Snap-on Incorporated Price & Performance (SNA)

Thank you, Nick, 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. 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, Sarah. Good morning, everybody. As usual, I'll start by covering the first quarter and along the way I'll give you my perspective on our results. Our markets, the current environment, our position in the turbulence how we're engaging the situation [indiscernible] what we think it all means going forward. Then Aldo will move on to a more detailed review of the financials. Well, these are interesting times. I don't think we've seen an interlude so packed with economic news, government shakeups, tariff bursts, the administration declaring that there's likely to be pain before the Renaissance emerges. I mean, the hits just keep on coming. You can see that uncertainty though in a more formal way and the consumers sentiment index. It dropped precipitously decreasing by 30% just since December. The second lowest rating ever And it particularly impacted the perspective of our grassroots economy like our technician customers It prompted an avoidance of longer payback finance items that that outran the Tools Group pivoting to quicker payback products. It created the pause in our upward trajectory that's visible in the quarter's numbers. Our sales of 1.1 and $41,100,000 as reported represented a 3.5% decline including $13,900,000 on unfavorable foreign currency translation and organic sales that were down low single digits, 2.3% on mixed results across the operating group.

Operating income for the quarter was $243,100,000 and that compared to $270,900,000 in twenty twenty twenty four. OI margin was 21.3%. And that was versus last year's 22.9%. Which I remind you included 90 basis points associated with the benefit from the the 2024 legal win. Now notably, the gross margin was 50.7% up 20 basis points despite the reduced volume. In effect, our OI margin gap reflected the fact that we kept spending on maintaining and strengthening our advances in in product and brand and in people, believing as we did in the pandemic, that it's best to emerge from turbulence at full strength and we plan to do just that. For Financial Services, operating earnings of $70,300,000 were up 2.9% from last year. Still from last year's 68,300,000.0 So as reported OI margins in the quarter, including both financial services and OpCo, were 25.2% versus the 26.5% recorded last year, Quarterly EPS is $4.51 was down point $40 which reflected the lower volume and 16% from last year's legal payment and $09 in higher pension amortization costs included in the the 2025 number. So now let's talk about the markets. We believe auto repair is quite critical. It remains strong and continues to be a great place to operate.

And the industry metrics agree. Now some people have pointed out that hours worked are down over the last couple of months and that's true. But there's positive news almost everywhere else. The U. S. Car park on average is 12.6 years old and it's getting old. It's old now and it's getting older. Household spending on repairs on car repairs are up substantially both year over year and over the trailing twelve months. And tech wages continue to rise nicely mid single digits. Having said that, the technicians are among those who are daunted by the current turbulence. Many of them believe we're going to a more positive place. But they fear the economy will careen off the rails before we get there. Those people who work are part of the broad group driving the drop in consumer sentiment. But even though they're now cash rich, they feel they don't have the financial cushion for an off the rails event as such. And as such they're reluctant to embrace finance products. Items like tool storage boxes or top of the line diagnostics. We can see it clearly in the double digit drop in our credit company originations.

On the other hand, we do believe that the tech's still confidence poor still have an interest in quicker payback items that makes their work easier They want to make more money.

So our tools group will keep pivoting to match the current preference. Preferences. Working with perseverance, with focus, and with confidence to restore that group's advance in closing its sales graph just like it had established last year. So that's the vehicle that's the text. That's the text sector. But also on vehicle repair, have independent shops and OEM dealerships approximate but distinct segment from the techs. That's the market of RS and I. The garages, those people there continue to tool up with the latest equipment and diagnostic systems meeting the needs of their customers, getting them back on the road quickly They know they have to invest. They know they need innovative new products hardware and so on. And software that improve improve efficiency, repair efficiency and accuracy. It's an imperative to to match the repair complexity of today's sophisticated and technically advanced vehicles. It's table stakes for them in the world of today and the repair shop owners and managers will keep moving in that direction. Another opportunity in the markets in the market we've focused on is critical industries. We've termed the market critical industries. Sector like natural resources, the military, aviation, heavy duty fleets, where the penalty for failure is high.

This is where C and I makes its money, where we're offering custom solutions to reach new operations and make their critical work easier. Of course, like everything, we see period to period challenges and and variations across geographies and across segments. Particularly in this time. And in the first quarter, we did see the usual pause in military business at almost always temporarily a company is a new sheriff in the defense department. But after a period dysfunction, however, the war fighters went out. And the process gets back on track. But in general, this is a robust arena. And we believe the critical industries are in a place of abundant opportunity and we believe we're growing stronger in that arena every day connecting with more customers using the insight to expand our product line and extend our presence wider in deeper. So overall, I describe our markets as continuing to offer opportunities.

Now of course, is an environment where challenges do exist. And there is turbulence. But we are confident that with our advantages in our strengthening product lines that solve critical challenges, our extraordinary brand that literally defines a professional. And our very experienced team that's so enabled we believe will prevail against these challenges.

Now, now, let's briefly address the issue of the day. Tariffs. A word that was mentioned last Friday in The Wall Street Journal two fifty four times Yesterday, it was down to a mere 163 mentions. Paraphrasing Klauswitsch, the world is in a fog of tariffs. A time in which there are so many changing variables that it's difficult to see the way forward. It's an environment that will require urgent action to adjust to optimize and to take advantage. And we're confident in that, FAC. We are, of course, not immune to the challenge of tariffs but we believe Snap-on is greatly advantaged by our manufacturing strategy to make in the markets where we sell and enable quick adjustment to changing production landscapes that are likely to happen. We already have the facilities. 36 factories around the world 15 right here in The USA, many of which we've just expanded. We're positioned well with American products. Our major product lines are already made in America using American steel. And our U. S. Plants already produce some version of almost all our product lines. What that means is no extended ramp ups for relocated products. We already have the resident know how right here in The USA.

And for the select rates placed in America, where we use some high tariff components, We have 21 factories outside The U. S, so sourcing activities in several locations and that gives us access to a myriad of alternative sources. Finally, skilled American workers, one of the barriers to reshoring or reacting to tariffs is skilled American workers are in short supply. The National Association of Manufacturers, after all, says there are 400 there are 500,000 openings in U. S. Manufacturing right now. But we haven't had difficulty filling positions. And we believe we continue to do just that in the future. So we're in the flag of tariffs. But we are confident and we believe we can engage and manage the turbulence. We're not immune to the impact but we believe we are very advantaged Now let's move to the segments. The C and I group, organic sales decreased by 2.9%. Low single digits. C and I's operating income was 53,200,000.0 below the 2024 levels by 2,200,000.0 but operating margins were 15.5%, a new first quarter record, up 10 basis points from last year. First quarter, remember, always seasonally kind of weaker for C and I. In effect, though, if you think about the this is the key point.

Gross margin for C and I gross margin in C and I in the period were 42.6%. Up 180 basis points. Yes. 180 basis points. In effect, we continued OE investments to expand our advantages despite the lower volume and it was a well considered offset to gross margin gains but we believe it was worth it. We're confident in and committed to extending in critical and we'll keep strengthening our position with C and I as we move forward Observing the task and using those insights to design products that make work easier all across critical industries. You can see that in our torque lineup.

Where precision and accuracy are essential. The aviation market where penalty for fail where the penalty period is high continues to adapt our control tech wrenches or what we call a C Tech made in USA built in our plant located in the city of Minnesota, California. It's an expanding presence in aviation covering a wide range of sizes each specifically matched to unique test. Aerospace makers and fixers love this product for quality and accuracy, but the big kahuna is its ability to dot document the force applied to the fastener. Wirelessly creating a record that the sensitive task has been completed just as specified. Now, as we recently learned, this is a pretty important this is pretty important where aircraft are involved. It's one of the reasons why it's still strong a product. Our Carol Stream facility in Illinois produces an elite lineup of preset torque wrenches and wireless controllers. Devices that excel in any production operation we are approving reducing net rework, decreasing warranty needs and just raising customer satisfaction are vital. Actually it's pretty much everywhere the operation is critical. So our SR controls linked with the manufacturer internal system and they relay engineering protocols directly to the shop floor operator.

Identifying the right tool, confirming the task is complete and correct, storing the records all to ensure that the right specs were applied and make sure nothing leaves the line without being fully correct.

And our newly expanded Kenosha facility another one of our expansions in The United States, C and I custom tool department makes the very difficult possible. A recent example is the aviation maintenance operation an aviation maintenance operation that required a one of a kind abnormally long three inches spline socket to effectively access a very tight area in an exceptionally high performance wing structure. Now this is not an easy tool to make or to come by. But our customer product team in Kenosha designed it tested it and put it in the customer hands all in quick time making that critical task easier with insight and speed that's only enabled by an operation close to the customer. That only such an operation close to the customer can achieve In Murphy, North Carolina, our power tool plant, launched a new combination set that was quite what we see. The Stardust set was our PH3050B Series AirHammer. That really packs a punch. Hitting with unwavering force, tackling heavy duty repairs with power and speed, 2,500 blows per minute, especially hardened piston strike the chisel with enough force of kinetic energy to dislodge even the most stubborn components. But the coolest part of the design is the special Kevlar disc inside the HAMMER's body.

Absorbing the shock dramatically softening the vibration making it more ergonomic much easier and more comfortable for the operator no more jackhammer joints. Now in AVMUCET, that Beast Hammer is paired with our most popular air chisels, hot forks for durability in our Elizabethton, Tennessee plant. And kitted into a foam pallet for easy storage. It's a great package and the techs know it. So that's C and I. A high in first quarter profit margins delivering solutions that make work easier make work safer, and easier and more productive. All enabled by American plants. On to the Tools Group. Organic sales were down 6.8%. With a high single digit decline in The U. S, partially offset by low single digit gain internationally. There's a difference between those markets you notice. Opportunity income of $92,400,000 compared with $117,300,000 of 2024 with an operating margin of 20%. The Tools Group continued to see challenges. With the technicians sliding confidence. With greater hesitance to purchase long payback items like large tool storage pockets or big ticket items in general. The pivot to faster payback items was gaining traction against against the worry brought on by the ongoing wars, the border crisis and a consistent inflation.

But we believe the events of the first quarter drove down confidence at an accelerated rate outrunning the continuing progress of the group the group's pivot. Our shift is powered by by altered capacities and refocused marketing and promotion campaigns probably most importantly, by the introduction of innovative new products that make immediate impact with a short term payback. Products like made in Snap-on factories like our recently expanded Milwaukee Wisconsin plant, bringing raw American steel into the back door forging it into near net shape, applying skill and know how to harden and finish steel into a final product. One example is our low profile flank drive socket capacity recently expanded, purposely built to navigate tight quarters, enabling the tech to beat the clock beat the flat rate and expedite the repair by maneuvering around instead of removing obstacles. To reach the fastener. It's to get right around. It doesn't have to spend the time removing the obstacle. Once engaged, the patented design the bolt on flat and not on the corners quickly removing the part with ease without debilitating damage to the points. Of the fastener. Quick payback items like our other quick payback items like our Synergy 100 tooth ratchets, Maine, Elizabethton, Tennessee Forge a design that's unprecedented for strong and easy operation in tight spaces.

It's now been introduced for our entire range including our challenging to make long handled versions. This quarter we put the synergy together with an array of those low profile sockets, a combination that that offers increasing accessibility versatility and reliability, a powerful match The shops love those QuickPayback sets and they're right in the current preferences for the deck. And when technicians are bouncing from bay to bay, or job to job, They need versatility to make speedy adjustments and remove hardware. So another QuickPayback hit product was our lineup of adjustable wrenches made our Elkmont Alabama facility It's the only American made adjustable wrench on the market. It's a demonstration of U. Made flexibility handling a wide range of different size fasteners just one tool. And the kind of the cool part about this is the smaller models are easy to fit in your pocket. So they're always ready as you move from bay to bay. And for customers needing to secure their tool we released our latest additions to the roll cart lineup, our KHP 46. Now this is at the bottom end of the bigger ticket items. It's It rolls out of our Algona, Iowa facility and it provides a rugged and secured storage that only 40 inches wide, making it easy to position right in the work area.

But it's equipped with slides providing drawer capacity up to two forty pounds That means it's a solid chassis that can hold everything necessary for positioning essential tools close to the workplace. In addition, the unit's comp compartment can configured in multiple layouts for managing power tools.

And it's got an installed 120 volt outlet and USB port that allow all electronic accessories and cordless batteries to be charged and be at the ready. The KHP 46, a roll card that's solid mobile with powerful features. A sturdy storage solutions with a quicker payback. It matches the needs of [indiscernible] poor techs that require a storage upgrade now and it is popular. Well, that's the Tools Group, armed with U. S. Factories. Vertically integrated with the ability to speed designs and and flexibility for pivoting to short payback items [indiscernible] to prevail in the turbulence. Now let's move to RS and I. Sales in the first quarter of $4.79 $75,900,000 with an organic gain of 3.7%. Advancements in our Diagnostics and Mitchell one operations and strong double digit improvements in our OEM markets. Operating earnings for RS and I were $122,100,000 up $9,200,000 or 8.1% from last year. And the operating margin was 25.7% representing an all time high for the first quarter that was up 140 basis points better than 2024. Reflecting continuing software expansion and the benefits of RCI. RCI shine through the turbulence as quarter with a gangbusters performance and it was enabled by product.

So I'll talk about that product a minute. We continue to enhance our software coverage leveraging our proprietary databases with over 500,000,000,000 data points and 3,000,000,000 repair records numbers that are unrivaled in the industry and unrivaled in health and tech navigate and diagnose cars faster. It's a lasting advantage. And keeping current with the tech's preference keeping consistent or current with the with the text now preferences, we celebrated the twentieth anniversary of our SOLID diagnostic This version, the latest version [indiscernible] built in our San Jose, California production and development center. It's aimed at simplifying the complex and making tech faster at diagnosing the true failures of modern vehicles. It's our fastest handheld with a two second boot up and it's our fastest payback way to powerful vehicle diagnostics. And the tax we responded to the campaign, recognizing the power and the of the handheld all at a quick payback. The program was actually one of the highlights of the quarter. Later in the quarter, our Ratchet Hills, Michigan facility released our all new [indiscernible] The diagnostics handheld handheld diagnostic platform focused on heavy duty commercial trucks, new hardware, a faster processor and an improved touchscreen. But the major advancement is integration with our repair database with the repair databases of Mitchell one, putting repairs procedures, vehicle specifications and step by step routines for fixing the truck directly into the tech's hands.

The new Michigan based ProLink puts Snap on in the clear lead for multi model heavy duty diagnostics And Louisville, Kentucky is home to our vehicle lift plant. All types and sizes of lifts.

And among the biggest hits is our Challenger CV10 AV3. It's a two post lift, the unique ability to adjust in width on the fly It's flexible enough to be installed in any facility in any bay, and powerful enough to handle a wide range of vehicles. Lifting vehicles is essential for accessing suspension system and for transmission setups and for EV repairs. And for a range And for a range of shop tasks, with this lift the techs can adjust the suspended height allowing for the best ergonomic approach to work and bringing them closer to the work piece to execute the repair.

The challenge with 334B is a great product and everybody knows it and it's from Louisville, We know this is a turbulent time. But Aris and I had a strong quarter and we believe it's poised for more And we keep driving to expand that group's position with repair shop owners and managers offer more new products, develop by our value creation process and we believe it is a winning formula. Well, that's our first quarter. Quarters of both challenge and advancement. Gross margin 50.7% up 20 basis points despite the volume low. The lower volumes. The Tools Group continues to pivot towards shorter payback items match and text preferences C and I penetrating critical industries recording Q1 operating margin of 15.5% driven by precision torque and custom Solutions. RS and I also recorded an operating margin record the first quarter, 25.7% driven by software and unmatched database. The environment is interesting. We are on alert but we are confident. Confident in our products, in our brand and in our people. And confident in our ability to confront the [indiscernible] with clear advantage.

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

Thanks, Nick. Our consolidated operating results for the first quarter are summarized on Slide six. Net sales of $1,141,100,000 the quarter compared to 1,001 and $82,300,000 last year reflecting a 2.3% organic sales decline and $13,900,000 of unfavorable 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 or our C and I group, as compared to last year, declines in sales to the military and in our European based hand tools business more than offset increases with other critical industry customers. Consolidated gross margin improved 20 basis points to 50.7% from 50.5% last year, primarily reflecting benefits from the company's RCI initiatives. Operating expenses as a percentage of sales rose 180 basis points to 29.4% from 27.6% in 2024 mostly due to a non recurring benefit of $11,300,000 from legal payments received last year. [indiscernible] the effects of lower sales volumes. Partially offset by savings from RCI initiatives. Operating earnings before financial services of $243,100,000 in the compared to $270,900,000 in 2024. As a percentage of net sales operating margin before financial services of 21.3% compared to 22.9% reported last year.

Which included a benefit of 90 basis points from the legal payments. Financial services revenue of $102,100,000 in the first quarter compared to $99,600,000 last year while operating earnings of $70,300,000 compared to $68,300,000 in 2024. Consolidated operating earnings of 313,400,000.0 compared to $339,200,000 last year. As a percentage of revenues, the operating earnings margin of 25.2% compared to 26.5% in 2024 again including the benefit from the legal payments. Our first quarter effective income tax rate was 22.2% in both years. Net earnings of $240,500,000 compared to $263,500,000 in 2024 and net earnings per diluted share of $4.51 in the quarter compared to $4.91 per diluted share last year.

Comparing the quarter's EPS, with the first quarter of the prior year, there is a $0.25 of headwinds on a year over year basis. In the first quarter, of 2025 diluted earnings per share included approximately $09 per share of increased year over year non service net periodic pension expenses. Primarily from higher amortization of actuarial losses while the first quarter of twenty twenty four included a $0.16 per share benefit from the legal payments. Now let's turn to our segment results for the quarter. Starting with the C and I Group on Slide seven, sales of $343,900,000 compared to $359,900,000 last year. Reflecting a 2.9% organic sales decline and $5,600,000 of unfavorable foreign currency translation. The organic reduction includes low single digit decreases activity with customers in critical industries and in the European based hand tools business. With respect to Critical Industries, a double digit reduction in sales to the military mostly as a result of contract delays more than offset higher sales of our specialty torque products and in other critical industry sectors. Gross margin improved 180 basis points to 42.6% in the first quarter, from 40.8% in 2024. This was primarily due to lower material and other costs increased volumes in the higher gross margin sectors of critical industries and savings from RCI initiatives.

Operating expenses as a percentage of sales of 27.1% the quarter compared to 25.4% largely reflecting the impact of reduced sales volumes. Operating earnings for the C and I segment of $53,200,000 compared to $55,400,000 last year The operating margin improved 10 basis points to 15.5%. From 15.4% in 2024. Turning now to Slide eight.

Sales in the Snap on Tools Group of $462,900,000.0 compared to $500,100,000 a year ago. Reflecting a 6.8% organic sales decline and $3,600,000 of unfavorable foreign currency translation. The organic decrease reflects a high single digit decline in The U. S. Business partially offset by a low single digit gain in our international operations.

During the quarter, we believe the heightened economic uncertainty continued to weaken confidence and technician sentiment. Which impacted their willingness to increase their purchases in the current environment. Gross margin declined 190 basis points to 46.3% in the quarter from 48.2% last year mostly due to a year over year shift in product mix and from the decreased volumes. Operating expenses as a percentage of sales of 26.3% in the quarter compared to 24.7% in 2024 largely reflecting the lower sales volume. Operating earnings for the Snap on Tools Group of 92,400,000.0 compared to $117,300,000 last year the operating margin of 20% compared to 23.5% in 2024. Turning to the RS and I group shown on Slide nine. Sales of $475,900,000 compared to $463,800,000.0 in 2024 reflecting a 3.7% organic sales increase partially offset by $4,900,000 of unfavorable foreign currency translation. Organic gain includes a double digit increase in activity with OEM dealerships and a low single digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers. These gains more than offset a mid single digit decline in sales of undercar equipment. Gross margin improved 70 basis points to 45.7% from 45% last year primarily reflecting increased sales of higher gross margin products, and benefits from RCI initiatives partially offset by higher material and other costs.

Operating expenses as a percentage of sales improved 70 basis points to 20% from 20.7% in 2024, largely due to the higher sales volumes and savings from RCI Operating earnings for the RS and I Group of 122,100,000.0 compared to $112,900,000 last The operating margin improved 140 basis points to 25.7% from the 24.3% reported last year. Now turning to Slide 10.

Revenue from financial services of 100 and $100,000 reflected an increase of $2,500,000 or 2.5% from $99,600,000 last year. Financial Services operating earnings of $70,300,000 compared to $68,300,000 in 2024. Financial services expenses of $31,800,000 compared to $31,300,000 last year provisions for credit losses of 19,100,000.0 compared to $18,800,000 in 2024. A percentage of the average financial services portfolio, expenses were 1.3% in the first quarters of both years.

In the first quarters of twenty twenty five and 2024, the respective average yields on finance receivables were 17.617.7%. While the average yields on contract receivables were 9.19% respectively. Total loan originations of $268,700,000 in the first quarter represented a decrease of 33,000,000 or 10.9%.

From 2024 levels, including an 11.7% decline in extended credit originations. The decrease in extended credit origination mostly reflects lower sales of big ticket longer payback items such as tool storage units. Moving to Slide 11, our quarter end balance sheet includes approximately $2,500,000,000 of gross finance receivables, with 2,200,000,000.0 from our U. S. Operation. Extended credit or finance receivables, The U. S. Sixty day plus delinquency rate of 2% is up 20 basis points from the first quarter of twenty twenty four. But unchanged from the number reported last quarter. Trailing twelve month net losses for the overall extended credit portfolio of 67,800,000.0 represented 3.41% of outstandings at quarter end. While delinquencies and net losses have been trending upward, 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 298,500,000.0 the quarter representing 121% of net earnings and compared to $348,700,000 last The decline as compared to the first quarter of twenty twenty four largely reflects the lower net earnings and higher year over year increases in working investment. Net cash used by investing activities of $32,000,000 mostly reflected capital expenditures of $22,900,000 and net additions to finance receivables of $8,200,000 Net cash used by financing activities of 193,600,000.0 included cash dividends of 112,200,000.0 and the repurchase of 260,000 shares of common stock for $87,200,000 under our existing share repurchase program.

As of quarter end, we had remaining availability to repurchase up to an additional $398,400,000 of common stock under our existing authorization. Turning to Slide 13, Trade and other accounts receivable increased $37,100,000 from 2024 year end Days sales outstanding of sixty six days compared to sixty two days at year end 2024. Inventories increased $17,800,000 from 2024 year end, including some investment to mitigate supply chain uncertainties.

On a trailing twelve month basis, inventory turns of 2.4 were the same as year end 2024. Our quarter end cash position of $1,000,000,434,900,000 compared to $1,360,500,000 at the end of 2024. In addition to our existing cash and expected cash flows from operations, have more than $900,000,000 available under our credit facilities, There were no amounts borrowed or outstanding under the credit facility during the year nor was any commercial paper issued or outstanding in the year. That concludes my remarks on our first quarter I'll now review a few outlook items for the balance of the year. With respect to corporate costs, we currently believe that expenses for the remainder 2025 will approximate $27,000,000 per quarter.

Additionally, during 2025, as previously shared, we have and expect to incur approximately $6,000,000 pre tax per quarter of increased non service pension costs, largely due to higher amortization of actuarial losses. These non cash costs are recorded below operating earnings as part of other income and expense net on our statement earnings. And we'll have about a point $9 per diluted share quarterly negative effect on EPS for the balance of 2025. We expect that capital expenditures will approximate $100,000,000 and we currently 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 fifty three weeks of operating results with the additional week occurring in the end of the fourth quarter. This occurs every five or six years and historically has not had a significant effect on our full year or fourth quarter total revenues or net earnings.

I'll now turn the call back to Nick for his closing thoughts. Nick? [indiscernible] Well, that's our quarter.

It's a period marked by particular and acute uncertainty piling on our already confidence poor technicians and abrupt development that sets back for the quarter. Overall sales were down low single digits, 2.4% organically. The OI margin was 21.3%, down but still relatively strong authored by a gross margin of 50.7%, up 20 basis points despite the lower volume again, a gain attenuated by our considered decision to keep investing despite the lower volume.

The Tools Group, impacted by the continuous air burst of commercial change sales and online margin both afflicted But C and I and RS and I had board performances, pillars of they were pillars of continuing strength supporting the enterprise. C and I, successful in critical industries with Torque and custom solutions. Sales down but more than explained by the settling in of the new military leadership and overall registering at NOI margin of 15.5%, up 10 basis points for a first quarter record. RS and I, another strong performance sales up 3.7% organically with OI margin of 25.7% up 140 basis points for another first quarter record, driven by progress in software the power of its databases the benefits of RCI. Gains across that group. And of course, the fog of tariffs a challenge that dominates the commercial landscape and Snap-on is not immune to the effects. But we believe we are advantaged. With newly expanded facilities. 15 factories all across America, with deep know how in America to make our major products. With a global sourcing network, 21 plants all across globe, to be agile and optimizing it against whatever tariff array emerges and with an ability to attract and hold manufacturing associates.

So these are interesting times. Action packed with news every day, We are on alert. But we're also confident confident in our ability to navigate through the turbulence.

Confident in the opportunities available in our essential markets [indiscernible] of our position in the fog of tariffs. Not immune, but advantaged. And most of all, confident in our product. That truly does make work easier. Confident in our brand that really does mark a serious professional and confident in our people, battle tested and committed that led us through that led Snap-on through the great financial recession and the pandemic and came out roaring. And we believe that powerful combination will overcome the turbulence and extend our long term positive trajectory as it has done. So many times in the past. Now before I turn the call over to the operator, I'll speak to our associates and franchisees. In these turbulent days. I'll simply say, for your contributions made every day for your deep dedication to our team, and for your unshakable confidence in our future held fast even in the turbulence.

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

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, And your first question today will come from Scott Stember with ROTH MKM. Please go ahead. Good morning and thanks for taking my questions. Nick, you were talking about, it sounds like the shops are still relatively strong, but the confidence for the technicians is falling even further than before. So what's the game plan here? Do we see opportunities to further pivot to lower price items or is there something else that needs to be done? No, look, I think there's a couple of factors there. One is the pivot worked in the first quarter. It's just I don't think we've seen a place where the hits just kept coming so much. I mean, the administration itself says, there will be pain this is kind of unprecedented and you can see it in the customer in the consumer sentiment, If you look at those numbers, see the drop from December is precipitous. And so we didn't know about that we were talking to people.

We talked to franchisees all over the country and we heard that in the shops. Really, what it is, is our pivots worked. I talked to some of them that did pretty well. Some of those sets I talked about sold well. Some of the products in like the cart sold well. What we learned in the period, I think, that's a little bit different is we were pivoting to what you would call standard short quicker payback items But what we found if we tailored things at the bottom end of the bigger ticket items, like carts, that simulated a box. Like the Solis, which is at the bottom of the diagnostics, we could make hay with those as well. Now you can't say you made great hay when you're down 6.8% organically, but that's really what we saw in that situation.

So going to keep pivoting because we saw continued traction. It just got overrun This was an unusual period. I think anybody says is an unusual period isn't reading The Wall Street Journal and seeing tariffs in two fifty four times. And so the thing is that's what we saw. So we think the pivot we learned some things on how to make the pivot better. So we're going to continue to do that and we'll learn from those things as we adjust. We're pretty confident that this works. And if you don't believe it's America, look at the outside The United States. Outside The United States, less affected by all this turbulence in recent days all that stuff, all those businesses went okay. Got it. And then if you're looking at RS and I in CNI, RSNI in particular, you were to back out the intercompany declines which I assume had a pretty big impact there, what would the organic rates sales rates in RS and I have been It's about it's a little bit better. I think it's the organic rate was about three point seven percent. And if you backed out the the inter companies, you're probably in four range, something like that, maybe a little bit better in that situation.

RS and I the big thing about RS and I is it's software packed these days. Software was up more than the increase in that. And the cool thing about it, Scott, is if you look at the RS and I division, almost all of them are up nicely profitability. So they're hitting on all cylinders. They really did have a strong quarter. And if you look back, it's been strong quarter after strong quarter after strong quarter.

Now, I realized some people may have thought it would have done better, They might have sold more. You could have argued that maybe a percentage point more, you could have thought that. But 257%, up 140 basis points it is a pretty good quarter.

And it's driven on the strength of their product and the increasing ability to affect the database. AI is part of that. Part of the reason why the databases are getting better and more effective is we can now translate what the we can use natural language processing that will translate what the technicians say about the repairs much more efficaciously into a database without as much time. So we're able to move forward in building that database much more effectively And that's helped us in this situation. But you can see you can see there that even in diagnostics we're making them pretty well positioned against the tariffs. I'm not saying we're immune. I've said this many times, we're not immune. But we like where we are.

Got it. And then last question before I go back in the queue. It sounds like the military had a pretty profound impact critical industries. Was that having anything to do with these Doge movements, or is there something that we should expect to see in the quarters ahead on the I don't know if it had anything to do with the Doge. I think it more had to do with people trying to you got budget cycles in there. But I will tell you, Scott, we saw it in the Biden administration. Anytime the administration changes the new sheriff of in town and he won't be pushed around. And so the thing is [indiscernible] [indiscernible] they start talking about procurement processes and so on slows everything down. And then after a while, the war fighters kind of say, the 50 caliber bullets when they go over overhead, I'd like to have better tools. I don't want to have somebody else's tools or some some tools that are missing. And everybody caves and it goes back to normal. So I think that's really what you're seeing mostly in the situation. I don't think it was associated with Doge except for maybe, Scott, the psychology of the Doge sword waving overhead of all government employees.

But I don't know how to evaluate that. It was significant. Without let's put it this way. Without the military downturn, C and I would have been up.

Got you.

All right. One sector was enough.

Everything else was good.

It Awesome. Thank you so much. Sure.

And your next question today will come from David MacGregor with Longbow Research. Please go ahead. Good morning, everybody. Good morning, David.

Good morning, Nick. Wanted to start off by just asking about truck level sales comps. What do you think those look like this quarter in The U. S?

Say that again, you said truck, you mean the vans?

Yes, the van sales comps. Yes, sales comps off the van.

They're about the same as we saw it to the van. About that same level. Was pretty much matched up in this quarter. It isn't always matched up in a quarter, but this particular quarter was kind of dead on. Pretty much the same. So we sold to them about what they sold off the van. I don't know what you make of that because it always it always rolls up and down. As you know, because you've followed us for years, it kind of it usually varies from period to period. But this was one of those that matched up.

But you didn't see any destocking at the truck level?

No, we didn't see that. Now there could have been some, but I don't think so. Because the numbers match. Of course, it's an imperfect it's an imperfect situation. And I will tell you that the franchisees start to get daunted when they hear the technicians talk about these things. But the franchisees have have a lot more, I would say, cushion to deal with what I said would be an off the walls things. Off the rail thing. I think really what happened is reflected in the customer sentiment. And maybe some of the franchisees got some of that thing, but there wasn't much destocking.

And then you talked about negative mix in the tool segment. I'm just trying to reconcile that with the narrative that reach big ticket.

Diagnostics.

The low end diagnostics sold. Remember I said, that's why I brought that's actually why I put the Solis thing in there. One, we learned something about it that we could could chip away at the bottom end of the big ticket items and have success. If we position them and program them correctly. And diagnostics driven by that low end, the SOLUS, the speedy one and cheaper was up in the quarter. And anytime diagnostics is up in a quarter, it's a weight on Tools Group's margins because as you know, they share the margin with the RS and I Group.

Right. So what would hand tools have looked like, Nick? Just isolate that category?

Hand tools, hand tools were not up, but they were certainly not down the way tool storage was. Tool storage was a killer. And if you look at the originations, if you look at the originations in the quarter, you can see it, Coming out of last year, the originations were up 5.8% were down 5.8%. Or they're down almost double.

In this quarter, 11.7% And I think that's Right. It all.

Okay.

Do you respond promotionally to the weaker demand?

Well, our margins our gross margins in the Tools Group were down some, but some of that has to do with the mix I just talked to you about. And we tend not to change prices that much. I mean, certainly across the corporation, I would say the 50.7% gross margin is ample evidence that up 20 basis points when your volume is down like [indiscernible] is ample evidence that you aren't giving it away in pricing. So while we do get more active in promotions and we try to we try make it more attractive to the customer. We're not out there begging for volume. I don't like that. So we don't [indiscernible] And Nick, can you talk about the regional kickoff Can you talk about the regional kickoffs and just were orders up or down this year and by how much?

The regional kickoffs were down this year. And I'm not going to give you how much because it was distorted, David. It's hard for us to evaluate because [indiscernible] not so great is that several of them were affected by snow. And so what happened was some of these regions, I was at one, Some of these regions I'm feeling some of these regions are are pretty big. And so snowstorms were bearing down, people left early. And so we didn't quite have the the full participation that we like to have in those situations. So it's hard for us to evaluate. It was one of the things that was difficult to evaluate what was happening in the quarter in the beginning because we looked at those and a lot of them were subject to these kinds of one off type weather situations.

And so weren't sure what to make of that, but when you talk to the techs themselves, you could hear that it's certainly starting to break through a especially as we started to get later in January when you started to hear after the inauguration. Everybody loves the archives, love the administration, But like I said, I think I said last quarter, it feels like they're on Space Mountain. They're afraid they're going to go off the rails.

Right.

Last question for me is just on manufacturing capacity. And you've obviously done a lot there recently, but I'm also guessing that backlogs are directionally lower now as a consequence of this demand situation. Can you say by how much your backlogs are down? And in what product categories you may be seeing the greatest backlog depletion? Total storage.

Remember, we used to have remember, about a what was it? A year, a year and a half ago, we were up to our eyeballs in tool storage backlog. Well, it's kind of liquidated that. One, we expanded our Algona facility and the demand has dropped off for the big ticket boxes Now we shifted more capacity to lockers and carts and so on, which is I think one of the things we we have confidence in going forward. So we think we're in good shape. I mean, we don't have a lot of backlog everywhere. Now certain products are backlog. Swivel sockets for example have a little bit of backlog. You always have some kinds of things. But generally the expanded capacity has put us in the right position. That's why we think we're one of the reasons why we think we're advantaged with the tariffs. We are available for American production.

Got it.

Thanks very much. Okay.

Your next question today will come from Gary Prestopino with Barrington Research. Please go ahead.

Good morning, everyone.

Good morning, Peter.

Nick, you mentioned in your your opening comments about the fact that hours worked were down by technicians as well in the quarter. I mean, vehicle repairs generally kind of mission critical. So could we assume that that was less elective maintenance kind of services Or what do you attribute that I know. You know, Gary, I put that in because it's a fact. Hours down, hours worked in the rolling 12 was up low single digits, but it was up. In the last couple of months, it was down. I want to say 3.3% or something like that.

I'm not sure what that means over a couple of months. It does mean, I suppose, that some of the garages aren't relatively white hot the last couple of months. But in wintertime that could mean a lot of things. So in normal times, lately those things and lately all the metrics in vehicle repair have been monotonically improving, improving, improving, improving, improving. And so I suppose in we're kind of sensitized to the idea for a couple of months that there was a drop off and it got my attention and some other people's attention. I'm not sure what to make of it as a long term trend. You would believe if hours are down, it probably is elective elective things because you got to have your car. So you would think that would be the case and maybe people are worried about some of you off the rails scenario. I think one of the things you do see is you see consumer sentiment is down you see our numbers down, but you see other people say, consumer activity is strong. But I think they're dealing with a different different FICO zip code. FICO zip code, better better better credits, the more the better healed people than maybe the mechanics in the garage.

Or the people of work. And I think that's part of what we see ourselves. Aldo, I think said, in his presentation that our own yield dropped from 17.7% to 17.6% and that really is the people who are originating loans for us are better credit risk than they were before. And so it just means that the people at the bottom end are too reticent. They're too affected by the uncertainty. So maybe you see some of that in the garages too. I don't know. Because I think people got to repair the cars. Sooner or later, you got to go in.

Right.

All right. Thank you.

And then just lastly, could you maybe comment on you made a lot of reference to the fact that this whole issue with tariffs coming up could have impacted technician confidence.

As you went through your quarter, did things really accelerate on the downside, starting in March?

One could take away from what you were saying that a lot of the the impact in the Tools Group in particular was due to these the uncertainty regarding tariffs and that kind of crop up in March.

Can you maybe give us go ahead. I would say, Gary, the guys I talked to, it wasn't only tariffs.

You come out and you're saying, okay, we're to reduce the government But then they start I have no political there's no political commentary, but they are laying off people seems like willy nilly. In other words, no one knows what and so I think the people at work, even though they truly believe in trajectory and and the goals of the current administration, they're saying, I don't know how the hell they can change all the government this much and not come out with some screw ups. And then you start hearing stuff like Greenland then Panama and Gaza. You hear that stuff. And so even before they started talking about the tariffs, people are saying, geez, I don't know. What's really happening here? I'm worried that the world is going to come off the rails and the tariffs came over the top. So that's a long way of saying, I don't think things changed so much I wouldn't say it got worse. I think just in general, this was a continual statement that people said, I don't know Our people, after all, aren't really affected by the tariffs. But they're kind of saying the broad view, I don't know if some administration can do this many things.

Coming up with new ideas every day, and not strike out a few times that might screw us up badly. That's the general view. Now tariffs tariffs is a different thing. It more affects the companies. When I say the fog and tariffs, I'm talking about at the [indiscernible] the Snap-on level or the company level. As dominating everybody. Everybody wants by the way, everybody wants to talk about tariffs. Anybody you can talk to wants to talk about tariffs. And And so it is a fog that does affect technicians and it affects a lot of different things. We just say, in that fog as we look forward, we think we're advantaged Okay. Thank you. Thanks.

And your next question today will come from Sharif El Sabahi with Bank of America. Please go ahead.

Hi. Good morning.

Good morning, Sharif.

Just within the tools group, are you able to give us a sense of how the demand drop looked throughout the quarter, maybe a bit of cadence if there's anything?

There wasn't much There know, Sherif, it's hard to say. You know, usually, [indiscernible] are different from from from week to week. This quarter was more uniform You know, it wasn't it wasn't just like I tried to explain to Gary a minute ago, you know, it started out, we thought, and there was really bad weather. So sometimes you can say, okay, it's bad weather. And that happens often in the beginning of the year [indiscernible] volumes are always light. And so you like that legend, the princess and the pea, any little change will affect you. But it kept kept being weak. And you know, when you talk to people, once the administration got in place, they started listening and they're saying, these are guys getting a little overactive, let's say. And then that's when they started to worry about the world. It's interesting when you talk to the people at work, technicians and and the guys in the factory, they're pretty savvy on this stuff. And I think it's because they don't have that much cushion. And so they're very sensitive to this. We found this all through a lot of different situations. And in some ways, through the canary in the coal mine, because that's why I've been talking about uncertainty for some time.

Understood. And we've talked about this dynamic of a shift to quicker payback items for quite a while. Have you seen any shift in the quarter just with regards to the volume? Is that purely just a harder shift towards this trend? Or are you seeing lower demand for even some of the quicker payback items as well?

Yes. We did see some low but we you know, look, I'm just telling you what I think happened from a lot of interviews. Windshield surveys and fortified by the metrics of the customers' consumer sentiment numbers, But if you look at it we had our the things I put up in the event like in the in discussions, you know, solace, big hit.

Synergy paired with the Flank Drop pockets, low pro, big hit. The idea so those are low payback items that are big hit. [indiscernible] sturdy tool storage cart, unprecedentedly holding two forty foot pounds, big hit.

So you had hits in the lower payback guidance We had almost no hits in the big payback items. So you could see the progress. I just think, like I said, my assessment and I think this is played out as some some both quantitative and qualitative support from interviews and from the consumer sentiment numbers. Is that [indiscernible] the effects of the last quarter on the general populace with topped off by the tariffs were so pervasive that they outran our progress. In those things. So I think we made progress in our performance. It everything else kind of the level of everything else kind of dropped. But the stuff we focused on seems to work. It's just the things you can't focus on everything.

Understood. Thank you for the call.

And your next question today will come from Luke Junk with Baird. Please go ahead.

Good morning. Thanks for taking questions. Nick wanted to start in terms of how you can play offense in this environment and maybe just a finer point, thinking mostly about the Tools Group in terms of marketing, kind of the balance of engaging franchisees versus engaging with technicians directly? And in terms of investments, the steady pace of investment just where we might see you look incrementally in terms of allocating dollars this year? [indiscernible] I think I said it. I think we're kind of encouraged by the idea that we can chip away at the lower end of what you might call our traditional big ticket items. After you run the programs after a while and I'd say like hand tools and power tools and the other stuff, you kind of got to recycle some. And so now we found a new and pretty successful area at the lower end of that. Like Solas. Which is way cheaper than say a Zeus or a cart, which is way cheaper. I mean, may be a factor of four cheaper than the than a big Epic unit.

And so you feel as though that's the kind of thing you can focus on. So we're kind of encouraged in that position. And then of course, you double down, you try to make sure that more of your new product introductions are in the area where you can have effect You want to spend a lot of time worrying about so you shift resources from the top of the line diagnostics from the from things like from things some of those are already in pipeline sometimes. Or things like Epic tool storage boxes or anything that's very expensive and you try to hit that sweet spot, and put most your development and promotion sources in those areas. So we continue to do that. And particularly when we see this, because what happened in the quarter was the program seemed to work.

The other stuff didn't.

So the general level dropped because of uncertainty. So we think we can hit It's just a matter. That's why I say that stuff overran us.

You can think about this that program successful the other products sort of the underlying base dropped in this quarter beyond where it had been before. And so what we'll try to do going forward is focus on those in terms of product Then in terms of we've got some ideas around getting to the customers We're constantly evolving the idea of social media and putting out a little shorter videos kind of a version of TikTok on Snap-on network. We're trying to do that. That tends to work for us, but we might have done that anyway. I'm not sure, Luke, but I mean, that's where we'd allocate some resource Got it.

We've talked a lot about the technician side in terms of sentiment and just how they're reacting to the environment. What about franchisees and the folks that you're spending time on? I guess thinking especially things like Cushion and how they might be thinking about working capital in their businesses be it inventory, their payables, extended credit, those sorts of things?

Yeah. Know, Look, I think I think well, it's down. But it's not bad compared to pre pandemic levels.

So and they're the same franchisees. So I don't think we quite have even though this is not something we are cheering about or something like that, it's hardly threatening.

It's not enterprise threatening for Snap-on.

You can look at the cash flows. I mean, the cash flow is down, but we aren't wringing our hands over We're trying to figure out where to get cash. We're not going to step back from anything. And most franchisees are in that situation. Now there are some, in which the idea is like always down at the bottom end they may be threatened in this situation. We try to work with them to make sure they can survive this situation. That's another place where we'd spend time. To try to make sure that the terminations, the exiting of the franchisees stay right in the same place. And more or less for government work, it has stayed in the same place. It's just in this environment, it's a little harder to get people to to move because everyone who might be a franchisee is in fact, somewhat confidence impaired in this situation. Got it. Thanks Nick. Appreciate the comments.

And your final question today will come from Patrick Buckley with Jefferies. Please go ahead.

Hey, good morning guys.

Good morning.

You talk a little bit more about recent dealer sentiment? I guess, Day and all the auto tariffs were more of a Q2 event. So, any notable to call out there to start the quarter?

What do you mean by dealers? You mean automotive dealers? Yes. And just demand for higher Do mean like semi dealers? No, the auto dealers.

Yeah. Like, yeah, like a Chevrolet dealer or a BMW dealer. [indiscernible] Look, I don't think we saw any particular move in that situation. Here's the thing.

You know, In our orb, it doesn't really, for sure, make any difference what happens with new cars.

Not for sure, In fact, the dealerships make you're probably very familiar with this I think you look at dealers all the time, they make a lot of money on repair and spare parts. And used cars. They don't make so much money on new cars. So the new cars, if you have tariff problems in the new cars or the auto companies are spitting up blood all over the ID, they got tariffs going back and forth in Canada. It doesn't make that much difference I think, for the dealerships. Now the dealerships moan about not having new cars, but I do remember during the pandemic when they didn't new cars, their margins were at an all time high, I think.

So I don't think being in the back shop it doesn't affect us so much. And so when I talk to dealerships, they will moan about the worry that boy, if they can't get cars they are gonna lose some and if if at asymmetrically, they have less cars than, say, their competition in the area, they may lose the customer bases that they've worked so hard to build up. There's that kind of thing. But I don't think for the near term that makes much difference for our business with them. I don't think they pull back. They might, some of them do, but some of them actually think in those environments that they want to invest and repair more because they're not going to get new cars, so they got to get the cash flow out of repair. So sometimes they want to do that in a situation. So it's unknowable in that situation. I suppose the one the one caveat to that is Patrick is that to the extent we are commissioned by programs with the OEMs that could be affected by turbulence. With new cars. And all this noise with the tariffs. We haven't seen it so far though.

Got it.

Helpful. And then I guess looking at the Tools Group, it seems like international sentiment was a bit higher than U. S. Could you talk about maybe some of the drivers there and the outlook for the international segment there?

Sure.

The international segment isn't worried about any of this stuff. They're not worried that Donald Trump's talking about Greenland and Gaza and the Panama Canal. They're not worried that they're they're really not worried about at the grassroots level, I don't think they're worried about the idea that they're going to tariff China 170% or whatever they are, 245%. I'm not sure what the number these days. But I don't think they're so worried about that. And it's kind of it's kind of proportional to where they sit. So Canada is probably more worried. Because of tit for tat with Trudeau and so on. I think impacted them some So and but if you look at Australia, The UK, they're kind of off shore. And so I don't think we see much of an effect in those places. And I think that's simply because the whole cash rich confidence poor phenomena has always been from the beginning when we started to see it a U. S. Phenomena.

Great.

That's all from us.

Thanks guys. Okay.

This concludes our question and answer session. I would like to turn the conference back over to Sarah 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.