Snap-on Incorporated (NYSE:SNA) maintained stable sales in the first quarter at $1.18 billion, despite a challenging market environment. The company reported a slight increase in operating income to $270.9 million and an improved operating margin of 22.9%. The Tools Group experienced a 7% decline in sales, while the Commercial and Industrial (C&I) Group saw a 1.1% decrease.
However, the Repair Systems & Information (RS&I) Group achieved a 3.9% increase in sales, reflecting the company's strength in the automotive repair industry and critical industries. Snap-on also benefited from a legal payment, contributing to net earnings of $263.5 million, or $4.91 per diluted share.
Key Takeaways
- Sales remained flat at $1.18 billion, with the RS&I Group seeing a 3.9% increase.
- Operating income rose to $270.9 million, with an improved margin of 22.9%.
- The Tools Group sales declined by 7%, but gross margin increased to 48.2%.
- Net earnings were $263.5 million, boosted by a legal payment.
- Snap-on introduced new products and heavy-duty repair information software.
- Cash provided by operating activities increased to $348.7 million from $301.6 million last year.
Company Outlook
- Snap-on expects a similar legal payment in the second quarter.
- Anticipates a full-year effective income tax rate of 22% to 23%.
- CEO Nick Pinchuk expressed optimism for the future, particularly in the RS&I segment.
Bearish Highlights
- The Tools Group and C&I Group both saw declines in sales.
- Diagnostics and power tools segments experienced declines.
- Franchisee attrition and inventory putback were factors in negative growth.
Bullish Highlights
- The RS&I Group demonstrated strong sales growth at 3.9%.
- Gross margins improved across all segments.
- Snap-on reported increased manufacturing capacity and new product introductions.
Misses
- Despite stable sales, the Tools and C&I Groups experienced sales declines.
- The company did not plan to increase promotions despite the sales decreases.
Q&A Highlights
- CEO discussed shifting focus towards shorter payback items and customer connections.
- Analysts inquired about the sell-in and sell-out rates for franchise tools; sell-out rates were better.
- No significant pullbacks seen in the shift towards cordless power tools.
- Snap-on did not comment on competition from Matco.
Snap-on's first-quarter results demonstrate the company's resilience in a challenging market. With a focus on innovative solutions and a strategic pivot toward products with quicker payback, Snap-on is positioning itself to capitalize on opportunities in the automotive repair and critical industries. The company's improved gross margins and strong performance in the RS&I segment highlight its potential for growth, despite headwinds faced by the Tools Group. Snap-on's management remains focused on driving productivity and enhancing their product offerings to meet the evolving needs of their customers.
InvestingPro Insights
Snap-on Incorporated's (SNA) first-quarter performance highlights its stability and potential for growth, especially within the RS&I segment. To provide further context to these results, InvestingPro offers real-time data and expert analysis that can help investors make informed decisions.
InvestingPro Data shows that Snap-on has a market capitalization of $14.98 billion and trades at a P/E ratio of 13.75, which is slightly below the adjusted P/E ratio for the last twelve months as of Q4 2023 at 13.69. This suggests a consistent valuation over the recent period. The company's gross profit margin stands at an impressive 51.29%, reinforcing the strength in profitability mentioned in the article. Moreover, Snap-on's dividend yield as of early 2024 is 2.84%, which is of particular interest to income-focused investors.
Among the InvestingPro Tips, two stand out as particularly relevant to the article's narrative. Firstly, Snap-on has raised its dividend for 14 consecutive years, underscoring a commitment to returning value to shareholders amidst market challenges. Secondly, the company's gross profit margins are indeed impressive, as reflected in the data, and this aligns with the article's bullish highlights on improved margins across all segments.
InvestingPro offers additional insights that can complement the information provided in the article. There are 10 more InvestingPro Tips available for Snap-on, which can be accessed at https://www.investing.com/pro/SNA. These tips provide a deeper dive into the company's financial health, stock performance, and future outlook. For readers interested in a full suite of analytics and expert insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Snap-on's solid financial metrics and strategic focus as discussed in the article, paired with InvestingPro's real-time data and tips, paint a comprehensive picture of the company's current standing and future potential in the market.
Full transcript - Snapon Inc (SNA) Q1 2024:
Operator: Good morning, and welcome to the Snap-on Incorporated 2024 First Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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.
Sara Verbsky: Thank you, Gary, 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 Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Although 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?
Nick Pinchuk: Thanks, Sara. Good morning, everybody. As usual, I'll start with the highlights of our first quarter. I'll provide my perspectives on the results, on our markets and our path ahead. After that, Aldo will give you a detailed review of the financials. We believe that our first quarter once again demonstrated Snap-on's ability to maintain its strength to engage headwinds, to manage challenges and to leverage the multiple opportunities of our markets. Looking at the results in total, we are encouraged. Like most quarters, we had turbulence from geography to geography and from operation to operation. North America was mixed, but with significant gains in critical industries. Internationally, our consolidated results were also mixed, but yielding overall positives as our operations in Europe and Asia overcame the effects of recessions in Europe and the delayed recovery in China. Now the results. First quarter sales were $1,182.3 million about flat to last year on an organic basis, excluding $6.7 million from acquisitions and $2.5 million from favorable foreign currency our sales were lower by 0.8%. OpCo OI was $270.9 million, an increase of $11.1 million and the Opco operating margin for the quarter was 22.9%, up 90 basis points. Now both those numbers benefited from the legal payment referenced in our release. But with or without that legal flow, our first quarter Opco OI and the margin were among our best. It's a strong statement given the turbulence of the day. Financial Services. Operating income grew to $68.3 million from last year's $66.3 million, and the results combined with Opco to raise our consolidated operating margin to 26.5%, up over the 25.6% recorded last year. And EPS, it was $4.91, including a per share benefit from a legal payment of $0.16, but up $0.31 or 6.7% from last year. So those are the numbers. Now let's turn to the markets and the trends we're seeing as we connect with our customers. From an overall perspective, we believe the automotive repair arena remains favorable. Vehicle OEM and dealerships continue investing in tools and equipment, preparing for the tie to new models, bringing the latest technology and drivetrains to the market. And in the quarter, our Repair Systems & Information Group, or RS&I, as we call it, expanded our reach into OEM programs and took advantage of the opportunities throughout its global footprint. And as we look forward, we see further prospects for RS&I capitalizing on that trend supplying dealerships and independent garages with just the products they need to confront the wave of modern platforms that are coming. So the shops are strong. Now let's speak of a technician. The guys and gals that twirl the wrenches, punch the keys, or tap the screens. This quarter, I have multiple occasions to visit with franchisees. And the report was generally that shops are humming, the bays are running at full capacity, and all that mirrors what the macro data says naturally. The car park is continuing to age. Now at an average of 12.5 years, and I think moving up, technician wages are rising and their hours worked are increasing. We believe it all signals ongoing and robust demand for repair. And you know it's true. The activity is strong, but there is a difference between the industry overview and the technician outlook for the future and by extension, their purchasing sentiment. The barrage of bad news, inflation, towards the border, the Red Sea, the election, the Iran bombing for the people of work, the fear of what's coming around the corner impacts the outlook and paraphrasing the characters of Dune, fear is the outlook killer. It erodes confidence. Techs are well positioned, and they continue to invest but it's in quick payback items that will make a difference right away, but don't require a long-term payment stream. And in response, we're continuing to redirect – we continue to redirect the Tools Group focus in our design efforts and our facility capacity and our selling and marketing efforts, working to match the current customer preference. So that's the auto repair. Now our Commercial and Industrial Group or what we call C&I, serving critical industries in the most international of all our groups, and in the quarter, C&I manages the difficult challenge of balancing multiple economies that are in economic turbulence. Europe now has more than half a dozen countries in technical recession. And then China – in the China environment, including the nearby countries, depending on it, they continue to struggle. India on the other hand, it's booming. Modi has the train running. So that's a positive in Asia amidst some very difficult economies. So that's the geographies. Now let's focus on the sectors. Areas like aviation continue to be strong. You don't have to read the paper very long to realize there's a significant focus on aerospace production and repair where the price for failure is high, and that arena is increasing demand for our precision torque products and for our asset control solutions to improve safety and productivity. In addition, in that sort of critical arena, custom kits, matching a set of items to a particular task it may it's an important business, especially for the military, both domestically and internationally. And with that, Critical industries is a substantial opportunity, and we are investing, expanding capacity, adding new products either organically or through the acquisitions we made over the last few years worth fortifying our runways for growth, extending outside the garage, and we know it’s paying off. So overall, the quarter was favorable despite the headwinds, Tools Group pivoting, RS&I expanding with OEMs, C&I extending beyond the garage solving the critical. And the OpCo OI percentage demonstrated once again the power Snap-on’s value creation processes, safety, quality, customer connection and innovation and rapid continuous improvement, developing innovative solutions that are born out of insight and observations right in the workplace. This understanding melded with RCI, helps Snap-on to once again hold fast in the turbulence of the day. Well, that's the macro overview. Now let's move to the segments. In the C&I Group, sales were $359.9 million, representing a decrease of $3.9 million or 1.1%, and that includes $6.7 million in acquisitions, acquisition-related sales, $1.4 million in unfavorable foreign currency and an organic decline of 2.5%. It all reflects higher activity with customers in critical industries, more than offset by weakness in Asia-Pacific and in our power tools. From an earnings perspective, C&I operating income was $55.4 million. That was about the same as last year. The operating margin was 15.4%, up 10 basis points, and that was despite 30 basis points of headwind from currency and the acquisitions. Within the quarter, the demand for custom kits, addressing particular critical tasks remain nicely robust with increased demand for control solutions like our Automated Tool Control products. It was a nice bright spot in C&I. On the other hand, power tools was down in the quarter, but help is on the way. Tuning power tool models born out of customer connection were recently introduced, each fulfilling specific needs for – each fulfilling specific needs. For repair garages, we launched the PH3045B AirHamer. This is a tool that replicates the effect of swinging a hammer and hitting a sizzle except the device, hurdles the hammer 3,500 times a minute. Vehicles are filled with components like ball joints, wheel bearing, suspension bushings that are packed in tight fit for maximum efficiency. This assembly can be a bear. We know this from being in the garage. While with our new AirHamer, the easy-to-use retainer securely holds a chisel in place while the piston sledge hammers away. It's powerful. But at the same time, the compact two-inch barrel – the two-inch barrel enables the access in tight spaces, delivering tremendous power, speed and energy with unlimited run time. It's a real productivity enhancer, but the essential feature born out of watching the technicians in the shop is the best-in-class vibration reduction, created by special elastomer shocks, allowing the mechanic to pound away at these suspension components without fatigue or paying, no more store arms from hammer work. The new hammer was introduced late in the quarter and techs have already noticed. Also on power tools, our cordless portfolio expanded with the introduction of a new 18-volt nibbler designed for collision repair and metal fabrication. It's a big time saver. It speeds up work that once involve hand shears or other devices, help technicians cut any free-form shake conceivable out of tough sheet metal. Again, the design resulted from customer connection from watching the tech struggle with shears. Our new nibbler makes a big difference when cutting in defenders extracting a damaged panel or cutting a ceiling of a car accommodating installation of a sunroof or creating a place anywhere in the vehicle for placing emergency lighting, shining away for first responders. I have to tell you, I have to tell you, we are encouraged by these innovative new products. And by all the others we're planning to introduce as the days go forward. We know work and they all will make a difference right away. C&I, a quarter confronted with international headwinds, strong momentum in domestic markets, led by critical industries, extending out of the garage with growing strength. Now let's talk about the Tools Group. The first quarter for the Tools Group was below our standard. However, we do remain confident, and we do see a pivot to focus on quick payback items registering a positive momentum and movement. Sales in the quarter were $500.1 million, including – reflected an organic decrease – including an organic decrease or reflecting an organic decrease of 7%. The Group's operating income margin was 23.5%, down 100 basis points. Notably, gross margin in the quarter rose 90 basis points, reaching 48.2%. You see shorter payback margins aren't shorter on profitability. During the quarter, we worked to redirect our plants, guide our franchisees to innovate solutions that drive productivity, and we kept engaging our customer connection, observing the task executed in the bay and using the insights to design and deploy innovative and focused products offerings that are dedicated to making work easier, like two new products, just engineers – just engineered to address time-consuming tasks where simple repairs are made complex by limited – made complex by limited accessibility or by seized components that slow the work to a snail's pace. You can see it in the garage. For instance, on General Motors (NYSE:GM), 6L80 and 8L90 transmissions, the valve body bolts are obstructed by the exhaust set up, making it very taxing to do this job with a standard ratchet or socket combination. We were in some – we were in some of those GM garages and observed the problem firsthand, classic customer connection. And the innovation that followed in our quarter-inch drive Torx Plus EPL-10 low-profile inverted socket. That's a mouthful. That innovation was released in the first quarter, and it does make GM transmission work easier. The new cushion design precisely maneuver – the new custom design precisely maneuvers between the exhaust assembly and the transmission engaging the fastener in such a way that provides enough clearance for a ratcheting box or a box-end wrench or a hand ratchet to access the bolts for easy removal with no exhaust disassembly require saving more than 45 minutes per repair right away. Techs working on GM transmissions can complete more work with this device and make more money. They can do that right away, quick payback. Another example we saw, another example of that was we saw that removing the brake caliber pins on Toyota (NYSE:TM) trucks and sports utilities was very difficult. The pins on 4Runners, Tacomas and Tundras are exposed to harsh road environments, often causing the parts to become immovable, regularly requiring like heat or excessive force to free the restricted fasteners. And each of those methods requires time and it raises the risk of damage to nearby components often elevating the complexity of the repair, taking a lot more time, watching the work. Our engineers produced a unique punch like bit that precisely aligned to an air hammer with the dimensions of the pin, maximizing the extraction force without endangering the surrounding systems. Once again, simplifying the task and freeing the tech to move on to other jobs. It's another quick payback item that's now available and popular. Finally in the quarter, we expanded our only – the only U.S.-made locking plier lineup by releasing two new models, the LP5LN constructed with a tapered nose. It's ideal for additional reach inside compliance space to easily access narrow workpieces. And the new LP5WC delivering a reliable gripping power is difficult to engage round objects like hoses. Beyond the special features of those two models, the full line offers our subcompact six-inch plier line offers increased accessibility and – because it's small enabling text to maneuver and crowded engine compartments and under the dash. The design also provides unmatched clamping forces, that locking pliers, unmatched clamping forces that will not slip under load with the locking mechanism. The pliers also serve as a second pair of hands. They're going to lock them up – locking up, holding materials, securely in place, freeing up the technician's hands to complete another step in the repair. And each unit, each of those locking plier units is forged and produced on our Elkmont, Alabama plant, and they're the only locking models made in the U.S. Well, that is the Tools Group, pivoting to match the technician's current preferences and needs, wielding our customer connections, deploying solutions that improve efficiency by making tasks easier. Now RS&I. The RS&I Group's results confirmed, I think, what we've been saying all along, Snap-on is well positioned to support repair shops, both dealers and the vast networks of independent shops. And in that regard, RS&I sales in the quarter were $463.8 million, up $17.2 million or 3.9% versus last year with an organic sales increase of 3.3%. Operating earnings for the group reached $112.9 million, reflecting an increase of $8.3 million or 7.9% versus last year. The operating income margin was 24.3%, rising by 90 basis points, a powerful performance driven by OEM-related activity and sales in undercar, helping shops prepare for new technologies. In terms of OEM-related activity and sales in undercar helping shops prepare for new technologies and enabling system upgrades in the growing collision market. We continue to seek to clearly see abundant runways for growth in RS&I, and we're working to take advantage. One example of that is the launch of our new heavy-duty repair information software. This package combines the vehicle interface capabilities of our NEXIQ heavy-duty diagnostic units with the horsepower of our Mitchell 1 information database. It's an innovative solution for repair and heavy-duty industry, which over the past decade has seen an explosion of new technologies relating to sophisticated emission control along with advanced computer and electrical networks that all combines to present heavy mechanics with complex and complicated repair tasks. Now the solutions – now with solutions all located in one spot, tests can search by VIN number and access operating specification, troubleshooting tips and interactive wiring diagrams, all be specific to the particular vehicle, all big time savers and existing products was deployed in the quarter, and it's a groundbreaking integrated platform. The combined diagnostic capability together with vehicle information, it's very powerful. And I can tell you, the heavy-duty industry has noticed. You can see it in the RS&I numbers. And in the quarter, our Diagnostics division also released its latest 24.2 software upgrade, expanding our broad range of vehicle coverage and test procedures throughout all our existing hardware. The new upgrade strengthens our already market-leading data positions. Technicians get access to our SureTrack vehicle-specific real fixes, repair tips and commonly replaced parts, all derived from our proprietary database of 2.7 billion repair actions and 355 billion data records unmatched insight, not only to interpret what the vehicle trouble codes are saying but to uniquely use the information to determine the exact problem, analyzing millions of data lines per car, predicting the most likely repair. Snap-on uniquely provides this capability. And in this latest update, we continue adding new models and functionalities, making our proprietary software position even more effective and more powerful. We’re confident in the strength of RS&I. And we keep driving to expand its position with repair shop owners and managers to make – by making work easier with more and more great new products. Well, that’s Snap-on’s first quarter, sales flat, overcoming the significant headwinds, critical industries advancing, again, the tools group pivoting, matching the preference for quick payback products. OEM undercar repair information markets are remaining robust. The Opco OI margin, 22.9%, up 90 basis points and an EPS of $4.91, strong results that overcame the headwinds and benefited from a legal outcome. All demonstrating the strength in the midst of turbulence, it was an encouraging quarter. Now, I’ll turn the call over to Aldo. Aldo?
Aldo Pagliari: Thanks, Nick. Our consolidated operating results are summarized on Slide 6. Net sales of $1,182.3 million in the quarter compared to $1,183 million last year, reflecting an 0.8% organic sales decline, partially offset by $6.7 million of acquisition-related sales and $2.5 million of favorable foreign currency translation. Activity in our automotive repair markets was mixed, gains in sales to OEM and independent shop owners and managers were more than offset by lower sales to technicians through our franchise van channel. Within the industrial sector for our C&I group, sales to customers in critical industries were up mid-single digits in the quarter as compared to last year. Consolidated gross margin of 50.5% improved 70 basis points from 49.8% last year, primarily reflecting benefits from lower material and other costs and savings from the company’s RCI initiatives. Operating expenses as a percentage of net sales of 27.6% compared to 27.8% last year. In the quarter, as noted in our press release, operating expenses included an $11.3 million benefit for payments received associated with the legal matter. The 20 basis point improvement in the operating expense ratio is primarily due to the benefit from the legal payment partially offset by increased personnel and other costs, which includes a 20 basis point impact from acquisitions. Operating earnings before financial services of $270.9 million in the quarter, including the benefit from the legal payment compared to $259.8 million in 2023. As a percentage of net sales, operating margin before financial services of 22.9% compared to 22% last year. Financial services revenue of $99.6 million in the first quarter of 2024 compared to $92.6 million last year, while operating earnings of $68.3 million compared to $66.3 million in 2023. Consolidated operating earnings of $339.2 million, which included the legal benefit compared to $326.1 million last year. As a percentage of revenues, the operating earnings margin of 26.5% compared to 25.6% in 2023. Our first quarter effective income tax rate of 22.2% compared to 23.1% last year. Net earnings of $263.5 million or $4.91 per diluted share, including an $8.8 million or $0.16 per diluted share after tax benefit from the legal payment compared to $248.7 million or $4.60 per diluted share in the first quarter of 2023. Now, let’s turn to our segment results for the quarter, starting with the C&I group on Slide 7. Sales of $359.9 million compared to $363.8 million last year, reflecting a 2.5% organic sales decline and a $1.4 million of unfavorable foreign currency translation, partially offset by $6.7 million of acquisition-related sales. The organic decrease is primarily due to a double-digit reduction in the power tools business and a high-single digit decline in the segment’s Asia-Pacific operations mostly associated with lower intersegment sales. These declines were partially offset by a mid-single digit gain in sales to customers in critical industries. With respect to critical industries, military and defense related sales were robust as was activity in the aviation sector. Gross margin improved 200 basis points to 40.8% in the first quarter from 38.8% in 2023. This is largely due to increased volumes and the higher gross margin critical industry sector. Lower material costs and other cost savings from RCI initiatives and 50 basis points from the benefit of acquisitions. Operating expenses as a percentage of sales rose 190 basis points to 25.4% in the quarter from 23.5% in 2023 primarily due to the effects of lower sales volumes, investments in personnel and other costs and a 70 basis point impact from acquisitions. Operating earnings for the C&I segment of $55.4 million compared to $55.8 million last year. The operating margin of 15.4% compared to 15.3% in 2023. Turning now to Slide 8. Sales in the Snap-on Tools Group of $500.1 million compared to $537 million a year ago, reflecting a 7% organic sales decline, partially offset by $600,000 of favorable foreign currency translation. The organic decrease reflects a high single-digit decline in our U.S. business, partially offset by a mid-single digit gain in our international operations. Gross margin improved 90 basis points to 48.2% in the quarter from 47.3% last year. This improvement primarily reflects decreased sales of lower gross margin products. Operating expenses as a percentage of sales rose 190 basis points to 24.7% in the quarter from 22.8% in 2023, largely due to the lower sales volume. Operating earnings for the Snap-on Tools Group of $117.3 million compared to $131.7 million last year. The operating margin of 23.5% compared to 24.5% in 2023. Turning to the RS&I Group shown on Slide 9. Sales of $463.8 million compared to $446.6 million in 2023 reflecting a 3.3% organic sales gain and $2.5 million of favorable foreign currency translation. The organic increase includes a high-single digit increase in activity with OEM dealerships and a low-single digit gain in sales of undercar equipment. Gross margin improved 150 basis points to 45% from 43.5% last year, primarily due to benefits from lower material and other costs and savings from RCI initiatives. Operating expenses as a percentage of sales rose 60 basis points to 20.7% from 20.1% last year primarily reflecting increased personnel and other costs. Operating earnings for the RS&I Group of $112.9 million compared to $104.6 million last year, the operating margin of 24.3% compared to 23.4% reported last year. Now turning to Slide 10. Revenue from financial services increased $7 million or 7.6% to $99.6 million from $92.6 million last year, primarily reflecting growth of the loan portfolio. Financial Services operating earnings of $68.3 million compared to $66.3 million in 2023. Financial services expenses were up $5 million from 2023 levels, including $4.3 million of higher provisions for credit losses. In the first quarters of both 2024 and 2023, the average yield on finance receivables was 17.7%. In the first quarter of 2024 and 2023, the average yields on contract receivables were 9% and 8.7%, respectively. Total loan originations of $301.7 million in the first quarter represented an increase of $800,000 or 0.3% from 2023 levels. Increased originations of contract receivables were mostly offset by a low single-digit decline in extended credit originations. Moving to Slide 11. Our quarter 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 1.8% is up 30 basis points from the first quarter of 2023, but unchanged from the rate reported last quarter. Trailing 12-month net losses for the overall extended credit portfolio of $54.1 million, representing 2.75% of outstandings at quarter end, which is up 16 basis points from the end of last quarter. Considering the current environment and despite these slight upward trends, we believe the delinquency and portfolio performance metrics remain relatively stable. Now turning to Slide 12. Cash provided by operating activities of $348.7 million in the quarter represented 129% of net earnings and compared to $301.6 million last year. The improvement as compared to the first quarter of 2023 largely reflects lower year-over-year increases in working investment, which included a reduction in inventory during the quarter as well as higher net earnings. Net cash used by investing activities of $63.2 million primarily reflected net additions to finance receivables of $40.2 million and capital expenditures of $21.8 million. Net cash used by financing activities of $164.2 million included cash dividends of $98.2 million and the repurchase of 248,000 shares of common stock for $70.2 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $290.6 million of common stock under our existing authorizations. Turning to Slide 13. Trade and other accounts receivable increased $36.2 million from 2023 year-end. Days sales outstanding of 63 days compared to 60 days as of year-end and to 62 days as of the end of the first quarter of 2023. Inventories decreased $35.4 million from 2023 year-end. On a trailing 12-month basis, inventory turns of 2.4 compared to 2.3 at year-end 2023. Our quarter end cash position of $1,121 million compared to $1,001.5 million at year-end 2023. Our net debt to capital ratio of 1.5% compared to 3.8% at year-end 2023. In addition to cash and expected cash flow from operations, we have more than $900 million available under our credit facilities. As of quarter end, there were no amounts outstanding under the credit facility, and there were no commercial paper borrowings outstanding. That concludes my remarks on our first quarter performance. I'll now briefly review a few outlook items for 2024. With respect to corporate expenses, in the second quarter, we believe we could benefit from a legal payment similar to that received in the first quarter. For the full year, we expect that capital expenditures will be in a range of $100 million to $110 million, and we currently anticipate that our full year 2024 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?
Nick Pinchuk: Thanks, Alan. Well, that's the first quarter. Strength in the midst of turbulence. Even with a part of the enterprise below standard, you see Snap-on is a business that reaches varied customers in different industries and in various geographies united in a coherence that is the criticality of work, the essential nature of what we do. And we have the opportunity and advantage – we have opportunity and advantage in virtually all of those arenas. And as a consequence, even when the largest of our entities is not a standard, we find a way in other areas to maintain overall strength. It's that coherent strategic breadth and the experience and capability of our team to execute that has made Snap-on so resilient, moving consistently upwards for all these years, and this quarter was another demonstration of that resilience. C&I, engaging economic challenges across geographies, extending to critical industries, proving that Snap-on can roll out of the garage, exploiting a considerable opportunity and do it profitably. The Tools Group acting to adapt, committing to accommodate the tech's certain outlook and their preference for quick payback products and doing it with still enviable margins. In fact, with gross margins up 90 basis points showing the promise of their pivot. RS&I, seeing opportunities with repair shop owners and managers and making the most of it despite the challenges in Europe, volume and margins growing in a very imperfect environment and the credit company, working against the grain of short payback preferences and still raising profit. And it all came together to keep activity flat despite the difficulty to register an Opco operating margin of 22.9%, up 90 basis points and to record an EPS of $4.91, numbers that are among our strongest ever results with or without the legal benefit. And as such, we look ahead with confidence, fortified by our inherent advantages in our product, deep, wide and growing, solving more critical tasks every day, advantages in our brand. Snap-on is the outward sign of pride, working men and women taking their jobs and advantage in our people, committed, capable turbulence tested many times a team that knows how to ring the positive out of the difficult and fueled by those advantages, we believe Snap-on will maintain its strength, moving positively throughout the 2024 and well beyond. Now before I turn the call over to the operator, I’ll speak directly to our franchisees and associates worldwide. The first quarter was a resilient and robust demonstration of Snap-on strength against challenge. And it all reflects your extraordinary effort to make it sold. For your contributions to the results, you have my congratulations. For the special capabilities you bring to bear on behalf of our team every day, you have my admiration. And for the unshakable belief you consistently display in our future, you have my thanks. Now I’ll turn the call over to the operator. Operator?
Operator: [Operator Instructions] Our first question today comes from Scott Stember with Roth MKM. Please go ahead.
Scott Stember: Good morning and thanks for taking my questions.
Nick Pinchuk: Good morning, Scott.
Scott Stember: Nick, it sounds like within tools that power tools was the weakest. Could you maybe quantify that how much? And maybe just talk about how the other sub-segments like tool storage, diagnostics and hand tools it?
Nick Pinchuk: Power tools was down. The most interesting thing, power tools, I hate to say tough comparison. They did have a difficult comparison year-over-year. Last year was one of the bigger quarters. It actually was up sequentially. So we saw some movement there and the pivot towards shorter payback items versus where we were in the fourth quarter. I think that was certainly down the biggest and as I think Aldo said, it was down double digits. Diagnostics was down, but the – one of the things that that did help the profitability was the fact that tool storage was up and hand tools wasn’t as afflicted as the others. And so therefore, what the Tools Group actually makes, remember that in the array of products, the Tools Group for tool storage and hand tools get both distribution and manufacturer’s margin. So that really is what describes the product of array. It was kind of – when we look at it, we can see the effects of pivoting. Tool storage was up, but it was in what we would call the lower end. We’re kind of pleased with it because we worked hard on the Algona plant, trying to do this pivot to get more capacity in the accessory and in the classic line in the carts and the accessories in the classic had big quarters, and those are the lower cost items, which people don’t get as embroiled and longer payback. So we’re kind of pleased with that. And hand tools, I showed you some of the arrays out of customer connection that we rolled out and we’re rolling out more going forward.
Scott Stember: So some of the two new power tools that you referred to you said help is on the way. When do you think we’ll start seeing this? Is this starting to shift or the…
Nick Pinchuk: We bought some of that in the quarter toward the end of the quarter. The way the two played out, things got better. I think sales up through demand got better as the quarter went on. So we kind of had some momentum. I hate to overplay that because I’ve seen – I’ve been here a while. I see all kinds of calibrations from quarter-to-quarter. The end did have Easter this year, still it looked pretty good. So I think we’re kind of encouraged by that. And what I meant by that was, I like those two that I brought out. We brought out other ones, and we have an array of new ones coming out in the second quarter around power tools. So I think what I meant there is help is on the way as we had – we introduced in the quarter, a couple of things plus others, because those two I mentioned, plus we’ve got others coming.
Scott Stember: Got it. And just last question. If you were to take out the intercompany pressure in RS&I and C&I, what were the external sales? How did they do in both of those segments in the quarter?
Nick Pinchuk: Yes. Look, it’s – if you look at it organically without currency and acquisitions, which would raise the numbers actually, with just apples-to-apples, C&I was up 2.2% externally. And I think RS&I was up almost 6%, 5.8%. So RS&I was pretty good right in our – right where we expect them to be all the time. So RS&I really had a pretty good quarter. And actually, given Europe, seven countries in recession and so you see this kind of thing. I think the hand tools business in Europe was kind of in defile. And so the other businesses went pretty well, so we’re pretty pleased with those businesses.
Scott Stember: Got it. That’s all I have for now. Thank you.
Operator: The next question is from Christopher Glynn with Oppenheimer. Please go ahead.
Christopher Glynn: Thanks. Good morning, guys. Nick, nice descriptions on the NPIs. I was actually lagging a bit because had that issue with the – I think, the caliper pins on my Sequoia last time I fixed the break. So I don’t think the Sequoia was on your list, but you can add it.
Nick Pinchuk: [Indiscernible] things that sell. When we talk about short payback items, these guys can see the tool and say, hey, I’ve spent a dog’s age fixing these things and this helps. So I think it works out okay for us. Yes.
Christopher Glynn: I was wondering if you could contrast, share some thoughts on the kind of decent strength from repair shops with an auto repair umbrella versus the technicians having some confidence?
Nick Pinchuk: Look, we've seen it before. We actually saw in the financial recession, the Great Financial Recession back what, more than 10 years ago. And the COVID is the COVID that the shops weren't down that much. They were down for a few weeks and then they figure out what to do, and they were humming in both situations. But the technicians were confidence poor; they didn't know where the world was going. So if you remember, I think it's approximately in the beginning of the COVID, we had the recoveries coming out when we had that V-shaped recovery in the third and fourth quarter, that was driven a lot by handfuls. Small payback and small payback items, short payback items. And so that's what they do. They kind of say, I don't know – it's very interesting. Financial economy, we have all these calculations. The people have worked think they get up every morning and they see the news for breakfast. And enough of it is bad, they start to lose confidence. And so that's what they're saying. They're saying – they're thinking, geez, I don't know, where are these wars are going to go? They're going to start raising taxes, our kids going to have to fight. The border seems to be a migration, all those things, and they start saying, "Well, I'm not – I know I'm doing good now. But I'm not sure what's going to happen in the future. They don't think in terms of soft landing, hard landing. I'm not sure what's going to happen in the future. So they don't want to get them ourselves out in traffic. Sometimes the narrative about everyday working people is that they're propagating and borrow in bad times. That's not been my experience. These people are pretty much.
Christopher Glynn: Okay. And sticking with those techs, so maybe we're seeing the lag effect of inflation and rates a bit here on small private operators and you're focused on pivoting the focus to match the faster payback. Should we basically figure you need a couple of quarters to align that as you or the organizational.
Nick Pinchuk: I don't know. Certainly, I'm tasking the Tools Group to do it at light speed, and we are working on it with alacrity it is an unknowable amount because what happens is as you move your capacity around in the factors actually refocus your capacity, no matter how much you start putting that thing, you start – you start sticking yourself back, you set up more cash to deliver. And sometimes that can be a problem. We despite the number, the number was worse from a, I think, a little bit in the quarter, but we saw progress there. We saw the characteristic shifting. And so we think that's going to work for us because we've seen it work before. I don't know how long that will take. Certainly, we expected to see improvement as we go forward. What the rates of that improvement are, I cannot tell.
Christopher Glynn: Makes sense. Thank you, Nick.
Operator: The next question is from David MacGregor with Longbow Research. Please go ahead.
David MacGregor: Yes, good morning everyone.
Nick Pinchuk: Hey David.
David MacGregor: Good morning, Nick. I guess based on our work, we expected the weaker confidence in technicians, but we also know you were more promotional than normal in the first quarter with the regional kickoffs and the follow-ons. And clearly, franchisees were not responding to those elevated promotional levels to the extent we thought. I guess going forward, do you raise further the promotional discounts and incentives – can you restore growth in the Tools segment in 2024? Or are we looking at the segment continuing at a negative mid-single-digit pace through the balance of the year. It sounded like your answer to the last question was kind of a more passive approach where you just have to wait and see how things play out as opposed to maybe taking more active initiatives?
Nick Pinchuk: I don't know if I accept your first premise that we were more pragmatic in our promotions in the first quarter than usual. I don't know that to be true. David, though, I'm not reviewing every promotion all the time either. So I couldn't sit here and review them at all. I don't think so though. I don't think – our view is like this. The real solution to it is, is the pivot. And the more of these small products, these short payback products, and they're profitable, that we get out, the more sales we'll have, I think trying to promote against the wins like corn water up a rope. And so we're not going to do that. We're not going to do that. I'm not that desperate – you know what I mean? I mean, look, this is a quarter, okay. The quarter is substandard, but we expect improvement. And oh, by the way, I think our margins are still enviable. So I'm not going to – we're not going to go – I'm not saying we won't have good promotions. That's not what I'm saying. But I'm saying we're not going to get our hair on fire on this in the promotion line. We will get our hair on fire and trying to pivot designing short payback items, altering the capacity in the factory and having our people in sales work more on – put more energy into getting our franchisees, how are you going to sell these shorter payback items. Sure. If somebody wants to buy an epic we'll be happy to comment them. But that's what I'm talking about here. I don't think we're going to be promoted any more than normal, any different than normal. Let's put it that way except maybe to focus promotions on maybe some short payback items to try to give people some energy around it. Promotions aren't actually say, but promotions aren't necessarily cost reductions, although they appear to be sometimes price reduction, sometimes it's just about creating energy and focus.
David MacGregor: I'm pretty certain that your post regional kickoff promotions were up year-over-year versus last year. But I can follow up with you offline on that.
Nick Pinchuk: I'm not saying it wrong, David. I'm just saying I'm not aware – I don't feel like we are frenetic about it. That's all. I don't talk to the wrong guy, if you think I'm following every promotion. I don't. But the envelope, I kind of described to you, we expect to follow.
David MacGregor: Yes. Just a couple of follow-up questions, Nick. Can you talk about the progress you made this quarter with the incremental manufacturing capacity and maybe the extent to which that increased ability to ship provided a partial offset to the negative top line?
Nick Pinchuk: Well, I don’t know about the volumes, but we certainly got out what we – I liked what happened in Algona, David, the full storage plan. It seemed as though Algona, which had been pounding away on it for a long time as I know you’re very well aware, had made pretty good progress. I think we’re a little behind that in, say, like Elizabethton and [indiscernible] certainly Milwaukee in terms of the handful plant. It may be a little more difficult to create the changes and create the pivot. So I was pleased with what happened. And I don’t know, though not so much liquidation. I don’t think there was that much of that. I think that would have been helped in the fourth quarter some too. So I don’t know. Not really a big factor in the situation.
David MacGregor: Okay. This last quarter, you had some inventory putback from franchisee attrition that contributed to the negative growth. Was franchisee attrition up again this quarter? And was the inventory put back again to source of negative growth?
Nick Pinchuk: I would say there was inventory put back. But maybe a little bit less than about the same, I suppose, is the fourth quarter, maybe not quite the same. So we didn’t see quite because what happens is I think the phenomenon there, Dave, is David, is that remember, I said that everybody was like they were white hot coming out of the SFC and then all of a sudden, everybody is starting to get a little nervous and that caused a little more put back. I don’t think we had that transition piece in this period. So that probably ended up not having as much put back.
David MacGregor: Okay. And the last question for me, just on credit. I guess I’m trying to make sense of the flat originations, given the – it sounds like the Diagnostics business, in particular, might be pretty weak. How much of that would you think was just kind of revolving account transfers and what’s changing in terms of these?
Nick Pinchuk: I don’t think much – I don’t think…
David MacGregor: Not much?
Nick Pinchuk: We will watch that. I’m pretty sure I know that didn’t change.
Aldo Pagliari: It’s actually lower and lower.
David MacGregor: Okay.
Nick Pinchuk: Not really impacted.
David MacGregor: It’s down, okay, down. What’s changing in terms of the EC approval rates? And I guess you mentioned EC, your originations were down low single digits. I’m just guessing overall credit penetration rates are directionally lower. Can you just talk a little bit about what you’re seeing in credit trends? Your provisioning was up $4 million.
Aldo Pagliari: I don’t think the penetration rates are dipping at all. I think what Nick has described as lower sales of big ticket items. And if there’s lower big ticket items, then there’s lower EC originations, but I don’t think there’s anything dramatic in terms of a shift of any sort in terms of how the Snap-on Credit is participating in the sales of the Tools Group.
Nick Pinchuk: If it helps, David, remember the small – faster payback items. So in diagnostics, diagnostics was down, but the smaller and SOLUS+ was strong in the quarter, and that doesn’t get EC as much as, say, Snap-on ZEUS [ph]. So some of that’s in that situation. But not really much change. I do that, EC doesn’t necessarily follow directly to the activity. Okay.
David MacGregor: Right. Good. Thanks very much gentlemen.
Operator: The next question is from Gary Prestopino with Barrington Research. Please go ahead.
Gary Prestopino: Hi and good morning all.
Nick Pinchuk: Good morning, Gary.
Gary Prestopino: Nick, can you maybe – could you maybe just help me out here? I mean, the market for repair – auto repairs is very strong. Sometimes takes longer than you would expect to get your car repaired, even on the collision side.
Nick Pinchuk: I agree.
Gary Prestopino: But yet you’re saying your power tools are down and diagnostics down. Don’t the technicians really need to have these products in order to do their jobs correctly and efficiently and quickly. So I guess what I’m asking is, is this just really a function of maybe what’s going on with the Tools Group is that your diagnostic products have kind of permeated the channel, and there’s not a lack of demand that is maybe being driven by the fact that everybody’s needs have been taken care of. And then on the other side, the power tools, maybe there’s just hasn’t been the opportunity to innovate as much as you had maybe last year to drive growth? I’m just trying to square all this together.
Nick Pinchuk: Look, I think the thing is you could, in diagnostics, we did sell the quicker payback items, the SOLUS+. It was the big ticket ones like ZEUS which is quite a bit more expensive that didn’t sell. In power tools, yes, it can be – it can follow very strongly what’s introduced in a certain period. At time, the power tools, I think, looks worse than it is, like I said, it was up sequentially with some reasonable gains. So I think we see progress in the power tools. So I do think – I don’t think we’re seeing that. We’ve seen it before where technicians will focus on things they have an array of things they want to buy from Snap-on. And often, when they’re confronted with this, they make a transition to say, well, where – how can I – I want to see the world play out a little bit more. I’ll buy this wrench or I’ll buy this smaller box or I’ll buy a small diagnostic or I’ll maybe hold on to my power tool a little bit longer. People need the products, but on the other hand, it is an imprecise thing. Sometimes they’ll say, okay, I need a particular power tool or a diagnostics because I had trouble last week on this particular on some Toyota or maybe on a BMW (ETR:BMWG). And they'll say, "Well, I'll wait a little while because I won't see another BMW for a month or two or a quarter three or four months. You'll see that it's an imprecise situation. Simply, our view of it is more – it's always influenced by product, about the new stuff that rolls out, it's a complex array. But what's happening, at least as far as we can report and I've talked to a lot of guys is that technicians – one guy in Northern California said the techs are scared. Another guy talked to in Kentucky – [indiscernible], Kentucky said they're getting involved in the everyday news. It's weighing them down. I got another guy in Nevada and Reno, we said, they're assessing over the election. So I'm telling you, this is kind of a – it's sort of saying, where is the environment going to go? I'm going to keep my powder dry for a while. I'm going to just take it bit-by-bit, I don't want to take a big bite – so when they want to figure out how to repair cars, they don't take a big bite.
Gary Prestopino: All right. And then I guess the last – you had mentioned that this had happened before, I think, in The Great Recession.
Nick Pinchuk: And in the COVID – Gary and in the COVID.
Gary Prestopino: So how long did this take to flesh out? Was this a couple of quarter phenomenon?
Nick Pinchuk: In the COVID, I would say it took three quarters, maybe two quarters for people to get used, and basically that was driven more by the – we're talking about attitude. It took about two quarters, maybe 2.5 quarters for them to say, "Oh, the all clear is blowing". Nothing is really going to happen. We're out of the COVID and the great financial recession is a little longer. But it all depends on how use they get to it. Now we help this by pivoting. Remember that in this situation, we help by giving them more small bites. So some of this has to do with matching the product – the new product available that's analyzing them with stuffs they're willing to take on, and that's what we're doing.
Gary Prestopino: Okay. Yes. Thank you.
Nick Pinchuk: Certainly.
Operator: The next question is from Luke Junk with Baird. Pleaser go ahead.
Nick Pinchuk: Hey Luke.
Luke Junk: Yes. Good morning. Thanks for taking the questions. Maybe just pivoting on that last point there, Nick, just trying to get a feel for your gut of how much you think is under your control as you make this pivot and like you said, just matching new products with where the demand is right now in terms of I guess I'd be interested to get your perspective on the last six months. Just how much that feedback has changed of what mechanics want? And to what extent are the franchisees able to kind of give you demand clues or is it more about kind of pushing the right products to the franchisees and helping to market the products?
Nick Pinchuk: No. No. No. Demand clues. I mean, fundamentally, it's on a macro basis, Luke, I don't know if it's six months. So this sort of started sometime in October. I don't know how long it is. But the thing is, is that it's pretty much about what people will say, if I buy this now, I can get a payback now, and I don't get committed for longer terms. So I'm not – that's a description in general. Of course, everything I'd say about the technicians probably doesn't apply to every technician and every garage is probably a great landscape for this. But that's simply what we're doing. And so we're getting feedback from the franchisees on this and we're doing a lot of customer connection on it. I'm talking to franchisees all the time. We'll have the NFAC in here in about four weeks. I'll talk to them about it. We're making a lot of cost. So we're getting feedback from those guys, and we have pretty good feedback right now. We know where we're trying to go. And so that we believe that will work for us. Of course, it all won't work but once we execute on that, then we'll iterate to hone in. Now how long that takes. And as I said before, I think our view is our standard is to keep improving I'm not so sure how quickly. But I do think we have the capacity to do it, and we've done it before.
Luke Junk: And then maybe a question on RS&I if I can sneak it in, just the expanded opportunity right now seeing with OEM dealerships, especially kind of new technologies and new things coming into the market. Just that seems more of a secular opportunity. I mean, do you see the opportunity is any different versus this business historically either in kind of the scope of the opportunity or even the margin opportunity maybe?
Nick Pinchuk: Look, I think three things about RS&I. One is that you've got – you've got the opportunity associated with the number of new models people are launched. And I thought a slant guy on TV about a month ago, he was talked about 30 new models. I don't know how we're going to get all of those. But every time a new model comes out, this is a good business for us. And every time they have a warranty kind of recall and stuff like that, and that business has been pretty good now for some time. It was up nicely in the quarter, double digits, and the profitability is strong now, so that's a good bit. And so that's a unique at this point, and I think it will keep going as the technologies keep changing. Then you see the equipment business. The equipment business wasn't – it was off, but it wasn't as strongly up because Europe was pummeled by the equipment business. Those recessionary businesses in Europe. I mean, Germany being a recession was a big blow for us in this situation. And so that was harder. That will come back. But it does have the collision business and the equipment business in North America, all of which are booming. And those are nice margins. The margin was up in that business. So that's fueling some of it. And then our software keeps doing pretty well. We talked about the heavy-duty software. And we did have this legal benefit, which was in this ore, and it confirms the proprietary nature of our database. So I think that's – all those things are better than a poke in the eye with a sharp stick.
Luke Junk: I’ll leave it there. Thanks, Nick.
Nick Pinchuk: Okay.
Operator: The next question is from Sherif El-Sabbahy with Bank of America. Please go ahead.
Sherif El-Sabbahy: Hey, good morning.
Nick Pinchuk: Sherif, how are you?
Sherif El-Sabbahy: Doing well. Thanks. And thanks for all the great color you provided. I just had one small specific question. Just within power tools, are there any specific markets or end users that saw an outsized pullback or drove the decline year-over-year?
Nick Pinchuk: Say that again, please. Sorry.
Sherif El-Sabbahy: Are there any specific markets or end uses for power tools that saw an outsized pullback or stood out when you were kind of looking at the numbers?
Nick Pinchuk: No, I don't think so. I think there is a constant movement between pneumatic and cordless in the power tools or a lot of people are converting to cordless. Not everything can be converted to cordless because people want to have continuous power and of course, the pneumatic will keep going. So if you're doing something over and over, sometimes people prefer pneumatic guns, because they don't run out of battery and they're lighter and all that stuff. So if you have a repetitive situations. But there's a general motion to cordless – we haven't seen any – if you look at the nature of the product line, products and power tools, what you see is sales that follow introduction of new products. Every time we bring out a new product, that tends to raise that particular category. I haven't seen much of a particular pullback. I think the need for power tools in industrial settings in critical industry settings remains moving at pace in the garage is less so because of the aforementioned uncertainty. That's all. That's the only color I can add in that situation.
Sherif El-Sabbahy: Thank you. Appreciated it.
Nick Pinchuk: Sure.
Operator: The next question is from Bret Jordan with Jefferies. Please go ahead.
Bret Jordan: Hey good morning guys. Don't think we've touched on the sell-in versus sell-out on the U.S. franchise tools. Do you have any color as far as what their POS looked like versus their take rate?
Nick Pinchuk: I'm not sure what you mean by point of sale. Okay. Yes. Look, sell off the van was better than our sell to the van this quarter particularly towards the end. So that's – we sold – our franchisees sold more of their vans than they bought in this situation – and that gap expanded a little bit as we went forward in the quarter.
Bret Jordan: And I guess the sellout rate, how do you think that compares to the general market growth rate. I guess, do you think you're keeping up from a market share standpoint? Or is there any – shift there?
Nick Pinchuk: No. I don't know, you may have a better view. Look, if you talked – I just talked – I talked – we talked to 36 franchisees and none of them mentioned I'm losing share. Nobody mentioned I'm losing share. So I don't think that's happening. And although these are windshield surveys and not based on data. But they don't seem to be in that situation. They can say, their view is, well, tougher to sell because people aren't buying, I don't have the big ticket items I used to sell and that carves down my product line that I can get to people to move on.
Bret Jordan: Okay. There seem there will be a little gap between – with the Matco numbers at the end of last year. So we're not commenting about Matco becoming more aggressive as far as pushing their volume.
Nick Pinchuk: Nobody's saying that I don't know. The Matco guys are smart guys. They may be able to – they may have some magic at, we don't know. But every place, it's hard to – what we found is we never really paid too much view of that over one quarter, those things go up and down. So I don't know. I can't really comment on their business, but I'm not hearing anything from our franchisees that would indicate that's a problem for us. Generally, we think that we sell to different people anyway.
Bret Jordan: All right. Thank you.
Nick Pinchuk: Sure.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.
Sara Verbsky: 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.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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