workplaces, observing the work, figuring out where the particularly sticky tasks are and designing and taking those insights to design and implement either a wrench or a piece of software that will make that task easier. And that rides above almost any industry really. But it does require -- that kind of thing requires that the industry and the job is critical. That is the need for -- the penalty for failure is high in places like vehicle repair or mining or oil and gas or aviation or the military and the need for repeatability and reliability justifies a Snap-on level product.

And so from that comes our business of today. We still have the van model. Like you said, when everybody thinks about Snap-on, they think of us in a van, and it's 3,400, calling on 3,400 people, calling on the end users. So we're very vertically integrated, calling on 1 million technicians. And that business, we call a Tools Group, and the quarter, they were up, what, 5% as reported, 3.4% organically, and their profitability was 21.6%, up 160 basis points. And then you have -- and that's about 40% of our business.

Then we're organized by customer. We have a customer base that stands right next to them. It's the repair shop owners and managers, not the guys who twirl the wrenches, the guys who run the shop. And they appreciate Snap-on, too, because vehicle repair is our history, and we understand it very well. And so we sell them what I would call semi capital projects -- capital things like software, run the shop or software to identify problems and solve the diagnostics problem in a car or under-car equipment like aligners or tool -- tire changers or tire balancers. And those -- that business is -- we kind of came to it lately, but it's about 28% of our business.

By the way, we don't sell through the vans. We sell direct or through distributors to that different customer base. That was about flat in the quarter, but it was up a little bit. It got enough to be the highest ever quarter for that group. Its profitability was 24.6%, down 60 basis points. But its gross margins were up 30 basis points. So that difference was really pretty much due to two things. I mean the lower profitability was due to two things: one, currency; and two, spending on things like better software systems, software development and brand building. So you have that business.

Then finally, about another 28% of our business, you have the Commercial & Industrial business. We say it's when we roll the Snap-on brand out of the garage, but still it's a critical thing where the penalty for failure is high. And so you go out there, it's industries like the military, oil and gas, mining, general industry, heavy duty, education, natural resources. And about 2/3, about 45% of that business, or 40% of the business is through direct sales that go out there and deal directly with the customer. And we sell customized tools that will solve the problems, for example, we sell a special customized kit, which will deal with the particular idiosyncrasies of repairing an F-35 fighter. We will provide a tool set that will help some of the heavy-duty equipment.

And so that business has been growing pretty well. That's been a decent business, and it's part of our Commercial & Industrial group, which also has in it what we do in emerging markets and has in a European hand tool business, which sells through distributors to the trades and to auto repair and another number of other items and other areas in Europe. And when you roll those businesses together, that grew at 10.8% in the quarter as reported, 7.1% organically. Its profitability wasn't as strong as we'd like to see it, 14.4%, down 110 basis points. But the 110 basis points reflected about 50 basis points of currency. Currency was not our friend this quarter.

And then the other piece of it is this is the place because it's the most international of our businesses was most affected by material costs and tariffs. And then you roll back from that. And one of the things if you want to know all about Snap-on and our business model, you can't talk about it unless you hear about the brand. And the brand is the outward sign of pride and dignity that working men and women take in their profession. We literally have people wear, buy our jackets, put our wrenches in the hands of their newborns or ask us for small toolboxes to bury their loved ones in it, and I'm not kidding. That's our...

So yes, those toolboxes are kind of interesting. You kind of tailor them to a lot of different things, and it's a really interesting marketing model with the storage space there. So going into that, does it feel like storage has turned a corner and now...

Well, I think -- I guess it takes a little background, but we think we see positive signs about tool storage, which is a product which is sold through the van channel, the franchise van channel. Remember, we -- what I just told you is we're organized by customer. The van channel sells to the technicians. RS&I sells to the owners and managers of the shop, and C&I sells to other industries, not automotive repair, but they're still critical and sells not to the users, but to the owners of those, the people in charge of those various facilities.

But if you come back to tool storage, it was positive in the quarter, and it's the first time in a while, it's been positive year-over-year. And the reason why this is significant starting in -- if you step back from -- if you step back and you see that probably starting in the fourth quarter of '23, we identified that uncertainty started to separate the grassroots economy from the financial economy and it particularly affected the mechanics.

Vehicle repair is one of those great resilient markets. There are a lot of secular drivers behind it. The number of cars are getting bigger every year, number of cars on the road getting bigger. The cars are getting older. Now they're 12.8%%, and they're all 12.8 years old, and they've gotten older every year since 1980. It's arithmetic. And then on top of it, there is a growing complexity of cars on the road that requires more tools and more information to actually repair them efficaciously. And those things are rooted in things like different powertrains, electric vehicles, plug-in hybrids and super hybrids as well as advancements in internal combustion engines that create a little challenge.

And then there's the growing desire for autonomy, not just the autonomous cars, of course, at the end, but every car these days is starting to take on automated driver assist systems. And this creates a greater need for things like the ability to decode those systems to make sure they're always in sync, to recalibrate those systems. And so those things drive that business.

So vehicle repair is one of the great businesses. Technicians are cash-rich. And you can see it in the Bureau of Labor data, hours up, technicians up, wages up and household investment in vehicle repair up year-over-year, high single digits. So our technicians that we call on are cash-rich. But starting back in the fourth quarter of '23', they started to get confidence support. They were looking at things like the border and the Ukraine war and inflation bearing down. And then since then, you've had a number of different instances of rising problems, the Middle East war that was finally settled. Now you have the Iran -- you have conflicts with Iran, you have conflicts with China that has been ongoing. So this weighs on the psyche of our customers.

And what we found is with this change, with this feeling about uncertainty, they withdrew from, let's say, not withdrew, but had less preference for buying big ticket items. And the reason is this, they could see, particularly with this administration, with the daily items that are coming out of Washington, they feel like they're on space mountain. You're going back and forth, you believe in where you're going, but you're worried you're going to tilt off the rails and they worry about that, and they figured a tilt off would create a problem for them because they don't have the cushion that other people do, even though they're cash-rich now. And so they say, "Wow, we don't want to tie ourselves to long cash flows that were required to pay less." Less people want to do that.

And in Snap-on business, we have 2 types of sales. One, the big ticket items like here like this tool storage box behind me, and that's -- we sell that with the credit company finance note for 3, 4, 5 years terms. And they have pulled back from that over time. In the first quarter, we started to see for the first time that they seem to be coming back in terms of our sales. Now I don't -- one quarter is not a trend make and it does not confirm that uncertainty is abating. It's better than poking eye with sharp stick. And so I think it's positive for us in that regard.

Right. So I mean, the comps have generally been easy. So it wasn't just a peculiar comp issue in the first quarter, just it fundamentally felt like a better quarter for tools.

Yes, I would have said -- Chris, I would have said the comps have been -- we did say the comp was easy. But not so much when you look particularly at tool storage. I think we thought that was a positive.

Yes. Okay. Great. And the -- while storage has had its sort of own cycle, and it's been kind of a similar cycle for SOT in general with the pullback, but you have had some successes with assortment along the way to quicker payback items. And some of that strategy involved adapting manufacturing capacity. Where are you with capacity alignment now for...?

We would say -- look, I think we called it the pivot. The the Tools Group pivots to shorter payback items. And so I said we have tool storage boxes, which are financed over 3, 4, 5 years. But the other 2/3 of the business are things like power tools and hand tools and other smaller items, and they're financed only like 12 weeks to 15 weeks, and customers are more comfortable signing up for that kind of commitment. And so we took the Tools Group and tried to pivot to provide a richer mix of products in those areas.

And so what you got to do is you got to get designs going to focus more. You got to take resources and focus more on those smaller payback items. And then you've got to take the manufacturing and tilt it towards that. And then you have to take the marketing, which is the easiest stuff, I guess, and you arrange your promotions to be more effective in that. And as the quarters have gone by, we've gotten better and better at that. And that's some of what you're seeing in the first quarter.

Okay. Yes. So is there a lot more capacity tweaking always underway there? Or have you gotten through kind of the most of it?

We got through most of it, but I think, look, there's always something you can do in that regard. I mean, it's a matter of balance. I mean, things keep getting -- let's say, for example, Chris, if the uncertainty continues, we keep tilting away from big ticket items. Right now, we're at a certain point, we could make it more small ticket items. But remember that when I say that people had a higher preference for shorter payback items, it isn't like no one took tool storage units. I mean tool storage was still selling. It just was down.

And I think maybe to wrap up on SOT, then we'll move along. But I think you had a favorable sell-through versus sell-in in the last couple of quarters. So that might suggest some increasing liquidity for your franchisees and put them in a good position.

Sure. You're exactly right. You know very well. We had -- what Chris it's referring to is that the -- when we talk about our sales, they are sales to the franchisee. But we also monitor the sales from the franchisee to the actual technician customers. And they were positive -- that was a positive number for a couple of quarters. And so if you look at the last half, we've gone through that number selling off is a little bigger than sell-in to -- our sell-in to. So as you say, the franchisees, the vans themselves should be in a little bit better position at this situation. You always like to see that. It generally, though -- Chris, generally, I think, it evens out over years. If you look at a year or 2, it's usually pretty...

Yes. But it's just kind of interesting. Do you think -- I mean, there's a lot of foresight in your experienced franchisee network of what might be coming down the pike or certain demand streams. Do you think they're kind of doing a little inventory cleansing, a little hygiene and are there certain programs that you think they're preparing for?

That can be. It can be. I was just talking to -- look, I think certainly, it's an unmitigated positive that you have a positive sell off the van, and it's better than sell to the van. That's a positive. I was talking to a bunch of franchisees over the weekend because we had our National Franchisee Advisory Council for both Canada and the United States. We have about 25 franchisees here. And I have to tell you, by and large, they seem pretty optimistic, pretty positive. So I take that to be a good dipstick, debt charge in terms of where things are. Now I don't think anybody knows how this Iran war is going to affect things. But despite that, they seem pretty good. So I came away from that in a very positive frame of mind.

Yes. I think people are kind of used to stuff happening now and things people just getting back to business. I saw that was a lot of like process industry project orders with some that were gated just other companies. So for C&I, it seems to be generating some incremental strategic momentum. You mentioned expanding field reps, stronger performance in kitting packages and alignment of production capacity with the front-end structures of C&I. So just wondering if you could discuss those factors and what seem to suggest internal momentum building as opposed to maybe just a better economic backdrop.

Yes. I don't think it was a better economic backdrop. I mean I think -- look, I think part of it is if you step back for a minute and allow me a moment, the principal pacing element of C&I is for us to get more understanding of the needs of critical industry customers, that is customers in aviation, oil and gas and the military and so on.

Remember, I started out the whole thing by saying our principal value-creating mechanism is to go into where the work is being done, understand it and figure out how we can make those particular jobs easier. That's our art. We're really good at it in vehicle repair because we've been doing it for 106 or 105-plus, more than 105 years. In fact, in this building, there are 600 people and 300 think they're car mechanics, they can really interpret. If you're talking about aviation, we're building.

And so what you're seeing in there is we're building an understanding and feeding those insights back to create a richer and richer product line that's customized to particular jobs and that's what we're seeing in the principal component. C&I has a lot of components. But the principal component, which we call the direct critical industries business, we saw some nice gains there. And part of it is, one, we're building a product line. Two, we recently added -- well, recently, 2 years ago, we added more capacity. And when you add capacity, Chris, you start out and it really helps you. But as time goes on for some period of time, you understand how to wield that capacity more and more effectively, and that's what we're seeing in the critical industries.

Critical industry was up. It's highest in almost 2 years, year-over-year. It was up high single digits and its profitability is strong. I mean, every bit as strong as the Tools Group. And so that business, I think, led the way in C&I. I'm very optimistic about it. Now you have other pieces in C&I. You've got the European hand tool business, which is more tepid in its profitability. It was up some, but Europe still has a bunch of pain. So that business is okay. And then you have power tools and the power tools business, which makes the power tools for us and the torque business. And those are the businesses most affected by material cost increases and tariffs. And -- so it isn't as positive for -- that's where they took a lot of hits in that situation in that area. That's where we took a lot of the, I guess, increases or negative impacts of the material cost.

And so -- and then you have Asia Pacific, who is kind of gaining momentum. One of the things I'm positive about in the Asia region is that we always thought this would happen. We invest out there. We build factories. We develop distribution. We build the product line. And then usually start out trying to penetrate and create a greater position in the market in the middle. Unlike most Snap-on, you try to build it in the middle because in an emerging market, there isn't that appreciation for the best product. And now what you're starting to see is a higher appreciation for the more higher quality tools that would be under the Snap-on brand and even a stronger appreciation for some of our most sophisticated position -- products like the automated tool control boxes, which keep track of tools to make sure they don't get left on site, let's say, in an engine -- in a jet engine after they close up in the cell. And so that's become more popular. So I'm kind of positive about that. So you see that business.

And if you look at -- if you step back, I don't think one of the things I mentioned is and I did talk about I know one of the questions that everybody will have these days is how is material cost increasing tariffs hitting you? And it does hit us some. We're certainly not immune to tariffs, but we're resistant. And then even if you make in the United States, the material costs have drifted up. But if you look at our numbers, and this is the gross margins, the gross margin for the corporation, I think, was 50.4%, down 30 basis points, but it took a 40 basis point hit from unfavorable currency.

So basically, we're holding flat gross margins in a time in which the cost of goods sold is probably the most turbulent that I've seen in a while. And that's a credit to our, what we call, Snap-on value creation processes, which we say is safety, quality. We keep the quality up, customer connection and innovation where you're in a shop and you turn it into a -- turn those insights into an innovation, but also rapid continuous improvement. People are at every site. We have special teams with Japanese consultants that fix particular problems and then irrigate the rest of the corporation and the techniques learned. We all go to a site once a year to work on this, and we have a -- we honor the best teams with traveling trophy and prizes to have parties. And that business -- that's what fuels our business in terms of improvement. And you can see in the gross margins in this period.

Okay. Yes, for the particular area of what the power tools and the specialty torque that you mentioned, is that a place where you can catch up on price with a lag? Or is that just -- it's going to be a negative equation when there's inflation?

Well, I think they're going to -- I think they get better and better at it because part of this is swapping out components that they're getting hit with. Well, who knows what the tariffs are going to be. The tariffs in China went 150%, and then it was 55% and it was 45%. So I don't know. One thing I do know, though, the tariffs are starting to lap tariffs for the second quarter and third quarter and fourth quarter next year are lapping tariffs. First quarter had an unfavorable comparison, any kind of tariffs you had, you felt like the princess in the pea, you could feel any of those things on a year-over-year basis. But I do think they'll get better.

They are -- part of the reason they're maybe not as helpful to C&I as they otherwise could be is they share the margin with the Tools Group. A lot of the stuff goes through the Tools Group. So yes, they bear some of those increasing costs and it goes through the Tools Group, and we can price for it there. It dilutes versus, say, the critical industries business, which is about 45% of it is where we sell. We make it in C&I, and we sell it directly.

Got you. Okay. And then I wanted to talk about the software business. I think you mentioned it's up to about 1/3 of RS&I now. Just want to hear you kind of mark-to-market what. What the composition of different pieces of that? How you define software sales in terms of pure versus embedded? I'm sure there's a mix of that in there. And then what you're seeing on penetration rates for the subscription models?

Actually, we don't have too much embedded in that number. That's pretty much more pure. But we do have a lot of embedded software and things like aligners or tire balancers or other things. It is -- but it is -- I guess you could say it includes 2 pieces, 2 big pieces. I think diagnostics and information systems sold to independent repair shops. That was up in the quarter. And that can range from the handheld diagnostic units, which hold a lot of software, including wielding our proprietary databases, which are going to be enhanced by the use of AI through those things. And we have been working AI to actually develop those databases, but our -- as the systems improve, we'll be able to wield them even more efficaciously.

You see we see AI is allowing us to bring out superior product, not just creating efficiencies. Then you've got subscription-based services like for, let's say, repair shop management or repair information or electronic parts catalogs and so on. And those are kind of fix the difference between those. So you have some things that are associated with a particular product that we sell them by the drink, and that would be diagnostics. And then we have a bunch of other businesses that are rooted in subscription. So that's what makes up software for us.

And I should add, the subscriptions are a growing amount of that.

Growing piece of the pie.

Yes.

Yes. And you break out certain categories of growth in RS&I, but it tends not to be software as a standard disclosure like you do have for under-car and electronic parts catalogs because I think the diagnostics part includes hardware, too. So just curious why the software piece isn't broken out a little more?

Because I don't like breaking it out because it's in a bunch of different businesses. That's why. And so it kind of confuses the issue. I will say software, we're very positive about its growth trajectory. That's what I'd say. But you know what influences some things like this. For example, in diagnostics in this quarter for RS&I or in the past quarter, you have the question of diagnostics, which was one of the categories that was down in the Tools Group despite the overall increase. And what drives that, Chris, is diagnostics, I think, has maybe 6 different product offerings. And so it's a very model-based quarters.

So if you introduce a new product, boy, if it's the right -- if it hits, if it's the right product, it tends to drive things up in a quarter. And that tends to go out for a couple of quarters. And after that, the penetration -- the exceptional penetration tends to stop, and it tends to kind of adopt a more standard sales pattern. And then -- so if you're comparing year-over-year without a new product, you can see some weaker comparisons. Now we just -- so in the second quarter last year, we launched -- or towards the end of the first quarter, we launched a new diagnostic unit. And so it's a little tougher comparisons. But what the -- we've just launched -- I think it was Thursday, a new product. Last year, we launched the TRITON, which is our #2.

We have the strike by highest, most challenged technician, that's the top of the line. Next works on a bunch of different things like calibration systems and so on. And then you keep going down until you got entry level. And so last year, we launched the #2. This year, we launched the #3, which is the Apollo, which we just launched last Thursday, and it's aimed at the middle. So we'll have to see how that plays out, but we're optimistic. I think we're pretty positive. The launch seems to have gone pretty well.

Okay. Sounds good. And then I think a big part of what you guys do is to develop key initiatives to help franchisee productivity. And I know coming out of the pandemic shutdown part of that phase of it, adoption of a lot of social media tools and electronic selling aids was a big part of what really opened up the valves and the capacity there. So just curious right now, if there are any -- I know there's always a lot of blocking and tackling, not every environment is like, "Hey, we've got this particular initiative here." But just wondering what you're focused on advancing with the franchisees in terms of professional development these days.

The big thing is we're trying to -- everything about the franchisees, Chris, is how much time can we save them so they can spend more selling time because they're calling on 1 million technicians. So they need selling time. It's one of the things. It tends to be one of the pacing elements. Every every once in a while, we'll run up against the ceiling that they don't have any more selling time and we can't follow the markets. So one of the elements here is as our products have become more sophisticated, specifically around the diagnostics product line, but also some of the power options in our tool storage and some of the other torque business, we need to give them more training so they can more compactly explain the great advantages of these sophisticated tools to the customer and how they can wield them.

So that's sort of part of our activity because they can go in -- what will happen is they're supposed to take 7 minutes per technician. They can roll into a garage with, would say, like a TRITON or the new Apollo and take 20 minutes trying to explain it. We're trying to make sure they can explain it in 7.

All right. And then with RS&I -- at RS&I, the OEM business looks probably levels off after a couple of years of really exceptional double-digit growth. So curious how you're thinking about the growth prospects for that segment in the near and medium term. It seems like C&I and SOT trends are a little more clear.

Yes. Look, I think this -- first, I have to give a commercial for RS&I because I think I said this, although when you're in these events each day, you're not sure what you said during this meeting versus the other ones. But look, I want to emphasize that, yes, RS&I was kind of flat, but it was still the best quarter we ever had in terms of -- biggest quarter we ever had in terms of sales. So it wasn't chop liver. One of the headwinds between that is, as you say, we have that business, we call it the EQS business, and it's a lumpy business. I was at -- I used to work at the auto companies as an engineer. And what happens is when you design a car, you pay attention to all kinds of things like cost and performance and emissions and safety and all that stuff, but you don't pay attention to repairability.

So when a car comes out, they look at the car and say, "Wait a minute. There are certain idiosyncrasies to this car design that makes it harder to repair. So we need to aid the dealer technicians." And so they commission Snap-on, and I think we're the leader in this field now to provide a set of tools or software that each of the dealerships need. And we've been doing pretty well in that. One is because there have been a bunch of programs. And two, we've gotten better and better, and we've gained share. And this quarter, it was a flat quarter for that business. And so that is part of the headwind on the sales in both the OEM area and then RS&I in general.

It's hard to predict in the next quarter because lots of times, Chris, the launch dates of these programs, even though we see a nice, I guess, landscape of programs coming up, the launch dates tend to be quite fluid. And so we're not sure when they'll come in. But I feel pretty positive about the business going forward, particularly because we are now the go-to business to -- for OEMs to try to help them in this area.

Yes. It sounds like you really kind of took a step -up assert in your preeminence in that space over the past couple of years. I haven't heard you talk about it in those terms prior to that. So point noted there, that's...

Yes.

Yes. Okay. And I think that's a positive note to end on here as we're at time. So always great speaking with you, Nick.

Good to see you, Chris.

Catch you later.

You know a lot about our company. It's always a pleasure to talk to you.

Indeed. Likewise. Bye.

[Audio Gap] of Snap-on, it is my honor to serve as parliamentarian for today's events. [Operator Instructions]. Today's meeting is being webcast and recorded, and a recording will be available on our website, snapon.com, shortly following.

I'd now call the 2026 Annual Meeting of Shareholders to order. We have made the order of business and rules of order available to all attendees, and I've just asked that you please all abide by, it is now 10:03 a.m. on April 30, and the polls are officially open. If anyone has not yet voted and would like to do so, our inspectors of election, Abby Cowart and Fred Papenmeier of Computershare in the back, and they can record your vote. It seems like everybody has already voted.

The following members of our Board of Directors are in attendance today and each has been nominated as a candidate for reelection at today's meeting. In addition, Mr. James Holden, a Director since 2007; and our Lead Director, Retired President and Chief Executive Officer of DaimlerChrysler Corporation is also nominated but unfortunately, was not able to join us today. When I say your names, please stand.

David Adams, Director since 2017 and Retired Chairman of the Board and Chief Executive Officer of Curtiss-Wright Corporation; Karen Daniel, Director since 2005 and Retired Division President and Chief Financial Officer of Black & Veatch Corporation. Ruth Ann Gillis, Director since 2014 and Retired Executive Vice President and Chief Administrative Officer of Exelon Corporation; Nathan Jones, Director since 2008 and Retired President, Worldwide Commercial and Consumer Equipment Division of Deere & Company; Henry Knueppel Director since 2011 and retired Chairman of the Board and Chief Executive Officer of Regal Beloit Corporation; Dudley Lehman, Director since 2003 and Retired Group President of Kimberly-Clark Corporation. Greg Sherril, Director since 2010 and Retired Chairman of the Board and Chief Executive Officer of Tenneco Inc.; Don Stebbins, Director since 2015 and retired President and Chief Executive Officer, of Superior Industries International, Inc; and Nick Pinchuk, Director since 2007, Chairman and Chief Executive Officer of Snap-on.

Nick will present an update on your company's performance at the conclusion of the formal remarks.

Also with us today are James Stewart and [ Bryan Donohoe ], representing our auditors, Deloitte & Touche LLP. They will be available to answer any questions following the meeting. We have an affidavit that notice of the meeting was mailed which will be incorporated into our meeting minutes. Since all shareholders have had an opportunity to vote, will the inspectors of election please confirm that all ballots have been counted.

Thank you, Abby. It is now 10:05 a.m., and the polls are officially closed. There are 52,057,343 shares of common stock, each having 1 vote at this meeting. I've been advised that we have 89% of all shares outstanding and therefore, we have a quorum. We have 3 items on our agenda today.

The first, the election of our directors. The Board has nominated each of the directors I introduced moments ago to serve until the 2027 Annual Meeting. Each director having received 75% or more of the votes have all been elected. Our second item is the ratification of our independent auditors, Deloitte & Touche. Over 87% of the shares represented voted in favor of this proposal, and therefore, the Audit Committee's selection of Deloitte & Touche been ratified. The third and final official piece of business today is the advisory vote to approve the compensation of Snap-on's executive officers as set forth in the proxy statement. Since 95% of shareholders cast vote in support of this non-binding resolution. It has therefore been passed. This completes the official and exciting business of the annual meeting. It is now 10:06 a.m., and the meeting is adjourned.

We will now watch a few videos. Please enjoy.

[Presentation]

[Audio Gap] I always love coming here. I love to meet old friends and make new ones and see many of the people. I only see once a year, and it's a great thing. So all I can say is, [indiscernible] to quote the inimitable Bill Murray.

Look it's my job today, kind of report to you, on the state of the company. And I can report to you that your company, our company, the company, even though it's been challenged, and even though we live in turbulence these days and everybody knows it is and there's tremendous uncertainty, this company is strong. I'm going to tell you a few things. We're going to tell you who we are, reaffirm that and tell you why it's so important to you to us. We're going to tell you what we did last year. We're going to tell you where we're going in the future. We're going to tell you how we're going to do it. We're going to introduce you to some of the people who are going to make that -- have made and will make that happen along the way. I believe by the time we're finished today, you will be convinced that this company is unique and special. It is strong, and it justifies the capability and the energy and the commitment that all of you enlist in our corporation every day.

Now before I start on beyond that, I've been -- by the way, I stand up here. Rich Miller is the parliamentarian. I'm very relieved. I didn't know what he did until now. But he forced me to do this. We've got to show something called the cautionary. So the cautionary is here to tell everybody that there's a lot of -- there's some kind of, I guess, speculation or -- when we look to the future, we're talking about where we think things are going, but we -- it's kind of a belief, not a certainty. Okay, that's enough. We don't need to have that. You probably read that already.

All right. Now let me start out simply by saying, we're going to talk about a lot of people today, and I want to start by speaking of our Board of Directors. After all they are my bosses, okay, so that's an important thing, but that's not why I'm saying this. The corporation is tremendously enabled by the team we have in our Board of Directors. Their guidance and support is unfailing, and little known, to I think people who aren't associated with all of us, they are a tremendous calling card for us outside, investors and potential hires and customers are impressed when they see our Board of Directors because they see if we have adamant people like this, on our Board, we are a serious company, unique and special. So let's give the Board of Directors another round of applause.

For anybody who was tempted to shall I say, lose concentration during this presentation. And I know this has happened. I was once given an honorary degree when I spoke at a graduation master of anesthesiology. Apparently, I sedated the audience and what was then record time, I think I need to drink here. Is there anything? Okay. Thank you.

And I think we will start by just talking about the beginning. You see it really did start with a spark and the spark was an idea. And the idea of [indiscernible] the dream and the dream shape lives and it reached across the nation in the world, so it is we could see it, embodied today in the Snap-on company, which was that dream. It was founded by 4 men and one of the great things about our company is we always, we maintain a living link to our founders. And some of them are here tonight.

So let me introduce them. First of all, I think in the third row down here, Patsy Callahan and Andy Callahan and his wife Crystal. We have over here, Sara Verbsky and [ Paul Tutskey ] not Sara Verbsky. She works -- she's back in here. [ Sarah Tutskey and Paul Tutskey ] Sarah is the granddaughter of Joe Johnson, Patsy Callahan being the granddaughter of [indiscernible] our funder. And Paul worked for the company 30 years. We all know him last as the Vice President of the Western region. And then next to them are Greg and Kathy Johnson, who are here at every event, grandson and daughter-in-law of Joe Johnson, and their daughter and her husband, Zach and Eliza -- Zach and Lynn, sorry. All right. So I'd like you all to stand up the founder -- our living link to the founders, please stand up. Give them a round of applause.

Snap-on is a company that if you go back to the founding, we were founded on a timeless principle. We respect for the dignity of work. And we're enlisted in a cause, making work easier for -- and creating -- making critical tasks easier and moving the world forward. An event, a cause that's as relevant today as it was years ago and such -- 105 years ago. And one of the things we have a campaign around Snap-on, we celebrate the makers and the fixers. And the reason is, is because historians have held that society is advanced, advanced by the number and the quality of their makers and fixers. American historians have said that, America is ascendant among all the nations in the Western hemisphere, at least, because of that. And we try to celebrate that in the video -- the video -- the video. I love it.

It starts out, the founder and the haunting piano music, appropriate for something looking back more than 105 years. And then after that, it morphs to the role of the years starting in black and white, faster and faster and on to color, right to this day. And then we're joined by the Snap-on Nation from cities all over this country and from countries all over the world. And then, because we know, and I'm going to say it several times today, you create the way we honored the stars that are in this room and beyond. So we have to the, I guess, Cold Play's Sky Full of Stars, we honor the stars in the room, that's all of you. But the thing I like the most are words. We speak now of the unique and the special. We speak of a company and its people, essential to the serious and respected by the world. Snap-on is that company and you are those people. We are the bringer of the prosperity. We are the bearers of pride. And we are the shapers of lives. We've been so for more than 105 years.

These are things that I think makes Snap-on people say, yes, it's true. And it echoes with emotion and it rings with truth to us. And it couldn't have been done by somebody from the outside, we do not engage an outside firm to do this. We have Snap-on people do it, and we have the Snap-on production team here with us, and so over here is Sam Bottom, our Chief Marketing Officer and behind him is Ms. [ Bridget Corea ], the people who are the thinkers, the writers, the directors and the producers of that great video. Please stand up, give them a round of applause.

As we look forward we say -- we always pay attention to who we are. And we have this plaque here shown behind me, that is pretty much in every room in Snap-on. And why do we do this? Because when you've been in business as long as I have, you know that when things get tough, and it's turbulent or you go to a new place, it's very important that you remember who you are and what you do, and the characteristics you have. So we talk about the idea that Snap-on provides the most valued productivity solutions in the world, and we have certain beliefs, beliefs in things like safety, quality, customer [indiscernible] innovation and rapid continuous improvement, we have certain standards, and they are things like certain values. There are things like integrity, and truth and respect and teamwork and listening. This is in every major -- every room in Snap-on so that we never forget this because it guides us through the difficult times, good times and bad.

Now one of the things -- there are other things that help us through these times and one of them or several of them are what we would call our strengths. We have particular strengths in product and brand and people and product, we have enabling product. I'm going to tell you, okay, you might say, well, how do you know you have an enabling product? Well, because magazines and different people say we have the greatest product line in the world. And so it is -- and [indiscernible] Magazine, for example, recognizes us last year some of the top tools, the professional tools and equipment news P10 name gave us 5 of their Innovation Awards and the People's Choice for Professional Tools and Equipment News, the ones that are voted on the act by the actual users gave us a record, 20 award. So we do have special tools, enabling tools.

We also have defining brand. You can see it up here. I think Snap-on brand is the outward sign of the pride and dignity that working men and women take in their profession. It started out that way, way back to the original 5 do the work of 50. When our founders said, boy, I have this device, 5 handles of different dimensions, a T, a cross, [indiscernible] and put them together with 10 sockets of different sizes and said they snap and made them so they snapped on interchangeably. He said 5 do the work of 50 of that and revolutionized tool sets all over the country. He also made them with great quality and Snap-on product is nonpareil in quality, but there's something else he did that was really important. He went into the shop and told us, he [indiscernible] the normal distribution. They used to sell tools through distributors back in 1920. We always said, don't sell through distributors, go right into their shop, lay those 5 handles and 10 sockets out on green felt, as it is, they were as precious as surgeons' knives, implying that if the mechanic used those tools, they would declare to the world, they're doing something special as special as a surgeon.

And you can ask, well, why do we think that goes today because it's about tattoos and toddlers and tombstones. I feel like I'm in the Wizard of Oz. Tattoos, toddlers, and tombstones, Oh my. And in reality, these are the things that people do, and they want to identify with our brand. People tattoo, to take tattoos that are Snap-on. One guy in the Midwest said, I want to roam the [indiscernible] for the rest of my life, and he tattooed it all over is forearm. That's phrase. And then we have people who put our wrenches in the hands that are newborns and yes, we have people who bury their loved ones in our boxes and carve their tombstone in the shape of that loved ones box. The outward sign of pride and dignity that working men and women take in their profession indeed.

And our brands define people, that's why they want to have that as part of their body or in their child's hands or on their jacket. It defines them as a special professional who is doing something critical and essential. And we -- it's not just Snap-on. We this year, interesting, not many people know this, but we have -- not many people here, I suppose, know it, but we have a brand in Europe called Bahco. The brand in Bahco was 140 years old this year. It was founded in 1886, and it's founded by a guy named Johan Peter Johansen, one of the great inventors of Sweden, actually, and he founded it with the pipe wrench, but he also went on to design and just, he and his colleagues our successors that went on to design adjustable wrenches. And to this day, in Europe, when somebody says, "Give me the adjustable ranch, they say, "Give me the Bahco". This has a following in its own right.

Last year, the Bahco team went to the Rock Sweden. It's a rock concert in Stockholm. And they opened a booth that gave out Bahco tattoos. They tattooed 500 people, turned away 1,200. Okay. So we have a defining brand. We also have differentiating people. You can see pictures of them. But our team is capable and it's committed. It's experienced and battle-tested. I'd like to introduce you to a few of them.

First, I'd like to introduce you to Michelle Lang, who's been with us 45 years. She was my first support assistant at Snap-on, stand up Shelly. Hold your applause to the end. I know you want to make applause stand up, Shelly are you there. Okay. All right. Then after her I have Lynn Ernst, who is from something called [indiscernible] here in Kenosha. She's been with us 48 years. And then I have the voice and the face of Snap-on, who all the directors come to see as opposed to seeing me, Ms. Pam [indiscernible], who is the video star, many of you know her here. And then we have Joe Swan who's been with us -- she's been with 48 years. Joe Swan has been with us 49 years. He is the father of the ATC. And the reason why we have this special toolbox all around the world that keeps track the tools is because of him.

And then from our IT department, Ms. Lees Pitch, 52 years with Snap-on, 52 years and counting. Let's give them a round of applause. Joe Swan, you missed your mark. I said stand up. It took you 20 seconds. I see. I see. Well, that's good excuse, good excuse. Right. Okay.

So we do have a differentiating team, and that is probably what makes the difference in our company. So let's look forward and see how 2025 -- we have -- we are advantaged as we go forward. We say it's time to cover the annual report this year that we're advantaged by strategy and structure. And what this means is that in this time of tariffs and supply chain disruption. We're advantaged because we have factories everywhere. We have 36 factories in the world and 15 in the United States. And we have a policy that says make in the markets where we sell. So 80% of what we sell [indiscernible] in the United States is made right here and a hand tool can be up to 50% labor. How much labor is the television, by the way? 5%. So somehow we make it, by making -- we make tools in America with a high labor content and we do quite well, thank you very much.

So let's look at some of the numbers. If you look at the sales last year. Now these these -- I want to start by saying that there's been some headwinds. I think we have a headwind slide here. I forgot about that, how can I forget about the headwinds. Headwinds are particularly difficult. I don't even, you have to enumerate them to you, but you've got tariffs and you have wars and you have uncertainty all over the country. And in fact, it weighs on the working men and women of the United States. And so our sales are still pretty good, in that aspect.

Last year, our sales were $4.71 billion, and this year, it's $4.74 billion. So a nice increase in the sales. We feel pretty good about this. That's something you want to feel good about. But then with the tariffs and the material costs, [Audio Gap] the next year was $3.06 billion and $3.28 billion than $3.35 billion than $3.43 billion than $3.69 billion than point then $3.73 billion. Then there was the pandemic. It went down to $3.59 billion. Then it came back to $4.250 billion, and then it came to $4.49 billion and then it was $4.73 billion $4.71 billion and the aforementioned $4.73 billion. And this is a great trend. I really -- most companies would love to have this trend, and we -- we're proud of this trend, but we're unsatisfied.

But we have benefited from great people and also from some great leadership. And we have some of that -- those leaders here and some of the relations. So the first one I want to talk about is the seventh President of Snap-on, Mr. Norm Woods, who was the first -- I think he was President in the late '70s. He brought Snap-on on to the public stock exchange and to the New York Stock Exchange. And we have here his -- I think his daughter and her husband, [ Susan Lutz Kenon ] and [ Bill Kennon ] up here from [ Libreville ], stand up. Let's give them a round of a applause.

And then next to them, we have somebody who is once known as the first lady of Snap-on, and she was Ms. Fay Gregory, the life of the tenth President of Snap-on, Marianne Gregory. Fay welcome back. Stand up. And then a man who needs no introduction, a man who gave us so much, rapid continuous improvement and taught us how to remember who we are and what we would do. And of course, I'm talking about my former boss, current counselor, an ongoing friend. Mr. Jack Duane Micheal, stand up, Jack. You're looking good, Jack. You keep looking younger. I look older. What's the problem? You're a kind guy not to answer that.

Look, okay. So that's the trend in what we would call operating numbers. Let's look at the EPS. So the EPS last year was $19.51 and this year, it's $19.19. But I mean, 2025, it was $19.19. Now this looks like it's down, but actually it was up slightly, because there was a huge pension charge, and we love our pension. Anybody out here who is there, in fact, many retirees, don't worry about your pension. But it costs us a little more at the bottom line in terms of expense. In fact, I think it was $0.36. So actually, this year, adjusted for pension would have been last year would have been a little bit better. And the trend is fairly nice for us. But first, before I go through the trend, go back one. I want to introduce the team that authored all of this, our management team down here. They're, I guess, sitting along here. Right? But Rich is up here, Rich Miller, you've met already, the parliamentarian of Snap-on. Anything else? No. Okay.

All right, down here in the front. Hold your -- I think we can applaud them one by one because, okay, from Scranton, Pennsylvania. The second most famous son of Scranton, Mr. Aldo Pagliari, our CFO. From South Jersey, the Senior Vice President and President of our Repair Systems Information Group, Mr. Tom Ward. Our Chief Development Officer, having been promoted on this day in this 1 year ago, Ms Marry [indiscernible] from Kenosha. And then from parts unknown, otherwise referred to as Iowa, we have Tim Chambers, the President of our Tools Group. From the [indiscernible] country, the President of our Commercial Group, Mr. Jesus [indiscernible].

And I apologize for this next item because I'm introducing a man who I believe, holds the world's record for being in quarantine during the COVID. He missed two of these meetings because he was in quarantine. So I'm happy to say that today, he has not missed the meeting, so I can say, introducing live Mr. [ James Zung ], the President of Asia Pacific operation, and then John Wolf, the President of our Repair Systems operation, right? Former market basketball player. Do you have to be in the game to be a player on the team? Or is sitting a bench okay, right? Did they call you splinters in college? Right. That's right.

Okay. Let's see. All right. Next to him, I'm going to introduce these other people because our Chief Marketing Officer, heretofore mentioned Mr. Sam Bottom, Sam was so shocked and he didn't know whether to stand up or not. June [indiscernible], our Chief Information Officer, June, and the quarter back of a response to the COVID and our Vice President of ESG and disruption Mr. Raul [indiscernible] stand up senior. Okay. We got a great team.

So let's go on to the trend here. And I think it starts in 2011 of $4.71 and then $5.20 and $5.93. And I guess, after that, it jumps to $7.14, $8.10, $9.54, $11.87. It's going up there. It's kind of gotten a great improvement, $12.41 and then COVID hit. $11.44 then it snapped back and made it to $14, $14.92 and then $16.82 and then $18.76 and after that, a $19.51 and we just showed you the $19.19. But I told you already, that's carrying 36% of our pension difficulties. All right. So we have this. And if you look at that trend, you can say somebody had to make it so. And we have here with us -- some of those people have gone on, they've left our corporation and are retired. So I have some retirees over here, that I'd like to introduce you just retired, our former Director of Internal Audit, Ms. Rachel Nyberg, after her, Rachel, can you stand up? Where are you -- over here. Okay. Rachel.

I think if we give everybody applause at once we'll be here forever. So okay, well, will stand up and then after him, just retired also the Chief Financial Officer of our credit company, out of Liberty, Mr. [ Andy Trester ], he's been with us 26 years. Give him a round of applause. And then our RCI effect, our RCI leader in Milwaukee plant Ann Whitey also kind of just retired just a few years ago, stand up Anne. And then Gary Henning, Gary Henning, who was retired recently and was with us 51 years. As the thinker, behind all our metallurgy. And there is a special treat. Special treat, all the way from Australia, know how long it takes to get here from Australia. We have Mr. Ajit [indiscernible] who was the General Manager of Australia and he's brought with him his wife [ Dammi ]. So please stand up. Both of you. Give them a special round of applause. Thanks so much for all you've done for the company. .

All right. Thank you. Thank you. Now this trend as -- if you're an investor, you're kind of saying, "Great, I'm glad the stock price went up and all but what about the dividends? And the dividends have been pretty good. You have dividends of $1.30 way back in 2011. $1.40, $1.58, $1.85, $2.20, and then it jumps all the way -- I don't want to read them all or recite them all, jumps all the way to last year, it was $8.86 and one of the people who contributed to that is sitting out here in the audience, I want his retirees. He was retired 21 years, my friend, my colleague, and my brother. Mr. [ Anuk Banerji ] stand up and up. Welcome back.

Okay. And the good thing about our dividends is we started paying them in 1939. We've paid one every quarter since then, and we have never reduced it. So that's the longest stretch probably the longest stretch of uninterrupted, unreduced dividends in the New York Stock Exchange, which says how strong and capable and resilient our company is. So that's where we've been. Now let's think about where we're going. I said we've advanced. We're advantaged by strategy and structure, and I explained that to you. But it's funny when when you prepare for one of these things you think about it. We obviously don't prepare that much, is that you think that there are many people involved, many constituencies. And one of the constituents is the community. We don't go very far without the support of our community and Kenosha right here is our home.

And I'd just like to mention, not ask to stand but mention, some of the community leaders, David Bogala who's like [indiscernible] who was the mayor, Samantha Kirkland, who is the County Executive; Brian Ulbrich, who is the Former President of Gateway Community College, one of our partners. Matt Jansen, the current Vice President of that college. Gina Madriano [indiscernible], who is the Chair of the Board of Trustees of Carthage College. Lynn [indiscernible], who is the President of Parkside College and back in there somewhere is my old friend, community leader and rumored, to be former Green Bay running back Mr. Mahon, everybody knows it. All right. Let's give those people a round of applause.

Okay. So that's where we're going. And you can see our first step is we kind of say we have runways. When we look forward, we said we have runways for improvement and runways for growth. So let's talk about the runways for improvement. They're actually offer who we are. Remember, I said we had certain beliefs, and we believed in safety and quality. Well, these are our runways for growth. They are -- we call them Snap-on value creation, processes. We work every day to make our business better. First is safety. The purview of Mr. [indiscernible] down here and safety, look at the record in terms of accidents. Last year, in fact, 98 of our 103 facilities had no lost time accidents. And a Snap-on associate, is 6x less likely to have an accident today than they were 20 years ago, some work of [ Mr. Cologne ] and the teams throughout the organization. So we feel pretty good about that. And sometimes investors will ask me, well, do you talk about safety. Well, the problem is -- we talk about it because it affects us. And we make tools for working men and women. We want them to be safe using our tools. What does it say about us if we can't keep our own people safe.

And then you talk about quality. I talked about the idea that 5 do the work of 50, those 5 handles and and 10 sockets were made at the highest quality of steel and it so it remains today. And we measure a lot of things about quality. But one of the things we do is to ask customers, what do you think. And you ask them a bunch of different questions, like what tool is most innovative. What tool has the highest quality, what tool are you proud of stuff? What tool makes you think that it will get the job done and what tools do you want to have? And in each of these cases, Snap-on is above 60% of the people saying that's our name. And #2 is just at 10%, and #2 varies. So we have quality.

Let me talk about customer connection. This is an important feature of Snap-on. You see we don't survey customers. We go to the -- and build our tools on that basis. We go to the actual work site, observe the work and then turn that insight into a tool, which will move the world forward by solving a particular problem. We say, some on the video said, we summon the new out of the now and that's out of the now. And that's what it means. We go into [ garage ]. That's now we see a new tool in those insights. We have 85,000 SKUs, and we've built a number of them. But one of the reasons why we're able to do that is we have a lot of places where we see work. We have 3,700 franchisees. We have who call on 1 million technicians. The 3,700 franchisees call on 1 million technicians every week, almost no one else does this. We have a number of direct sales forces. We are in 700,000 garages in the United States and Europe. We have databases of 3 billion repair records and 600 billion repair data points. We call on 3,700 schools -- community schools to equip them with Snap-on product and see how the students use them, making the student Snap-on customers for life and then this very building has had 4,000 customers visit for special interaction. So customer attention is very important to us. And it generates innovation.

Innovation is the way in which we take these insights and we develop a product. And this is the -- the people who do this are our engineers. So I've got a bunch of our engineers back here. I'd like to introduce some of them. And each of them has something to do with one of these tools. You see the ratchet -- you see the hand tools up there, the little ratchet, the little ratchet. That's the smallest ratchet on the market, and we have -- we have [ Dave Gross ] in the back, who's one of our manufacturing engineers, came to us from -- he's a [ indiscernible]. He came to us from Southern Illinois. Stayed up, Dave. Okay. Let's give him around of applause. Okay. I'm going to ask the rest of you just to stand and give them applause at the end. Okay, your hands must be getting tired. So right -- keep standing, Dave.

And then [ Dave Seversky ] who is a power tool engineer, came to us from Southern Illinois -- not Southern Illinois, Northern Illinois and he helped design this long neck ratchet here. It's 13 inches. It allows you to reach in and get anything you need, get to places where other rachets can't match, can't reach. And it's 30% longer. It's a great seller. Stand up. Just stay, David -- both David stand up.

Okay. Now all right. Next to him, I've got from Algona, you see this box out here. This is a 1776 box. We made it just for the semi quincentennial And it was helped -- this young lady help design it and produce it. [ indiscernible ], who has only been with us 3 years. She came to us from the North Dakota -- South Dakota School of Mines in University of Nebraska. Stand up [ indiscernible ], she's up. And then [ James Pango ] who's been with us, by the way, 38 years and he's an electrical engineer and he worked on the new TRITON. And I think on the new Apollo was just launched last night, which is a diagnostic unit. You can see it up here. This is a TRITON unit. Then [ indiscernible ] who is from -- came to us from [ indiscernible] who's from -- who's in our challenger lift facility in Louisville and helped design this this 12,000K -- 12,000 pound lift that's particularly adjustable is brownbreaking on the market. And then finally, Pat Mancini from California who designed -- designed this control tech state-of-the-art torque range for industrial use and Pat is from unbelievably, he's in California, but he's from [indiscernible], he went to Alford and then RIT, I believe.

Our engineers, the innovators, give them a round of employ Okay. So our runways for improvement. Snap-on Value Creation. Safety, quality, customer management, innovation and rapid continuous improvement. Rapid continuous improvement is how people get up every day and figure out how to make their job better. You heard a lot about AI. And AI is important, but an equally tremendous force is harnessing the force of your people who know the work and can figure out how to make it simpler and better step by step by step by step by step. We have RCI coordinators in every place -- we have an RCI conference where we celebrate the best RCI events in the world in our world and the winner gets $15,000, traveling token and $15,000 for a party in its own facility. And you can see the results of this. You see the numbers for OI, the OI margin that I just talked about. And what this adds up to since 2005 is 1,560 basis points of improvement. This is 80 basis points per year. Anybody who's in business and here's that number, knows it is a wow -- is a wow. This is a place where people kill for 10 basis points. And so rapid continuous improvement. It's -- so that's -- those are our run rates for growth, safety, quality, customer connection, innovation and rapid tines improvement, and they drive our way forward. We don't go anywhere unless we keep improving.

Mr. Jack Michaels taught us this. And then, though, we -- when we step back and we think about growth -- you have to think of it in this way. And I think this is important to share with all of you because it was a watershed event in the United States -- in our business. We looked at our business and we were saying, we're a great business. We make wrenches. We sell them through franchise vans, to automotive technicians. And we did, and we did it great. No one did it better. But it was a narrow description of what we really do. What we really do is what I told you just a minute ago, we get in a workplace. We observe the work. We figure out what are the stickiest and most difficult tasks. We summon the new out of that now, to provide a new product. So Snap-on is a company that observes work and takes those observations and creates it to make it easier, and you can make it easier, not necessarily just with a wrench but you can make it with a piece of software or a number of other things. And you don't have to sell it through the vans. -- although the vans do a great job, we can sell it other ways because other people buy from other types of distribution.

And then finally, we don't have to sell the auto mechanics. We sell it to anybody, anybody who works on critical tasks because Snap-on like all the way back to the greenfield, a Snap-on tools like a jewel. And so people who are doing something where the penalty for failure is high, want a Snap-on level tool. And so that's what we focus on.

Now as we look forward, there's one other thing in our way. There's a couple of other things in our way, headwinds. Okay. Everybody talks about headwinds, but there's a lot of uncertainty out there shouldn't there be. We have things like people talking about Greenland. We have problems with China. I think the relationship with China has never been worse. We have a war in Iran or some kind of action in Iran, we have a war in the Ukraine. We have tariffs. We have government shutdowns. And I'm not playing -- this is not a political statement. I'm not commenting on what -- but these things, if you think about it, create a fog of uncertainty, just tariffs.

You look at tariffs. I mean tariffs, you can have a different opinion about tariffs, okay. But what you can't have, what you probably don't have if you were in our place and say, wait a minute, what tariffs are we going to use? Tariffs from April. China is 150%, 170% in April. Tariffs from a later on in July 55%, later on 45%, you can see the same thing in Taiwan, and the thing is written across all the tariffs. So one of the things that creates headwinds, and I am not -- it's way up my pay grade to say whether this is a good thing or a bad thing in terms of national policy, but it doesn't help business. You can't plan anything. And so that's another headwind we have. So I think we have some things, though, that will offset the headwinds. I believe. Go ahead. We call them points of light.

How do you like to know this new coloration. We have a bunch of different colors that come out of our new building out here. I think one of the few people to build a building in the boundaries of the city here in a while because we're -- Kenosha is the wellspring of our past, and we're going to be here, we think, for another 105 years. So we want to build here. So go ahead. This points of light. This is the box. We introduced [indiscernible], and she was one of the people who worked on this box. And you can see it up here. You can see the outline of the American flag and then the top part, the iconic events like the iconic American scenes, like the Statue of Liberty and the raising of the flag at [indiscernible] and Mount Rushmore and the landing on the moon. And took a lot of effort to create the stars, we had to cut out the stars and have the white background in there and make sure they got painted white and we built these and everybody loved them. But -- we didn't sell that many. You know how many we sold 1,776. We built 1,776 of the boxes. So I think everybody -- the franchisees talk about, I got one of the boxes. It's one of our points of light. It helped us grow in the situation.

Now here, we got another one and you look at the power tools. And I'm going to talk about Verizon, the Triton. The Triton is a handheld diagnostic. Now a lot of people here who i suppose don't know what a handheld diagnostic. But what it is, is it's a laptop for a car. You go in and you contact the car. By the way, this does it wirelessly. You contact the car, reads the code. It says the car says this, I'm sick because of this. But that isn't definitive. There are a lot of possibilities, and this will put you in touch with one of our proprietary databases of 3 billion records and allow you to diagnose the car with great speed. No one else has this database. No one. Ford and General Motors and [indiscernible] are blind to it, because it happens -- the warranty. So it's a great advantage for us. It's one of the great things, Snap-on Wheels and it will be especially more powerful now that AI is becoming more provident and can bring more patterns out of such data.

And then finally, we have the Nanopower tool. And Nanopower tools. It's a small tool. It fits in your pocket and everybody loves it because there's a lot of work under the dash or in different places that don't take a lot of power, but you need to get in there. Today's cars, geometry and access is a big factor. And these things, our Nanos have been a point of light. We also have -- go ahead. I want to talk for a moment about this box, 1,776 of them.

You know that this is the Semiquincentennial of America. I remember the Bisesquicentennial. So I'm kind of bumped out about this a little bit, but I'll be celebrating at all. And it's worthwhile thinking about America. How is it we are, where we are?

Well, one of the reasons is from all through America, all through our history, men and women have been willing to leave their homes and go into harm's way for the good of our nation. This happened in the sows of Valley Forge, the [indiscernible] of New Orleans, the fields of Gettysburg the Hill at San Juan, the forest at Arden beaches at Normandy, the clips of Sipan, the [indiscernible] slopes of [indiscernible] the Black Virgin Mountain, the ridge at [indiscernible] and places all around Canada, and it continues today, people leaving their homes and willing to sacrifice for us, if nothing else just to put their lives on hold. It's one of the very core of America.

And Snap-on people have been central to this in many different ways, not always to leave their home, but to work on behalf of the nation and one of our great [indiscernible] out here in the in the garage is a -- not in a garage in the museum -- is a telegram. And the telegram is addressed to the people of Snap-on tools. And it says, it's dated November 25, 1942. And it says, "Thank God for the people of industry, labor and management in America that have given us the supplies we need to pursue this Noble campaign. Thank you all and God bless. And it's from Allied headquarters, in Europe, and it signed [indiscernible], Dwight D. Lieutenant General commanding. This is [indiscernible] we treasure because it shows how important Snap-on was and how all the people who work here went went to bat for America working on working for our country. That's particularly meaningful in [indiscernible]. There's another story I want to tell you about Warner [indiscernible] he's passed away. But this was an American. He worked for Snap-on for 44 years in our press shop. And this guy leaves here, trains with the tenth Mountain division, fights in a famous and bloody battle in Italy called River Ridge. He tells me that he carried a 50-caliber machine gun up the river edge and used it, and they won that battle, which was pivotal in our taking of Italy. And he went on to other battles throughout the war. Then in the full -- and by the way, anybody has been the army and after the 50-caliber machine knows it ain't so easy lift. Anyway, this guy did all this, and he comes back. He's about to come home. So he comes on a boat, he gets to New York City. He gets on a train. The train takes -- a couple of changes to Kenosha, he gets off the train. This is, he's describing. Gets off the train and his father, only his fathered. They shake hands. He goes home, his mother makes him in his own words, his favorite dish [indiscernible] and meat balls.

And so after fighting all these battles, coming over on a boat, getting on a train coming here, going home and having [indiscernible], the next day got up and came to work at Snap-on. This was an American. And we have other people here who have sacrificed for us in the military. So I'd like to ask some of them to stand. Save your applause and first, we have Rich Boucher, who's back here and he was with us 26 years, a machinist and he was the army, the Vietnam, and he's very active in supporting Vietnam veterans. I think when they come back, and then we have Jim Singer, who's here with -- and he's with his wife, Roseanne, who everybody knows because she used to work here. And then we have Dave Singer, who is here with his wife, Susan, and he was in the army, and I believe he was a member of the story, the Big Red One, the first [indiscernible] Division. We have Peter Steve, who worked for us for 38 years, was [indiscernible] and he's here with his wife, Carol. He was in the Army during Vietnam. And then Vietnam era Navy Vectren, Mr. James Gamble, who's here with his wife with Stella and his daughter Kunita. He was a single man in the Navy, leaving in their homes, going into harm away and sacrifice for America, these are Americans, give them a round of applause.

Okay. Let's go ahead. All right. So we have some things in our favor though. I said that we're going forward and there's a lot of headwinds, but we have our principal value creating mechanism which is pretty strong. I described it to you already, and it's simply customer connection, go into the garage seeing what works what's needed, what tools can move the world forward and turning those insights into an actual tool. By the way, this principal value-creating mechanism doesn't tie us to any industry, any distribution any technology. It works for all of that. It's why Snap-on has such a great future. So okay, the other thing we have, as I told you about advantage by strategy and structure is our factories. Our factories are terrific places -- and we have 36 of them, 36 factories and 15 right here in the United States. So these things allow us to pursue our 4 runways for growth. Enhance the van channel. The vans we have the franchise vans channel, we want to enhance it. We want to expand and they sell just to technicians. We want to expand to repair shop owners and managers. They are people who like Snap-on and stand right next to the technicians, but they buy differently through direct and through distributors, extend to critical industries, role as Snap-on brand out of the garage where people want the effect of Snap-on tools in places like aerospace and the military and mining and oil and gas in education. And then build in emerging markets because no matter how our situation is with some of the emerging markets now, there are opportunities for us going forward.

So let's talk about enhanced van channel. Enhancing the van channel takes making sure that you have great franchisees and leveraging their capability. And I've asked several of our franchisees to come here today. I want to introduce them to you so you can recognize them. When you see them afterwards. Mr. [ Lyle Yannis ], right? From Estevan, Saskatchewan, stand up. Can you move to the left a little bit, let them be seen here. I think he's been with us 8 years. Next to him, somebody has been with us 26 years, Mr. Paul the #1 franchisee in the United States -- you're standing. And then we have from Water Lou, Iowa, was 6 years with us Helen Woods, who is a video star for us since she was one of them. And then I have a retired franchise here, Mr. Brian Neil, who was with us who had a route in [indiscernible], Iowa and [indiscernible], Illinois actually. And the reason why I've asked him to comments he worked for us, he was a franchisee for 38 years. But more than that, he had one of the great quotes that we ever heard out of the franchise system. We had him on camera and he said, "I feel like I shape lives. I change lives every day, wouldn't you want to be in a company that was able to give somebody something that was their most prized possession. And so it is. He's here with his wife Natalie. Let's give them all a round of applause. Brian, thank you.

All right. Thank you. Thank you. So enhance the van channel, expand with repair shop owners and managers. This is basically taking what was our inherent understanding about order repair. And you have like -- there are 600 people in building, 300 fancy themselves the auto repair people and you take that and you move it to help the shop owners and managers. Part of that help is from things like the diagnostic unit that allows repairs to go much faster. And that business run by Mr. Tom Ward, and Mr. John Wolf has done pretty well for us. And then extend to critical industries. A lot of people didn't think this was likely, but extended critical industries is just rolling a Snap-on brand out of the garage. To me, people who actually want our tools. I once met an an airline mechanic. He said to me, "I love Snap-on tools, but I can't buy them. There's nobody that calls on us. I feel like the only way to get Snap-on on tool is to throw myself in front of a Snap-on truck, and then they'll be able to now we call a people directly. A lot of them direct and people like Boeing and the other places. And we're in the F-35 jet. The building and the maintenancing of the F-35 jet, the ARTEMIS II use Snap-on tools to build it. These are places where the penalty for failure is high and the need for Snap-on product is necessary is really wanted, and we extend to critical industry to do that.

And then build in emerging markets. We have about 1,000 people in emerging or 1,500 people in emerging markets, Mr. [ James Zong ] in charge of a big piece of it in Asia Pacific. And we have 5 factories there. And we don't have them to support the United States. We have them to take the advantage of all the billions and billions of people who want to buy our products. And that's -- so our runways for growth, enhance the van channel, build and enhance van channel, expand with repair sooner and managers, extending the critical industries to build in emerging markets. And you could say, okay, in the future, how do things look -- they look good or bad. Well, we think we have a lot of strengths, but the markets we play in, particularly the auto repair market looks pretty good. Look at this data. If you look at cars. I think you're going to need more repairs well cars are getting older every year, now 12.8 years old, to just keep getting older every year, it's the math. And so therefore, there's more business for us.

And the car park keeps getting larger in the United States. It's now up to 290 million cars, which means there's almost 1 car for every man women and child in the United States. This is a great market. And the other thing about it is, it is a place where the cars keep getting more complex. To repair a car today, you feel like you need a PhD in electronics and mechanical engineering combined. Because it's a very difficult thing. Here's a fact, interesting fact. You know many doctors that are in the United States, 1 million. Do you know how many car mechanics there are 1 million. So a doctor is no more rare than a car mechanic. So people need car mechanics. And we see this. We see the aging of the car park and the rising complexity because as the cars get more complex and the mechanics need more help, we can put them right on target with products like our Nano and our Triton and the new Apollo that we launched last night. And so you can look at Bureau of Labor Data. And the Bureau of Labor Data just simply says the number of technicians is growing. The number of hours are working is growing. Their wages is growing very fast. And -- the amount of money Americans are spending merit household spends and car repair have grown high single digits. This is a good market, and we plan to take advantage. This is one of the reasons why you should be confident, why we proceed with comments even though this has been a challenging year and the challenges remain, we proceed with confidence.

But let's look at -- oh, I want to say something about this logo here. 105 plus logo, why we have 100-plus logo because we decided we're 106 years old, don't want to start talking about 106. So we're greater than 105. That's the idea. We're going to keep the -- saves us marketing -- running to keep changing. But then you looked at, okay, that was the last year, old news, as Aldo would say, old news, Jethro he'd call me Jethro, living in the past. Those of you that's an in joke for most people here. okay? But I remember that album.

All right. So our numbers in Q1 were like this, they're pretty good, $1.207 billion, up 5.8% in sales, up 5.8% and as reported. And then if you take out currency, which is a financial contract, 3.4% growth, which is, I think, fairly good, and the $1.207 billion was the highest first quarter ever for Snap-on and the second highest of all quarters ever, which means we did pretty well in a difficult environment. And the OI margin, the gross margins, which are an indication of how bad material pricing and tariffs are hitting you and it held up pretty well, 15.4%, down 30 basis points. but that was mostly due to currency. The currency didn't change. That would have been rock solid. It's quite a feat when the world is spinning all around you with tariffs and increases. And then the OI margin, 20.8% versus 22.1% versus 22.7% last year, down 60 basis points, but again, it's currency and spending on things like AI -- but it was a good quarter. The Street was pleased and so were we.

Now remember, I always say we look at these things, and we were proud of them, but we are unsatisfied. We're proud of these results. They're terrific. It shows how strong and resilient your company is in the storm, but we always think we could do better and we will. So that's my story.

It's sort of like this is that these are challenging times, and your company is still strong and resilient and powerful -- and we are proud of our results, but we're unsatisfied. But when we look forward, we see the opportunities in our markets and other things we have. So we are proceeding with confidence -- and the principal reason why we proceed with confidence is we know of our strengths in product. Snap-on products really do make work easier. They really are the basis of summing the new out of the now. They do make work easier and they move the world forward and everybody knows it. And motor magazine and professional tools and equipment news with their innovation awards and professional tools and equipment news and our People's Choice Awards, say it so.

Snap-on brand, is our tools are enabling. Snap-on brand is defining. We really are the outward sign of pride and dignity that working men and women taking their professions and tattoos and toddlers and tombstones say it's so every day. And then we do have differentiating of people. That was the big -- one of the big purposes of this, to convince you of that and show you that we do have people, capable, energetic, committed, battle tested, not accepting less than strength. And you saw it in the longevity from 45 years to 52 years. We saw in our retirees, we're proud to be with us here. You saw it in the tie to the founders. You saw it in the innovation people, the engineers who delivered all this. You see it in the franchisees who are enlisted in our company, all of those say it so. So I hope that when you heard this, you have a couple of more things to say, but I hope you hear this.

You leave here convinced that this company is special, that we really do have strength in the fog. And this company is worthy and it justifies the commitment and energy and capability that you enlist in it's success. And that's true because the final message of today is this is a strong company with an extraordinary past an exciting now and a promising future and all of you make the way. Now we'll take some questions. Okay. Questions from the audience.

I think we have our first one right here in the center.

Nick, Stephen [indiscernible] with Legal. I'm wondering with all the tariffs and the...

Are you also a parliamentarian.

Not today. No.

Can you tell me what Rich Miller does?

A lot. Everything.

This is the section of the presentation where you're supposed to tell the truth. Okay. Go ahead.

So with all the tariffs and the ongoing conflict with Iran, I'm wondering what are the company's key priorities to maintain growth and profitability going forward?

That's a pretty big question. Our key priorities are just what I showed you is we want to nurture our Snap-on -- first of all, we want to nurture our Snap-on value creation process. Keep working on safety, quality, customer management and innovation and rapid continuous improvement, because this creates the substrate on which we leap forward. And then you could even add AI fits in this. Everybody is worried about AI. Well, okay.

But we have a strategy around AI. We reviewed it with the Board yesterday, but it is just part of that value creation. We engage our people to create the way. We're going to keep doing that. So that will give us a great substrate. Then we have great opportunities in repairs in the vans because the -- just as I said here, vehicle repair just gets more complex. We can sell more product because it's harder for the mechanic to do it based on the [indiscernible] or pants. Although I understand somebody tried to fix one of the Board members cars just by getting a description of the noise in the car last night. But I don't think it generally cuts it today.

We're going to try to expand with repair shop owners and managers. And all that means is getting more product to sell to them because they love Snap-on product. We just don't have enough of it. We haven't been building that product line as long as the ones we built for the technicians. But we're doing things like expanding in diagnostics and equipment and software, both software and hardware. Then we're going to extend the critical industries because this is our biggest opportunity because we haven't really penetrated this. And those people love our product. So right back here, why did we add this building to give us more capacity to access the Boeings of the world and the Space Xs and just the places that are building, even general factories, so access aerospace and the military and mining and oil and gas and natural resources and general industry and heavy-duty equipment.

And then finally, we don't want to forget about emerging markets. They're a little off the bubble now, but we like to be everywhere. You saw in the beginning where we said we had the Snap-on nation from cities all over this country and from countries all over the world, we want to keep that strength up. So that's what we're going to do. Okay. Next.

Nick, right over here.

Kathy Parker from the Tools Group. You've been a strong advocate for up-selling the American workforce. I'm curious to know how you think AI might impact the skilled workers in our customer base?

It's going to be an impact, but look, I think people adjust. Our view is AI is enabler, armed with AI, our capable people, our differentiating team will become more powerful, generate more products. So one of the things about our company is we don't make a lot of common products. We go into the shop. We observed the work. It's a smaller group of people, smaller tasks we're trying to fix and we build a product for that. And that's pretty costly when you do it in low volume. And so AI will allow that cost to go down. But it also will enable us to do more of that. The real value of AI is to develop stronger products not to do things more efficiently, although doing it more efficiently is something to do that. I think -- look, and the other thing, if you look at our customer base, the economists, I'm going to say this later, the economist said that the people who work, mechanics are among the most AI proof of professions, and I believe that to be true. Next?

We got one over here.

Yes. Nick, Steve Bartels, retiree.

Steve Bartles? Okay. Did you work here?

I did for a few years.

I see -- very few. Okay. If you count only working years. Okay. Go ahead, Steve.

The Tools Group had a great start to the year and a strong first quarter. I was wondering what you're going to do to keep that momentum going?

Well, one of the reasons why we had a good start. I mean there are a lot of reasons, our franchisees and so on. But the technicians today because of what I talked about, all those headwinds and tariffs and other things, or the wars, it's pretty uncertain. If you think about it, we haven't been in such an uncertain time in a long period. And so what we know is the technicians, the everyday people, the grassroots people. They still have work. The technicians that I showed you, the technicians their wages are going up, the hours are going up, everything is going up. So they're cash rich, but they're somewhat confidence poor.

So they're not investing in as many boxes as we used to sell because they -- it requires that box is pretty expensive. It requires them to pay it off for an extended period of time. We're able to help them with our credit company, but they still have to -- they're still tied to a payment for a long period. They are less likely to do that. So if you're Snap-on, we have 85,000 SKU product line, 40,000 for the Tools Group, you just shift to try to build more of those quick payback items to take advantage of their preferences, and that's what worked in the first quarter. We're going to keep doing it. And what I mean by that, fewer boxes, more power tools and hand tools. All right. Anything else?

One more right over here, Nick.

Nick Chris Mason with IT here. You talked about rolling the brand out of the garage. Do you see any opportunities in the data center boom?

Actually. We just did a deal for doing data centers to help construct it. I'm not sure what will happen when the data centers are running, we'll have to see that. But the construction is going to give us some pretty big opportunities because, a lot of it has to do with the construction and isn't all bytes and bits. There's a lot of mechanicals and holding some of the items to cooling the space, and we have opportunities to address all of that. We've got air conditioning units that do this. We have torque product that will allow them to build the racks that are necessary to hold the data, the data devices. So we see that as being pretty good for us. Any other questions?

That's it. Okay. Look bear with me one more minute.

I like -- when I stand here, thinking about it, I guess, I could say we've done what we said we would do. We have spoken of the unique and the special. We have spoken of a company and its people, essential to the serious and respected by the world. We are a company that is the bringers of prosperity. We are the bearers of pride and dignity, and we are the shapers of lives. And we spoke about that all here today. And we spoke about the resilience and the capability of the company going forward. And this is -- I've been in big companies and great companies, but this is a special one. It is unique and special.

And one of the things I want you to realize when you go here, it is all of us who do this. You see, Snap-on cannot do what it does. It cannot proceed with confidence if it -- it doesn't have the confidence of our investors. We can't go forward if we don't have the conviction of our franchisees, the commitment of our associates, the faith of our customers, the support of our communities. And of course, we wouldn't be where we are if we didn't have the legacy of our retirees. To the extent we strive to go forward, we stand on your shoulders. And it's true. See, these are interesting times. I mean whatever side of the political spectrum you are, you've got to recognize, I think you'd have to recognize that things are going like this.

Every day you get up, and you can read something new now. I'm not making any comment on a political basis, I'm simply saying this does create a kind of version of difficulties. So as you move forward, it's a challenging time. Our technicians are uncertain. But you see the clouds we see, the threats we meet, the wars we wage, the fears we hold they are formidable and they create a fog when we look forward, ask yourself that that's not true. It is true. But shining through that fog shining through that fog are the resilience and the power and the importance of work, and we are the people of work, and say, okay, it's just a -- it's mechanics and other things. But if you think about what I said, about makers and fixers historians have held that America and any other society that goes forward does so because they have people who can accomplish things. Can make and fix things.

America was ascended because it is, and you don't have to have any greater evidence than to look at the telegram. In the -- and we see them. You see America won World War II because we had great leaders and brave people like our heroes that we talked about here. But most people recognize this, they also were aided by the people in the factories, the people in the laboratories who created the industrial substrate, that in World War II allowed us to win the one war we could not afford to lose. And okay, you can say that's ancient history. But recently, in the pandemic, we saw that, well, 1/3 of America was sheltering in place, the people of work were at their posts ensuring and keep ensuring that life went on and that society would not disintegrate. And we were all witnesses. And you know it's true.

And Snap-on as a company, and all of us are people who, one way or another are involved in that work which does by virtual resilience and [indiscernible] being essential, shines through that. Just that's the story about the economist saying that, boy, the professions that are immune from disintermediation from AI are the professions of work. I believe it's true. And Snap-on is a part of that. and dedicated to it. You can hear it in the video in terms of people and the litany of work. We speak now as a unique and special, we speak of a company and its people, essential to the serious and respected by the world. We are Snap-on, and we are those people. We are Snap-on, and we are in progress. We are pride, we are prosperity, and we shape lives. And we have for 105 years, we are Snap-on, and we make a difference now, now, now, now, now and for many years to come. Why is it we have resilience, why is it we're confident going forward because of that? Because we know that without what we do, vehicles don't roll, cities don't rise, lights don't shine, planes don't fly, dreams aren't made. And yes, in this [indiscernible] doesn't rain and all of that is created by you.

I hope that's the message you take here that you're all involved in this. For us, I just want to end by saying for all the -- we talked about the history. You saw those trends. And people in this audience has their fingerprints all over these trends. And they had -- we think the first quarter of this year was a success. And we thought last year was success in the turbulence. And for the progress you have created, all of you have created in this most challenging of times, you have my congratulations. For the capability and energy and special understanding and commitment, you bring to our company every day, you have my admiration. And for allowing me to visit personal and for allowing me to be among you, people are respect, people that I can depend on and people that I can count on as friends, this allows me to shape my life and fulfill my dream for that and for many other things, I thank you all, see you back next year.

Good day, and welcome to the Snap-on Inc. 2026 First Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sara Verbsky, Vice President, Investor Relations. Please go ahead.

Thank you, Betsy, and good morning, everyone. We appreciate you joining us today as we review Snap-on's first quarter results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, Snap-on's Chief Executive Officer; and Asia Pacific, 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 provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. These slides will be archived on our website along with the transcript of today's call.

Any statements made during this call relative to management's expectations, estimates or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward-looking statements. [indiscernible] differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in our forward-looking statements are contained in our SEC filings.

Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everybody. This was some quarter. There are a number of different storylines threaded through our last 3 months. But I believe if you step back and you look at the whole, you can see several important facts. First is that this has been a period of considerable uncertainty, but the resilience of our markets and the strength of our operations have restarted a momentum registering strong sales. It's also quite clear that our team continued to invest in expanding and preserving our strengths and our line of products and our continuing brand position and new technologies for more powerfully wielding our proprietary databases. We believe and many people believe that the combination of technology and proprietary databases are among the great powers in business today. And through the blizzard, with uncertainty in tariffs, opposing currencies, rising material costs, all the elements of storm, our gross margins have resisted the impacts and overall profits have remained at a strong level.

So today, I'll review with you the highlights of our quarter. I'll give you my perspective on our results, on the markets and on our progress. And after that, as usual, Aldo will give you a more detailed review of the financials.

For us, when you look at the quarter and what it means, we proceed with confidence, confidence in our markets, in our products, in our brands, and of course, confidence in the knowledge and energy of our experience and capable team. And as such, we're encouraged by our first quarter results. We believe they reconfirm that this confidence is well placed even in the most difficult times, and you can see it in the numbers. Overall sales in the quarter were $1.272 billion, up 5.8% from last year as reported, including a 3.4% organic increase, a new first quarter record and the second highest quarterly -- our second highest quarterly sales ever.

APO operating income or OI for the quarter of $250.8 million was up compared to the $243.1 million recorded in 2025. And the OpCo operating margin was 20.8%, 50 basis points below last year, but still strong despite the 40 basis points of unfavorable foreign currency and the impacts of higher investments.

For financial services, evidence, earnings of $68 million in the quarter were lower by $2.3 million or 3.3% and that will lead to a consolidated margin, including both OpCo and financial services at 24.4%. That compared to 25.3% last year. Our overall EPS was $4.69. This was up $0.18 from 2025, and the results show broad gains, overcoming the uncertainty and demonstrating our resilience.

Now let's turn to markets. We believe -- we continue to believe -- we believe that the vehicle repair environment remains robust, extremely favorable, requiring a continued stream of new tools and information systems for confronting the rising complexities of the modern vehicle. It's clearly an unmistakable trend. The repair shops, dealerships and independents, they see it every day. They'll tell you repairs are tougher and more complicated, and we love this. The ongoing strength in the market is -- and the ongoing strength of the market is confirmed by its key metrics. Car park continues to age. The average age is now at 12.8 years, and naturally, that requires more extensive maintenance and overhauls. And that's seen clearly, if you look at the household spending on vehicle repairs, it's up single -- up high single digits in the quarter. But it's more than vehicle so it's also seen in the world of the shops and the tech, the hours worked are up and the tech wages are [indiscernible]. [indiscernible] and the need for more skilled text continues -- and the need for more skills continues to increase. And we believe all these data points say that vehicle repair is stronger than ever and the prospects that is just getting it better. That said, the uncertainty is still high across the American grassroots. Tech confidence remains tepid. [indiscernible] toward long-term purchases, but they are bullish on shorter payback solutions that make work easier, faster, safer and helps them beat the clock and move on to the next vehicle.

Now Snap-on speaks with its franchisees and techs all the time. In my recent conversations with individuals and our van network coast to coast say that green shoots are popping up. Even with our tool storage units, they were up this quarter. I'll say that again, tool storage was up. And as we spoke, the franchisees expressed their excitement about -- and as we spoke to them them, I had the extended conversations, the franchisees were excited about where they're positioned and the enthusiastic about their future, as I said, they see green shots. But it still seems that with each day -- having said that, it still seems that with each day, there's more bad news for [indiscernible]. I mean, the hits just keep on coming, risking another rise and uncertainty.

Having said that, though, we like where we're standing, rooted in the resilient vehicle repair market, continuously connected with the techs, observing the work, launching great new products and having the capacity to manufacture them right here in America. And in this environment, we're seeing what we think might be an early [indiscernible].

Now let's shift to the other half of the automotive segment. This is where Repairs Information or RS&I besides servicing shop owners and managers. The activity in the RS&I remains consistent, although it does, at times, reflect variations based on new product timing of OEM campaigns. Shop owners and manufacturers see the trends. They know vehicle complexity is rising and then it drives the need for more sophisticated systems, equipment and tech assist to manage those changes. As I just said, the drumbeat can be influenced by the lumpy nature of the OEM project sector, but the owners and managers keep saying they need more techs, the garages are busy, the repair difficulty is increasing and they need more help in keeping pace. I can tell you, Snap-on is up to that too. That's why RS&I continues investing in modern equipment and diagnostic platforms that navigate procedures on vehicles new and old with precision and with speed.

Now we do have a strong lineup in undercar and collision equipment in RS&I, but particularly powerful our diagnostics and information systems and proprietary database. We continue and we continue investing in that advantage to fortifying our positions by applying new technologies like large language models and natural language translators, those capabilities that enable to expand our data sets more quickly and wheel the resulting systems more powerfully. The progress [indiscernible] systems that search billions of data points, matching the unique vehicle profile and current systems to just the right fix. And it all happens in seconds.

A great example is our newly launched feature that streamlines the process for confronting job estimates, kind of a Mitchel one. It's a Mitchel One brand. And it's estimates are particularly for and time-consuming challenge for any shop, but our new system for Michel One makes it much easier. We're going to hear a lot about that later as we go forward.

So that's vehicle repair, robust for both individual techs and for grade owners and managers. And we believe we have a decisive advantage in both arenas. We expedite repairs, we improve productivity, we keep people moving, we help techs and the shop make much more money. We believe it's a great place to be.

Now let's go to the critical industries. This is where our Commercial & Industrial group or C&I operate, rolling the Snap-on brand out of the garage in harsh environments where the penalty for ferry is high, the work is demanding and the need for precision and repeatability and reliability are high, all conditions that warrant a Snap-on level product. C&I covers a wide range of applications from the latest space missions to expanding the power grid, to extracting natural resource, helping build the data centers. This is where we excel with customer connection and -- we excel with customer connection and innovation, observing the work and turning those insights into individual products or custom kits, matching the tools to the specific task. It's a business rooted in the essential, both domestic and internationally.

And with that, critical industries offer an ongoing and robust opportunity. And as such, we continue to invest in those possibilities, expanding capacity and building our understanding the work and it's paying off. The industrial business, our critical industries operations, showed considerable strength in the quarter, growing high single digits with particularly great and broad strides in aviation, heavy-duty and natural resources. So that's our markets vehicle repair business [indiscernible] not just in this interim, but driven by continuing secular trends of aging and complexity and despite the the uncertain environment of secular trends keep it moving.

The metrics say being a tech is a great place to be, and Snap-on's keeping up, pivoting to match the current tech preferences with great products. The shop owners and managers recognize that upgrading is table stakes, the cash -- to cash in on the robust vehicle repair demand that they're seeing. And Snap-on has the equipment, the data and the systems to put them right on target, and we're reaching beyond the garage, taking full advantage. The industrials quarter says it so. The critical industries are bellwether. The essential is expanding, bringing with it more demand for precision and customization. It's all music to our ears.

And one fast overall perspective on our -- one fast perspective is that our results demonstrated once again the power of the Snap-on value creation processes, safety, quality, customer protection, innovation, rapid continuous improvement, developing innovative solutions borne out of insight and observations from standing right in the workplace. And those insights in this quarter, combined with our dedication to RCI enables us to resist the turbulence of the day. You can see it in the numbers. It's an important and ongoing strength. So that's a macro overview.

Now let's turn to the segments. In the C&I group, sales were $381.6 million, representing an increase of $37.1 million or 10.8%, and that includes $11.9 million in favorable foreign currency and an organic gain of 7.1%, gains across all the business divisions, but led by the Industrial division with custom toolkits for critical industries and the constant demand for precision port products. As I said, Industrial had a great quarter. High single-digit growth that was without a significant rise in the military. Gains in almost every other sector with aviation up strong double digits, [indiscernible]. It was a great quarter.

From an earnings perspective, C&I operating income of $54.9 million was up 3.2%, and the operating margin was 14.4%, down 110 basis points, but the quarter included 50 basis points of headwinds from currency and the impacts from tariffs and rising material costs, which are particularly focused in C&I. Again, the core -- again, the quarter for the power tools division improved year-over-year, driven by new products and first-to-market innovation. Our Murphy North, North Carolina plant released 2 14.4-volt agents cordless races that extend what I think everybody says that our already powerful ratchet lineup. The addition is focused on making tasks faster, break it loose, press the trigger and zip the fastener off, spinning at 550 RPM, which doubles the output of our standard unit.

I know ratchets to make quick work of applications with with numerous bolts, great for dealing with timing, covers oil pans, engine rebuilds and many more applications. The garages use them all the time now. We launched 2 First, the CTR-887 long neck for reaching deep into the engine compartment. And then the compact CTR-881 designed specifically for navigating tight space, enabling access to the workpiece without removing adjacent components, expediting and repair and save a lot of time. Remember, the techs feel the need, but need for speed and our 2 new ratchets bring just that.

We also expanded on [indiscernible] launch last quarter of our all Nano Access portfolio. Again, we build customer connection, observing that trouble the trouble that was troubled navigating crowded engine base and penetrating the fast webs of sensors and wires hidden behind the dash on modern cars, so we designed quarter-end stride CTN 2040 straight power driver with a narrow 90-degree head. I mean this baby is small and it goes everywhere and makes them difficult easy, and it's loaded, but features unique to the nano a variable speed trigger [indiscernible], selectors and 600 fasteners on a single charge, all while operating at a lightning for-for small power tools of 300 RPMs. The techs love the fast payback solution and it was another representing piece.

C&I had a quarter with strong momentum in domestic markets. Sales up 10.8%, 7.1% organically, led by critical industry expanding the Snap-on brand out of the drag propelled with strength in power tools and precision tools. Let's go on to the Tools Group. First quarter sales were $486 million, up organically 3.4%, higher sales in both the U.S. and international networks. The operating income of $105 million was up 13.6%, and the operating margin in the quarter was 21.6%, up 160 basis points. Notably, the gross margin in the period also rose 140 basis points, reaching 47.7%, overcoming the impact of tariffs and rising material costs, prospering in a day in which cost is a question.

During the quarter, we maintained -- and during the quarter, we maintained our pivot wheeling our customer connection, observing the work and using insights to develop new products that align with the customers' preference for short payback items [indiscernible]. You want to bring out short payback items that also make the tedious and the complexes. We think we've done that. That was demonstrated by 2 new products forged in our Milwaukee plant. First, the glow plug socket. Diesel glow plugs are central for preheating cylinders to the optimal temperature that supports ignition, but replacing these common comments is not so simple. For example, on the 2006 to 2016 models of the popular GM Duramax engines, accessing these components is really cumbersome. And quite frequently, the plugs are seized from exposure to harsh environments. It takes considerable power to break them loose, especially in tight quarters. Standard tools won't reach without removing blocking parts. And both of those [indiscernible], the seizing and the tightness of the compartments, make a routine job complicated. So our team went to work developing the new IPST-ML12, a quarter-inch millimeter swivel side. It's 52% longer than our regular offering and it all joints 30 degrees. -- features that combine to reach the overall -- reach the workpiece with general ease. And a new unit is also a design with our flank drive geometry. That feature directs the force to the flats of the fastener and away from the corners, maximizing the torque, bringing the needed power while preventing rounding, efficiently complete the repair without damaging the components because of the power you had to apply.

Another example of customer connection released in the back half of the year is a new socket configuration that matches up with our great Nano Access Cordless products. Developing a power tool small enough to fit your pocket was a great idea, but we took it a little further. We designed an entirely new set of sockets to make the overall combination even smaller. It's called the 1119NTMLE. It's a 19-piece quarter tools -- quarter-inch tool set, and it consists of 10 metric and 7 imperial size sockets that are 22% shorter and 8% narrower than the standard offering. And each item is secure in the foam pallet for good storage in these products. The techs value, the accessibility and a lot of the new sets, really amplified the success of our Nano product.

Now tool storage in the quarter generated some momentum backed by the ongoing development of fast payback storage alternatives, new items like our KSC40 -- KRSC46. That's a roll cart that was unveiled last summer, built in our Algona, Iowa plant. It's 1 piece fully welded body setup, which includes 6 stores, each with 120-pound load [indiscernible] pretty high, and with an 11-inch deep flip-top compartment, ideal for store and power tools. And I think that's important for a car because people want them -- the technicians want to match them up with the boxes they've already purchased. It's available in multiple paid term colors, and it's capable of managing any full-size box. So the unit provides -- and that is always the case with [indiscernible] card. The unit provides ample space for the techs looking to expand, but it's been designed to enable functionality without taking the leap into long-term payments. And that combination worked.

And in the quarter, also hot were accessories such as lockers and side cabinets and work centers, options that increase storage space for existing boxes, all at a lower entry point than a new roll cabs. Speaking of roll cabs, full-size roll cabs, we did release in the quarter in the quarter, a commemorative box celebrating our nation's 250th anniversary title attributed to America. The 84-inch Epic is a beauty. It's close that case with white tours and [indiscernible] and a 12-inch power draw. And the top left corner have had a blue panel overlay with 50 laser-cut stars. The Red, white and blue set up kind of coders the view of the American flag when you step back from it. And the work center drawer displays on its own, symbolic images of synonymous with the U.S. history, the statue of liberty, Mount Rush More, the economies, raising a flag with Jim and the first moon landing. And each model has a serialized modality numbered 1 to 1776. And overcame the big ticket of reticence in the quarter, becoming a highly coveted box, epitomizing both the Snap-on's U.S. presence and the birth of our great nation.

Some products are too exciting to pass up even in the [indiscernible].

[indiscernible] pivoting to match the technician's current needs and preferences. We think manufacturing solutions right here in the U.S. that improve its efficiency by making the tasks easier.

Now on to RS&I. Sales in the quarter were $45.3 million, up 2%, including $9.1 million of favorable currency effects. Organic sales were up only slightly to last year, but it was still enough to be the highest ever quarter, the highest ever sales quarter for the group. The volume reflects increases in our Diagnostic and Repair Information products to independent repair shop owners and managers, offset by lower sales to OEM dealerships. In short, the [indiscernible] product business hit a flat spot.

Operating earnings for the quarter were $119.5 million, representing a decrease of $2.6 million or 2.1% versus 2025 levels. The operating income margin of 24.6% included 60 basis points of unfavorable currency and compare to the 25.7% recorded last year. The gross margins were 46%, up 30 basis points despite the unfavorable currency effects and the impact of tariffs and the impact of tariffs and higher material costs. So the lower ROI margin reflected primarily the unfavorable currency and our investments fortifying our proprietary database by enhancing them with large language activities, investments that we strongly believe will strengthen our advantages going forward.

We know the complexity of today will only grow, and we'll continue investing in software and equipment, empowering shop owners and management with the resources required to confront that trend and to make more money. Case in point, air conditioning systems have evolved. Now they're not just for climate control, but they are for supporting overall vehicle performance in EV battery maintenance. As a an example is our Protec AC recycles rolling out of our facilities in Conway, Arkansas. During the quarter, RS&I released the new Pro Series Protec. That was, as I said, produced in our facility in Conway, Arkansas. One machine, new Pro Series Protech. one machine for both popular refrigerant types, R-134a and R1234YF. The pro models are also loaded with features for managing a wide variety of vehicles. A large filter allowing for extended run time, nitrogen leak testing, compressor diagnostics, a 2-stage vacuum necessary for supporting systems on small CITIC to large suburbans and a 12-inch touching for easy navigation, even with the [indiscernible]. And the units have -- this is one of the best features, I think, the units have automatic functionality. Techs can tackle another job while the recycling goes on and a bright status light or an [indiscernible] notifies the user when their intervention is required. It makes recycling particularly more efficient.

The onboard database is terrific. It identifies the VIN and presets the unit with OEM vehicle specification, preventing the time often wasted manually looking up the stats. Our new Pro series is a great example for helping shop owners and managers navigate the complexity of new cars, hook it up, enter the VIN and the machine takes over, improving both productivity and error proofing the process.

We're confident in the strength of RS&I. We keep investing to expand its position by making work easier with great products and with proprietary information. That's a stamp on first quarter.

Corporation overall sales $2 billion -- $1.272 billion, the highest first quarter ever. Organic sales up 3.4%. OpCp operating income up and gross margins holding firm. The C&I Group's organic sales up 7.1%. The critical industry is recording a bagful quarter. Tools Group organic sales up 3.4%. Gross margins up 140 basis points, and operating margin up 160 basis points. RSC organic sales up slightly, but still the highest ever. Gross margins up 30 basis points. Investments across the group to fortify our advantages in product and brand and in people and the corporate's EPS $4.69 up again over 2025. We had strong results that overcame the [indiscernible]. C&I extending the brand out of garage. Tools were successfully pivoting to customer preferences and RS&I leveraging our proprietary offering to solve the complex was an encouraging [indiscernible].

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

Thanks, Nick. Our consolidated operating results for the first quarter are summarized on Slide 6. Net sales of $1.272 billion in the quarter represented an increase of 5.8% from 2025 levels, reflecting a 3.4% organic sales gain and $26.9 million of favorable foreign currency translation. Sales in our Commercial & Industrial sector or C&I Group increased year-over-year, led by strong performances with critical industry customers and robust sales by our specialty torque operation. In our automotive repair markets, sales gains were achieved through our franchise van channel, while activity with repair shop owners and managers was essentially flat.

From a geographic perspective, consolidated sales were up across all regions. Consolidated gross margin of 50.4% compared to 50.7% in the first quarter last year. The decline of 30 basis points primarily reflected 40 basis points of unfavorable foreign currency effects.

In addition, the benefit of increased volume and savings from the company's RCI initiatives were largely offset by higher tariffs and other material costs. As you may recall, many of the incremental tariffs did not go into effect until the second quarter of 2025. And as such, the first quarter last year did not include those additional costs.

That being said, Snap-on is relatively advantaged in the current tariff environment by principally manufacturing in the markets where it sells. However, our cost can be somewhat impacted by trade policies.

Operating expenses as a percentage of net sales of 29.6% compared to 29.4% in 2025, primarily due to increased personnel costs and expanded technology investments, partially offset by the favorable effects of sales volume. Our technology investments include further strengthening of our core infrastructure as well as broadening the use of large language models across key business functions to improve productivity.

Operating earnings for financial services of $250.8 million in the quarter compared to $243.1 million last year. As a percentage of net sales, operating margin before financial services of 2.8%, including 40 basis points of unfavorable foreign currency effects compared to 21.3% reported in 2025.

Financial services revenue of $101.1 million in the first quarter compared to $102.1 million last year, while operating earnings of $68 million compared to $70.3 million in 2025.

Consolidated operating earnings of $318.8 million compared to $313.4 million last year. As a percentage of revenues, the operating earnings margin of 24.4% included 40 basis points of unfavorable foreign currency effects compared to 25.2% in 2025.

Our first quarter effective income tax rate was 22% in 2026 and 22.2% last year.

Net earnings of $247 million or $4.69 per diluted share compared to $240.5 million or $4.51 per diluted share in 2025.

Now let's turn to our segment results for the quarter. Starting with the C&I Group on Slide 7. Sales of $381 million rose $37.1 million compared to 2025 levels, reflecting a 7.1% organic sales gain and $11.9 million of favorable foreign currency translation. The organic increase includes gains in each of the segment's operations, including a high single-digit improvement with customers in critical industries and a rise in the specialty torque business. The strong demand in critical industries includes higher sales in the quarter to customers in the United States and international aviation, heavy-duty and natural resources. Shipments serving military applications, however, were essentially flat year-over-year, but reflected an improving trend from activity in 2025. Additionally, our European-based hand tools business also contributed to sales growth in the period.

Gross margin of 40.3% compared to 42.6% in 2025. This decline is primarily due to higher tariffs and material costs and 50 basis points of unfavorable foreign currency effects, partially offset by benefits from the increased sales volume.

Operating expenses as a percentage of sales of 25.9% in the quarter improved 120 basis points from last year, primarily reflecting the higher sales volume. Operating earnings for the C&I group of $54.9 million compared to $53.2 million in 2025, and the operating margin of 14.4%, including 50 basis points of unfavorable currency compared to 15.5% last year.

Turning now to Slide 8. Sales in the Snap-on Tools Group of $486 million compared to $462.9 million last year, reflecting a 3.4% organic sales gain and $7.2 million of favorable foreign currency translation. The organic rise was due to low single-digit gains both in the U.S. and in the segment's international operations. During the quarter, while we had some success with featured tool storage products, we believe our ongoing pivot to shorter payback items continue to temper the consistent uncertainty of technician customers in the current environment.

Having said that, we were pleased to see the positive uptake of tool storage products during the period. Gross margin improved 140 basis points to 47.7% in the quarter, 46.3% last year, mostly due to increased sales and savings from the segment's RCI initiatives, partially offset by higher material and other costs. Operating expenses as a percentage of sales were 26.1% compared to 26.3% in 2025. Operating earnings for the Snap-on Tools Group of $105 million compared to $92.4 million in 2025. The operating margin of 21.6% improved 160 basis points from last year.

Turning to the RS&I group shown on Slide 9. Sales of $485.3 million compared to $475.9 million a year ago, primarily reflecting a $9.1 million of favorable foreign currency translation. On an organic basis, a low single-digit increase in sales of Diagnostic and Repair Information products to independent repair shop owners was offset by decreased activity with OEM dealerships and managers. This decline primarily reflected lower sales associated with OEM programs in North America, which more than offset higher revenues with OEMs in Europe. In addition, sales of undercar equipment in the quarter were essentially the same as last year.

Gross margin for the RS&I group of 46% compared to 45.7% last year, primarily due to the favorable business mix and savings from RCI, partially offset by higher tariffs and material costs. Operating expenses as a percentage of sales of 21.4% compared to 20% in 2025. This increase is largely due to 20 basis points of unfavorable foreign currency effects, higher personnel cost and expanded technology investments, including those in support of the segment's growing software-based businesses.

Operating earnings of $119.5 million compared to $122.1 million last year. The operating margin of 24.6%, including 60 basis points of unfavorable currency effects compared to 25.7% reported in 2025.

Now turning to Slide 10. Revenue from financial services of $101.1 million decreased $1 million from last year, primarily due to lower interest income resulting from a year-over-year decrease in the size of the average portfolio in the period. Financial service expenses of $33.1 million increased from $31.8 million in 2025. However, provisions for bad debts improved by $300,000 from those recorded in the first quarter of last year. As a result, financial services operating earnings of $68 million decreased $2.3 million from last year's levels.

In the first quarter, the average yield on finance receivables was 17.6% in both 2026 and in 2025, while the average yield on contract receivables was 9.1% in each year. Loan originations of $264.6 million in the first quarter represented a decrease of $4.1 million or 1.5% 2025 levels.

Moving to Slide 11. Our quarter end balance sheet includes approximately $2.5 billion of gross financing receivables with $2.1 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 1.9% is down 10 basis points from the first quarter of 2025. Additionally, the rate is down 20 basis points from last quarter, reflecting the typical seasonal decrease between the fourth and first quarters. Trailing 12-month net losses for the overall extended credit portfolio of $72.9 million represented 3.75% of outstandings at quarter end.

We believe that these portfolio performance metrics remain relatively balanced considering the current environment.

Now turning to Slide 12. Cash provided by operating activities of $368.7 million in the quarter represented 145% of net earnings and compared to $298.5 million last year. The improvement of $70.2 million or 23.5% from comparable 2025 levels largely reflects decreases in working investment versus increases last year and higher year-over-year net earnings. Net cash used by investing activities of $28.6 million, mostly reflected capital expenditures of $21.2 million and $5.1 million for acquisition of a former independent car line or collision distributor in Australia.

Net cash used by financing activities of $211.1 million, including cash dividends of $126.8 million and the repurchase of 267,000 shares of common stock for $99.9 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $234.1 million of common stock under our existing authorizations.

Turning to Slide 13. Trade and other accounts receivable of $890.7 million represented an increase of $9.3 million from 2025 year-end levels due to the higher sales volumes. Days sales outstanding were 67 days in both periods. Inventories decreased by $4.7 million from 2025 year-end, primarily due to $5.6 million of foreign currency translation. On a trailing 12-month basis, inventory turns of 2.4 were the same in both periods.

Our quarter end cash position of [ $1.753,3 ] billion compared to [ $1.624.5 ] billion at the end of 2025. In addition to our existing cash and expected cash flow from operations, we have more than $900 million available under our credit facilities. There were no amounts borrowed or outstanding under the credit facilities during the quarter nor was any commercial paper issued or outstanding in the period. With respect to our outstanding debt, notes payable and current maturities of long-term debt increased by $300 million, reflecting the reclassification of our March 2027 unsecured 3.25% notes to current status.

That concludes my remarks on our first quarter performance. I'll now review a few outlook items for the remainder of 2026.

With respect to corporate costs, we currently believe that expenses will approximate $28 million each quarter. As a reminder, in the third quarter of 2025, earnings per share included a $0.31 nonrecurring onetime benefit from the RS&I group legal settlement. We expect that capital expenditures for the year will approximate $100 million, and we currently anticipate that our full year 2026 effective income tax rate will be in a range of 22% to 23%.

I'll now turn the call back to Nick for his closing thoughts. Nick?

Well, thanks, Aldo. [indiscernible] quarter. Our markets are resilient and strong. And it's the strength, not dependent on the ups and downs of the economic cycle, they are rather driven by the solid secular trends of aging, rising complexity and expanding criticality. These are, of course, turbulent times. The hits do just keep on coming, continuing tech uncertainty, unfavorable currency diluting our margins, the impact of inflation and the fluctuation in government policies. They all serve the cloud at horizon way on consumers. But we see we see some green sheets in our general volume and our overall sales gains and then are nascent increases in tool storage. We do see encouraging signs, and we believe our future is quite positive. And as such, we continue to expand our investments in what we believe are, for Snap-on, corridors of decisive advantage. You can see the numbers. trend across the face of the quarter is progress along our runways for growth and for improvement.

We are enhancing our franchise network, and we are extending further into critical industries, growing substantially even while the military is flat. And we are wielding our Snap-on value creation processes with effect, launching great new products and customer -- with customer connection and innovation. And we are effectively bringing RCI to bear on the major challenges of the day, keeping gross margin strong against the wind. I mean I'll say it all, C&I sales up 10.8% as reported and 7.1% organically with the critical industries leading the way with high single digits. The Tools Group back to positivity with increases of 5% as reported, 3.4% organic. Gross margins strong at 47.7%, up 140 basis points. OI margin is 21.6%, up 160 basis points. And RS&I volume up slightly in the quarter, but still enough to record the highest sales ever in the period -- in a quarter. And RS&I gross margin of 46% are up 30 basis points against 40 basis points of unfavorable currency effects. OI margins are still robust at 24.6%, but 110 down from last year. And that reflects the currency and the continuing but what we believe are powerful investments in the overall corporation. Sales up 5.8% as reported, 3.4% organically, making it the highest first quarter ever and the second highest of all our quarters. Gross margins 50.4%, strong against the wind. OI margins, 20.8%, also strong, but down 50 basis points due to 40 basis points of unfavorable currency effects and reflecting the decisive investments. And the EPS, $4.6, up again in this period, up again. This period was a demonstration of the resilience of our markets. The power of our model and the skills of our team, making progress in the [indiscernible] and still investing in our future.

Looking forward, I just started this. We proceed with confidence, and we are confident and convinced regarding the positive future. And we are confident because we know the special nature of our markets, driven by powerful secular trends. We know the strength of our advantages and product. Snap-on really does make a critical work easier. And we know our advantages in brand. Snap-on stands alone. Snap-on name really is the singular sign of the pride and dignity working men and women taking their professions. And we are confident because we know the advantages in our people. Our team is committed, capable, battle tested. Our team just doesn't aim to succeed, Snap-on expects to succeed.

As such, we believe that propelled by these advantages, Snap-on will continue to move forward positively throughout 2026 and well beyond.

Now before I turn the call over to the operator, I'll speak directly to our franchisees and associates. I know many of you are listening or will be hearing this later. Our progress in the period, strong sales and holding firm against the challenges, they has been a result of your efforts, for your performance in the quarter. You have my congratulations. For the energy and capability you bring to the enterprise every day, you have my admiration, and for enlisting your future, your dedication and your confidence in our team, you have my thanks.

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

[Operator Instructions] The first question today comes from Brett Jordan with Jefferies.

In the prepared remarks on C&I, you talked about heavy-duty sort of specifically within that sort of the stronger categories. Do you think you're seeing a cyclical trend there that after a long softness in the heavy-duty market, there's some improvement? Or is this sort of a product or short term...

No, I think it has to do with -- we didn't see so much softness in heavy duty, but -- so I don't think it's so -- I can't say that it isn't part of that some sort of macro trend, but we believe it's because we are understanding the work around heavy-duty more every day, and this leads to more effective complex and customized solutions, which people are signing up for. So we think when we do this, yes, we're following the markets, but we're also capturing some share in our business.

And I guess also in the prepared remarks, you talked about restarted momentum you talked about green shoots a couple of times. Could you talk about maybe the cadence of the quarter? I mean, obviously, the last month had some pretty significant geopolitical events going on. But the underlying trend are you seeing that the volumes in the garages are picking up that's driving this green shoot or...

Well, volumes -- I think a couple of things. I think a couple of things. I mean it's hard for us a month isn't a really significant progress. And so when we look at it, I think when we look at the quarter, we can make no conclusions about the effect of the war on where the world is going. But I'll tell you this, is that the green shoots were associated with the principally like we saw that tool storage and the sales of the growth -- sales of the item. And I just talked to these conversations with the franchisees aren't -- they aren't long ago, they are recent. And I talk to people trying to find out how they felt. And they sounded pretty optimistic to me. So you could see -- and all of them -- I talked about that big box that wasn't cheap, the Epic box with the Red, White, Blue flag on the front, they were all talking proudly about the I well, I saw -- I was able to get 2 of them or 1 of them.

So they seem pretty positive. And I can tell you, franchisees do not hold back when they talk to me. I get a lot of complaints. And these conversations were pretty positive. So I think I put that together with the sort of nascent tool storage increase and say, that's a kind of green shoot plus our total sales. But Bret, it's 1 quarter. You never know, really. We don't give guidance, but you never really know, but I -- it's better than a poke in the eye [indiscernible] stick what we got.

The next question comes from Scott Stember with ROTH.

Nick, can you talk about how some of the other subcategories and tools did, whether it's hand tools, power tools, diagnostics?

Sure. Look, I think tools, hand tools was up, power tools was up, diagnostics was tepid. In fact, it was challenged in this period, but had some difficult comparisons last year. So that's the way it went. Pretty much most things were up, except for diagnostics was a little weak in this period.

Okay. And as far as sell into the van channel versus sell off of the channel, any meaningful differences?

Look, I don't think -- I tell you the truth, I don't think 1 quarter is meaningful in this kind of thing, but it's in the same ZIP code as the growth, up to the 3.4%. For example, the 3.4% totally was also what happened in the United States. And so the sales off the van were in that same ballpark. It's never exactly the same, but over -- as you know, because you study it so well, you know us so well, it kind of rolls off over the year. So we felt pretty good about the sell off the van this quarter.

All right. Just last question on tariffs. I know that you guys have done a great job of being relatively insulated. But some of the recent changes that we saw, is there going to be any changes to that narrative? And to the extent that you've had some payments that you've made, are you guys looking for to pursue some rebates with the [indiscernible] business going away?

Okay. Look, I tell you what, tariffs these days are blizzards. They got really [indiscernible], they changed the 232 rules and they added 122, it's like numerical salad. We don't think tariffs are going to change very much actually going forward. We're not planning or expecting some changes. Now in terms of refund, I got to tell you, Aldo has been rehearsing his answer for like 3 weeks here. So I'm going to ask him to answer this question. Aldo, go ahead.

Well, actually, I won't even reversing since April 20, Scott, they opened the portal for people to apply for refunds. Our view is, first, I want to emphasize tariffs are not as significant to Snap-on as they might be to many other companies out there in the universe where we play. That's one thing to keep in mind. But our strategy is to protect the fact that we don't want anything to expire. And if you don't file for a rebate through the portal, you run the risk that things go past what they call the liquidation date, and then you can never challenge it even if one wanted to. So that's our strategy right now. So why not significant, we're protecting our rights so they don't expire or unchallenged.

I think -- I'd just add a little. We're not depending on anything as I'm not sure what's going to happen. So I think it's unsure what will happen with tariff refunds and when they will be paid, how it will all work. So for us, we're just trying to make sure we keep ourselves in the game and not depend on any thing.

The next question comes from Luke Junk with Baird.

Nick, maybe to kick it off here, curious, there's been a lot of chatter about an increased level of tax rebates this year in the U.S. Just curious if you saw any impact from that in the Tools Group or maybe the finance company if so, any looks to that?

Well, it's hard to say. I have a lot of things to say about that. First of all, there is a finance company, you did point out the finance company, yes, originations were kind of flattish. The losses did creep up a little bit, but the 60-day delinquencies are better both sequentially and year-over-year. So that's a pretty good thing. What the result of that is, is not clear, but I will tell you that our guys were talking about improvement in that area before we thought about the tax returns were at play.

Now -- so I never know. But I'll tell you, when I go through the garages, unlike the standard story about people who have the grassroots, most of these people don't let this money burn a hole in their pocket. They tend to say it happened during the pandemic with their, what I would call, stimulus numbers. They were saying I'm putting it in a bank or I'm going to pay off some debt. So maybe that could have worked be paying off the debt, I'm not so sure. I will say that none of the franchisees I talked to mention that. Now I didn't prompt them or ask the questions a little directly. And maybe if I had, they would have said, yes, that's great for us, but I don't think so. Normally, they're bring in this kind of thing up. So I don't think we're seeing it as a big factor, but that's hard to say. It's kind of an uncertain thing.

Got it. Switching gears to C&I. Could you just remind us on the military exposure within critical industry specifically? I know you mentioned that seeing a lot of growth right there right now, but just in terms of past experience, what you've seen in terms of an impact that tends to be, I think, a little lagged when military activity picks up?

Yes. Well, military -- the C&I business is a pretty good business. I mean it's well over $100 million in a quarter. But the thing is that the military is one of -- it's broken into maybe 6 different segments and military is towards the top of that list. So you can figure that out in terms of the amounts. Lately, the military has been down. Last year, military was down double digits. And it sort of -- we kind of got a little bit back in the fourth quarter. And this year, it stayed flat. So it has improved some. We expect the military to improve going forward. We truly do. I think that's one of the things that you would expect. When you look at the situation, I mean, could there be any more situation where you need the military, if nothing else, history says that when conflicts like this are over, refurbishment becomes important, they restock and refurbish. So we usually get good business out of that. On top of which, we kind of -- I don't know your view, but I think the nation is kind of saying, well, given this environment, we got to stock up a little bit more on military.

So we kind of expect them to expand. What I loved about the quarter of us, though, the melter didn't help us. And boy, some of those other areas like aviation, gangbusters. And so -- and it's pretty profitable. So I meant it when I said that Industrial had a terrific quarter. We always -- the industrial business seems pretty good to us. We think it keeps expanding. And it's mostly because we keep understanding the work better in each one of those places. That's our principal value creating mechanism, to understand the work, create products that are irresistible to customers in that way, whether they're customized or not, and as you get -- as you understand it work better, you get a bigger product line, that's what we're doing, and it seems to be working.

The next question comes from Christopher Glynn with Oppenheimer.

Just wanted to keep going on the C&I things you just talked about, Nick, because the comments you just made kind of reinforced some of the stuff in your prepared remarks. C&I growth historically has been pretty intermittent rather than hitting a growth cycle and a consolidation cycle. So I'm wondering if you're suggesting something just culturally and in the bones has gotten better about identifying the work kind of like SOT really hit stride with social media and bandwidth enhancing tools out of the pandemic. You...

I think that's -- yes, I think you're right about that. I think it happened. We've seen it a couple of times. Back -- by the way, how do you know my marks were prepared, maybe not prepared at all. Anyway, the -- we saw this happen before. We're going along, [indiscernible] along in critical industries, and then we expanded capacity here in Snap-on. We added a whole building that allowed us to build more customized kits and expand on that, and it shot up and then it hit a little bit of a pause when the military started spitting up blood. And then it's coming back. And I think behind all this is the idea that I really do believe we're gaining share because our products are getting better. It's hard to talk about any one product because most of them are kits. But in those kits we're configuring them such that they meet the problems for if you have a particular jet aircraft you want to deal with in terms of maintenance or manufacturing, we'll put you right on target. And we have some of those. So I think that's what's happening now. I'm not saying we're immune to cycles, because it's certainly a...

What has elevated the game? Have you instituted new organizational layers or structures or talent realignments?

No, capacity. You know what I mean, in other words, we're learning how to wheel the capacity better. Like I said, we have added people in the fields. We have learned more about the work, like you say. But also, we've created a capacity situation where we can deliver quicker and more effectively. And so those kinds of things have combined to give us some acceleration. And as you -- what happens in these kinds of things, you add something and you learn how to do better and better with it. When you start up something, it kind of helps you. And then you realize what you got, you kind of work on it, sort of the essence of RCI. So what you're seeing there is in the bones of Snap-on value creation, figuring out how to have more improvement. And secondly, around just having a better product, I believe that's the situation.

Appreciate that. And then my other one, just on SOC originations. It sounds like storage might be turning a corner and pretty good comparison backdrop for a while there. And Diagnostics was off in the quarter a little bit, but not at the RS&I level. And even SOT had a couple of really nice diagnostic quarters in the middle of last year. So it seems like maybe the ingredients are in place for originations to start to grow and the commemorative unit, in particular, sounds really cool and hitting some stride at a high price point. So do you feel like [indiscernible]?

Well, the originations were flat in the quarter, I think, roughly, for government work. But I used the word green shoots, particularly -- I chose that particularly because I'm not sure what the increase in tool storage means. I do think, though, it shows some [indiscernible]. We couldn't get arrested before with big box and stuff like that. And now you saw the tribute to America. And I just had the feeling that it's sold well, not only because it's a compelling offering, but also because maybe the hurdles were a little bit lower. So we'll see how that plays out.

I think -- look, I think [indiscernible] is a favorable thing. It shows that tool storage isn't completely dead. In fact, it's pretty strong. It's a nice strong quarter for tool storage.

The next question comes from Gary Prestopino with Barrington Research.

So maybe I missed this, but nobody asked this. Could you maybe just talk about how much tool storage was up year-over-year?

Wow, I don't like to get involved and get big -- I think that's across. I don't want to nail myself to me, all right? But tool storage was up more than the average. You know what I mean, it was 1 of the leading items. That's all. But I don't -- Gary, a quarter, who knows what a quarter means. I mean it's not definitive, but I still feel pretty good about it. I'm not here to declare victory, and we're on the big wide highway to victory now, but I feel good about it.

So I guess, if I ask this another way, I mean, was a lot of that due to this new lower price point product that you put or the techs?

Yes, sure. Some of it was due to that. It's hard to say, but I talked about the new roll cart that came out, and we made it -- one of the things we did was smartened, we made it available in all these colors. You might think that's trivial, but it isn't because people want to buy something like a rural card. They want it to match their box if they got a candy apple red box with the carbon trim, they want the roll cap to look like that. And if you make that available, then it tends to sell more. So that was one of the big breakthroughs here. It sounds so simple. But in fact, it worked for us and the [indiscernible] is pretty steady. So that was another contributor. Yes, the attribute to America was a good contributor to, but it's an account for everything.

Okay. And then just a couple of more questions. You said the franchisees are a little more optimistic than they had been. Do you attribute that to some of what you've done strategically with shorter payback products? Or are they really starting to see a turn in the appetite for technician purchases of tools? I mean, you had cited all sorts of issues with uncertainty for the last couple of quarters. Has that changed a little bit you think?

Well, look, I think it's this way. I think it's probably some of both. But franchisees usually talk to me about 2 things: products they don't like or something like that or something in the system or how easy it is to sell or hard to sell. It's not exclusively. And so when I say they were positive, they weren't saying it was hard to sell and they have said that before.

Now I didn't talk to every franchisee. It was a windshield survey. But the guys I talked to seem pretty positive. And -- but I do think it makes it easier to sell if we have tools that if we have offerings that are matching the preference, so hard to make a difference. I guess the answer is, I think both things are in play.

Okay. And then 2 more quick questions here. In the C&I segment, are you seeing increased demand from the data center market for specific tool kits?

Yes, we're seeing increased demand for specific products for the data center market in terms of the construction of the data center. So yes, we're seeing that. I don't know where that's going, but we are being asked to quote and we find business in those areas.

Okay. And then last question. What was the FX impact to EPS, Aldo?

$0.02 of good news when it came to operating income. When you look at the unfavorable currency remarks throughout the deck, that has to do with transaction negative variances, and that largely is associated with our factories emanating out of Sweden and actually the United Kingdom to some extent.

So we said some good news like [indiscernible].

That's positive. The reason why we talked about the negative is [indiscernible]. He says that's 1 of the conundrums of this period. It was positive on the EPS, but negative on the margins because it added sales and it did not add profits in any kind of proportion to that. And it added a lot of sales and almost no profit.

This concludes our question-and-answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and thanks for joining us. The next meeting is going to be with Snap-on. With us today is President and CEO, Nick Pinchuk. Aldo Pagliari, CFO, is here as well. I'm your host, Scott Stember. I'm the senior analyst at ROTH. If anybody has any questions after this, they could shoot me an e-mail at [email protected].

And thank you, everybody, for being here. Thank you, Nick. Thank you, Aldo. Maybe to start off...

First question is did you go to the Chicago party last night? I heard it almost slipped out of control.

Yes. Yes. I was there. I enjoyed it thoroughly.

You keep clothes during the...

Yes, I kept my clothes on, and I didn't go up on stage.

So Nick, you are often asked to speak in the media about since all the different touch points that Snap-on has in the economy, asking you about how is Main Street going? And what are you seeing? So maybe you could just -- before we get into the questions, maybe you could just start off by talking about what you're seeing and what you're hearing on the ground.

Well, look, I mean, I think the thing is that what we found starting some time ago that the grassroots, which is one of our principal customers, we have really 3 customer bases. One is the mechanics. We call on 1 million of them every week. And then -- so we're in the garages talk to them all the time. We have the garage shop owners and managers, which are kind of small business and then we have bigger businesses in critical industries.

But the grassroots have been uncertain for some time, and it's only built. It's -- and it's very different than you will hear on business channels on TV because they had such a different experience during the pandemic. They work the whole time. They weren't sheltered, not at all. They never looked at their posts. So their view after that became much more detached from what I would call the organized sector, certainly in terms of the finance community.

And they started to sense uncertainty, say, in the end of 2023 because of the Ukraine war. And then it just built on that with the Middle East and the inflation and the border and the election and then the rapid fire stuff out of Washington. And so the result of that has been that they have shooed big ticket items. These are pretty smart people. They say their business themselves, the auto industry -- the vehicle repair business is booming really. Nominal spending on repair is up mid-single digits. The wages are up. The number of technicians are up, all kinds of things, and it just keep going positive because the cars are getting more complex and they're needed.

And so they have cash, but their confidence is poor. And the way that plays out in the commercial environment is they're unwilling, they don't want to tie themselves to a set of long-term payments, which means bigger ticket items, they don't want to buy. So they buy the smaller ticket items. And our job in serving them has been to try to pivot our product offering and our focus to give them quicker payback items. And I don't see that changing right now. Do you think it's any more uncertain today than it was, say, 6 months ago?

Maybe.

You think? I don't know. I don't know. The thing about this is, though, remember, you're talking to the mechanics. And what they feel is if we go to war, their children will fight. They're convinced...

Got it. So maybe just talk about the secret sauce, which makes Snap-on so unique in the auto parts world. The value creation model, I guess, that you call it with the mechanics, new products, systems. Maybe just -- I don't know if everybody here can appreciate how valuable that is to Snap-on.

Sure. Look, Snap-on is in 3 pieces, and this applies to our whole business, but it's most -- it's easiest to understand with the van business. This is franchise vans, 3,500 of them in the United States, 4,800 worldwide that go through and call on garages. Actually, the mechanics, not the garages, they call on the mechanics every week, which means that we're kind of a very integrated business.

Raw steel comes in the back of the factory. We do a -- and we make a hand tool out of it in some really complex processes, and we ship it all the way into the hands of the end user. And we do that for diagnostics with a little bit less vertical integration. But the thing about this is our shtick is we say we have advantages in product and brand and people. So what's the root of our advantage in product is we are in the garages for more -- in the shops for more hours, for more times than anybody else.

And so we don't survey people about what they need. We watch what they need and therefore, come up with particular tools that will solve this problem like the low-profile socket that will take -- help you take off the filter at the bottom of the 6.7-liter engine on Ford F-350 trucks. Now you might say, boy, that's a low volume and it is, but people will pay premiums for this. It's the secret of our margin improvement is that these products have come out.

So we have an advantage in product because the mechanism itself keeps working. We're actually in the garages. And we -- over the time, we've become experts at the work, and we have 85,000 SKUs and growing. 85,000 SKUs and growing. So we're the anti -- we're complexity headquarters. And so one of the things -- and that's a product line that almost no one else can duplicate.

Secondly, our brand actually does impart value. The display of the Snap-on brand is the outward sign of pride and dignity working men and women take in their profession. And I think like almost no other brand. They actually use this brand and they want to display it because it marks them as a professional and somebody who is doing something special.

We have people put our wrenches in the hands of their newborns because they believe what the baby touches first will influence the rest forever and ever. We have people ask us to give them small boxes so they can bury their loved ones' ashes in it because the loved one was most proud of Snap-on tools. It really is. It provides something to them, so it provides value.

Thirdly, our people are pretty good and their experience, the average guy at Snap-on has been there 15 years, but here's why it's important is because managing that brand and making sure that we do nothing that undermines that special nature is an art, not a science. And our people have been around so long they have that art. And then secondly, the idea, 85,000 SKUs, it's a complex environment. How do you keep management?

You have to keep improving every day, every day. And our people have that written on their shorts. And they get up every day thinking about improving, which is why our margins have improved. I think it was 2006, it was 6%. Last year, it was in the 22% range. That's continuous improvement against the complexity, growing complexity. We have competitors who make 200 million sockets and have 450 varieties. We make 20 million sockets, 1/10, and we have 4,500 varieties. That's -- our scale is 1/100th. Our people are pretty good at this. Almost no one else can do that. Okay. So those are the advantages -- that's the secret sauce. Our advantages in product, brand and people.

So within tools and speaking to the, I guess, the confidence portion from the repair technicians. You started to see sales or demand start to stabilize in the second quarter, third quarter and fourth quarter, fell back pretty much in line. But you've been pretty much able to -- despite this, able to move the needle forward. There was a lot of pivoting that went on to new types of products. Maybe talk about some of those. And are we fully pivoted to the market right now?

Yes, it takes a long time to do this. You have to move your manufacturing. You have -- marketing is pretty easy, but you have to come out with products. And so it really, for us, it means that if you look at our main product lines, the products which are big ticket that get financed over 3, 4, 5 years are things like the tool storage boxes. A tool storage box from Snap-on costs you $10,000.

Now mechanic buying a tool storage box for $10,000 is like the people in this audience buying a Lamborghini. And so they want to finance it. And our diagnostics units, some of them are affordable, but others are -- require some financing and several other products. But things like hand tools, power tools, certain portions of what we call shop and tech that are specialized product, and they're smaller.

So what we did was when we started seeing this, we started to move our product development toward spending more time on bringing out those smaller products. Now you can't abandon the big products because we sell some of them. I mean they're not completely gone. What I'm saying is that those products are down 15% or 20%, but still 80% good profit products. So you got to keep bringing it out. So we've pivoted in that direction.

And I told you some of those -- another area where we kind of created a lot of positives for us in small ticket items out of the Tools Group. We made this -- we installed a process called cold forging. It's a forming of a tool by an unusually complex product under cold pressure, and it makes for a lot stronger plier, and we're able to create a whole line of pliers, which we have sold. At the same time, in diagnostics, where we have some things that are diagnostic units or nonpareil, but we came out last year with an MT2600, which is much lower cost.

And for entry-level technicians, if you're going to -- by the way, if you're going to -- even if you're going to do oil changes and brakes these days, you need some kind of guidance, and this puts those people right on target. So those are the kinds of things we're doing. Of course, you got to make your manufacturing because these are all manufactured, we have to shift our manufacturing to that, and we have.

Got it. So let's move over to the loan portfolio. A lot of people focus on this as well. Delinquency rates and write-downs have come up just a tick, and it sounds like that's all part of the usual variations of the business. But maybe just talk about the favorable risk/reward scenario that you have, factoring in some of the lending -- the controls that you have in place at the shop level.

You mean like we loan to sub subprime customers and our yield is 17% and our losses are 3%. Those are the kinds of numbers we get. So this is a pretty lucrative business. And part of the reason it works is because it is enabled by possibly the best credit collection force in the world, that is our franchisees. Now you might say this is bold. Stuff like this is another CEO who is super excited about his own company or has an aberrated view of that.

But it's true. These guys call on mechanics every week. And if the mechanic gets on the van and says, I want to have a tool storage box, the franchisees, okay. So they apply for credit. And if they don't get -- if they have the right credit bureaus, they get it and it's paid over, let's say, $10,000 over 4 years, $45 a week. And he collects -- our franchisee is calling on him every week collects that $45 passed by the credit company.

If he doesn't pass the bureaus, many of our franchisees, we've got stripes. So they say, we still want to lend because I know this guy is a great guy. This guy really is a great guy. We still lend in the same role. By the way, the franchisees, if the things go bad, the franchisees on the hook for 25% of the loss. We would repossess the box and probably sell on a secondary market because it was a strong one. But here's the thing, that's 35% of the business.

But if a guy wants to buy a power tool, that power tool is $600, let's say, he didn't say $600. He says $50 a week for 12 weeks. And they make a credit decision like that. I've seen guys get on vans who want to buy that power tool, the guy says, I don't think so. This probably doesn't fit your business. And I ask him -- when I asked the franchisee, why didn't you sell them a power tool for $600, he says his daughter is starting in college. He's already popping me for $100 a week. I want to see him pay that $100 while his daughter is in college for a little while before I do this.

They know them that well. They're like local bankers. And so what this -- and then they collect every week, and that's their nickel. It's not financed by the company. But the long and the short of this is everything which is sold off a Snap-on Van, big ticket or low ticket or small ticket is on credit. And the franchisee is involved in the credit approval process in everything, and he collects every week. So for a franchisee, every sale, a credit decision, every interaction, he meets 1 million technicians once a week is a collection. They're possibly the best credit collection force. And that's why 17% yield, 3% losses, even with sub subprime, even with sub subprime. I'm getting excited I'm moving that away.

So moving away from tools, let's talk about RS&I. This has been a nice bright spot, particularly over the last couple of years. Maybe just talk about what's driving that.

A lot of things. Look, I think this -- RS&I is the company that sells to repair shop owners and managers. They don't call weekly, but they have direct salesmen and they have distributors. And basically, if you think about what's -- they basically facilitize a repair shop. So they give them the computer systems to run the shop. They give them the lifts, which will lift those cars up, tire balancers, aligners, many of those are high-margin stuff.

They'll also sell diagnostics, which analyzes the car and we will help you figure out what to do by the way. So we have a particular advantage in diagnostics because the repair in a car is like this. Car comes in. It's got check engine light. So the easy thing is -- first thing you got to do these days, you used to listen to the motor, now it's so complex, it's difficult, so you got to connect to the car and look at this tens of thousands of trouble codes, and it's a blizzard.

But you can scan the codes, and that's the most pedestrian of things people do for technicians. They help them scan the codes and they leave it to them to figure out these codes what's wrong. Secondly, though, okay, we do that, but you also have -- we also have a database based on 3.5 billion actual repairs. This was wrong. This was what fixed it, and this is Audi with 100,000 -- 2020 Audi with 100,000 miles on it. And we give the technician a Pareto diagram that says, 69% of the time, it was a mass airflow sensor.

Now he could diagnose it himself by a series of physical tests like a decision tree, this voltage, that voltage, that takes up a lot of time. This guy is paid -- the technician is paid by the job. So we'll give it -- all he's got to do is go and test the mass airflow sensor. Boom, done. If it isn't the mass airflow sensor, he tries another one.

And if it's none of the things on the Pareto chart, we have a 600 billion data point database, which will help him solve those things that only happen on alternate Wednesdays with months that have an R in the number -- in the name. Then, okay, that doesn't mean he knows how to take it apart. By the way, that's a proprietary database for us. I think if you know anything about AI or the efficacy in companies, the real value is to be able to mine large proprietary databases to pattern recognition of those things.

That's part of what we're doing in these things, and it's really set us apart. But nobody has that data. It's proprietary to us because nobody is in the shops as much as we are. The other thing you got to do is he might not know how to take out the mass airflow sensor on Audi. So we have a database, which will show them how to do that. And then all of this, I haven't said anything about how hard it is to take it out even if you know how to do it, and we'll sell them the tools to do that quicker than anybody else.

And that's based -- much of that is based in the diagnostics business. It was -- its profitability was 25.2% last quarter, OI margin. Margins were about flat. They spent all their money. And we like spending money actually. Actually, one of the things about this though, this is -- you can take this from me. If you have a company that has an advantage on product and brand and people, particularly brand, you spend like it. If you don't, you lose position. So we kept spending through the pandemic and through this period, and it played us -- well, during the pandemic, we said we're going to keep spending. We came out like gangbusters. This period of uncertainty, we've kept spending. We kept spending.

Let's move on to...

Investing, I should say, right? Spending is the kind of thing you do when you go to a Chicago party.

Let's move on to commercial and industrial. Critical industries, I guess, in particular, has been doing really, really well the last few quarters. Maybe just talk about how critical critical really means and how consistent it really is.

When we first -- Snap-on a couple of years ago, we got a little bit lost -- not a couple of years ago, 25 years ago, we had a little bit lost. And one of the things we tried to figure out is, well, how come we're lost? And part -- and we looked at what we did and a lot of people said and our own people said, Snap-on is a place that makes wrenches, sells through franchised vans and sells to mechanics. And that -- we did that well, but that was a focused portion of what we did.

What we realized is that isn't what we really did. What we do is we're in the workplaces, observing the work, using the insights to create a tool that will move the world forward. But the similarity between all -- and that can be any industry, any industry. But not just auto repair, but here's the unifying principle. It's got to be critical. The definition of critical is the penalty for failure is high and the need for repeatability and reliability justifies a Snap-on level product.

So 2 of our groups, the Tools Group, which is the franchisees, sells to mechanics. RS&I sells to the repair shop owners and managers. C&I sells to critical industries. We roll the Snap-on brand out of the garage. The respect for the brand is just as high on a flight line as it is in a vehicle repair garage and criticality may be even more.

So the margins are pretty good in this business. So we're expanding it. And so you got places like the military, .50-caliber bullets if I can attest this. If the .50 caliber bullets are flying overhead and you got to fix the vehicle, it sounds critical to me. You got the flight line. So aviation is big. You've got general industry where you got things rolling down the line. You got oil and gas. You got education where you got to educate these people and make them Snap-on customers for life. So that's the business we're working and that seems to be moving pretty well. And the cool thing about it is people thought when we rolled out of the garage, we couldn't get our pound of flesh for value, and we do, the margins are pretty good in that business.

We'll take a moment to see if anybody in the audience has a question.

Amazing storytelling, by the way. Thank you. What are the key metrics that you watch when you run the business?

Sales, operating income and OI percentage. That's it. The thing is we also watch some other stuff. That was a little bit of a blip. But I'm really -- when at Snap-on, we just finished 2.5 weeks of reviewing the divisions and thou shalt improve your sales, OI and OI margin and ROA a bit, return on assets. You got to do those, and I don't really care how they do it.

Within certain envelopes, for example, there's a commandment at Snap-on, which is, if there's any commandment is thou shalt not sell to do-it-yourself people because that would -- we could make a lot of money at that. We could build our volume but the brand would be kaput because one of the reasons why Snap-on is such a special brand is we only sell them to professionals. And so you have that kind of thing.

So we focus on those things. Other sub things we look at, for example, we bring out thousands of -- last year, we had 1,620 ideas for new products. We bring out new products all the time, huge numbers. But what we focus on is how many hit products do we bring out. That is $1 million in the first year of -- after the launch. So that number just keeps going up. Last year was up 8% over the prior year, and it's gone up like 8x over just maybe 15 years ago. So those are the kinds of things and some specifics for each business. But I'm not a guy who will tell the general managers, okay, I want you to manage your working capital. I don't like your inventory.

I don't care about their inventory as long as there's no obsolescence and they got a good return on our assets. If they get a return on their assets, it must be good, maybe they know what they're doing. So we don't do that at my level. The simple thing is Snap-on doesn't measure things, but we have concepts. We choose strengths over weakness. We decide what we're going to be strong in, and we invest in those things, the other things we don't care about. We choose critical.

We choose critical over the popular. So we'll sell to the people who -- where the penalty for failure is high, and it doesn't matter how much volume there is with popular things like DIY. We choose pride over the practical. So we'll spend money making the franchisees feel good about themselves, and we won't skimp on it because it's so important to us.

Even though we could get away -- we have a Snap-on franchisee conference every year, we could do it for much cheaper. But on the other hand, you see if you want to enlist a franchise business, these are individual businessmen. They have to feel that they've been listed with a company that's worthy of their time and will create a value for themselves and others that they could not create individually. And part of that value is being able to go to some place like where we have our franchisee conferences because they couldn't create that individually. But they also know that the tools they couldn't figure out individually.

They also know that the brand couldn't be like this. And they also know that our people understand the auto business, the auto repair business, not auto parts business, by the way, you said auto parts in the beginning, we're not a parts company, better than they do. And so those are the kinds of things we pay attention to. After that, it's simple. My job is so simple. I'm kind of a trained dog that stands on the x and the other guy just runs the business. Okay. What else? Is that it?

Yes, we're just about out of time. So I want to thank everybody for joining us.

Okay. Thank you.

Good afternoon, everyone. My name is Sherif El-Sabbahy. I'm on the U.S. machinery research team here at BofA. And really happy to have with me, Aldo Pagliari, CFO of Snap-on Incorporated.

To start us off, Aldo, for those in the audience that might be a little less familiar with Snap-on, can you just give us an overview of business model, your core marketing positions in different segments?

Okay. Well, first off, Snap-on has been around for quite some time. It was founded in 1920 and was devoted strictly to auto repair. If you think about 1920, there's probably 100 different auto manufacturers in the United States, maybe not so dissimilar to what you find in China today. And everyone thinking about how do you make new cars and how do you sell new cars and how is this technology going to unfold? Meanwhile, you had a company that came into existence thinking, how do you fix cars? So it devoted its entire attention to repair of automobiles and did it in such a fashion that said we're going to go up close and personally visit the technicians. At that time, a technician, a mechanic, was also a garage shop owner. They were one and the same. But over the ages, that's changed. Now you have mechanics that still existed this day, and it's a very important part of the company.

Our Snap-on Tools Group which visits mechanics every single week, makes up about 34%, 35% of the total company revenues. But immediately adjacent, what used to be one of the same is now a repair shop owner and manager. There's still mom-and-pop repair shop owners, but now you've morphed into sophisticated car dealerships, Toyota, which tends to be urban-centric, could have as many as 90 technicians in one location. You have people like Costco, Canadian Tire, Walmart, Sam's Club that are huge sellers of tires, and that's the primary reason. They sell tires in their auto repair centers. So they don't want to get underhood repairs, as I call them. They want to get more tire repair, but they have certain needs. And then you have Firestone, Goodyear, [ Chengs ], Pep Boys, Penske Auto, a variety of different national chains that have to service fleets. That's done by Repair Systems & Information Group.

And then finally, people that work on things other than light cars and trucks. That could be heavy machinery, things like Caterpillar, John Deere tractors, Boeing aircraft, aviation, oil and gas, natural resources, solar, wind mills, that's in a section that we call commercial and industrial.

So over the tunnel of time, what we've said is we expect the Snap-on Tools Group to have opportunities to grow organically about 4%. The Repair Systems & Information because there's a little bit more geography available to it and is less penetrated, maybe 5-plus percent. And critical industries because it has most, not all, but most of the emerging markets and a lot of fragmented undeveloped addressable markets like oil and gas, aviation, military, technical education. We think that growth rate should be in the neighborhood of 6%.

So the common denominator that underlies all of this is getting up close and observing the work, not surveying at a distance, but actually observing the work. Where are people struggling with problems? Do we have a hardware or a software solution that can make it easier for them. So the common denominator is observation, and that doesn't come for free. So you have to make an investment. Therefore, Snap-on is married to selling premium products, solving critical tasks because if you're solving a truly critical task, then people are willing to pay that premium for it. And whatever nuance you bring to the equation, if you could show them the subtlety and how it helps them perform, then the problem you're solving dwarfs the cost of the premium that one pays, at least that's our philosophy.

And thinking about sort of the core tools business, there's been a long stretch of growth. It kind of trended down for a little bit of negative, mostly on negative sentiment. It came back middle of last year and then kind of flipped towards the end of this year. Just as we think about the unrest in the Middle East, some of the roll-on impacts to sentiment, how should we think about that maybe translating into your business? Are you seeing any impacts from that just on the sentiment side? And then more broadly, what impact should we expect that to have on maybe miles driven, any of the sort of roll on secondary impacts to the business more broadly?

Okay. We tackle that step by step. In recent times, you're right, the sales of the Snap-on Tools Group have been somewhat flattish, for lack of a better word. We came out of it. We start showing some growth in Q3. We regressed by about 1 percentage point in the Tools Group in Q4. And we've said over the last several quarters that there's been a lack of technician confidence. We describe technicians, mechanics as cash-rich confidence-poor.

So what do I mean by that? The employment level steady and growing, pre-COVID, through COVID, after COVID, if you're a skilled technician, whether you'd be an auto repair or a welder or a CNC machine operator, your skills are in demand. So unlike many other disciplines, if you remember, Elon Musk and DOGE, if you're working in government, that was not so comforting because what job might be eliminated the next day. Here, hopefully, none of the people in this room, but now white-collar management employment levels are under attack from AI. I don't know if that's real or just talked about. But a mechanic doesn't have that. He can look out over the landscape and say the number of cars in service are more than they were last year and are guaranteed to be more next year.

Why? Because however many they produce, a lousy year, 15 million units in the U.S. Great year, 18 million units. They're only going to scrap 10 million. So therefore, add 4 million or 5 million, 6 million to the installed base and the other 275 million to 280 million units that are already out there got a year old. Just like people, as cars get older, they need more maintenance.

So pretty steady business. The wages have gone up about 5%. So we say the technicians are pretty cash rich. Now does that mean they're not subject to a pinch of inflation coming from their insurance rates, their car premiums? Sure. But again, unlike a lot of other disciplines. At the same time, they go into the conference held by Bank of America and they say, I don't know, a lot of volatility, a lot of uncertainty. Well, if that's the case, maybe I'll hold off on making a big ticket investment decision.

So for example, the mean price of our tool storage cabinets when nothing in them is about USD 8,000. And a tool storage cabinet is kind of discretionary because everybody goes to work each day, whether it be with a bag or a satchel or a toolbox, you don't have to buy a new one today. So what we've found is they pivoted to quicker return, quicker payback items, not necessarily as profitable. Sometimes people think you're talking about cheaper products. It's not. But a hand tool actually is maybe the highest margin rate in the Snap-on portfolio for the Tools Group. But if all their buddies are saying, I'd be careful yet, it's not risk on yet. And therefore, maybe I'll hesitate on the $8,000 to $10,000 decision. So we haven't seen solid evidence that, that changed as we exited Q4.

A couple of green shoots I'll talk about in a second, but I just want to comment. I can't think of anything since our earnings announcement in February that would be more positive. This war certainly doesn't help people. And what's going to be -- I'll get to your question on gasoline prices, petrol, I have to say we're in the U.K., I say petrol. So we saw some signs that tool storage is starting to stabilize. We say that because of our originations in the credit company saw sort of a flatness. So having been down high double digits to down mid-single digits, down low single digits, it will take flat if you can get it.

We started to see our franchisees themselves express a little bit more confidence and they bought a little bit more than what they sold. So that was a good sign. We saw the critical industries, which is now a different segment, affected by the 43-day government shutdown yet came out of the back half of November and of December with very strong growth. So those are kind of the positive things that we call green shoots on our earnings call. So we see some opportunities there.

So you enter 2026 before the announced or unannounced invasion of Iran or bombing of Iran, however you want to term it, with a better view. You have people forecasting GDP, depending on whose forecast, 2.5% to 2.8% up for GDP development. You have companies lapping headwinds from tariffs because Liberation Day was in April of last year. So the second round of tariffs, whatever they are, it's hard to keep track of them. You start to lap it in Q2, 3 and 4. So there's good reason to believe that companies are going to be making more investments, and they still have that view.

Now with respect to what's happening today in oil, if you go back in the past, when there is a precipitous change in gasoline prices, it affects miles driven only in the very short run. The immediate response is, that's it. I'm changing my habits. Well, in the United States, there's not a lot of options. Here, at least you have the tube, and if you're on the continent, you got the metro, people do not like riding buses in outside of New York City, and I guess you can use the L in Chicago. People in the United States do not like to abandon their car. So while you have a temporary reaction, I found over history that miles driven doesn't really change very much. And if it stayed permanently down in the long run, sure, a car would be used less. It might break less. But as most people in this room know, that many repairs and cars are now time-based repairs and not necessarily miles-based repairs. So I don't view that as a negative.

For our franchisees, they do burn on average 55 gallons of diesel fuel per week. So that's not nothing. So they will deal with it as individuals in their own way. So they might offer less of a discount on certain products. They might embrace a Snap-on or introduce new products with new features that have better price points for them to be able to put in front of the customer. But I don't think there will be anything that's really that demonstrative. Now again, I don't want to predict. I'm not going to give the first quarter results, anything like that. I don't think anybody actually knows what's going to be the long-term effects of this in Iran.

What I would say, and I want to make sure it doesn't come across somebody endorsing a conflict. Look, eventually, all these things have to be repaired. Whether you're selling to the military, whatever military, it could be anything associated with NATO certainly or U.S. military, items will be eventually create more demand for replacement. But more importantly, if you destroyed the runway in Dubai or an oil refinery or a hotel or in Gaza, if you look at the outcome, eventually, those things are going to have to be repaired. And these are things where Snap-on is not going to get immediate drop in business, but there'll be a lot of ancillary tools in repair and maintenance that's associated with restoring the infrastructure.

The infrastructure never gets attention until it doesn't work. Then people will say, well, why didn't they replace the grid in California sooner so they didn't have wildfires? Or why are there so many overhead lines in Connecticut? Don't they know tree branches interrupt the power supply. It's only after a cataclysmic event occurs where people say, maybe more time in there should go into infrastructure development, and that's where we drive.

And kind of coming back to the change in customer behavior, how long can that last? It feels like this is more of a deferral. And let's say, when sentiment recovers is not something where they come back to the market and we see sort of a larger pull from all these deferred sort of purchases? Or how do you expect to kind of see that play out once sentiment improves?

I think there would be -- I don't think it'll be a demonstrative -- I've used that word twice now, it must be stuck in my head. I don't think there's a great recoil of a spring. I think if people start to buy more big ticket items, it would be beneficial. It will create some incremental opportunities for the Snap-on franchisee because their cash flow will be enhanced. When they tend to sell things on credit, they get immediate cash flow from that outcome. They don't have to wait to collect the money over time. The money is advanced by Snap-on Credit put into their account, and they can choose to use it as they see fit. They might go to the World Cup or they might choose to invest in buying more tools from Snap-on. Hopefully, we see the latter. So I think you'll get some incremental benefits coming from that.

But as confidence is restored, I think Snap-on more -- in the Tools Group tend to get back to that 4% growth rate. That's what we believe is the correct long-term vision. And again, the reason for that is GDP development is about 2% in the mature markets. We think because of the number of cars that I mentioned already and the ever-increasing complexity of the vehicles, it requires incrementalism that you need to have a more and more array of tools, software and hardware included to able to service these vehicles properly. So that's what we think are the drivers of the business. So the minute -- not the minute, but as the clouds lift, I think the willingness for people to invest will be there. That's our view.

And you sort of talked about the demand side of things, but tools margins have been strong even last quarter. And if we think about the last few years post-COVID, they've been structurally higher than they have been. What's driven on some of that change and kind of contributed to the higher margins in that group?

Okay. I don't ever know anything with certainty. But what I would suggest is that through COVID, I've said this story to some already a number of times, so I apologize for being repetitive. Snap-on never closed. There were some districts in the European content that forced temporary closures. But other than that, Snap-on didn't lay anybody off during COVID, Snap-on never closed. It's a high-touch business model. We tried to get paperwork that would convince the state of California, police department that our franchisees are essential so they had to get out and visit shops because initially, it was orders to stay at home, New York City, New Rochelle, in particular, had restrictions on travel initially. And I can't blame the world. In March of 2020, people didn't know if there was ever going to be a vaccine or if you're facing a pandemic that was unstoppable. But Snap-on never closed.

As a result of that, that came out of -- starting in June of 2020 with very dynamic growth. Why? Maybe because one of the few that was still out there consistently, and by being there, people said, well, when I really need someone, Snap-on is there on a rainy day, so that benefited. And then the COVID morphed into supply chain disruption because you had China closing for, I think it was 6 to 9 weeks, I forget the exact number. Port of Los Angeles strikes, very strong changes in chip availability. What are you going to manufacture and where? And as a result of that, it created underlying inflation. The tariffs didn't exist quite as prominent as a word yet. So you had supply chain inflation. And as many people on TV will say and note when prices go up for everybody, not just for Snap-on, they don't tend to go down as quick if anybody has ever noticed that. Companies don't give it back quite as readily unless it's so obvious that, let's say, oil prices go up and there's a short-term effect and then it goes down. It's called surcharges usually.

And then you top it off with the second layer of tariffs introduced by Donald Trump and then of course, it became more prominent after Liberation Day. So that creates -- even if you're like Snap-on and use U.S. manufactured steel, even if you're somewhat insulated from tariff inflation compared to some of your competitors, the prices still go up. It didn't take the U.S. steel producers long to realize that, well, if all my competition from overseas are going to go up because of a 10%, 15%, 20% tariff, sometimes 50%, I can increase my price and they did. So that created inflation. And at this point in time, if you can continue to come to market with new products, new ideas that don't make the price point of inflation obvious, if you can bring features to the market, your pricing kind of become sticky and it has. And therefore, benefits that you can create, we call it rapid continuous improvement to offset the cost of inflation or production, they accrue to the company that can come up with those solutions and Snap-on has benefited in that regard.

You mentioned rapid continuous improvement. The other thing that's sort of new has been brand building that you're investing in that you mentioned last quarter. As you think about the brand building, what are the early stages of that look like? Any early successes? And is there any sort of focus within there, in particular?

I've said a couple of times today, I've kind of coined the phraseology. If you want to sell a super premium product regardless of what it is, whether it's a hand tool or if it's an Hermes Birkin bag, you have to act like you're a super premium company. That means even when times are tough, you can't rush. I won't say not to be mindful of operating expense investment, but you can't throttle back that you destroy or attenuate the service level because if people are buying super premium priced products, whatever it is, they expect a level of attention after the sale. It's not a onetime episodic event. If not, I'll just buy off the Internet or some lower-priced solution that might be out there because you're going to walk away.

Well, Snap-on is around for 106 years. It doesn't walk away. So we're going to continue to invest. We thought it was still appropriate. Even when there might be technician lack of confidence to show we have confidence, and we want to reinforce the brand and what it stands for and what it can do for you. That requires you still to get out there and meet people and show people the solution. They might not buy immediately, but if you saturate that demand and make your knowledge around your capabilities better known, we think it will have a long-term effect in a positive way.

Understood. And thinking about some of your other segments, C&I, for example, have been fairly robust. There's a wide variety of end markets contained within that. On the whole, what are you hearing from your customers? What are sort of the main markets that are driving that right now?

Aviation has been huge. Military and defense has been steady, not as robust as you might think, and I think that's been more because of the U.S. government shutdown. But aviation, if you think about it, you've heard nothing. If you're on this side of the ocean, you've heard Mr. Ryanair talk noticeably about Boeing and now Airbus' inability to deliver. There's a huge demand for more fuel-efficient aircraft. So that's not going to -- I think the forecast for aircraft growth is huge between now and 2030 and '32. And I'm not an expert on the aircraft manufacturing, Boeing is here, so you're better off to talk to them.

But what I'm going to get at is that there's a stronger need than ever to keep the existing installed base of aircraft in the air and on time. So we sell to Boeing in Everett, Washington. We help them build new planes. We sell to Airbus, but we much prefer selling to Heathrow and Gatwick because coming in, they don't know what type of problem is coming in. They know there's an aircraft coming in and it's going to need some type of service. So the more unpredictable the nature of service, the more wider variety of tools. And for something as simple as British Air having an on-time departure or not an on-time departure, that's a big event. So if the flight line supervisor can convince their local management that, hey, if I invest in this set of tools or this array of know-how, I can better guarantee our performance, the benefit of that pales in comparison. So it doesn't go back to American Airlines' headquarters in Dallas or United's headquarters in -- I don't know if they're in Denver or Chicago these days. So it's a local decision made up close and personal and Snap-on can have an impact on that. So aviation, huge sector.

You heard Germany declare they're going to invest more in defense. I don't know if all the nations in NATO will follow with that. But I see more investment, not less, on the defense related industries. And over time, it's not going to be an immediate drop in because the countries don't have the revenue to do everything at once, but they're going to invest more in defense. The writing is kind of on the wall.

And then oil and gas, despite the disruption, oil and gas and natural resources are still a very sizable opportunity. Snap-on has only scratched the surface on what it sells there. But we have a company not so far away in Banbury, United Kingdom, it's about an hour up the road, that started with servicing Rolls-Royce engines that morphed into bridge construction and special torque know-how that then grew into the North Sea oil platforms, both commissioning, new development as well as decommissioning. And all of that has built the technology around opportunities. And like I said, even if you're not putting new oil wells into the North Sea, you still have to protect the ones and make sure they're not spilling oil on the floor. So huge opportunities in those venues. So again, people don't just hand you the work. You have to go there and the pacing element will be going to the place of work and observing it. But it's a very fragmented market. So I think it's ripe for upsized opportunities.

And you mentioned earlier the complexity of vehicles, particularly software. That's been a big driver for RS&I because of the core software offerings you have there. Has that structurally changed the backdrop where dealers are spending more on CapEx, these larger complex diagnostic systems that's helping drive that for the next few years? Or how do you kind of think about that?

Well, OEMs themselves have always prescribed their own diagnostic laptops to fix cars. And the reason we have some access to this because some of them have us populate the database for them, install it and distribute it to the dealership. So we have some visibility to what's actually happening at the OEMs. But in the aftermarket, there's no one to do that. And you can't afford to buy one for Toyota, one for Ford. So it's just impractical. So if you can buy a more broad-based solution like Snap-on or competitors, then that becomes the preferred methodology. Plus, every car company has its own speak in terms of how it refers to an oxygen sensor versus an 02 sensor versus a mass airflow sensor. I think we saw the other day that was pronounced, there's 32 different names for an oxygen sensor.

Well, if you have a great search engine, and we think we do, it's an opinion. But if you overlay that, then it speaks technicians. So the technician doesn't have to precise and say, well, what does BMW call it versus what does Ford call it? So overlaying a great search engine is very valuable because of the speed of the repair. And then it helps both in the stocking of parts and what parts have to be applied to that repair.

And I was talking today to some people, if we feel you can get an estimate done more rapidly if you've all related to taking your car in for service, you're going in for a known problem that you're having or a tire change or an oil change. If I can get you to become aware at the time of check-in that there's other problems with your car you should seriously think about, and I can know if I have the parts in stock to fix it today, and I can know and tell you here's the estimated cost to fix it, the odds of the customers signing up at the point of check-in are much greater. Whereas if I wait 3 to 4 hours to call you and say, hey, we fixed what you came in for, but we came across this other problem. And would you like to do it? You don't have to do it, well, we recommend it. The odds you're approving it diminish.

So therefore, the quicker you can search a database, the quicker you can estimate the necessity of a repair and do you have the parts to fix it and what should you quote as a cost, the likelihood of that shop getting more revenues is greatly enhanced. So this is kind of the stories behind the scenes that people really never think about, but they exist out there in the aftermarket in the repair business.

As we think about that technology, obviously, AI has become a new area. Is that something where the current software model is potentially disrupted by that? Or is this something where there's a bit of a barrier just given some of the databases you maintained over the years?

I think before we use the word artificial intelligence, we have large language learning modules. And I believe that is a form of AI, just that we didn't use the word. So we start to weave into our script because it makes you sound more trendy, and it's true. So we use elements of AI to enhance the database and do what I call statistical probability analysis that if a car comes in with these type of symptoms and here's the mileage, here's the likely probability as to what it takes to get it fixed.

Now question is, in the Wall Street Journal today, so I apologize for being redundant because I've said it to some of the people I've met with. There's a model today in the Wall Street Journal that says Perplexity has come up with an alternative to the Bloomberg Terminal for $2,500 a year. I think Bloomberg is quoted in the article charging $30,000. Now you're going to have the argument go on. Are they really equivalent? I think that will have to play out. You're going to have the Bloomberg loyalist to say, no way, no how. And by the way, I like where everything is at my Bloomberg Terminal. I'm not going to give it up.

I think you'd be naive, Snap-on, to not be prepared for someone to make arguments that I've used other forms of data gathering. Snap-on has accumulated over decades by actually looking at how cars are repaired, what do the repair orders say, what are done. We actually have taken cars apart and measure it ourselves. We actually license data from manufacturers. We've accumulated that over decades, so you have these 3.5 billion data points that you can do some statistical analysis on. Can AI come in and supersede and do maybe in a shorter time, when it's taken us decades to do, you have to be prepared for that eventuality. You have to be prepared to say, okay, is there truth to that? Or is it leaving something short because people will claim, just like Perplexity today, will claim you can get the same type of information. Can you? I don't know yet. I'll see how it plays out. So again, there will always be competition. There will always be disruption. You have to be prepared to deal with it. You can't ignore, I guess, would be my answer for today.

And you mentioned competition. Just for the audience, broadly speaking who do you think of as your competitors within the tools markets? And I mean you've always been the premium product. There's always been sort of budget options. It feels like some of those budget players have been more aggressive in recent years. Has that landscape changed at all?

It's always changing, it's still the same. When I grew up Sears & Roebuck was a dominant seller of tools under the Craftsman label, made in America, guaranteed for life, selling through a catalog. Remember the Internet wasn't invented yet in the '60s. I actually grew up in 1954. So I got to be honest here. So it's just the 60s. But there's always been significantly lower cost competition. You have to differentiate yourself. You have to be able to back it up. So while there's other people that might be in the news today and the big boxes are bigger and there's more of them, you're going to have a wholesale sale of tools occurring.

So one is, as I said before, you have to deliver both a premium product and premium service to go along with that, and that comes with investment. It comes at a cost. While our operating expenses -- the gross margins are very robust. Operating expenses are not nothing. But net-net, we made 22.1% operating income as a percent of sales that excludes the credit company, it would be even better to put the credit company in. And we weren't happy with that because that was 60 basis points lower than the year before, and we don't like taking steps backward, yet still the absolutely pretty high and not lower at all because -- at least we don't think so because of the competitive landscape.

So you have to stay leading edge. You have to reinvent your tools, your products, your feature set, hardware and software, and you can't abandon what got you to the dance. And the dance is superior customer service, up close and personal, being able -- sometimes the first credit that technician will ever get. It's called credit start. There might not be any credit profile, they might not be able to get a credit card, yet their first loan they might ever get is from Snap-on Credit. It's not because we're trying to hover over them like a payday loan situation. It's because we give them what we think is a reasonable interest rate and get them started. And actually, that brings a very sticky relationship, sometimes tearful memorials to Snap-on over the tunnel of time because Snap-on took a chance on them. when other people would not.

Understood. And I wanted to turn to the balance sheet for a moment. Snap-on has got a really strong balance sheet. You've got a good cash build in the last few years. As we think about capital allocation, you've been fairly consistent on the dividend and so forth. But have your key priorities for cash changed at all and with the growth in your position?

No, not really. I mean Snap-on's capital allocation model is first and foremost, support organic growth. So while organic growth hasn't been dynamic over the last year or so, it's still when it occurs, we're very working capital intense because of the nature of what we bring to the party. So every dollar of sales is usually 32%, 33% working capital as a percent of sales. So that's number one. Number two would be M&A. And while we look at things each and every quarter through good times and in bad, we're fairly selective. We look for what we call coherent acquisitions. The room might think of them more as bolt-on acquisitions.

We're not looking to diversify the company into a new segment. So we're not looking to get away from what is in our DNA because that's where we think we add value. And if we get away from that, we don't know because the expression I use is anybody can buy something. I assume that something that's for sale is at a fair price, not necessarily a bargain price. So if that's the case, unless you bring some type of synergistic effect, what is it that you bring to the party? So we want to feel comfortable enough, while the synergy is never guaranteed that we can bring something to the equation that makes 1 plus 1 equal something more than 2. But we're picky. So because of that, you could make the argument, well, snap, I'm going to do a multibillion-dollar acquisition. It doesn't mean over time that we have not looked at a $1 billion or $2 billion acquisition because we have. But the bigger the target the more likely you might find things that we don't prefer, like we don't like selling to do-it-yourself. We don't like selling on the Internet, and we don't like selling to big boxes.

So a sizable portion of a Target's activity engages in things like that, that would be so interesting. There's an example without naming exact names that came to market a short time ago, not short time, in 2010, dating. It comes back on market every year pretty much, but it had a lot of business that was predicated on serving the big box. Yet within it, they had certain specialty tools that were great for power tools for aircraft applications. If you ever look at the wing of an airplane, you'll realize how many rivets there are. There's a lot of what they call drilling and filling when it comes to aircraft maintenance. So if we could have bought some of the sub companies, we would have been very interested, but you're not going to buy this whole $2 billion item to get access to, say, $500 million of interesting activity. So long story short capital allocation is to look at acquisitions.

Next, the dividend. We've stated publicly that uninterrupted, unreduced since 1939, which means that every time we increase it, even if it's only $0.01 a quarter, that means it's a perpetuity. That's how we look at it. It doesn't make it right or wrong academically speaking, but that's our view. And then share repurchase has a role. We have not done accelerated share repurchase programs. So there's probably no obvious indicator that we would, yet we've been nibbled, I guess, for lack of a better word. We've about 1.5% to 2% of the outstanding share count has gone down in the last several years. So there's a role for share repurchase, but we're not what I call big bang share repurchases.

You kind of touched on liking some of those sub brands when you look at acquisitions. And one thing Snap-on has been very good about is introducing new products, doing a lot of the designs in-house. Is that something where when you see sub-brands like that, you kind of consider well, maybe we can do this in-house ourselves and kind of compete there. Or is there enough sort of brand loyalty in these fragmented markets where it's a bit more difficult to do that?

There are always elements of brand loyalty. Again, I'll turn it to the example of the street in Banbury, Norbar, name of the company. Niche yet well respected among technical disciplines around the world when it comes to applying thousands of foot pounds of torque. Torque is a measure of effort, a force. Snap-on is very educated on how to apply it to auto repair. So from the 0-foot pounds to 500-foot pounds, Snap-on has a lot of experience. Here's a company that's in England, that is very niche, but knows how to apply thousands of foot pounds of torque in very adverse conditions.

On the other hand, they had to buy some of their power technology from others where Snap-on has its own power tool manufacturing and say, well, how can I get a handheld battery-operated torque multiplier as an example, I'm getting a little granular here. Snap-on has technologies that might be able to do that where they would have to outsource this from an outside supplier. It doesn't mean that it wouldn't work that way, but Snap-on has now that synergistic opportunity to say, well, if I work more in tandem, will they work more closely because they're all under one common ownership. We think that, as an example, yet the loyalty to the Norbar name is noticed, and that's why in Sara's portfolio deck, you'll see a variety of brands that are very niche and well understood.

When it comes to alignment machines, the inventor of hauling wagons in the field for agriculture was a guy in the name of John Bean. We preserved that name today because he determined that if you line the wheels on a wagon, it's a lot easier to pull through the fields and your off-road. So that has stuck. So to this day, we use that name.

In the case of the European theater, we bought a company from Sandvik back in the 1990s. Its brand name is Bahco. Bahco has existed, I think, since 1860. It's very well known in the trades, particularly among electricians and plumbers and wood workers as well as in the pruning industry. So they make a lot of cutting tools out of Sweden. Sweden at one time was known for Swedish steel. It was very appealing. You don't want to take away from that halo effect that comes from those brands' reputations.

So while Snap-on might have common ownership, we are very appreciative of the loyalty of the brands that come with it and stay true to their heritage. And that's why we bought companies that have that type of follow. If you go to a Sweden Rock Festival, a guy like your self loves music, there's people that actually will get the Bahco name tattooed on their arm out there, and they stand in line by the hundreds to get this. And we have the same phenomenon, of course, if people have seen any Snap-on photos, tattoos are ubiquitous among the Snap-on kind of setting.

Certainly, a lot of brand loyalty. Yes. I guess just as we close out, going forward, where are you keeping your eye on in terms of factors that are out there? There's -- obviously it's volatile backdrop. What do you think investors should pay most attention to for Snap-on?

Well, I guess the heritage of the company, it's enduring. Like I said, I worry about everything and yet there's not one thing that will make or save the company. It takes a lot of tools. For example, we come up with new water pump flyers. That sounds kind of mundane, but $6.4 million worth of sales in the first year of existence, not chump change, but it takes a lot of $6 million sales to add up to $4.8 billion in total revenue. So it's not any single thing that will make or break the enterprise. But I think staying true to the heritage of the company that is observing the work, exploring the critical and bringing a problem-solving solution that can have demonstrable productivity. I think that's what the world craves.

You might not like diesel engines. But if I can help you service a diesel engine, to be the way the inventor intended it to be. So it had only this much particulates and not some mass particulates, you've done the world of good. Not that you have to love diesel engines, but if they exist, you wanted to at least be within tolerance, and therefore, I think Snap-on makes products that are not disposable that help products run for as long a cycle as can be. I think it's actually a healthy approach and doing something good to the world, and we make money while we're doing it.

Well, thanks so much for that. I appreciate you joining us here today.

Thank you.

Good morning, and welcome to the Snap-on Inc. Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Sara Verbsky, Vice President of Investor Relations. Please go ahead.

Thank you, Drew, and good morning, everyone. We appreciate you joining us today as we review Snap-on's fourth quarter and full year results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, Snap-on's Chief Executive Officer; and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions.

As usual, we've provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. These slides will be archived on our website along with a transcript of today's call.

Any statements made during this call relative to management's expectations, estimates or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward-looking statements, and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings.

Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everybody. Well, I'll start by saying these times are summer. It seems like every day brings a new twist of considerable significance. fluctuating tariffs with big swings, unprecedented domestic and international events that dominate the news, prolonged government shutdowns. We just avoided another one that hits just keep on coming. But as we speak about the period, I believe you'll see that in the middle of it all, Snap-on shine through with strength.

I'm going to tell you about that as we review the quarter. It's a story of resilient markets, sales progress, profitability and continuing investments that further fortify our advantages in product and brand and people. And so as I cover the highlights of the last 3 months, I'll give you my perspective on the performance, on the markets and on the progress we've made. Then Aldo will move into a more detailed review of the financials.

Our fourth quarter was encouraging. We believe it emphatically serves a testimony that our balanced approach, growth and improvement is effective enough. Our advantages are powerful enough, and our team is experienced, capable and committed enough to perform even in the most challenging of environments. So here are the numbers. In the fourth quarter, sales were $1.231.9 billion, up 2.8% from last year as reported, including a 1.4% organic increase and $15.6 million of favorable foreign currency, positive growth against the wind.

And our Opco operating income OI for the quarter was of $265.2 million was equal to last year's. And the OI margin for the period was 21.5%, 60 basis points short of last year. The impact of unfavorable currency, combined with additional investments in brand building and product development.

For Financial Services, OI of $74.4 million was up $7.7 million or 11.5% from last year, due in a large part to the 53rd week in the 2025 fiscal calendar being uniquely beneficial to the credit. And when combined with OpCo, the overall earnings for the corporation of $339.6 million was up 2.3% versus '24 and total margin was 25.3%. Our overall quarterly EPS, it reached $4.94, up $0.12 from the $4.82 recorded last year. The quarter shows the same resilience demonstrated over the years as we've paid dividends every quarter since 1939 without a single interruption or reduction.

In fact, in November, it was with clear belief in our future. that we raised our dividend by 14%, the 16th straight year of increase. It was another strong and tangible estimate to Snap-on's consistency right through a variety of environments. Well, those are the numbers.

Now to the markets. We believe the automotive repair remains very favorable, and that's validated by the average age of the car park now at 12.8 years, and it's continuing to rise by the growing complexity of new platforms driving more difficult and time-consuming repairs and by the ongoing climb in household spending on vehicle repair. It's up again.

And the vehicles and fixers all over are cashing in on the surge. Tech wages are up again. extending a fairly positive trend. Hours worked in the bays are also on the rise. We believe technicians are financially stronger than ever and their prospects just keep getting better. It's unmistakable. There's a growing demand for capable vehicle repair. Shop owners tell us all the time, they need more techs. And we believe the need to continue. And we believe this need will continue for several years.

In fact, there's a good piece, I think, a recent article in the economist ditch test books and leave and learn how to use a wrench to AI-proof your job. That piece emphasized the considerable need for more technicians and the solid security provided by the profession, and it cites vehicle repair as one of the most AI proof of jobs. is pretty challenging, both physically and mentally. Each repair is different with variations and conditions that never seem to be the same.

And as such, a mechanic needs a mastery of a massive repertoire of procedures, must sum in the logic to troubleshoot puzzling failures and must be able to navigate intricate mechanical setups with precision. It's a job that's getting more complex every day. The techs need help in keeping up and Snap-on is well -- very well positioned to do just that. Now in a related but different segment, shop owners and managers are also adapting, continuing to invest in the advanced equipment and specialty tools required to attend the latest vehicles.

This is where Repair Systems Information or the RS&I group resides. It's a target-rich environment. It's a target-rich environment for our capable undercar and collision equipment, and it's a great and growing opportunity for our expanding array of software and data products. It's an arena where Snap-on is well positioned with our extensive line of proprietary and comprehensive databases, billions of data points, now leveraged with large language models, language machine learning programs that search the exhausted and complex information, matching the promise signature with just the right repair procedure in a split section.

Second, greatly expediting the vehicle fix, increasing shop productivity and getting the vehicle back on the road faster than ever. Again, this quarter, I had the opportunity to meet with franchisees from coast to coast. They're a great barometer. They were all positive about the about the now. and very enthusiastic about their futures.

Sure, they still encounter the ongoing hesitation of techs have toward long-term payback purchases. But at the same time, they're energized by the success of the Tools Group execution, pivoting to faster payback items, rolling out a continuous stream of innovative offerings that are making difficult and critical repair work faster and much easier. Now in the current environment, tool storage remains the most impacted category, but we do see demand for smaller boxes and our large range of accessories are starting to roar.

In fact, the fourth quarter showed kind of some significant improvement in originations. They were almost flat in the quarter. It's a clear game that bodes well for our future. It appears that our pivot is working. So despite the challenges, automotive repair remains robust, and we believe we're well positioned to capitalize. Now let's turn to critical industries where our commercial and industrial or C&I group operates with a focus on taking Snap-on out of the garage to places where work is very critical, justifying a Snap-on level product.

Complex tasks performed in harsh and grueling environments from oilfields to subsea floors to clean rooms for chip manufacturing and to tightly controlled bays for rocket manufacturing. This arena relies on our extensive catalog of products that provide precision, durability, reliability and repeatability, all characteristics required to get the job done where the tasks are essential and critical. We believe we have a decisive advantage in these critical areas, and we keep investing to make it even stronger, and the fourth quarter was no exception.

This is also in the market we're with the largest global footprint for us. And that creates challenges in navigating the international headwinds like government protocols, varying economies and currency fluctuation. And during the quarter, Europe saw the continuing impact of the Ukraine war and Asia was marked by the general loss of confidence in the Chinese economy and the impact and the impact of the evolving U.S. tariff regime changes all the time.

More than any group, C&I encounters these obstacles from country to country, and it does cause some adversities across the group. But we're confident we have the strengths to overcome the variation and keep progressing, making the most of the abundant opportunities in this critical sector. So that's an overview of our markets. resistance against turbulence filled with opportunities.

And we're well -- I should say, resilience and resistance against the turbulence, and it's filled with opportunities. And we're well positioned to leverage the possibilities, progressing down our runways for growth, efforts that are fortified by our Snap-on Value Creation processes, safety, quality, customer connection, innovation and rapid continuous improvement, or RCI, the core activities that underpin our performance, enabling it to hold fast despite the difficult headwinds of these days. Now for the operating groups.

Let's start with C&I. Fourth quarter sales of $398.1 million for the group were up $18.9 million or 5% with an organic gain of $2.8 million and $7.9 million of favorable foreign currency translation. Our power tools division led the way with that growth with double-digit gains. Moving forward on the market enthusiasm for our new innovative power solutions that make work much easier.

And the specialty torque business was also up, driven by the ever-growing need for precision instruments. And in the critical industries come back. Our industrial operations overcame the impact of the prolonged U.S. government shutdown. It kind of cut off things for a while. Things were kind of slow for a while. They overcame that wielding its increasingly powerful custom kitting operations like never before to come roaring down the stretch, registering a positive volume and catching up.

I mean you should have seen this team see them working on catching up. It was a wow. OI for C&I was $60.6 million and included a benefit of $4.5 million related to the refinement of our footprint and it compared with the $63.5 million registered last year. The OI margin was 15.2% versus the 16.7% in 2024, primarily due to material cost increase and stronger sales in some of the group's lower-margin businesses.

As I said, the sales -- the sales growth was fueled by new innovative power tools engineered by our team in Murphy, North Carolina and Kenosha, Wisconsin in the back half of the quarter. For example, in the back half of the quarter, we launched our new Nano-Axcess cordless lineup. I mean this baby is groundbreaking, developed from insights gained from customer connections right in the shops at the point of work. The Nano is a compact power tool.

And when I say compact, I mean small enough to fit right in the palm of your hand, and it can be carried everywhere in a small pocket to be always on hand when the need arises. It's a big advantage as this text change positions across the shop or venture out into the yard. The unit has an internal -- also has an internal Ampere hour battery that drives over 600 fasteners, 600 fasteners on a single charge. You see from our customer connections, we know that most inspections and general repairs are low-torque applications like removing panels, clamps and fasteners under the dash and in crowded engine compartments.

For these common tasks, the nano has the power for rapid removal, the control to avoid stripping the fastener and has the right size to fit where no other power tool can go. It's a real time saver and a fast payback item, and it's right on target for the environment. The initial release featured 2 models, 1 straight and 90-degree pistol driver, and both units set new records for new power tool rollouts, pretty strong.

Also in the quarter, our City of Industry factory in California launched our new ControlTech Plus torque wrench. It's a unit that has the high precision needed for critical industries and performs a great reliability in the harsh conditions that are often encountered outside the garage. It's robust all steel construction, it's durable, perfect for heavy-duty use.

And the design includes a large LED display that's visible in bright sunlight or in dark work areas anywhere an industrial tech applies their trade. And that unit is -- the unit is intrinsically safe, meaning it's certified to work in flammable areas. It's an important feature for critical applications. And the internal rechargeable battery ensures the device is always powered up and ready for work.

Our new ControlTech Plus, accurate, durable, easier to use and safe, taking Snap-on out of the garage and helping deliver the C&I quarter. Well, that's C&I, sales up, a powerful comeback, wielding our critical custom kit capacity, mighty might power tools and precision torque, rising -- all rising to new levels.

Now on to the Tools Group. Quarterly sales of $505 million. Quarterly sales were of $505 million were down from the $505 million, down from the $506.6 million of last year. But the OI was $107.3 million, up from $106.9 million last year, and the OI margin was 21.2%, rising 10 basis points. The fluctuating tariffs, the prolonged shutdowns and the constant of big bang actions and ideas coming out of Washington have stoped technician uncertainty and reinforced reluctance toward longer payback items.

But the Tools Group's ongoing pivot has authored a series of shorter payback items that are bringing high value and strengthen margins for the shop. And that positive is evidenced by the group's gross margins of 46.1%, a gain of 150 basis points over last year despite the flat volume. This is an eye-popper. And at the same time, even in the turbulence, we remain committed toward investing -- even in the turbulence, we remain committed toward investing in the van network, maintaining our advantage in product and brand and people.

So the quarter in the Tools Group -- so in the quarter, spending on operating expenses rose 140 basis points, helping to ensure that the group will be at full strength when the uncertainty thaws. But the Snap-on core -- the core of our business here is our powerful product line. Now over 85,000 strong across the corporation, over 40,000 just in the Tools Group. And the period saw a number of great new examples in the Tools Group.

During the quarter, our Milwaukee, Wisconsin facility released the new line of Impact Flex sockets. Customer connection identified a range of tasks where components we're removing components to access the fix was burning a lot of tech time. Armed with that insight, our engineers designed the new 307RIPLMS, a 7-piece impact socket set featuring extra long reduced diameter shafts and low-profile hexets. Its design enables easy access to deeply recess fasteners and it provides the clearance around blocking obstructions, all without removing additional parts. It's an ideal tool for speeding up routine tasks like brake caliber removals, catalytic converter replacements and extracting exhaust.

Our new Lshaft impact socket set is a winner. It increases productivity, creates quick paybacks and the technicians have noticed, making this design another hit $1 million hit product. Also rolling out of the Algona, Iowa plant, a new 2 storage configuration, the KTL1021, a 54-inch single bank master series roll cab, but with the unique features that all 7 drawers span the full width of the box.

And those drawers are equipped with heavy-duty dual ball bearing slides. The unit has the space and the strength to handle additional storage without -- within a compact footprint, 9,300 square inches to be exact. Now space and strength to find a storage utility and the new unit has plenty of space for our foam organizing trays at Techlub and a load capacity of nearly 3.5 tons big. It's an offering with powerful capabilities at a mid-range price point, and it's just the storage product for this environment.

And as you might expect, it was a great success. Some of what you see in the originations come from this. Well, that's the Tools Group. matching technician preferences, leveraging customer connection, investing in our strengths, all in the turbulence.

Now for RS&I. Sales in the quarter were $467.8 million, up $11.2 million compared to 2022 and including our organic sales gain of $4.8 million, the group's fifth consecutive quarter of growth against the turbulence. Higher volume with vehicle OEMs and dealerships and gains within information databases to independent garages led the way, more than offsetting lower sales in big ticket diagnostic units. RS&I operating earnings for the quarter were $117.7 million, and the operating margin was a strong 25.2%, but it was down 140 basis points from the 26.6% recorded last year.

That reduction represents very robust investment in software development and brand building. Similar to Tools Group, RS&I gross margins were strong, 46.9%, about equal to last year despite cost increases. And just like Tools, the group invested to build its advantage in both hardware and software, helping driving the operating expenses 130 basis points over last year, thus the numbers. But we believe the spending will be well worth it and we will make our advantages even stronger going forward.

You see growing vehicle complexity paired with an aging car park makes understanding the different vehicle setups very difficult, especially with the variations of creature comfort and safety equipment found in modern vehicles. And this is where RS&I excels, converting billions of data points within microseconds and delivering it into the hands of the tech, enabling them to diagnose the problem and execute the fix quickly. And it's already happened.

In the quarter, the group released the all-new MT, the Snap-on MT2600 diagnostic platform, offering a quick payback unit positioned as a powerful entry-level device for the diagnostic area for the automotive diagnostic arena. The new unit is capable of communicating with 50 different OEMs from around the globe on models dating back to 1983. In other words, it handles a wide range of vehicles, and it is fast with live data graphs, functional tests and the capability to reset service and check engine lines, plug into this vehicle's diagnostic into a vehicle's diagnostic port and press. It's ready to go.

No time wasted loading software. and it automatically identifies the vehicle specific information just the same -- just because it's the same making model. doesn't mean the vehicle is the same in the repair world. Models are not the same in the repair world.

One could have been ordered with options like parking assist and the other with air ride suspension. But there's no need to look it up. Now the MT2600 knows the unique differences instantly without any additional input, and it's a real time saver. It's a productivity advancer and it's a pay razor for entry-level tech. The Snap-on M2600, a powerful feature set and a price aligned to match current technician preferences, and it was a hit with franchisees and with the customers alike. So that's RS&I.

Trends remain robust, aging car park, vehicle technology continuing to advance, making repairs complex, abundant opportunities for growth. And Snap-on is the position in the product lineup to take advantage, and we're investing to extend that lead. That's our fourth quarter performance in the midst of turbulence.

C&I sales up, critical industries impeded by the shutdown, but roaring back to report a positive, substantial gains with new power tools and precision torque products. The Tools Group about flat, attenuated by tech uncertainty, but growing gross margins, up 150 basis points without a volume boost, continuing investments in products and brands and its people.

RS&I, a fifth straight quarter of growth gains with OEMs and independent shops, strengthening its proprietary database and its software and the overall business. Sales up 2.8% as reported, 1.4% organically and an EPS of $4.94, up again over last year, progress and investment in a difficult market. It was an encouraging quarter. Now I'll turn the call over to Aldo. Aldo?

Thanks, Nick. Our consolidated operating results for the fourth quarter are summarized on Slide 6. Net sales of $1,231.9 billion in the quarter represented an increase of 2.8% to 2024 levels, reflecting a 1.4% organic sales gain and $15.6 million of favorable foreign currency translation.

Sales in our commercial and industrial sector or the C&I group, increased year-over-year, led by strong performances with critical industry customers and robust sales by our power tools operation. In our automotive repair market, sales gains with repair shop owners and managers were somewhat tempered by slightly lower activity through our franchise van channel.

Consolidated gross margin of 49.2% compared to 49.7% in the fourth quarter last year. The decline of 50 basis points primarily reflected higher material and other costs as well as higher sales of lower gross margin businesses within the C&I group. These headwinds were partially offset by benefits from the company's RCI initiatives.

And while Snap-on is relatively advantaged in the current tariff environment, generally manufacturing products in the markets where they're sold, our costs can be affected by trade policies. Operating expenses as a percentage of net sales of 27.7% compared to 27.6% in 2024. Operating earnings before financial services of $265.2 million in the quarter were unchanged from last year. As a percentage of net sales, operating margin before financial services of 21.5% compared to the 22.1% reported in 2024.

As you may know, Snap-on operates on a fiscal calendar, which results in an additional week being added to our fiscal year every 5 to 6 years. Accordingly, the 2025 fiscal year contained 53 weeks of operating results with the extra week relative to the prior year occurring in the fourth quarter. While the impact of this additional week was not material to Snap-on's consolidated fourth quarter total revenues and net earnings, our Financial Services segment did earn an additional week of interest income from its financing portfolio.

At the consolidated level, the net earnings benefit from the additional week of financial services interest income was largely offset by a corresponding additional week of fixed expenses, primarily personnel-related costs. With that said, Financial services revenue of $108.4 million in the fourth quarter, including $7.4 million of revenue resulting from the extra week of interest income compared to $100.5 million last year, while operating earnings of $74.4 million compared to $66.7 million in 2024.

Consolidated operating earnings of $339.6 million compared to $331.9 million last year. As a percentage of revenues, the operating earnings margin of 25.3% compared to 25.5% in 2024. Our fourth quarter effective income tax rate was 22.3% in 2025 and 22.5% in 2024. Net earnings of $260.7 million or $4.94 per diluted share compared to $258.1 million or $4.82 per diluted share in 2024.

Now let's turn to our segment results for the quarter. Starting with the C&I Group on Slide 7. Sales of $398.1 million rose $18.9 million compared to 2024 levels, reflecting a 2.8% organic sales increase and $7.9 million of favorable foreign currency translation. The organic gain includes a mid-single-digit increase in activity with customers in critical industries, a double-digit rise in power tools and a mid-single-digit improvement in specialty torque. These gains were partially offset by lower sales to the United States markets by the Asia Pacific business.

Overall, the organic sales gain largely reflects successful new product launches from our power tools operation and continued improving demand from our critical industry customers, including those in the United States and international aviation, heavy-duty and technical education. Despite delays associated with the government shutdown in October and November, sales into military and defense applications rebounded and were down only slightly for the quarter versus last year, with activity increasing as we exited the fourth quarter.

Gross margin of 38.6% compared to 41% in 2024. This decline was primarily due to higher material and other costs, increased sales in lower gross margin businesses and 30 basis points of unfavorable foreign currency effects, partially offset by savings from RCI initiatives. During the fourth quarter, the C&I Group refined its footprint and go-to-market strategy, resulting in a net benefit to operating expenses of $4.5 million.

As detailed on Slide 7, these actions included a net gain on the sale of a building that was partially offset by cost to retire certain trademarks and by restructuring charges. As such, operating expenses as a percentage of sales of 23.4% in the quarter, including the net benefit compared to 24.3% last year. Operating earnings for the C&I Group of $60.6 million compared to $63.5 million in 2024 and the operating margin of 15.2% compared to 16.7% last year.

Now turning to Slide 8. Sales in the Snap-on Tools Group of $505 million compared to $506.6 million last year, reflecting a 0.7% organic sales decline, largely offset by $1.8 million of favorable foreign currency translation. The organic decrease reflects a low single-digit decline in the United States, partially offset by a high single-digit gain in the segment's international operations.

During the quarter, we believe our ongoing pivot to featuring the benefits of shorter payback items continued to mitigate the persistent uncertainty of technician customers in the current environment. Gross margin improved 150 basis points to 46.1% in the quarter from 44.6% last year, mostly due to a year-over-year shift in product mix, including higher sales of new products and savings from the segment's RCI initiatives.

Operating expenses as a percentage of sales were 24.9% compared to 23.5% in 2024, largely reflecting increased brand building and other costs. Operating earnings for the Snap-on Tools Group of $107.3 million compared to $106.9 million in 2024. The operating margin of 21.2% improved 10 basis points from last year.

Turning to the RS&I Group shown on Slide 9. Sales of $467.8 million compared to $456.6 million a year ago, reflecting a 1% organic sales increase and $6.4 million of favorable foreign currency translation. The organic improvement includes low single-digit gains in activity with OEM dealerships and in sales of diagnostics and repair information products to independent repair shop owners and managers.

While our undercar equipment sales were flat with last year, the business experienced improving activity in all of our product lines outside of collision repair, which continue to be down year-over-year. Gross margin for the RS&I Group of 46.9% compared to 47% last year and savings from RCI nearly offset the effects of tariffs and higher material costs.

Operating expenses as a percentage of sales was 21.7% compared to 20.4% in 2024, largely reflecting increased activity in higher expense businesses and a rise in other costs. Operating earnings of $117.7 million compared to $121.4 million last year. The operating margin of 25.2% compared to 26.6% reported in 2024.

Now turning to Slide 10. Revenue from financial services of $108 million compared to $100.5 million last year. As previously stated, this includes $7.4 million of higher revenue resulting from a full additional week of interest income due to our 53rd week fiscal year. Financial Services operating earnings of $74.4 million compared to $66.7 million in 2024, largely reflecting the additional interest income. Financial services expenses of $33.6 million compared to $33.8 million last year.

As a percentage of the average financial services portfolio, expenses were 1.3% in the fourth quarters of both 2025 and 2024. In the fourth quarter, the average yield on finance receivables was 17.6% in 2025 compared to 17.7% in 2024, while the average yield on contract receivables was 9.1% in both years. Total loan originations of $285.1 million in the fourth quarter were unchanged from last year and on a year-over-year basis reflected stable originations of tool storage products.

Moving to Slide 11. Our year-end balance sheet includes approximately $2.5 billion of gross financing receivables with $2.2 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 2.1% is up 10 basis points from the fourth quarter of 2024. Additionally, it is also up 10 basis points from last quarter, reflecting the typical seasonal increase between the third and fourth quarters.

Trailing 12-month net losses for the overall extended credit portfolio of $72.1 million represented 3.67% of outstandings at year-end. We believe that these portfolio performance metrics remain relatively balanced considering the current environment.

Now turning to Slide 12. Cash provided by operating activities of $268.1 million in the quarter decreased $25.4 million from comparable 2024 levels, primarily reflecting a $52.7 million increase in net cash paid for income taxes, partially offset by a $23 million decrease in working investment. Net cash provided by investing activities of $25.9 million included proceeds from the sale of a building, a net decrease in finance receivables of $11.2 million as well as capital expenditures of $13.5 million. Net cash used by financing activities of $204.5 million included cash dividends of $126.7 million and the repurchase of 227,000 shares of common stock for $80.4 million under our existing share repurchase programs.

As of year-end, we had remaining availability to repurchase up to an additional $260 million of common stock under our existing authorizations. Turning to Slide 13. Trade and other accounts receivables of $881.4 million represented an increase of $65.8 million from 2024 at year-end levels and included $25.3 million of foreign currency translation, $19.8 million related to the previously discussed sale of a building and a higher mix of sales with longer payment terms.

Days sales outstanding of 67 days compared to 62 days at year-end 2024. Inventories increased by $81.8 million from 2024 year-end levels, and that included $41.4 million of foreign currency translation. On a trailing 12-month basis, inventory turns of 2.4 were the same as last year ended. Our year-end cash position of $1.624.5 billion compared to $1.360.5 billion at the end of 2024. In addition to our existing cash and expected cash flows from operations, we have more than $900 million available under our credit facilities.

There were no amounts borrowed or outstanding under the credit facilities during the year, nor was any commercial paper issued or outstanding at the end of the year. That concludes my remarks on our fourth quarter performance. Now I have a few outlook items for 2026. With respect to corporate costs, we currently believe that the expenses will approximate $28 million each quarter.

We expect that capital expenditures for the year will approximate $100 million, and we currently anticipate that our full year 2026 effective income tax rate will be in the range of 22% to 23%.

I'll now turn the call back to Nick for his closing thoughts. Nick?

Thanks, Aldo. That's the quarter. Sales growth, solid profitability and expanded investments in fortifying our inherent advantages. All in a time of turbulence, tariffs, shutdowns and conflicts, considerable uncertainty. C&I sales were up 5% as reported, 2.8% organically, a late comeback for critical industries, recovering some of the shutdown impact and great new products in Power Tools and Specialty torque Tools Group, volume down 0.3% as reported, 0.7% organically, about flat OI margin of 21.2%, up 10 basis points and gross margins of 46.1%, up 150 basis points against the impact of higher material costs and inflation.

And RS&I sales up 2.5% as reported, 1% organically. OI margins down, but still strong at 25.2% and gross margins about flat, resistant to the pressure of cost rises and tariffs, on -- making gains on our advantage in both software and data. And it all came together for diluted EPS of $4.94, up from the $4.82 reported last year. It was, as I said many times this call, an encouraging quarter. Going forward, we believe we'll benefit from our continuous investment in building our advantages.

The uncertainty appears to be in for a thaw, and we believe the resilience of our markets will continue, essential and critical as they are. We are building our advantages, and they are all our advantages, and they are powerful. With our advantage in product, our tools really do solve critical tasks. And we have more than 85,000 of them with new entries always coming. Our advantages in brand.

Snap-on really is the outward sign of pride and dignity of working -- that working men and women take in their professions. It's a respected and preferred many and with our advantages in people, skilled, committed, battle-tested and enlisted in the expectation of success as a standard. We believe these strengths will set us apart, will enable us to overcome the turbulence and will drive Snap-on to extend its positive trajectory throughout this year and well beyond.

Before I turn the call over to the operator, I'll just speak directly to our franchisees and associates. When I refer to our advantages, both now and in the future, I think of you, the quarter was encouraging, and your conviction and hard work has made it so -- for your success once again in authoring another positive performance, you have my congratulations.

For the intense energy and extraordinary capability you bring to bear every day, you have my admiration. And for your continued commitment to our team and your unfailing confidence in our shared future, you have my thanks.

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

[Operator Instructions] The first question comes from Scott Stember with ROTH Capital.

Question on the Tools Group. We saw a little bit of a rebound in the previous couple of quarters and returned a little bit negative here. Just trying to get a sense, are you seeing any increased level of technician softness? Or is this you guys just having a greater availability of these quicker payback items, and we're just seeing a little bit more of a mix towards the lower [indiscernible] items?

Actually it's -- that's a great question. Look, I think this. I think it's about flat. were up a little bit the last time. So you could look at that as back. But we don't see it that way. We see that the quarter was pretty turbulent. You might think that the shutdown doesn't affect the Tools Group, but you should have been there talking to the franchisees of Maryland and Virginia. They didn't think it had any effect. They didn't think it was a no-effect situation.

And then the tariffs are getting pretty turbulent. Just think about Canada. There have been 29 different presidential or Prime Minister pronunciation since the beginning of the year about changing the tariffs with Canada and the other tariffs are not the way they are. And then you have this news every time you get up and you look at the noise you see things. So that affected their -- I think their general view. And then we heard a little bit about that.

So I think that was part of it. Now I think I said in the call, I think sooner or later, our people got to get used to this. So you could kind of expect a thought coming. You saw green shoots, I think, in one in the originations and the originations being kind of flattish year-over-year, down a little bit, but that's better than it's been. So you kind of believe that, boy, things are -- that's a change. And part of it is pivot, but some of it may be some thaw.

So we see that. And then one of the things I think that's eye-popping, I said so in the call is, geez, in this time, your gross margins are up 150 basis points, wow. So whatever the Tools Group is doing and executing, they're doing pretty well within the conditions they've been handed.

Got you. And I think you alluded to tool storage actually. I think you said it was kind of flattish in the quarter. Can you talk about actual hand tools, diagnostics, just some of the other subsegments?

Sure. Look, I'm not going to give you exact numbers. I don't want to pin myself to that cross. But I think -- look, this -- I didn't really say that tool storage is up. I said that originations, which is not what the Tools Group does. Remember, Tools Group sells to the franchisee and the franchisee on sells and that becomes an origination.

So the originations are more an indication of what's happening at the level between the franchisee and the customer. So that was sort of flattish, which is all the same positives as I said, the tool storage was still down some year-over-year in the Tools Group selling to the franchisees. Hand tools was better. Diagnostics was down. Power tools is up.

Okay. Sorry about that. And then just last question, sales onto the van versus off of the van?

I hate talking about this, Scott, because no month is significant really, fully significant. We always say that it has a lot of variations from month-to-month, but it all comes out in a wash in the end. And generally, what we sell on the van equals what we sell off. But this quarter, sales were up over -- up kind of substantially bigger.

I don't know if you call it substantial, but, clearly, with quite a bit of room bigger off the van than our sales to the van. So I think that's a better -- I would say that's a nice data point, better than poke eye with a sharp stick, but I'm not going to hang my hat on it. But it is -- if you want to classify green shoots, maybe this is a green shoot. I just hope the rabbits don't eat the green shoot. But I think it's a positive thing.

The next question comes from Luke Junk with Baird.

Maybe if you could just jump off on one of the things you just said, Nick, Diagnostics, I think you said it was down in the Tools Group in the quarter. Can we just maybe double-click on that? I'm not sure if we should think there is some pull forward just from the launch strength that you saw in the middle part of this year? Or is there just maybe some inherent lumpiness? Can you just separate the change...

Well, it's kind of -- I think it's more -- look, I think it's more inherent lumpiness driven by the characteristics of the launch. So in the third quarter -- second and third quarter, towards the end of the second quarter, we launched the Triton. I think that's got a street price. I don't know, it must be $4,000, $4,500. It's a massive and powerful unit.

And this quarter, we launched the MT2600, which is an entry-level thing, which is substantially lower in price. But a sale is sort of a sale to the franchisee. Yes, maybe he has to work a little harder for the bigger ticket item, but not -- he still probably got to put in the same amount of time for either one. And so he spends his pitch, does his show and explains everything, and he gets $1,500 or $4,000, I think that's pretty much what you're seeing this quarter.

Okay. Helpful. I want to switch gears to C&I. Critical industries, if we look at a quarter ago, returned to kind of modest growth, now tracking up mid-single exiting '25. But it sounds like it actually maybe even was higher in December, given what you mentioned around the shutdown. Any reason to think that, that momentum doesn't carry over into next year in critical industries?

Well, I think we have we have great optimism for our power in critical industries. We think our array of custom kits keeps growing, and therefore, we have a greater span of sale. Our custom kitting capacity, we keep increasing it. And one of the things I didn't fully, I suppose, tease out in this comments is that's what allowed us to catch up at the end. We really pumped it up.

I mean if you looked at October and November, it wasn't the greatest time. Things had -- the military business, which is a nice business for them, had gone to a crawl and then they came roaring back. Like I said, you had to see these guys out there working. The head of the division was out there and is younger he's working packing.

So I think this is -- yes, you should see momentum coming out of this quarter. Now we don't give guidance -- so this is one data point that we are positive, and they didn't fully catch up. So therefore, you would expect to have some catch-up coming out. We'll see how that plays out over 3 months, but I feel good about it.

Last thing kind of coming across. I know both C&I and the Tools Group, just the power tool strength. I mean that's been under pressure for a while here, a pretty sharp bounce back in the quarter. I just want to unpack maybe shorter-term impacts given the product launch momentum that you mentioned and just maybe your historical experience in terms of the tails of that momentum leaking into future periods.

Well, I don't know. Look, I think, again, we don't give guidance, but the last time we've launched a product like this, like the Nano years ago, it was a while ago, this kind of the uniqueness of it. And it had quite a bit of legs went on for a while. It's not -- it's a whole different line.

So that tends to have more legs to it. If you're talking about other products like the long neck ratchet, which I didn't mention on this call, I mentioned the last call, 13 inches -- 30% longer than anybody else, trends power at a distance, but that one can be more episodic. And so you have to sell -- find the people who don't have it already if you're a franchisee. And then to some extent, it is episodic like the diagnostics.

I do think, though, that you're going to see that more and more in power tools today for us because there was a period when we turned our power tools engineers and some of our engineers partially away from new products and said, this is the period in which we couldn't get components.

And so you had to use engineering time to target the components that were actually -- you could actually get that actually were available, and that meant design change and it eats up time. And so now we've got everything full strength focused on new product, and they seem to be hitting the ball out of the park with repeatability. So I feel pretty good about it. I think the nano has got legs, but generally, power tools can be episodic.

The next question comes from Sherif El-Sabbahy with Bank of America.

I just wanted to -- on some of the brand building expenses that you had called out, particularly in the Tools Group. What exactly is embedded in those costs? And how do you expect them to -- how do you expect them to look going forward? Is that sort of an ongoing cost you?

Well, I'm not going to give you exactly what's in the cost because you'll be asking me how much I'm spending every quarter on each of those categories. I'm not going to say that. But look, here's the kinds of things we worked on. We worked on training. This is the kind of thing training in our business. We worked some on advertising for the brand. The advertising is up.

We worked on building software, which spreads across this business and the RS&I business. We worked on social media, the use of social media more correctly. I mean these guys are all individual businessmen, the 3,400 fans. And some of them are great at this stuff and some of them are not. So we worked on those things. That's the -- those are the kinds of things we spent on in the tools.

Understood. And I know the 53rd week wasn't necessarily impactful to the financials. Are you able to give us sort of a ring-fence the size of it and the impact of the year?

Sure. One thing you got to know. it's vastly different between the financial company and the operating company. For the financial company, it's a bonanza. I think Aldo said, it's like $7 million extra profit. That was pretty much 53rd week. But if you look at the operating companies, you got to understand where it is, and it's during the Christmas, the holiday period. And these are expense full sales week periods. So it generally is a loser.

You have most -- you have a lot of the expenses flowed through your P&L. They're just there like clockwork, and you don't get any sales. That's what happens. So they're a negative. I will tell you that when you roll that out, it's not -- what do we call it, it's not significant. It's not a significant thing for us. Maybe -- but it's a little bit of a weight, actually, a little bit of a negative, but not significant.

The next question comes from David MacGregor with Longbow Research.

I wanted to just ask you about -- last quarter, we had talked about the SFC, and you had said there were great orders, you were up mid-single digits, but that we're not getting money. I think that was the exact quote. You're not getting much of that at all. So I guess I'm having trouble reconciling that with essentially flat second half sort of Snap-on Tools segment organic growth. Can you help us understand those dynamics -- and also maybe what you're seeing in the way of first quarter growth in the non-SFC fulfillment business?

Yes. Look, I think -- remember, I think I say that the SFC are orders, not sales, so that [indiscernible] cancellation.

But you fulfill in the second half...

No. And so what second half, I don't know -- do you mean the second half or the quarter or the fourth quarter?

The second half of the year.

Well, the second half of the year is not supported by the SFC. The SFC pretty much starts to blink out in terms of effect just as you cross over the year-end. So there isn't an effect what I mean it's all in the half. So you could ask why we didn't do better in the fourth quarter if we had mid-single digits in the SFC. And that's because the actual orders end up being a cocktail of about 3 things.

There are the SFC for that half that we referred to. There's the kickoff for the second half, the big bang events. And then there are a bunch of usual programs that flow out at different times. They're big promotions. And then there's the monthly meetings for the franchisees that roll out promotions in each one of those. So the combination of those is what makes the quarter.

So if you say that the SFC orders were 5.8%, was like mid-single digits. And okay, you're not really you're not necessarily going to get those. They could be canceled, but they could all be taken up and you could have weakness in one of the promotions or just everybody say every month, well, I got enough, I'm not going to take anything this month. I'm going to take a lot less this month.

That is -- that's what makes it so hard to predict. Now SFC and kickoff, you feel good if you get more orders, but it's not definitive. I think I say that when this happens. So that's a look at it. So it's a cocktail of a bunch of different selling efforts that result in the flat quarter.

Yes. Maybe I'll follow up with you offline on that. Is there anything you can say about the regional kickoffs, Nick, and how they're going?

Well, they're over. First of all also, they're behind...

I know they're over. I'm asking how they were.

Okay, they were in the first quarter, so I don't comment on future, but the one I went to was very positive. People were very enthusiastic. And I would say that our reports from around the country, Aldo went to one, and this was similarly positive. So we think they came out well. I think like the -- I think the orders were reasonably robust. But like the SFC, they're not definitive. So if you were just going to base your view of the future on the kickoff, you would feel pretty good.

I think what I'd say, David, is more or less, that this was a particularly turbulent time in terms of uncertainty. But if you look at the gross margins, the execution seems to be pretty good. If you look at the originations, it seems like the pivot is working because people buy in some of those small boxes, at least off the van. If you look at the sales off the van and you say, well, yes, it's only one quarter, but it's better than the sales through the van, that seems like a positive. And if you look at the nature of the world and you wonder if people aren't getting tired of being uncertain and things won't go. So I think we're kind of optimistic going forward.

Okay. Last question for me is just on the balance sheet. I mean you got $1.6 billion of cash, a little over $400 million of net cash. You're generating $1 billion a year of free cash flow. I mean you're doing an extraordinary job here. Where are you going to go with the cash? What -- remind us on your priorities for M&A?

Okay. Priorities are like this. Well, as you know, I bet you've been looking at it so long. You know this dead nuts. But the -- if you look at it, we're working capital hogs. So we always have to have a pretty good dollar of cash to make sure in case things should explode in terms of sales, we want to be ready to fund it because we are not working capital -- we're not among the small working capital, great inventory turnover, for example. But we -- that's our model.

And so you got that. You got to have cash for that. Then the whole thing is the dividend. We have -- as I said in my call, we have declared a dividend every year since 1939, and we have never reduced it -- so we think about the perpetuity of the dividend. And we think with 16 straight consecutive increases, we always look at it in those context. And then you've got acquisitions. We always -- we're always reviewing acquisitions.

Now quite often, you look closer and you find out so many warts you don't want it or it's selling into a segment we don't want. But we do look at acquisitions consistently. And we have made several of Car-O-Lineer, for example, Norbar, a bunch of different things over the years. And then we look at, as Aldo took you through, I think we spent $80 million plus in share buybacks last year.

The next question comes from Bret Jordan with Jefferies.

This is Patrick Buckley on for Bret. Within Tools Group in the U.S., could you talk a bit more about what you're seeing in the competitive landscape? Any notable shifts in strategies as far as pricing or mix or marketing?

Why do you always ask about the competitors? That's what I want to know. But anyway, look, no, we're not seeing -- I don't think we're seeing so much about that. I mean I think we have less pressure from tariffs than almost anybody else. I'm not sure that everybody's gross margins are up in the Tools Group, but I'm not hearing people talk about pressures, but that's not -- that's normal. I'll tell you this.

When I get on a van, and I do all the time or I meet franchisees, they never mentioned the competition. they always -- I shouldn't say never, but they seldom mention the competition. And it's because Snap-on is kind of in a different area. People decide to buy a Snap-on product or they decide to choose from a bunch of other alternatives. That's really the way it is. We're not actually competing with those guys for the same people. I don't -- we don't see it -- our guys don't see it that way.

Now I don't know. I think knowing where they source from and some have had difficulty in making in the United States, I think the tariffs have got to give them some fits, given us fits. So I would think we'd be in a better position. Well, I'm not sure. I mean, they might absorb it in profitability. Nobody said to us that anybody is dropping price. Nobody said to us, oh, people are raising a price and it makes a difference to us because we're always above them anyway.

This concludes our question-and-answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning. Thanks for joining us. My name is Luke Junk. I'm the Baird analyst covering vehicle tech and mobility. Really great to have Snap-on with us this morning, as you probably know, is a leader in the auto aftermarket and other industries. Really happy to have Nick Pinchuk, CEO of the company with us here this morning. Once we get settled in here, Nick, do you want to kick us off with some introductory comments?

Sure. Okay. If you're not familiar with Snap-on, I'll give you a brief people's view of it.

We're a company that operates in the critical. So in other words, our customers are those people who are looking to solve things, where the penalty for failure is high and the need for repeatability and reliability justifies a special tool, as special as a Snap-on tool. It's a lot of different industries, automotive repair, aviation, you can think about quite a few, and they are natural customers. And how do we pursue that?

Well, our principal value-creating mechanism is to go actually to the place of work, not survey, not analyze, go to the place of the work -- that work and observe the work and figure out which work is particularly difficult, critical and therefore, would benefit from a Snap-on Tool. We bring it back and we make the tool for it. And it doesn't really matter to us how widespread that problem is. We try to solve problem after problem after problem. So we've got 85,000 SKUs and growing. We're kind of like complexity headquarters with regard to products.

Now how do we handle that? Well, we have something called Snap-on Value Creation, processes and safety, quality, they're kind of obvious. You got to be safe if you make things for people, for workers, you got to keep your own people safe. You want to have quality because people don't want the tools to break down. But then we have something, as I just described to you, customer connection. That's what we call. We go into the work and observe the work and take the insights and use innovation in a number of different forms to create a new product. But then we have something called rapid continuous improvement.

At every site in Snap-on, there's somebody dedicated to it. There are thousands of events every year. And therefore, we're able to manage this complexity, without it killing our costs. And the evidence of that is over the last, say, 15, 16, 17 years, Snap-on has increased its OI margin, an average of 85 basis points every year.

Now that puts us into -- we organize -- we have different organizations that face off in customer base. So we have the Snap-on Tools Group, which is what everybody thinks about Snap-on. It's 4,800 vans, franchise vans worldwide, and they call directly on the customer, the people toil the branches, that business was up in the quarter about 1%. It made 21.7% OI margin, and that was up 10 basis points year-over-year despite the tariffs.

Then we have the C&I business, which calls on people -- no, we have the RS&I business, which calls on a different customer, not the mechanics who actually toil the wrenches, but the owners of the shops and the managers, sells things like software and lifts in vehicle repair. And that business was, I guess, there's a lot of adjustments in the quarter because we had a legal settlement in that group. But when the dust settles, they were at 25.6% OI margin, up 20 basis points.

And then we had the Commercial Industrial Group, which calls on people outside the garage, like aviation, oil and gas, general industry, mining, education, military and also calls direct. That business was down -- was up in the quarter in sales, but was flat in the quarter in sales. But it was down a little bit in terms of OI margin. I think it was 15.6%, down 110 basis points. A lot of that was currency, though, and a lot of it was -- some of it was tariffs. And you think in this time of tariffs, I have one other piece of data to tell you, and that is we make in the markets where we sell. It's part of our manufacturing doctor.

We have 36 factories worldwide, 15 are in the United States. So generally, we know how to make everything here. So in this time of tariffs, our gross margins this quarter were 50.9%, down 30 basis points, almost all described by currency. So we just took the tariffs and went like that. That's my story.

Okay. Great story, Nick. Join into the conversation, I believe the e-mail address for this room is [email protected].

I'm going to start with the Tools Group. And the third quarter that you reported a few weeks ago, and frankly, the #1 question that we've gotten about the company recently is around seasonality. If I look over the long history of our model, 2Q to 3Q, very long time that has been down seasonally. Last 2 years, it's been up seasonally. What do you think is -- what's going on there? Is this a permanent change, do you think, in terms of your ability to execute through that?

I mean the thing is the third quarter is always squirrely. I say it on every conference call in the third quarter or even rolling up to the third quarter. And the reason it is different is, because in our world, there are a lot of vacations that run through the summer.

Remember, we're calling on individuals. They go on vacation. right? And so you have that. The franchisees who call on them for the Tools Group in vehicle repair. When I'm talking about customers for the franchise business, they are vehicle repair technicians. We call on almost 1 million of them every year, every week, every week. So we go up and call on these people every week, and that's the cadence of the sales in the Tools Group. Well, some weeks, they aren't there. And then there's no opportunity to sell. Some weeks, some third quarters, they are there. So we have that variation in that group.

And then secondly, we have our Annual Snap-on Franchisee Conference, where the franchisees come in and we -- it's like 1/3 training. We train them in the new products like our new Diagnostics product, which are difficult, very complicated and very powerful, but they got to be trained in the issues. So we have lots of training seminars, 1/3 training seminar, 1/3 buying show. We had, I think, three football fields of product. And so they go around, they actually touch the product, which they might not be able to do unless they order it. So they do this at this event, so they order and 1/3 is [ pep rally ]. I'm in charge of [ pep rally ].

So generally -- but if you think about it, okay, 85% to 90% of our franchisees pay their own way to come to the site where we have the conference. They pay their own airfare, they pay their own hotels. But more than that, they come out of the field. So they park their vans. So there's 1 week at least of the 13 in third quarters always that's kaput, at least several days. And so therefore, this combination of vacations and the SFC makes the third quarter extremely hard to predict.

Now let me put it this way, having the third quarter up is deeply against the tides of seasonality. So for us, while the quarters are squirrely and there's a lot of variations, having the third quarter up over the second quarter has only happened 2 or 3 times in my tenure, and I've been around a long time. And so therefore, even though it's not completely definitive, it's better than a poking the eye with a sharp stick, it's pretty good. So I think that's how I can describe it. I don't think it's definitive, but it does seem to fill because -- to fit the Tools Group profile lately because Tools Group has been improving, as it was set back by the uncertainty with technicians.

Technicians, automotive repair has not stepped back. Actually, it didn't step back during the great financial recession. During the great financial recession, the Journal was writing articles like economies glum, repair shops hum. And so it is. If you look at the BOL's data, household spending on vehicle repair is up double-digits. And it's been continually going up double-digits because cars keep getting more complex. And so that's driving their business. Technician pay is going up mid-single digits because they're doing more things. And a senior technician has to know 2,000 procedures. How many procedures does a surgeon know? By the way...

Not 2,000, I bet. Okay. So they have to know a lot of things. And so therefore, they have cash. But the current environment made them tremendously uncertain. They are not buoyed by Wall Street. Now I'm not saying it's bad to be buoyed by Wall Street, but they don't care whether the stock market is up or not. They don't care whether the Fed is backing off in interest rates. It doesn't affect them at all.

What they worry about are things like inflation and the wars and the sort of rapid fire things that are coming out of Washington now. They don't worry so much about the tariffs, but they say if we change so many things, something is going to come off the rails. They feel like they're on space mountain. So therefore, they don't buy part of our product line. They tend to pivot toward what we call quicker payback items.

About 1/3 of our product line are big things like Tool Storage Boxes. We finance them the $10,000, a mechanic signs up for 4 years of making weekly payments. They've slightly shifted from that to things we sell them that are cheaper, like a Power Tool and it's paid off over 15 weeks. So that created turbulence for the Tools Group. And what we've seen since then as Tools Group is starting to regain its momentum. Third quarter was another example of that. Profitability was the second best ever for the third quarter.

Well, speaking of a pretty good trend in the third quarter, Diagnostics really was a star in 3Q. What do you just think about the outlook there? Does it have legs? I think there's a product launch that was part of the story in the third quarter here. And relative to that sentiment that you touched on, does Diagnostics as a category say anything about big-ticket demand and the margin going forward, Nick?

I think it says something but not so clear. The thing about it is that it says something about the power of our Diagnostics. It says something about the compelling nature of our Diagnostic offering, which will allow you to solve problems or fix the cars much faster, much faster and with much more accuracy.

Now we get our pound of flesh for that and price for that Diagnostics, but people bought it heavily in the quarter. And see, I think the urgency of that, the idea of that overwhelms some things. If you think about it, Luke, our Tool Storage business was down like, I don't know, let's say, originations were down 5% or 6%. They were down 10% in the prior quarter. And so originations mean how many loans we give out? So it's a measure of how many big-ticket items we sell. So it's down -- I was on a franchise van. I'm on franchise van all the time. I was just meeting someone in San Diego. I said, how is it going with big ticket tool storage? Going okay.

And I'm thinking the results are dog food. And then I did the math. He sells -- this guy sells 10 Tool Storage Boxes every quarter. So what that meant was he didn't -- he only sold 9. So if you were calling on people every day, one down wouldn't seem like that much to you. But to us, it's like -- we're like the princess in a [indiscernible], it's a significant effect for us. So I don't see -- what I see in the Diagnostics, not so much is a shift -- a willingness to finance. I see a recognition that I got to have this new hot new product that's going to make my job easier and really save money.

So it was a more compelling offering than others. Now I do think that if you go forward, one of the things that happens about this is people see different events in the environment and they say, okay, they start to get used to it. For example, one of the things that -- these are guys, the technicians, why do they get nervous about Ukraine or the Middle East? They think like this.

What do you think sons or daughters are going to fight if the U.S. gets in a war? They think it's there. So they're much more worried about this. They make a lot of -- they're comfortable in terms of cash, but they know if things go off the rails like the space mountain car goes off the rails, they're not sure they have enough cushion to absorb that problem. Therefore, they're more conservative. But I do believe as you go longer, people got to start to get used to the environment and therefore, be a little more comfortable with it and believe, well, the cataclysm hasn't come. The world hasn't ended, and therefore, I can go back to my normal activity.

Can you talk about Power Tools? I mean it does seem like one of the areas that at least for me has been harder to model, just maybe unpack what's been going on in that business and some of the opportunities in the near term?

Power Tools tends to go by new product, tends to go. People love to see a new power tool. And so we had a great new product in the quarter. So it came out of the SFC with a lot of momentum. Things like, I think our Long Neck Ratchet. Now you say what the **** is this thing?

Okay, a ratchet is something that will remove or replace a fastener. And in automotive repair, if you think about it of almost all the things we deal in, automotive repair is a place where the workers, the person who does the work actually has to do it in tight quarters. An engine compartment is pretty tight. And so sometimes you can't reach-in to get the fastener. You have to dismantle everything to get to it.

Well, we got this ratchet, 13 inches neck, a 13-inch long neck that will reach-in for you. And we made the power of it 30% more than anything on the industry, and it's 50% longer than anything on the industry. See it turns out a metallurgy and the dynamics of a product like that, putting the force at a distance is a metallurgical and physical challenge. And so we're able to do it, and that's sold like hot cakes.

We just brought out something called the Nano, which is a 7.5-volt Power Tool that fits in your pocket. So there's a whole bunch of stuff under a car that isn't quite high-torque, but you've got to do it like if you're under the dash or and you're in some place where it's tight, these people can carry it around. And when they're confronted with this easy stuff, they can just whip it out, they don't have to go back to their box and get a Power Tool because they wouldn't want to be carrying a Power Tool all the time if they weren't using it. This thing is very versatile, and it's selling like hot cakes. So new products, we're kind of sanguine about our new products in that situation. We'll see how it works out.

Okay. Tariff is obviously very topical right now. I want to put it through the lens of your footprint, which is mainly very U.S.-centric. Can you talk about maybe opportunities to press the advantage on that front into next year? Are there any areas that you can push on?

Sure. I mean it's like this. Our manufacturing doctrine is, because we get benefits from being in the workplace. And because we bring that to -- we create the insight for the innovation for the product development people, we like to be close to the customer-only manufacturer.

So we tend to make in the markets where we sell. So the U.S. is one of those. So as I said before, just a small [ praises ], we have 36 factories, 15 in the United States, but more than that, virtually everything -- 80% of what we sell off-demand was already made in the United States, has been made in the United States. But more than that, we pretty much know how to make everything in the United States.

So we imported some Power Tools from, say, our factory in Kunshan, China. The small ones, but we can make them in the United States. In fact, we're making them now in the United States. We just shifted in the United States. So where will we have advantages?

I think the advantages we have are that we're unaffected and therefore, don't have to adjust price or we can raise price to be -- to match the rising prices of anybody else. We can do either one of those. We're pretty profitable already. And we believe our RCI, our rapid continuous improvement can keep making us more profitable, and I think it has over the years. So -- and we are the price leader already. So I think this is a situational thing. I would suggest it gives us great flexibility, whether to figure out we want to pump volume or we just want to hold and maybe get some pricing on the thing. The cool thing is we probably can pump volume without changing pricing.

You mentioned mechanic sentiment. Let's look at something that's more real in terms of mechanic health. Just what you're seeing in credit and collection trends right now that inform sort of the real trend within your customer base?

Yes, the credit and collection -- well, the credit, I would say the cycle losses are up some. They're creeping up to a point where they're among the highest they've ever been. But put it this way, our yield in this portfolio is ballpark 17% and change, 16.5% and change. The losses are in the 3% range, 3.5% range at the highest levels. So that doesn't seem to be a daunting situation.

What we are seeing now, I think, is that certain customers are saying, geez, they have other obligations and they're kind of having a more difficult time. Not -- they're still trying to pay our stuff, but some of them get overwhelmed. And it's a small number, so you see it moving up. But generally, that portfolio has been stress tested in the great financial recession, in the pandemic where it didn't burp. And now in the great uncertain -- I would call this the great sea of uncertainty we see throughout America these days, I think it holds pretty well, and still is quite profitable. And we don't see it as an avalanche or anything like that.

So clicking into next year, you don't give guidance, so that's not even an issue.

We do.

Well, the CapEx guidance.

No, no, no, hold it. Let me correct you for a minute. We give guidance, in that we say our expectation is to grow at 4% to 6% in sales, and we expect our OI margin to go up every year.

Well, that's what I want to talk about that.

That's our guidance. That's our guidance. We don't give specific guidance because we don't have backlog. So why would I do that? Okay. So go ahead.

Tools Group, I think, would be more 4% to 5%, that long-term guidance.

Sure.

What do you have to do in '26 to get to that level, Nick?

We got to continue to pivot. The pivot seems to be working for us. So by that, I mean, when you're a guy like me and you're selling 30% of your business is sold to big ticket items. That means you design them, you manufacture them, you promote them and you roll them out to the marketplace, putting them into the actual hands of the end user through the Tools Group.

And then the other 2/3 of the business is the smaller ticket items. So when you see that customers now prefer to spend their money on smaller ticket items or quicker payback items, I should say. So therefore, they liquidate the problem. They don't -- they're not tied to long-term debt. You have to adjust the product design. You have to adjust the manufacturing and you have to adjust the promotional program. And we've been doing that.

It's pretty easy to adjust the promotional program. But in terms of design and manufacture, a little longer wait, and we're building momentum in that situation. So I think we need to keep doing that. We need to keep bringing out new products like Diagnostics, which -- like the Triton Diagnostics, which puts a boost, and that gives you a little boost there. And we need to keep -- I think those things will lead to a return to this kind of thing, 4% to 6% -- 4% to 5%. We always say that will be at the bottom of the end because they have -- boy, they have pretty dominant -- pretty good, I shouldn't say dominant. My lawyer will have me off the stage.

But we have a fairly strong market share. So you're probably not going to gain too much market share, but you can. And I think -- so we see it at 4% to 5%.

Let's talk about C&I. So maybe nearer term, some of the key end markets that you're focused on in terms of incremental growth opportunity? And maybe if we zoom-out bigger picture over the next, say, 5 to 10 years, should we expect this to be a bigger business? And how can you invest to really drive that idea?

Yes. Well, look, C&I is a number of different businesses. I think I could call it -- you can think of it in three pieces.

One, is the pure critical industries business that sells to customers outside of the garage. We say C&I is where we roll the Snap-on brand out of the garage. It's a direct sales business. And it is -- we call on customers that have big projects and then afterwards, want maintenance those projects. And so the customization to those projects is important. So to this group, we'll sell -- let's say, somebody has a big project in the military. Let's say, the F-35 fighter, they will buy from us a box of tools like this that gets populated with different tools, most of which are Snap-on, but not all -- but the others we smear the Snap-on patina over. And if they want to change, we'll change it and give them a different product.

So our ability to bring together all those tools, put them in a box and have a never-ending variety of these customizations for different projects is one of the things we need to keep investing in. This business just went like this, except for the last couple of quarters, but had been going like this because we just gave it more capacity. We built a new building that allowed us to have more capacity to create those customized kits. We're going to keep doing that.

The second thing about that is we have to keep investing in direct salesmen, so they can keep going out and observing the work and then figuring out what new tools it is. See on the vehicle repair side, we've been in it like 120 years -- not 105 years, 105, I got carried away, 105 years. But -- so we know vehicle repair. If you want to get your car fixed, come to Snap-on. 300 guys in the headquarters know how to fix your car.

But it isn't like we know the military as well as vehicle repair. We don't know oil and gas as well. And so we keep gaining that understanding and that will drive it. This business is a good business. I mean, we're talking margins toward the top end of our margin range and maybe higher. And it grew at 3% in the quarter. Now one of the things about that particular business is it's a little bit off where we want it to be. We expect it to grow at 3% to 6% -- like at the top end, the 4% to 6% range.

But in this particular period, the tariffs are causing us a little problem here, not because of our cost because of our customers'. Now you might say, well, why did the tariffs cause problem to the customers, its like this. I think generally, there are two phenomena here. You may not fall pray to this, but I found when I go on the shows like spot buys or anything like that, just saying, why aren't manufacturers moving? Why don't you have plans now to move?

Well, through the lens of a manufacturer, the time constants are much longer. If you think about, if you're in the financial community, you can change your portfolio pretty quickly. And execution isn't so much of an issue. It's the decision is everything. In factories, the decision isn't everything. Decision is one piece of it, then execution is another. And so it can't happen that quickly. That's one. It takes a while.

Secondly, at this particular interlude, we tend to think that the tariffs have settled down. Now things are more or less settled down. Wrong. The tariffs for Canada, Mexico and China are all unsettled. They're all unsettled if you look at it. And these are three of the four main sourcing partners for anyone who would have a project associated with manufacturing.

And so if you're a guy like me, you're saying, I'm not going to present to my Board that I'm going to build a new plant. I'm going to adjust something, I'm going to make a major capital investment because of the tariffs because I don't know where the tariffs are. And if they change, I got to go back and say,"never mind", it's not -- and so what's happening is a portion of that business has become delaying projects, keeping their powder dry.

Now what will happen is this all come -- should explode later on when tariffs get settled, that should be good. So then the other -- so I think those are the places where we need to make the most investment. We have an Asia Pacific business in C&I, and we have a European Hand Tool business. And the European Hand Tool business just has to convert from distributors to more direct because direct is our thing. And Asia Pacific actually is -- I don't know, I don't know if you looked at the economies of Asia lately, but they're all screwed up. Everyone has got some problems. I mean the Korean President was just put in jails prices. Thailand's market -- Thailand's auto market was down like 30% 30%, right? This is big. And India is always kind of a basket case. In China, there's a lot of discussion about China, but there's a lot of uncertainty in China and people are disgruntled.

Xi Jinping has got a tiger by the tail trying to manage that economy. So you have those things. Those things you have to clear up. But it doesn't matter. We keep investing in the physicals and product to make sure we can take care of those markets, when it comes out of these difficulties.

Maybe last question, a question from an investor, just how you view the trade-off between the capital allocation between internal investment, M&A and buybacks and maybe to quantify return potentials across those choices?

Best return is invest in ourselves. That's the best return. So we invest in ourselves. For better or worse, this may horrify everybody in the room, but Snap-on is a working capital hog. When we add business, we add a lot of working capital because we don't want to lose any business because of that and because of the complexity associated with our products.

But if you look at it, our returns on assets are pretty good. So we get our pound of flesh out of the -- so we need to have good resources ready to support our business as it grows. Secondly, you got things like AI coming now, which, by the way, I think asymmetrically empower Snap-on because we're at the point of sale, we have a rich group richer array of data to feed into such mechanisms. See our data really goes down to what size the shorts are for the mechanics? And so I think these things will benefit us greatly.

And we're working some of this stuff. I mean, I think it's early days for AI and this stuff, but people are going to be making some investments in that, that will be capital expenditures and so on. So we tend to invest in the business first. Then we have M&A, of course. We can afford -- we have a lot of capacity. We have a lot of dry powder, so we can have M&A. We look at a wide group of businesses. And anything that would enhance the van channel, expand our position with repair shop owners and managers, extend the critical industries or build in emerging markets, we will acquire.

And then we've paid a dividend every quarter since 1939, and we have never reduced it.

We'll leave it there, Nick...

I manage it right there. I didn't have to answer...

Management will be available in the Oak room for a follow-up. Thank you.

Okay.

Good day, and welcome to the Snap-on Inc. Third Quarter Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Sara Verbsky, Vice President of Investor Relations. Please go ahead.

Thank you, Bailey, and good morning, everyone. We appreciate you joining us today as we review Snap-on's third quarter results, which are detailed in our press release issued earlier this morning. We have on the call 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 provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. These slides will be archived on our website along with a transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward-looking statements, and actual results may differ materially from those made in such statements.

Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everyone. Well, we believe our third quarter demonstrated encouraging momentum, continuing our progress, moving upward against one of the most challenging environments of our time, wars, inflation and tariffs. Moving upward against the tide of seasonality. And upward emits the variability that always accompanies the late sum.

The quarter showed that the resilience of our markets the momentum of our program, the advantage of our strategy, making in the markets where we sell and of our structure, the flexibility provided by our 15 factories in the U.S. have driven us forward, and we believe it will serve us well for some time. As we proceed today, I'll start with the highlights for our quarter. I'll provide my perspectives on the results, on our markets and on the path ahead and then Aldo will give you a detailed review of the financials.

My thoughts regarding the past 3 months that without question or qualification, our results are once again encouraging, fortified by the progress along our run rates for both growth and improvement. It was another quarter of bearing witness to our building traction against the uncertainty and headwinds of today. You can see it in our -- third quarter sales, $1 billion. Third quarter sales of [ $1,190.8 ] billion were up 3.8% from the $1.147 billion recorded last year. Excluding $9 million in favorable foreign currency translation, organic sales increased by 3%. In this third quarter, was up sequentially over the second quarter results, again, against normal seasonality, and we believe it offers substantial evidence of ongoing momentum. The -- operating income margin was 23.4%. Now that includes 190 basis points from a recent legal settlement. So excluding that local at that legal item -- OI margin was 21.5%, down 50 basis points. [ 20 ] of which were due to unfavorable currency, but 21.5% is still at a strong level and represents the second highest third quarter ever despite the turbine.

For financial services, FINCO OI of $68.9 million was down from the $71.7 million last year. And a number that when combined with our ACO results resulted in a consolidated OI margin of 26.9%. EPS was $5.02. And or [ $4.71 ], excluding the $0.31 from the onetime legal benefit, representing the highest ever for a third quarter and overcoming a $0.09 impact from higher pension amortization costs. So those are the overall results, we think they're pretty good.

Now let's take a view of the markets. During the third quarter, the overall repair market remained favorable, displaying a continuing need and a rising complexity. Miles -- keeps growing. People move even in difficult times and they're holding on to their vehicles longer, requiring more upkeep. The car park keeps aging. It's now averaging nearly 2.8 years. In other words, people need repairs with solid regularity and the range of vehicle models needing work just is expanding and the vehicles keep getting more complex every day. The ever-expanding array of drivetrain sophisticated motors, neural net worth of sensors, multiple systems, a melding of hardware and software to control a growing range of functions. It all marks the trajectory of modern vehicles. Its environment of constantly rising repair challenges. In short, it appears never had a more promising future. And you can see it in the industry metrics, spending on repairs up double digits.

Tech comps rising wages continuing their upward march and keeping with the increasing skill required to keep the world mobile. So the techs are cash rich, but they're also confidence poor. Certain of their value but uncertain about the environment. They still want new tools that make the work easier, but they remain reluctant to commit to paying for big-ticket items with long-term financing. But in turbulence, our strategy of pivoting toward faster payback items is taking hold and it's making engaged.

Automotive repair is a great business. essential to our society and always advancing. Snap-on is well positioned for success with our short supply chains and the ability to redirect manufacturing capitalizing opportunities and on challenges as they arrive -- as they arise.

Now let's speak of the other side of vehicle repair where repair systems and information or the -- Group operates, repair shop owners and managers, no they have to upgrade to keep pace with increasing complexity and to keep driving productivity. Technicians need to wade through more possibilities than ever to find the right fix. And RS&I can put them right on target. With our innovative hardware and powerful software, proprietary database offerings. I will have offers faster, more accurate ways to navigate the thousands of repair procedures that confront tech and a modern shop. It's a changing market in which dealerships and independents need to have the equipment and the specialty tools for tackling the advanced vehicles rolling into their garages.

As we go forward, the momentum just keeps building. and you can see it in the RS&I V soles, for the critical industries. Now this is the area where we have the largest global footprint operating across geographies and in multiple currencies. -- the rapid fire policies out of Washington and the headwinds politically and economically across the globe have clouded the prospects. Many of the players have adopted a wait-and-see approach, wanting the dust to settle for tariffs and for various other arenas before charting of course, fearful that the wind will suddenly change again and leave them embarrassed or disadvantaged.

But despite the continuing reticence, our order book keeps growing. In fact, despite everything, customers have started to commit, and we saw a nice and very profitable growth in the quarter. Critical industries offer a great opportunity for our customized products that will drive productivity and those still attenuated, some of that potential is starting to shine through. So overall, our markets offer attractive opportunities. The ever-changing landscape does dampen some of the possibilities, but our operations again this quarter, enabled by our broad and innovative product line, our distinctive and meaningful brand and our committed, capable and battle-tested team displayed unmistakable momentum. Overcoming this certainty and taking advantage of abundant opportunity.

That's the market, let's talk about the groups. In C&I, third quarter sales reached $367.7 million, which compared to the $365.7 million of last year. The quarter's volume included $4.8 million of favorable currency translation and an organic sales decrease of 0.8%.

From an earnings perspective, C&I's operating margin was 15.6%, a decrease year-over-year of 110 basis points with 30 basis points of that coming from unfavorable currency. Gross margins, gross margins were a robust 40.9%, down 30 basis points. But that fairness is pretty much explained by the unfavorable currency. And it's a level that clearly demonstrates our resistance to the impact of the tariffs. Results were in the group were mixed across the business units with the -- or organic sales decrease primarily due to reductions in the Asia Pacific business, reflecting the quick relocation of the supply chains away from that region. Gains in critical industries and in specialty torque were the offset.

Critical entities, in particular, showing strengthening in the aviation, heavy-duty and natural resources sector are demonstrating that criticality can overcome the uncertainty of the changing trade policy, and we'll continue to do so. Precision torque also continues to be a spark. The appetite for accurate measurement continues to rise. When the cost of failure is high, even a slight deviation is a problem, our readers want them for our precision, our surgent production facility in -- stream, Illinois knows it is firsthand. And in the quarter, it launched the all new TAC-2 Torque and Angle Click branch. It's built for the task, securing essential components like hydraulic fittings on heavy-duty equipment and natural resources or agricultural applications, places where downtime in our moat area can be catastrophic.

The TAC 2 offers a fast charging cradles.making sure that the tool is always powered and at the ready without the weight and thickness of other tools that utilize for onboard batteries. The rent is also accompanied with electronic module that communicates the torque value actually applied, allowing confirmation that the proper spectrum achieved and providing documentation for later review. And finally, heavy-duty equipment contains considerable variation in fastener giants. Our new unit features a unique mechanism that accommodates over 200 different adapters, enabling the device to physically address a wide range of fasteners used across different pieces of equipment, it consolidates dozens of tools into 1 model, the TAC 2, a new level of flexibility, connectivity and ease of use and the customers.

Also with C&I is our power tools operation, which is -- which in the back half of the quarter, launched our in 14.4 volt to [ 380 Xtolong ] cordless radget. This baby has a tech right between the eyes. Manufacturing in our Murphy, North Carolina plant, it's in a league of its own, a best-in-class 80-foot pounds a torque and a best-in-class 13-inch neck, 50% longer than any other offering. I mean this tool reaches farther into tight areas, applying greater power at the point of work. Everybody is talking about it. It speeds up repair and it's already a hit million-dollar product.

Well, that's C&I, critical industry is in torque leading the way forward, leveraging customer connections to solve the critical and navigating the turbulence in international markets.

Now let's move to the sales. Volume up organically 1%, increased activity in the international network and slightly higher sales in the U.S. Notably, the volumes also up sequentially from the second an unusual pattern, we believe demonstrating that the group has momentum and continuing momentum going forward. The group's operating margin was a strong 21.7% up 10 basis points from 2024. And that was overcoming a 10 basis point impact from unfavorable currency.

Now the third quarter is where we hold our annual Snap-on Franchisee Conference, or SFC, as we call it. This year's event was our Orlando, nearly 9,000 people attended franchisees, yes, and of course, the Snap-on team. It was a weekend filled with hands-on training transaction interactions with our expansive product offers and some great fun. With a cavalcade of 155 buses, transferring the Snap-on crew to Disney's Hollywood studios to celebrate our 105th anniversary. It's quite a weekend.

The product expo floor was our largest effort ever, spanning 185,000 square feet, well over 3 football fields where our entire portfolio of products was on display and real work situations, a new feature this year. that enables enable franchisees to witness firsthand the Snap-on difference in solving typical repairs. It was another memorable SSC, one filled with integration, education great new products and friendships, reinforcing the unique and special bond we have with our franchisees. The atmosphere and the outlook of the franchisees was extremely confident and positive. I've talked to many of them since. And they left pumped. We're ready to hit the road and apply the lessons learned and the icing on the cake, SFC orders were up nicely, increasing over last year by mid-single digits.

Hundreds of new products were on display at the conference, new innovative offerings derived from our new innovating -- new innovative offerings derived from our customer connections. Insight we gain directly in a workplace, faster base products like our S67 150-millimeter stack at forged in the Milwaukee plant. You see a traditional unit can't easily install cylinder head bolts on 6.7-liter power stroke engines used on their -- the range of trucks from F-250 and above. That sophisticated power plant requires a precise 7-step working procedure that reaches nearly 300-foot pounds and here's the problem. A normal socket is quite challenged to handle such force and many have socket has been damaged trying to apply the power needed. On top of which, they're too big to avoid nearby obstacles, completing the job with the standard tools often requires component disassembly to clear the way. So our engineers acting on a customer connection designed a purpose-built socket, increasing the wall fitness by [ 32% ] to withstanding extreme force and reducing the height for a more compact device, creating more access and higher durability in the same package, Snap-on customer connection and innovation, making a difficult task easier, faster and safer. But Milwaukee did more. The plant just released the all new -- Ford hogering flyer. I know. But it's a real time saver, we remove urea oil and upholstery to access sensors, heating or cooling elements and wires located within the vehicle seats. See, we don't always realize -- but complexity is not just under the hood or in the drivetrain and it causes all over the chassis. The new flyers are built to remove and install high retention clips, keeping the seat cover type providing a factory of parents after repair and doing it with increased safety. The new tool makes it difficult, but everyday task quite simple, and I'll tell you, the reception has been -- and in our Alabama plant, the local engineers address the customer connection observed with text using a small number of using small pocket screw drivers to price small component part, separate terminal connectors or remove seals. Well, screw drivers are not meant for those jobs. It's quite unsafe. And can lead to some pretty nasty cuts.

So the Snap-on team developed a 3-peas pocket, spybar set, just over 5 inches long, small enough for those post quarter, but first quarter, but tough jobs. The bundle -- this bundle made that common, but difficult work, much easier and safer. It was a while the tech oversubscribed. It was really a brilliant view by the Elkmont guys.

Powering tools, the Tools Group pivot quick pay back products from all over our American factories, made the group's quarter, big hits, continuing momentum, driving sequential growth and authoring the strong levels of third quarter profitability. We like the Tools Group performance in the quarter and innovative new products force the path.

Now RS&I. Sales of $464.8 million in the third quarter were up as reported 10% with an organic improvement of 8.9%, 8.9%. Higher activity with OEM dealerships and increased sales of diagnostics and repair information products led the way. Operating earnings for RS&I of $141.2 million in the period included a benefit of $22 million from the legal settlement and compared to the $107.3 million in 2024. The operating margin for the quarter at RS&I was 30.4%, 25.6%, as adjusted to exclude the legal effect, still up 20 basis points from last year and overcoming 30 basis points of unfavorable currency. Snap-on was marked by some strong performances in hardware and software. Sales of diagnostic repair information to repair shop owners and managers rose high single digits.

The new Triton handheld had a strong quarter, its brighter screen, enhanced labscope and powerful intelligent diagnostics, powered by billions of repair record make it popular with franchisees and increasingly essential for advanced tech. At the same time, our sales OEM dealerships grew by double digits. Snap-on is fast becoming the partner of choice for assisting automaker programs and at automaker programs aimed at supporting new models of recalls. And that operation turned in a -- what I would call at [ Anbester's ] performance in the quarter. We have great confidence in our RS&I business.

But our customers and industry partners share the same belief and was demonstrated as PC Magazine announced its steam 2025 Innovation Awards and People Choice Awards. Our -- was well representative with the represented whether the Apollos FastTrack Intelligent diagnostic platform the sum TAM aligner for every Duty trucks and Mitchell One's job views software, all recognized as winners in both designations.

RS&I also captured single award for its diagnostic thermal imager, it's a BK-5700 Bristol and for its Pro-Cut X19 cordless rotor matching system as a mouthful. In fact, collectively, the corporation was honored with a total of [ 2510 ] awards across the 56 possible categories. We believe it's a true testament to our competitive advantage and product across the corporation. But back to our RS&I. We're quite positive about RS&I's possibilities with repair shop owners and managers as the vehicle industry evolves and the quarter supports that confidence. I mean 8.9% of organic growth with higher margins -- as and I go -- so those are the highlights of our quarter, progress against big volatility and uncertainty, against seasonality and against the variability of the third quarter.

C&I, the power of our customized kits punching through cuts, through renaissance in critical industries withstanding the Asia Pacific supply chain disruption. Tools Group, great products, confident franchisees, strong sequential momentum, the pivot continue with traction. Profitability remaining strong. RS&I, organic sales up 8.9% strong gains with both OEM dealerships and with independent repair shops, great new and decorated products, both hardware and software, powered by our proprietary pair and diagnostic data, all enabling technicians to make complex repairs easier, and it showed the numbers. And the overall corporation sales up 3.8% as reported 3% organically. Gross margin, 15.9%, resilient and existent holding firm at times of unprecedented sourcing turbulence, OI percentage 23.4%, 21.5%, excluding the legal benefit, still very strong and among the highest ever for the third quarter. It was an encouraging quarter.

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

Thanks, Nick. Our consolidated operating results for the third quarter are summarized on Slide 6. And Net sales of [ $1.118 ] billion in the quarter represented an increase of 3.8% from 2024 levels, reflecting a 3% organic sales gain and $9 million of favorable foreign currency translation. Sales in our automotive repair markets were up, led by the strength in our Repair Systems & Information Group, which included solid gains in OEM dealership and independent repair shop owners and managers as well as higher sales of diagnostic products for our franchise Amgen.

Within the industrial sector, our C&I group, sales to critical industry customers increased in the quarter, but those gains were more than offset by continued weakness in the export activities of our Asia Pacific operations. Consolidated gross margin of 50.9% improved sequentially from 50.5% in the second quarter and compared to 51.2% third quarter last year.

The year-over-year decline of 30 basis points primarily reflected 20 basis points of unfavorable foreign currency effects. While Snap-on is relatively advantaged in the current tariff environment, generally manufacturing products in the markets where they are sold, our costs can be affected by trade policies. In the third quarter, the impact of tariffs was largely offset by the higher sales volumes and benefits from the company's RCI initiatives.

With respect to the unfavorable foreign currency effects similar to last quarter, although the lesser degree, Snap-on incurred negative transaction impacts associated with the year-over-year strengthening of the Swedish krona versus the euro and the U.S. dollar. As a reminder, Snap-on as factories in Sweden, serving both the C&I and the RS&I groups that export throughout Europe and into the United States as well as into emerging markets.

Operating expenses as a percentage of net sales of 27.5% compared to 29.2% last year. In the quarter, as noted in our press release, operating expenses included a $22 million benefit from the settlement of a legal matter. The 170 basis point improvement in the operating expense ratio is primarily due to the 190 basis point benefit from the legal settlement, which was partially offset by higher brand building and promotional investments as we celebrated our 105th anniversary.

Operating earnings before financial services of $278.5 million in the quarter, including the benefit from the legal settlement compared to $252.4 million in 2024 as a percentage of net sales, operating margin before financial services of 23.4%, including 190 basis point benefit from the legal settlement, compared to 22% reported last year.

Financial services revenue of [ $101 million ] in the third quarter compared to $100.4 million last year, while operating earnings were $68.9 million compared to $71.7 million in 2024. Consolidated operating earnings of $347.4 million, which includes the legal benefit compared to $324.1 million last year. As a percentage of revenues, the operating earnings margin of 26.9%, including the legal settlement compared to 26% in 2024. Our third quarter effective income tax rate was 22.6% in 2025 and 22.9% 2024.

Net earnings of $265.4 million or $5.02 per diluted share, including a $16.2 million or $0.31 per diluted share after-tax benefit from the legal settlement compared to $251.1 million or $4.70 per diluted share in 2024.

In addition to the benefit from the legal settlement, when comparing the quarter's EPS with the third quarter of the prior year, diluted earnings per share also included approximately $0.09 per share of increased year-over-year nonservice net periodic pension expenses, primarily from higher amortization of actuarial losses.

Now let's turn to our segment results for the quarter. Starting with the C&I group on Slide 7. Sales of $367.7 million compared to $365.7 million last year, reflecting a 0.8% organic sales decline, which was more than offset by $4.8 million of favorable foreign currency translation. The organic decrease includes a mid-single-digit reduction in the segment's Asia Pacific business, partially offset by low single-digit gains with customers in critical industries and a specialty torque operations.

Overall, the organic sales decline largely reflects a reduction in certain cross-border sourcing activities in the current trade situation, which was offset by improving demand from our critical industry customers, including the United States and international aviation as well as technical education.

Sales to the U.S. military were down year-over-year. However, order activity has been increasing despite the uncertain timing of funding for some government-related projects. Gross margin of 40.9% in the third quarter compared to 41.2% in 2024. This decline was due to 30 basis points of unfavorable foreign currency effects. In the quarter, higher material and other costs were offset by increased sales in the higher gross margin critical industry sectors and by savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 25.3% in the quarter compared to 24.5% last year, largely reflecting the impact of lower sales in the Asia Pacific business as well as increased personnel and other costs.

Operating earnings for the C&I segment of $57.5 million compared to $61 million in 2024, the operating margin of 15.6%, improved sequentially from 13.5% in the second quarter and compared to 16.7% last year.

Turning now to Slide 8. Sales in the Snap-on Tools Group of $506 million compared to $50.5 million a year ago, reflecting a 1% organic gain and $600,000 of favorable foreign currency translation. The organic increase reflects a low single-digit rise in the segment's international operations and slightly higher sales in the U.S. business.

During the quarter, we believe the introduction of new products like the next-generation Triton Diagnostics platform combined with our ongoing pivot to shorter payback items was successful in overcoming the continuing uncertainty and the confidence of technician customers in the current environment. Gross margin declined 50 basis points to 46.8% in the quarter from 47.3% last year, mostly due to a year-over-year shift in product Operating expenses as a percentage of sales improved 60 basis points to 25.1% in the quarter from 25.7% in 2024, largely reflecting the higher sales volumes.

Operating earnings for the Snap-on Tools Group of $109.9 million compared to $108.3 million in 2024. The operating margin of 21.7% improved 10 basis points from last year.

Turning to the RS&I Group. Shown on Slide 9. Sales of $464.8 million rose $42.1 million compared to 2024 levels reflecting an 8.9% organic sales increase and $4 million of favorable foreign currency translation. The organic gain includes a strong double-digit increase in activity with OEM dealerships and a high single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers. These gains more than offset a low single-digit decline in sales of undercar equipment including collision repair products.

Gross margin declined 40 basis points to 47% from 47.4% last year, primarily reflecting increased sales of lower gross margin products, higher material and other costs, and 20 basis points of unfavorable foreign currency effects, partially offset by savings from RCI initiatives.

Operating expenses for the RS&I Group in the quarter included a $22 million benefit from the previously mentioned legal settlement. Operating expenses as a percentage of net sales improved 540 basis points from last year, primarily due to a 480 basis point benefit from the settlement as well as from the higher sales volumes. Operating earnings of $141.2 million, including the $22 million legal benefit compared to $107.3 million last year. The operating margin of 30.4%, including the 480 basis point benefit compared to 25.4% reported in 2024.

Now turning to Slide 10. Revenue from financial services of $101.1 million compared to $100.4 million last year. Financial Services operating earnings of $68.9 million compared to $71.7 million in 2024. Financial services expenses of $32.2 million compared to $28.7 million last year. The increase is primarily due to $2.5 million of higher provisions for credit losses as well as a rise in personnel and other costs.

As a percentage of the average financial services portfolio, expenses were 1.3% in the third quarter of 2025 and 1.1% in 2024. In the third quarters of both 2025 and 2024, the average yield on finance receivables was 17.7% and while the average yield on contract receivables was 9.1%.

Total loan originations of $274.1 million in the third quarter represented a decrease of $13.9 million or 4.8% and from 2024 levels, including a 4.9% decline in extended credit originations. The reduction in extended credit origination mostly reflects continued lower sales of discretionary big-ticket items such as tool storage units.

Moving to Slide 11. Our quarter end balance sheet includes approximately $2.5 billion of gross financing receivables were $2.2 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 2% is up 10 basis points from the third quarter of 2024 and also reflects a typical seasonal increase from the rate reported last quarter.

Trailing 12-month net losses for the overall extended credit portfolio of $71.4 million represented a 3.59% of outstandings at quarter end. We believe these portfolio performance metrics remain relatively balanced considering the current environment.

Now turning to Slide 12. Cash provided by operating activities of $277.9 million in the quarter compared to $274.2 million last year. Net cash used by investing activities of $21 million, mostly reflected capital expenditures of $19.9 million.

Net cash used by financing activities of $180.9 million included cash dividends of $111.5 million and the repurchase of 250,000 shares of common stock for $82 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $306 million of common stock under our existing authorizations.

Turning to Slide 13. Trade another accounts receivable of $925.7 million included $25.1 million of foreign currency translation. [ $17.7 million ] from the legal settlement and a greater mix of sales with longer payment terms. This represented an increase of $110.1 million from 2024 year-end. Days sales outstanding of 71 days compared to 62 days at year-end 2024.

Inventories increased by $81.1 million from 2024 year-end primarily due to $38.9 million of currency translation improving demand trends and some investment intended to mitigate supply chain uncertainties. On a trailing 12-month basis, inventory turns of 2.3 compared to 2.4 at year-end 2024.

Our quarter end cash position of $1,534.1 billion compared to $1,360.5 billion at the end of 2024. In -- our existing cash and expected cash flows from operations -- we have more than $900 million available under our credit facilities. There were no amounts borrowed or outstanding under the credit facilities during the year nor was any commercial paper issued or outstanding in the year.

That concludes my remarks on our third quarter performance. I'll now review a few outlook items for the fourth quarter of 2025. With respect to corporate costs, we currently believe that expenses will approximate $27 million. Additionally, as recognized in the previous 3 quarters of 2025, we expect to incur approximately $6 million pretax in the fourth quarter of increased nonservice pension costs largely due to higher amortization of actuarial losses. These noncash costs are recorded below operating earnings as part of other income introduction expense net on our statement of earnings and we'll have about $0.09 per diluted share negative effect on EPS in the fourth quarter of 2025. We expect that capital expenditures for the year will approximate $100 billion. And following our assessment of the One Big Beautiful Bill Act during the third quarter, we continue to anticipate that our full year 2025 effective income tax rate will be in a range of 22% to 23%.

Finally, in 2025, our fiscal year will contain 53 weeks of operating results with the additional week occurring at the end of the fourth quarter. This occurs every 5 or 6 years, and historically, it has not had a significant effect on our full year or fourth quarter total revenues and net earnings.

I'll now turn the call back to Nick for his closing thoughts. Nick?

Thanks, Aldo. that's our third quarter. It was encouraging and marked with words like resilience, momentum and advantage. It represents meaningful progress -- are those clearly, one, again, some unprecedented turbulence gains captured against the headwinds of seasonality and increases against the variability of the late summer period. As such, we believe we leave the quarter more confident and stronger than when we entered. The Pivoted & Tools Group is building traction. The potential for critical industries and specialty torque is breaking through, our expansion were repair shop owners and managers continues to rise and our advantage in strategy and structure was -- fortifies our resistance to tariffs demonstrates its efficacy. And you can see it reflected in the group's and the numbers.

C&I year-over-year gains realized and sequential improvements demonstrated fueled by progress in critical industries and precision chart, gross margin holding firm in a time of trial -- another positive quarter, OI margin up building -- holding to strong levels, OI margin up and holding to strong levels. Momentum continued, sequential growth displayed and the pivot to quicker payback items strengthened. RS&I continuing expansion with repair shop owners and managers, 8.9% organic growth, gains in hardware and software and yet another strong performance in OI margins. And it all came together for an encouraging overall performance.

Sales for the corporation was up organically 3% with sequential gains. Gross margins a powerful 50.9%, down 30 basis points, but primarily due to currency OI margins of 23.4% or 21.5% excluding the legal action, the second highest ever third -- second highest third quarter ever and an EPS of $5.02. And $4.71, excluding legal, the highest ever third quarter in a very turbulent time.

As we go forward, we proceed with confidence because we believe our markets will remain robust and Snap-on will benefit from our advantages and strategy making in the markets where we sell in structure enabled by the flexibility of our factory and products, we make work easier and more reliable and everybody knows this.

In brand, Snap-on really is the outward sign of pride and dignity for working men and women and advantage in people. Our team is skilled, battle tested committed and always aims high. And we believe this combination of advantages will propel our corporation's even stronger performance as we proceed through 2025 and well beyond.

Now before I turn the call over to the operator, I'll speak directly with our franchisees and associates. I know many of you are listening. We've spoken today of momentum, of performance and of new highs. We know that all of that has been created by your extraordinary effort in the past 3 months. For the success you've achieved this quarter, you have my congratulations. With the energy and skill I see you bring to the corporation every day, you have my admiration. And for your ongoing confidence and dedication to the future of our enterprise, you have my thanks.

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

[Operator Instructions]. Our first question comes from Christopher Glynn with Oppenheimer.

Thanks. Wanted to dive into some of the businesses at RS&I for the diagnostics and repair systems, I think, 5 quarters of growth now more consistency than I've seen in the past. Usually, it's been a little lumpier with new product splashes and then some wells. So I don't know anything to read into this kind of consistency.

Well, I think -- we'd like to believe we've gotten the launches a little bit better. You said yourself, Triton was launched last quarter and had a good quarter last quarter and this quarter. The other thing about it is this quarter, I think versus the prior quarter, we had pretty good performance on a sequential basis across the line. And this has been something that you kind of need. You can't just always depend on new launches. Although as we go forward, you're going to see more new launches happened this year and things like a launch to happen this year. So you get that in the -- but the sort of the Holy Grail in diagnostics is to make hay with the launch and then -- but not lose volume with the other businesses, and that happened this quarter. So we feel kind of good about that. But we'll see how it goes going forward. We'd like to see that happen. And I think we're starting to get some understanding of how to promote both the launch and the existing platforms side by side.

Great. And then just on the other 2 pieces, OEM. It sounds like that kind of share accrual is kind of building on itself and has some legs. And then on the under car. Does that feel like that's stabilizing or still kind of firmly in?

Yes. It looks like undercar looked like it stabilized this quarter. I mean it was down okay, we don't like that. But it was down a lot less than in past quarters. So it didn't hurt RS&I as much maybe it wasn't as much of an offset. It was part of the idea of the 8.9%. I mean that may not be the highest quarter, RS&I ever had. But in this kind of environment, I think it's super sonic. And so that worked out pretty well. And some of it had to do with narrowing in that gap, and you've rightly said it that the OEM, the OEM business is both programs happening and share gain. We used to talk about lumpiness, and it still could be -- it's still a lumpy business, but we have share gain component on top of this, which tends to offset some of it.

Okay. Great. And then C&I, I didn't hear about your European tools, assuming it's kind of flattish. Does that feel pretty steady?

Yes. Do you know France? It gives me a headache.

Not personally.

No. Look, I think the thing we're noticing is the grass roots in Europe are starting to display that, in fact, they have made for a couple of quarters, display the same kind of uncertainty or resistance that you see in the United States. So you see a bifurcation in Europe, where the -- I would call it maybe the transactional business with individuals, the up and down the street business kind of flattish strong -- not so strong, but there's hay to be made in projects, which is part of the success of critical industries in this quarter.

Our next question is from David MacGregor with Longbow Research.

I wanted to ask about the sequential sequentially strong volume and tie that back to maybe some of the investments you've made over the last couple of years in capacity. And I'm just wondering if that incremental capacity now gives you the ability to fulfill on the SFC orders a little faster? And if that's really what's driving this? And if so, how do we think about the margin improvement in 4Q?

I think you're right to point out that the capacity increases that we did over the last 2.5 years has been helped you match better the ups and downs of the volume. But I think the SFC this year was not necessarily a component in the sequential improvement. Actually, I don't think it was at all. The sequential improvement really primarily affects our more effective activity that had certain products, one of which was diagnostics, but there were others like so that tended to push things forward.

And so that's why we feel pretty good about that. And the SFC effect is beyond that sequential improvement. We do -- we -- I made a lot of them in my remarks, and the sequential improvement really is although it's a pretty big deal for us because we don't see it very often, and we think it does indicate momentum. Going out after the SFC, you're going to see that play out. But the SFC had some great orders, but not many of them got in the third quarter I think.

Do you feel like you may be pulled forward a little from 4Q here? Or should we expect 4Q to be...

I don't think so. I don't think so. I don't think so. I think SFC has just -- yes, go ahead.

No, that's a good enough answer. I guess I'm just trying to, secondly, square or try to square the strength in unit volume with the 1% organic growth in Snap-on tools, which suggests maybe price was down. How much of this is mix, how much of this is promotions and will we see this again in 4Q?

Well, look, I think some of it might be promotions. But let's put it this way. The margins were up pretty good. The margin was 21.7%, up 10 basis points -- and the gross margin was down, I guess, 40 basis points, but that was against 10 or 20 basis points of currency. So it wasn't a big fluctuation. I don't think that's a factor. I mean, I think is the volume might be -- I don't know if I recognize so much that the volume was that high compared to the sales. But in fact, I don't recognize that at all. I kind of just think it was kind of a quarter that had always its variable mix. And it went through, had good profitability, and the U.S. had increases, which is the second one in a row and we're pretty positive about that. So I don't think we're worried so much about that situation.

Certainly, we don't think the pricing is eroding. If we thought the pricing -- I mean, if the pricing was eroding, you'd see at the gross margin, and we're not seeing anything like that -- and yes. Go ahead. Go ahead. Go ahead, I'm just going to say, David, you know this very well. One of the big kahunas in this quarter for the Tools Group was diagnostics and at one of the biggest margin businesses for the Snap-on Tools Group because it shares the margin with another one of our divisions, the Diagnostics division and still the gross margin held.

Yes. Okay. Yes, that's an interesting point. And then finally, just off the truck sales, how you're feeling about -- I know you've got good data on that. How would that have compared with the selling?

The off the truck sales was a little bit higher than -- a little bit lower than the -- to the truck sales I think, though, as we see this all the time. It's within, I think, the range of variability that happens in those 2 businesses. They always seem to come out about the same in the year. Last year, for example, the on the truck, off the truck was -- while it had variability from quarter-to-quarter is dead nuts at the end of the quarter, equal. So I think we kind of -- so there's nothing narrowed. It's a little bit lower, but it's nothing that has us concerned about that. It's just within the margin of the usual variability.

So there's a little bit of restock going on. Is it your general sense that the franchisees are still pretty liquid. They've still got very good liquidity. So the 2026 ends up being a better year, they're in a good position to restock up in advance of that.

Yes, I think there's some of that. But I think -- look, I think the uncertainty thing has to be fixed. I think they're starting to catch some of the uncertainty. And so I think that has to be fixed. And then when they get back, they go back to their old levels. I don't know. I don't know. But there is that possibility going out in the future at some time. But we're not looking for restocking to be a major push. We never really plan it that way. Sometimes it can affect the variability from quarter-to-quarter. But generally, like I said, it all kind of evens out.

Our next question comes from Scott Stember with ROTH Capital.

Within tools, obviously, it sounds like diagnostics had the best performance. Can you maybe just flesh out how hand tools did, how power tools and tool storage just to give us a sense of how it broke up.

Yes, we'll start had another occluded quarter. You can -- I guess you can see part of it you see hints of that in the originations, what was originations down 4.9% in total for EC. And that's about the same as last quarter. So they were -- they were down both. So those stores wasn't that strong. And that's despite the fact that there was good sales of diagnostics. Hand tools did not have a great quarter which happens from time to time. So that wasn't very positive in the quarter.

Diagnostics was up big. And then we had some good news in things like air conditioning and other smaller items from Shop and Tex. Power tools didn't have a great quarter except at the end of the quarter, when it introduced a new product, it had a gangbusters month, and so we felt pretty good about that. And so while Power tools didn't contribute so much for that, overall, it really helped at the end of the quarter with this new product because that was -- once the franchisee saw those babies, they love.

Got it. And then on C&I, it sounds like, particularly for things that are based on government funding, still some delays in orders, but you talked about the backlog of orders starting to build up again. Can you maybe just talk about that dynamic?

Yes. Look, I think what's happening here is anybody's associated with resourcing a REIT or change in the supply chain in a big way. If that's their primary focus, like generally as you're rightly based on -- I think I might have said this, if I didn't, it was just by process of elimination, the military was down again, although not down as much as the prior quarter, a little bit better. But the other thing that is weaker was general industry, which is a big business for us. And what you're seeing, Scott, is anybody who's got factories that I think is sitting there saying, "What the hell do I do?" Because if you look at it, it may -- it seems that most people like the tariffs have settled down since Liberation Day, slot, Canada, Mexico, China, Three of the top 4 sourcing partners for manufacturers in the United States for general industry in the United States, they're still unsettled. There's no trade deals with those countries now, and they're pretty big numbers. They're double -- deep double-digit numbers. And as you saw, China just got threatened with another 100%.

So those people in that sector are much tighter in whole keeping their powder dry. If you're looking at other places, that was the sort of message, I think, is a bit maturing to make. Places like aviation, if you're just talking about maintenancing airframes and education and other places, those things are pretty good. Natural reason is pretty good because they're not really worried about this reshoring. So that's what's happening in the big ticket items in the United States.

Then if you go to Europe, there's not so much worry about the tariffs as much and so projects are good business in Europe these days.

Great. And then just last question on the legal settlement. Can maybe just talk about that a little bit.

Well, I think I told you all I'm prepared to tell you. I think the legal settlement, and I think it's pretty clear, it was in the repair it pertains to the repair system information rule. It did not -- it's not a follow-on or related to the prior legal settlements of the prior year. And so other than that, I don't think I'm going to comment on it. I'll just lay out where it is. And I think we have it pretty much all in this quarter.

Our next question comes from Bret Jordan with Jefferies.

Could you talk about the cadence of the tool sales off the truck in the quarter? Is the mechanic feeling -- I guess you've always talked about the recently talked about their uncertainty, but is that reasonably stable or -- was there any notable trend in the quarter?

I don't think there's any notable trend in the quarter. I mean it's hard to -- look, Brett, for us, the third quarter is normally so squirly that we can't find any trend in there because we've got the SFC at the back. And so you don't know how people will order because a lot of new tools, hundreds of new tools are at the SFC. And then the other problem is, of course, we punch through the franchisees to the technicians and our franchisees sometimes take vacations around SFC. And that can creep up. So we don't have a good feel. All we have a windshield information.

And my view is that they're still pretty uncertain. This 100-plus tariffs on China couldn't have helped the certainty sure, I think it only makes it seem worse. Now they're not rightly -- they're not affected by that, but they're worried about the macros, I believe. We see the same kind of thing a little bit in Europe, emerging in Europe, but it's been pretty consistent when you talk to people.

And part of the reason is like this is I think you've got a group of people who uniquely are at the bottom end of the credit scores, the subprime customers, but they have pretty reliable income based on the vehicle repair. But -- so therefore, they're making their money, but they don't have a lot of cushion. So if the world goes awry, they're worried they're in trouble. And so anything that thinks that there might be macro problems, I think, tends to worry them. We saw that a couple of times, particularly like in the great financial recession. This is the kind of thing they're worried about. So I don't see that getting better. Now the Middle East was a kind of positive. We'll see how that plays out. Maybe things will get better because of that.

And I think it's a question given the inflationary environment and tariffs are tough to predict, but where do you see same SKU inflation contributing to growth in '26, just from a pricing outlook standpoint.

No. I don't know. It didn't contribute much to us this time. You might say pricing was like 1% or so. I don't know. I actually don't have a view of that because I think the tariffs model a lot of things. I don't know whether you call inflation I don't know -- some guys are talking about -- I mean GM was talking about $6 billion of tariffs and you got other players in our sector are talking about big numbers in tariffs. So I don't know how they play out in pricing. We'll see. I think it's tough to predict. I know that basic inflation like beef and milk and other things are up some. But I think people have kind of ingested that may place some small background thing. And I think the big factor though, I think, in the future will be what happens with the tariffs across any particular industry.

Right. And but as you stood today with $100 rent be $105 in '26 just as materials and wage and everything else is sort of upward biased? Or what do you build on the model for that?

Well, probably the one you have now won't be $105, but we'll have a new one by then that will be $110. I think 5% would be a large pricing for us. Look, we're already priced ahead of everybody else. I guess the question is, if you're asking us what will we do if other people price. We'll do that on a product-by-product basis. That's the way we would adjust it. I don't -- but I don't see us necessarily raising our prices usually unless things change. I mean, so far, there hasn't been any huge expansion in the marketplace.

The next question comes from Luke Junk with Baird.

Just wondering anything interesting to call out within the SFC orders? I think you said in the mid-single digits. I guess I'm thinking just tens of traction and big ticket in that number, maybe continued diagnostics -- or just anything else that you thought was interesting?

No, I don't think we saw anything unusual in that regard. I think the thing would be -- I suppose just what I said that they were up nicely. But I want to remind you that these are orders, not sales, so it has to play out, and there can be cancellations and all that stuff. It's better than a poke in the eye with a sharp stick, of course, to have orders up. And the orders this year. I think, go out through December, and I think there's -- it was a nice take-up throughout that period of time. So we feel pretty good about it, but it has to play out. There's nothing special about mix in this situation. I think people -- well, I could say, I think people thought hand tools sold pretty well. And so that was our -- we got orders pretty well, but it always does.

Got it. What about diagnostics growth within the Tools Group specifically? Just wondering if it might have been at or maybe even above the high single-digit growth rate that we saw within RS&I, storage -- we can tools now to power tools either. It seems like that was really the story of Tools Group this quarter. Is that fair, Nick?

Yes. Tools Group was a bigger growth than -- but the RS&I, remember, I said that the diagnostics and information diagnostics to independent repair shop owners and managers, it was up double digits in the quarter. That was in RS&I. So it was up double digits in RS&I, and the Tools Group was every bit as good as sec or more.

Got it. And then last question for me. Just maybe if you could double click on the Asia Pacific business. Just kind of update us on what that business looks like today? I know there's a couple of components of that and kind of the specific exposure you've got to those supply chains being asked in...

I will. I will. It's 2 pieces of business, of course. There's the -- before we start breaking down by country, there is the internal business, which is pretty much exports and is the internal business. So internal business, dog food. Terrible because we shipped it, we try to adjust the supply chain. So the Asia Pacific business in C&I is not so good. That's why we called it out. But that was mostly internal, external seller in the markets actually wasn't too bad. I'm kind of proud of our Asian team because they pretty much China was up and India was up and in Southeast Asia was up. So they did a great job in terms of catching up. And I don't know if you're following things in China, but the economy there is so good. And India is kind of always a basket -- even though they say they're growing, it usually is difficult to determine what they're talking about. And the Thailand Prime Minister just got decapitated but taken down for being on a phone call for one of the Cambodian prime ministers and criticized in general. And Korea just had some problem with the Prime Minister. So you see a lot of turbulence there, but our guys have done a good job overcoming.

Our final question comes from Gary Prestopino from Barrington Research.

What impact did FX have on EPS this quarter?

It was $0.01 of negative news, Gary.

Okay. And then regarding how well you did in the RS&I business with the dealerships, particularly OEM dealerships, are you seeing a movement here for these OEM dealerships to start increasing their capital equipment outlays after a couple of years and maybe not doing so? Or is this just -- does it just kind of go in kind of bunches up and down cycles on a quarterly basis?

No, no. I think, look, I think that's a pretty big question. I mean there's a lot of segments to RS&I, even within the dealership business, but I generally think you're seeing a constant drumbeat in the dealerships and in the independent shops realizing that all these new features and benefits and powertrains that they have to adjust to. So you're seeing some of that.

Now part of the reason why OEM is big this quarter is because -- you're also seeing a drumbeat of new models come out. And I think this idea of pivoting from electric vehicles to internal combustion are going to even keep that going. So and on top of that, we're gaining some share. So I think that particular business, yes, it's going to have some variation from quarter-to-quarter in terms of what it sells, but I think it's pretty solid. I think that's a place where the economy is pretty strong that people need to repair to maintain the mobility, people keep driving. The car park keeps aging, all those things drives business in that area. They won't be explosion or anything like that. But I think it's going to be a good growth. We say that the RS&I business should grow and we say we should grow at 4% to 6% in ordinary times, we say RS&I should be in the middle.

Okay. Sounds good. And then just lastly, getting back to the order rates coming out of the conference and that doesn't -- the translation into sales. Is there any -- is there a correlation that you can look at? I mean is that all over the place? One conference you could have great orders, but then it doesn't translate into sales and vice versa?

That's right. That's what happens. I don't know. We don't -- I go down there and every time they tell me -- or the orders allow you to come back to pressed or a static. And many times, it doesn't play out that way in the fourth year. This year, though, I think we've tried to guard against that. We tried to make the packages smaller, so the cancellations would not -- which is what the variability comes out of because people get down there in their eyes are too big to the stomach. And I think you have good -- you certainly have good orders spread out into the fourth quarter. So I think that's pretty positive.

Well, did you come back to prester static this year?

I'm just ecstatic. But I'm kind of a sucker for good news.

Okay. Thank you.

That concludes our question-and-answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.