Q3 2021 Snap-On Inc Earnings Call

Good day and welcome to the snap on incorporated third quarter.

'twenty one results conference call. Today's conference is being recorded at this time I would like to turn the conference over to Sarah for obscure Vice President Investor Relations. Please go ahead.

Thank you Olivia and good morning, everyone. Thank you for joining us today to review snap on third quarter results, which are detailed.

That's release issued earlier this morning, we have.

On the call today, Nick Pinchuk snap ons, Chief Executive Officer, and although probably Ari snap ons 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.

In our pre closing.

We will take your questions.

As usual, we have 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 snap on dot 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 otherwise state 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.

And 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.

Good morning, everybody.

As usual I'll start the call by covering the highlights of our third quarter in a long away all I'll give you my perspective on our results they are encouraging.

Our markets there are positive and more than.

And I'll speak about our progress and plans to spend considerable each period, demonstrating increasing strength, even when in the midst of sell those things.

And will also speak about what it all means for our future is incredibly promising and then Aldo will move into a more detailed review of the financials.

Our reported sales.

On a quarter, where 1 billion $37 7 million. They were up 10, 2% and 49, 6% nine 6 million of unfavorable foreign currency and $19 5 million of acquisition related sales organic sales growth was up 7% or 7% gains in every group.

Group It was our fifth straight quarter of above pre pandemic performance and snap on value creation processes safety quality customer connection innovation and rapid continuous improvement of RCI as we call. It all combined to drive that clock. Some pockets of work I'll cooperating income of $201 3 million was up $15 6 million.

And last year.

<unk> margin was 19, 4% down 30 basis points impacted negatively by acquisitions, but still very strong at a strong level for financial services operating income of $70 6 million increased seven 6% and the delinquency in the delinquencies were down.

Even.

Oh, the 2019 prevent demick levels are continuing to catch them only to tour, our unique business model and its ability to navigate the most threatening of environments.

First quarter EPS was $2 57 up 29 cents or eight 8% from last year.

And as I said before.

But we believe snap on is stronger now than when we entered this great Wittering and our third quarter results testifies to just that.

Compared with the 2019 before we ever heard of the virus. Our new sales grew our sales grew a $135 9 million or 15, 1%, which includes $21 million from acquisition.

And related sales $13 6 million of favorable foreign currency, and $101 3 million and an $801 3 million or 11, 1% organic gain.

And that 2021, Apple Opco operating margin of 19, 4% was up 80 basis points from the pre pandemic levels even.

Absorbing the impact of the new acquisitions, and while meeting our what we can call the considerable disruption of these days.

Now, let's talk about the markets.

Auto repair remains quite resilient.

The technicians are prospering.

No they've weathered the depth of the Covid shock learned to.

To accommodate the virus environment and are well along the psychological recovery.

The resilient they've been at their posts for the last 18 months undaunted and they won't be shocks again, and they are optimistic about the future of their profession about the outlook of individual transportation and about the greater need for their skills as the vehicle park changes with new technology.

Vehicle repair as strong as a strong and resilient market you can hear it in our franchisees' voices and you can see it written clearly across with our numbers every quarter.

Also on auto repair there our shop owners and managers different from the text, that's where our repair systems information group, our F&I <unk>.

Its trade.

Demand for new and used cars is high despite limited supply and dealership repair and maintenance and warranty is rebounding and dealers are starting to invest again.

And we've been able to make a.

We've been able to take advantage with groundbreaking products like our award winning a two point advanced driver assistance calibration system our new.

Our new diagnostic are new.

Diagnostic Triton D 10, intelligent diagnostic came in our acclaimed Mitchell one pull demand repair estimating guidance, all representing new technologies and data deployed to make work easier in the shop.

Vehicle repair looks more promising than ever.

And snap on is.

Poised to capitalize.

Now, let's talk about critical industries with Stefan Rolls out of the garage solving task of consequence, where.

Commercial and industrial or C&I operates the virus had a much longer impact on these customers there was slower to accommodate but they are recovering and in the quarter. Our results showed that trend gains.

In North America, Europe, and Asia, all over the globe. So overall I'd describe our C&I markets as improving and coupled with the strength of the auto repair sector as our markets are beyond resilient and we are ready and well positioned to make progress along those run rates to recover at the same time.

The same time.

It's clear that we have ongoing potential on our runways for improvement the.

Snap on value creation classes they'd never.

I've never been more important helping to counter the turbulence of the day, especially important with customer connection.

We're standing to work of professional technicians and innovation matching that insight with technology driving.

New products in just this quarter snap on was prominently represented with nine professional tool <unk> equipment news, we call. It <unk> 10 People's Choice Awards, where the actual users the technicians make the selections were also recognized with two P. 10 Innovation Award and we were honored with two Motor magazine Top tool award an essential driver of snap on growth is innovative.

A product that makes work easier and the awards.

Hard one are a testimony that great snap on products, just keep coming maxing matching the growing complexity of the task, becoming more central to technicians and driving our forward progress.

Buffy environment.

Pretty positive.

Now, we'll move to the operating groups and C&I volume in the quarter Rose 13, 9% or 43 million versus 2020 on significant growth across all divisions, reflecting a 32, it reflected a $32 9 million or 10, 6% organic uplift and $7 5 million from our <unk> acquisition.

And double digit growth in our European hand tool business businesses and a high single digit rise in critical industries led the way C&I.

C&I operating income of $53 6 million was up $10 5 million or 24, 4% and the operating margin was 15 three.

Percent, that's an increase of 130 basis points versus last year, I'd say, that's an attention getting rise against the wind.

Now we can compare to.

The pre pandemic 2019 results sales were up four 8%, including a 9% organic gains and that OE margin of 15, 3% was.

Maybe basis points against the 70 point impact of acquisitions and unfavorable currency.

Once again, SNA Europe delivered double digit growth beyond three double digit growth beyond pre virus levels, I guess, a complex and very varied marketing environment propelled by the customization power of their backup or go to a management system.

In our industrial Division Rose in critical industries recording nice gains in general industry heavy duty education in U S aviation a number of positive sectors, overcoming weakness and continuing weakness in the military and natural resources.

N is rising and we're enthusiastic about the possibilities.

We keep strengthening our position to capture those opportunities.

<unk> and enabling that intent is our expanding lineup of innovative new products in the third quarter did see some great new offerings like our 14, four volt three agents drive brushless or action the CPR at 61.

So really popular and it's no wonder.

It's a powerful combination of strength and speed.

Towards 60 foot bonds to bust loose very stubborn bolt and rapid operations 275, RPM forgetting those fashion resource and quick time.

Made our Murphy North it's made in our Murphy North Carolina plant and it features a full frame brushless motor for longer run time and durability. It includes a safety switch that shuts it ended a clinical safety.

<unk>, hi, switch that shuts down such down the tool at the two minutes of continuous use that's eliminating the chance of overheating. It also has a super bright eating aluminum front facing light that stays illuminated after the the trigger was released allowing easy an immediate inspection of the work.

Just ratchet also features are built and break that stops the.

Throw in or a fad.

Passengers, which as you know it seems like not much but it's an important safety feature for technicians and it also offers a great cushion grips that makes for a more comfortable tool control even during extended use the C. D are at 61 power speed and comfort.

Very compact package.

It's a mighty Mike for accomplishing critical paths and the professionals love it.

Well that's C&I.

Turning upward exceeding pre pandemic volumes.

Truong profitability and positioned for more.

Now onto the tools group.

So we have a 400.

The tool for $1 4 million up $21 8 million, including $4 9 million of favorable currency and a $16 9 million or three 7% organic gains both in the U S. Both in the U S and the international operations and the operating margin.

It was 28% one of our highest effort.

70, <unk> hundred 40 basis points from last year.

Compared with the pre virus 2019 level, the organic gain was $80 4 million or 26% and 28% operating margin was up 700 basis points compared with the pre pandemic level 700.

Basis points in the midst of operating turbulence.

Tools group is responding to the challenges of the day, increasing its a product advantage fortifying its brand its brands.

In further enabling its franchisees, giving them more selling capacity, it's all working.

<unk> strong.

One quarters of above pre pandemic performance extends its so.

Now the third quarter is when we hold our most of you know there's other third quarters. When we we hold our annual snap on franchisee conference. Our SFC. This year. So we're back again in person at the Gaylord and and Orlando, Florida, Florida over 9000 attendees.

N V. A record we are training seminars and sales growth in intelligent diagnostics. They were well attended and well received and we had several football fields of products. So our franchisees could get up close and personal with our latest innovations for the franchisees.

The SFC is an opportunity for learning.

For touching and ordering new products.

And for recharging their snap on batteries and believe me they are charged.

For the company the SFC isn't as an opportunity to gauge the franchisees' outlook on the business.

One quantitative ways orders, while they were up.

Strong double digits over last year's virtual live.

Porch event and from the 2019 SFC live in Washington, D C and when I say up I mean, all of our product categories showed substantial gains over both of those events.

And so that's the quantitative look at it qualitatively I spoke with many of our franchisees and I can attest.

They were booming.

Showing a lot of confidence in our business and the clearance considerable optimism on their future and their future days in decades ahead with snap on we do believe our franchisees are continuing to grow stronger each quarter and we continue to invest in our future.

And if you were with us in Orlando.

You would've seen it.

<unk> from the favorably and.

We are investing.

Building, our franchisees' ability to use the direct interface with technicians, enabling them to better communicate their unique capability and a unique capability and growing technology of snap on product lines, we have great confidence in the power of our product and there are real reasons for the confidence you heard.

On the product awards, well beyond that there's a continuous stream of terrific new Walker.

Drilling and subsea.

The tools group unveiled its new J H P 415, portable 40 inch substation powered car, it's targeted at entry level technicians, the ones working on a narrow.

Heard about the slope of repairs.

It's built in our L Bona, Iowa factory and the new card enables young mechanics progressive step up storage at a value price while at the same time getting some very attractive professional features are laughable comp compartment, corpo, Georgia stores and adjustable power tool rack that holds up the 10 tool and a power strip with five outlets and two USB.

<unk> reports for battery and device charging.

New car.

Yeah. It was well received and it's quickly read reaching what we call a hit product status over $1 million of sales it's racing upward.

Steep trajectory.

Beyond products, we spent time working to scan franchisee.

Selling capacity harnessing social media, improving product training and RTI on the van operations and is working.

Capacity is up and you can see it clearly in the five straight gangbuster quarters for our van network.

The tools group is on a very positive trends.

Sending and leaving pre pandemic levels.

Way behind us.

Now onto our Tonight.

Those were up 14, 8% or $46 9 million.

And putting a $31 7 million or nine 9% organically with growth was weighted towards the under car equipment, but our diagnostics and information businesses also.

<unk> chipped in with the double digit increases for 2020, RPI operating earnings were 83.3 million, representing a rise of $3 2 million.

Comparing with 2019 sales grew $41 7 million or 12, 9%, including $24 2 million or a seven 4% organic green.

Just broke the arsenide Oi margin Oi margin was down versus the last two years attenuated by business mix acquisitions and currency.

Still a strong 22, 9%.

See we clearly see the potential of a runway with our C&I expanding snap ons presence at snap.

<unk> presence in the garage with coherent acquisitions and a growing line of powerful products.

Third quarter annual growth was broad based but a strong double digit rise in under car equipment was an especially welcome turn that's a nice turnaround and it was led by innovative products like our 15th pay up for post alignment.

Lift.

It's really taken a hold in the repair shops as they resumed investing there's this new 15 K provides professional great alignment lifting for a variety of vehicles sizes with open front columns best in class Ultra wide 26 inch runways and integrated 100 inch along where a place it's suited to accommodate vehicles from.

Comp at passenger cars Putback passenger cars to the big pickup trucks and it's it's slow easy on approach angled mix of great. Even for low profile sports cars that are often a challenge for other lifts.

Our Louisville, Kentucky plant on an assembly line number hits made her Louisville, Kentucky plant an assembly line I'm very.

<unk> familiar with I participated in RCI event for that process. Our new 15, K has helped it helped drive the recovery for under car equipment, and it's driven the rise in our F&I volumes were quite positive about our size by arthritis possibilities with repair shop owners and managers as the vehicle industry evolves. It is.

We got a great future.

So that's the highlights of our quarter continued its strong progress.

Interest rate period exceeding pre pandemic levels C&I on track with strong sales and interesting and increasing profitability are tonight underpart coming back towards group strong pumpkin moving vertically at credit companies solve it in a storm and profitable.

Total corporation organic sales rising, 7% Opco operating margin of 19, 4% and EPS $3 50 to 3057 cents a considerable rise in most important.

More testimony that snap on has emerged from the turbulence much stronger than we entered.

It was.

The old an encouraging quarter.

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

Our consolidated operating results are summarized on slide six.

The third quarter of 2021 exhibited another period of solid financial performance. The results also compared favorably with the third quarter of 2019, which being a pre COVID-19.

Was in some cases may serve to be the more meaningful baseline.

Net sales of $1 $37 $7 million in the quarter increased 10, 2% from 2020 levels, reflecting a 7% organic sales gain $19 $5 million of acquisition related sales and $9 $6 million of favorable.

Foreign currency translation.

Additionally, net sales in the period increased 15, 1% from $901 $8 million in the third quarter of 2019, including an 11, 1% organic gains 21 $1 million of acquisition related sales and $13 $6 million of favorable.

Foreign currency translation.

Consolidated gross margin of 52% improved 30 basis points from 49, 9% last year.

Gross margin contributions from the higher sales volumes 60 basis points of favorable foreign currency effects and benefits from the company's RCI initiatives more than offset higher material and other costs.

For operating expenses as a percentage of net sales of 38% increased 60 basis points from 32% last year, primarily due to 60 basis points of unfavorable acquisition effects.

Benefits from the higher sales volumes were offset by increased brand building travel and other costs, including the restoration.

Of our annual in person snap on franchisee conference.

Operating earnings before financial services of $201 $3 million compared to $185 $7 million in 2020, and $167 $7 million in 2019, reflecting an eight 4% and a 20% improvement.

<unk> respectively.

As a percentage of net sales operating margin before financial services of 19, 4% compared to 19, 7% last year and 18, 6% in 2019.

Financial services revenue of $87 $3 million in the third quarter of 2021 compared to $85 $8 million last year.

While operating earnings of $76 million increased $5 million from 2020 levels, reflecting the higher revenue as well as lower provisions for credit losses.

Consolidated operating earnings of $271 9 million increased eight 2% from $251 $3 million last year and 18.

<unk>, 9% from $228 $7 million in 2019 as a percentage of revenues the operating earnings margin of 24, 2% compared to 24, 5% in 2020 and 23, 2% in 2019.

Our third quarter effective income tax rate of 23, 7% compared to 20.

Two 4% last year.

Net earnings of $196 $2 million or $3 57 per diluted share increased $16 5 million or 29 cents per share from last year's levels, representing an eight 8% increase in diluted earnings per share.

As compared to the third quarter of 2019.

<unk> net earnings increased to $31 $6 million or <unk> 61 per share representing a 26% increase in diluted earnings per share now lets turn to our segment results.

Starting with the C&I group on slide 11.

Sales of $351 $4 million increased 13.

13, 9% from $308 $4 million last year, reflecting a 10, 6% organic sales gain $7 $5 million of acquisition related sales and $2 $6 million of favorable foreign currency translation.

The organic gain reflects higher activity at all of the segments operations and includes.

<unk> high single digit increases in sales to customers in critical industries.

Within the critical industries year over year sales gains were achieved in general industry heavy duty and technical education, but were partially offset by declines in sales to the military and international aviation, both of which had particularly robust sales in the.

The prior year period.

As a further comparison net sales in the period increased four 8% from 2019 levels, reflecting a $3 million organic sales gain $7 $5 million of acquisition related sales and $5 $6 million of favorable foreign currency translation.

As compared to 2019 sales.

European based cancels business were up mid teens with respect to critical industry sales activity in that period are lower sales to the military international Aerospace and natural resource segment offset gains in our sales to technical education heavy duty and general industry customers.

Gross margin of 38.

2% improved 90 basis points from 37, 3% in the third quarter of 2020.

Contributions from the higher sales volumes and benefits from RCI initiatives were partially offset by higher material and other costs.

Operating expenses as a percentage of sales of 22, 9% improved 40 basis points.

As compared to last year, primarily due to the improved volumes, which were partially offset by higher travel and other costs.

Operating earnings for the C&I segment of $53 6 million compared to $43 $1 million last year, the operating margin of 15, 3% compared to 14% a year ago.

Turning now.

Okay.

Sales in the snap on tools group of $471 $4 million increased four 8% from $449 $8 million in 2020, reflecting a three 7% organic sales gain and $4 $9 million of favorable foreign currency translation.

The organic sales increase.

<unk> reflects a mid single digit gain in our U S business and a low single digit gain in our international operations.

Net sales in the period increased 22, 4% from $385 2 million in the third quarter of 2019.

Reflecting a 26% organic sales gain and $5 $8 million.

A favorable foreign currency translation.

Gross margin of 45, 8% in the quarter improved 30 basis points from last year, primarily due to the higher sales volumes and a 130 basis points from favorable foreign currency effects, which offset higher material and other costs.

Operating expenses as a percentage of sales was 20.

25% improved from 26, 1% last year, primarily reflecting the higher sales.

Operating earnings for the snap on tools group of $98 $2 million compared to $87 $1 million last year.

The operating margin of 28% compared to 19, 4% a year ago, an improvement of 100.

Third 40 basis points.

Turning to the <unk> group shown on slide nine.

Sales of $364 4 million compared to $317 $5 million, a year ago, reflecting a nine 9% organic sales gains of $12 million of acquisition related sales and $3 $2 million of favorable.

Currency translation.

Organic increase reflects double digit increases in sales of under car equipment and in sales of diagnostic and repair information products to independent shop owners and managers.

While activity focused on OEM dealerships was essentially flat.

As compared to 2019 levels net sales increase.

$41 7 million from $322 $7 million, reflecting a seven 4% organic sales gain $13 $5 million of acquisition related sales and $4 million of favorable foreign currency translation.

Gross margin of 46, 8% declined from 47, 3% last.

<unk> 14, primarily due to the impact of higher sales and lower gross margin businesses increased material and other costs and 10 basis points of unfavorable foreign currency effects.

Declines were partially offset by savings from RCI initiatives, and 60 basis points of benefits from acquisitions.

As a reminder, under car equipment.

Which had healthy sales increases in the quarter typically has a gross margin rate that is below the arsenide segment's average operating.

Operating expenses as a percentage of sales of 23, 9% increased 180 basis points from 22, 1% last year, primarily due to 170 basis points of unfavorable acquisition effects.

Operating earnings for the Arsenide group of $83 3 million compared to $81 million last year.

The operating margin of 22, 9% compared to 25, 2% a year ago.

Now turning to slide 10.

Revenue from financial services of $87 3 million compared to 80.

$5 $8 million last year.

Financial services operating earnings of $70 6 million compared to $65 6 million in 2020.

Financial services expenses of $16 $7 million decreased $3 $5 million from 2020 levels, primarily due to lower provisions for credit losses, resulting from.

Comparable loan portfolio trends, which support lower forward looking estimated reserve requirements.

As a percentage of the average portfolio financial services expenses were eight tenths of 1% and nine tenths of 1% in the third quarters of 2021 and 2020, respectively.

And the third quarters of both 2000.

From front in 2020, the average yield on finance receivables was 17, 8%.

The respective average yield on contract receivables were eight 5% and eight 4% respectively.

Total loan originations of $269 3 million in the third quarter increased $16 5 million.

A six 5% from 2020 levels, reflecting a five 7% increase in originations of finance receivables and a nine 5% increase in originations of contract receivables.

Moving to slide 11.

Our quarter end balance sheet includes approximately $2 2 billion of gross financing.

Receivables included $1 9 billion from our U S operation.

Our worldwide gross financial services portfolio increased $7 $5 million in the third quarter.

The 60 day, plus delinquency rate of one 4% for U S extended credit compared to one 5% in the third quarter of 2020.

And one 7% in the third quarter of 2019.

Sequential basis, the rate is up 20 basis points, reflecting the typical seasonal increase of 20 to 30 basis points, we experience between the second and third quarters.

As it relates to extended credit or finance receivables trailing 12 month net losses.

$2 $7 million represented 248% of Outstandings at quarter end down 22 basis points as compared to the same period last year.

Now turning to slide 12.

Cash provided by operating activities of $186 4 million in the quarter reflects 92.

5% of net earnings.

While this represents a decrease of $37 $6 million from 2020 levels. This cash conversion rate compares favorably with 77, 5% of net earnings in both the third quarters of 2019 and 2018.

The decrease from the third quarter of 2020, primarily reflects the.

As a fortinet earnings being more than offset by net changes in operating assets and liabilities, including a $61 $9 million increase in working capital. This change in working capital is largely driven by the more typical seasonal inventory build in the third quarter of 2021 as compared to the reduction of inventory you experienced.

In the period last year.

Inventory additions also reflects some increases and buffer stocks and higher levels of in transit inventories associated with the supply chain dynamics being seen in the macro environment.

Net cash used by investing activities of $29 7 million included net additions of finance receivables of $7 $6 million.

The higher teen dollars 2 million of capital expenditures.

Net cash used by financing activities of $385 $8 million included $250 million in senior note repayments cash dividends of $66 $3 million and the repurchase of 300000 shares of common stock for $66.

$6 million under our existing share repurchase programs.

As of quarter end, we had remaining availability to repurchase up to an additional $197 1 million of common stock under existing authorizations.

Turning to slide 13.

Trade and other accounts receivable increased 12.

$5 million from 2020 year end.

Days sales outstanding of 56 days compared to 64 days at 2020 year end.

Inventories increased $43 $1 million from 2020 year end on a trailing 12 month basis inventory turns of two seven compared to two four at year end 2020.

By quarter end cash position of $735 $5 million compared to $923 $4 million at year end 2020.

Our net debt to capital ratio of 10, 3% compared to 12, 1% at year end 2020, but in addition to cash and expected cash flow from operations, we have more than <unk>.

$3 million in available 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 third quarter performance I'll now briefly review a few outlook items for the balance of 2021.

We now forecast that capital.

800 approximate $90 million. In addition, we currently anticipate absent any changes to U S tax legislation that our full year 2021 effective income tax rate will be in the range of 23% to 24%.

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

<unk> will snap on third quarter can be summarized in one word.

Momentum.

Our markets are showing extraordinary possibilities almost across the board with auto repair the most advanced going beyond resilience.

We saw the COVID-19, playing out with our customers and three.

The shock interruption in the face of virus uncertainty a combination of gradual learning a ton.

Pursue essential work, while staying safe and psychological recovery of competence in the future and a return to normal buying.

But now we're seeing a fourth phase.

Ratio.

Certainty that were there.

Moving sharply higher levels ignited by the conviction that we have met and manage the virus and they won't and that we won't get shocked again, it's a bright outlook and snap on with continuing invest investment in product and brand and people is well positioned to serve that trend.

Of course, the Covid is still lingering and its side effects inflation.

That were my disruption around the loose, but snap on as strongly arrayed arrayed to engage those challenges.

I direct selling model and strong brand position enables agile pricing our vertical integration in shorter supply chains make us less vulnerable to sourcing viscosities, our broad product line more than 80000 Sku's supports flex.

Flexible.

Supply cutting guide around shortages and our RCI culture drives cost offsets.

We found opportunities on a runway for growth and improvement even amidst these challenging times and you can see it in our numbers.

Encouraging.

C&I sales up from both of them last year in 2019 O y.

Margin of 15, 3% strong and rising 130 basis points and 90 basis points versus 2020 in 2019, respectively. Our C&I up organically nine 9% versus last year and seven 4% beyond the pre pandemic levels Oi margins of 22, 9% in the tools group organic volume.

Rising three 7% versus last year's record level and up 26% versus the days before the virus Oi margin. It was 28% up 140 basis points from last year and up 700 basis points from 2019.

It all led to a corporation being organically up seven.

7% compared with last year, and a strong 11, 1% versus pre pandemic numbers.

Overall Oi margin was 19, 4% solid in the face of turbulence in our credit company navigating the uncertainty without disruptions.

Profit, it's up delinquencies down.

And EPS.

$3 57, rising emphatically versus all comparisons.

We have emerged from the virus stronger than when we entered in the numbers confirmed.

We've now recorded five.

Five straight quarters of above pre pandemic performances, and we believe that with our markets, reaching beyond resilience to exploration with the capability.

Abilities of our model to overcome the challenges of the environment and with a considerable advantage nurtured by our continuing investment in product branded and people will continue to rise maintaining our upward trajectory through through the end of this year and well beyond.

Now before I turn the call over to the operator I.

I want to speak directly to our franchisees.

Associates.

Always familiar with them.

This is a period of great momentum for Stateline.

You are the fuel that has ignited and fan that drive forward and upward for your success in creating this encouraging performance you have my congratulations with the capabilities you bring to bear and achieving.

Our progress every day you have my admiration.

And for your commitment to our present and your confidence in our future you have my thanks.

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

Thank you.

If you would like to ask a question at this time, please signal by pressing star one on your telephone.

Yeah.

If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question we will pause for just a moment to allow everyone the opportunity to signal.

Yeah.

Our.

He passion is coming from Christopher Glynn with Oppenheimer. Please go ahead.

Hi, Thanks, good morning.

So.

Snowboard team looked really good sequentially.

You know is usually down about 5% seasonally.

First got about half suggests little incremental commercial execution taking place.

Wondering if you think I'm looking at that a little too closely or you know how are you.

I characterize that well I think look I think I think there are certainly on an upward trajectory. So that would include better sequential performance I think that's quite.

So we're pretty as I as Ive used many times in my comments, we are encouraged by this performance and they seem to be rising.

If you looked at pre pandemic levels, which is the appropriate comparison up big.

And their operating margins are strong.

And you know this is a turbulent time and they are managing.

Great.

I'm doing well.

Okay.

<unk>.

Curious the you talked about vertical integration in shorter supply chain, that's clearly characteristic but probably not necessarily for every product you have so I'm wondering if you did kind of have kind of a general.

General quantification of any revenue gaps in the quarter that created some backlog build given widespread guy now yes.

I.

Nothing I can put my finger on look I mean, the thing is the place you would you would expect to see that might be in the critical industries, where we have a huge.

Huge range of products, we put together these big kits and you have to ship them complete.

And I'll say it might have a kid with a thousand.

Items in it and you have to ship it completely at that business was up pretty well in the quarter C&I was up nicely in the quarter and that lead critical industries led the way, but I don't think I can put my finger on any of that of course.

We had some of that but we overcame a.

Part of it is like I said agile marketing allowed allowing yourself, okay, I've got something else to sell.

So I think generally it's not it's not like we weren't without impact, but we kind of overcame but it's sort of like you remember you probably don't remember this Saturday night live Roseanne Rosanna Dan.

It's always something and this is just the something of the day and it's our job as managers to get through it.

So it was.

And.

Oh.

Comment on the balance sheet, you know the stock's down five or 6%. This morning, you've got X O T calling founding nicely.

16% prior year organic.

Any kind of fresh thoughts on using the balance sheet too.

Yeah.

The address where it looks maybe like a little disconnect between performance and reaction.

Well I don't know the electrodes that are implanted my body, giving me the stock price at every moment.

I haven't looked at yet no actually we didn't see that it was down necessarily but look I don't know we take advantage of we take advantage of situations. So I don't know, we say that we're trying to be agile in terms of share buyback. So I'll just leave it at that.

Thank you we will now move to our next caller next we have Scott <unk> with C. L. King. Please go ahead.

Good morning, guys and thanks for taking my questions.

Sure.

Could you break out within the tools group I don't know if you gave us before.

And tools versus some of the bigger ticket items. So.

Yeah.

I'm trying to get off the quarter by quarter, a train of you know looking at product lines, because I don't know that I mean that much but I will tell you that hand tools were down this quarter actually versus what we're you know I would say incandescent levels of Q3, and the bigger ticket items were up.

Aggregate double digits and also I think I think that kind of a sense of kind of like sort of a reversal of what's been happening lately.

And that I think that gray actually even though their margins to 28, 8%, 28% that's kind of a drag on margins because the highest margin businesses hand tools for us.

And in the tools group, so that's kind of an interesting.

Observation I think in that regard, but it seemed like at least for our franchisees that tool storage and diagnostics were getting a little more prominent at this time of course euro versus the pre pandemic levels. They were all up nicely.

They'd have to be to contribute to the 20.

6%.

Yeah.

Right, so but at least on a year over year basis, we're talking like last year's to hand tools were just canceled.

Cancels were down but you know okay like I said before just kind of it's always something they go up and down like that you can't read too much into a quarter, but that's what happened, but we kind of think that boy if it was encouraging to us to see.

Storage come back double digits in diagnostics would be nice as well.

Alright.

<unk>.

Anything that stood out it sounds like everything was up year over year or even versus two years ago.

More importantly, but is there anything any products or any one area of lower line that really stood out.

No no I wouldn't say I don't see I don't think so it seem to all be good I couldnt parse between though of course, there are variances in that I think tool storage spreads popular restaurant epilepsy actually.

But you know I want to point out has got these are all their.

Their orders.

And so you never know the FFC are greatest.

I see it doesn't guarantee a great finish to the year or first quarter next year, our bad SFC. It doesn't it doesn't do them you do a bad one because you have you have a lot of other things that goes on between August and the end of the year in terms of selling and ordering and so on but it's better than a poke in that I would a sharp stick when everything is everything is up double digits.

And if you were there you would've been impressed I mean.

The the franchisees are pop I really mean it they were I've never seen him more enthusiasm that's why we get the idea of acceleration I think you know it.

Where we're going beyond resilience when youre looking at the auto repair market in this situation.

Got it and then last question.

On the EV side I know you guys have worked with Oems and have gained some I guess.

Business related to tool kits that are specific and diagnostics to evs.

Some of that embedded in some of the <unk> increases that you talked about for this quarter yeah.

It's actually yes.

So we have a couple of projects in this in this quarter I think they are extending.

We have one project to extend it for a couple of quarters, but it has added a couple I think another vehicle this quarter, where we have from one big manufacturing, we don't like to name them, but they have four or five EV models that are coming out and we're providing a package deal.

The dealerships and metered out proportion.

Across the country. So there's some of that debt and then of course, you've got dealer FX.

That is still coming to fruition, but it was up nicely quarter over quarter still a little bit of a drag in terms of margin.

Year over year, so that that was pretty nicely.

We're seeing herself.

Kind of get on that EV trained getting any early warnings of all these things are early warning I mean, when you're with the EE when you're when you're getting projects with the OEM. That's an early warning on what the vehicle is going to need by the time, they get into the business and as <unk> grows we have a sort of like a neural network of early warning to see whats happens in the garage. So we're kind of positive.

But at some stage you know there aren't that many on the road yet.

Got it that's all I have thanks again, okay sure.

You'll go to Luke junk with Baird. Please go ahead.

Yeah, Aldo good morning.

Good morning, I got two questions. This morning first Nick.

Touched on the benefits of vertical integration in your comments to wrap up the prepared piece is certainly a lot of investor attention right now being paid to the supply chain issues and environment generally speaking. So I was just hoping you could expand on any steps that you've taken going into the fourth quarter next year of course, we can see overall gross margin up 30 basis points.

<unk> year on year. This quarter, you mentioned the RCI related benefits I'm sure. There are some other factors going into that would it be safe to say that you feel like you are on the front foot in terms of addressing the current supply chain environment.

Well.

Who knows I mean every day, there's something new but I think what I was trying to say was Lukas we do take steps.

Model enables those steps to be particularly efficacious.

The vertical integration means that we don't buy that much.

Most of the stuff is in our house you know if you think about a handful raw steel comes in the back of the factory and basically we had very little when it comes out so you're worried about steel we buy steel in the U S source of supply chain.

And I buy we buy some of our chips in the U S.

And closer places so that's not bad circuit board those kinds of things that we have those things as well as one of the advantages we have a look and we do this we're very aggressive in spot buying.

So we go out spot buy because we don't buy we don't buy large quantities of any.

The one thing.

If you're an auto manufacturer I used to be import you are buying something for the Mustang or four where the Ford focus or wherever it is you're buying a lot of stop it hard to it once that once that supply chain.

Dropped it because of the Shanghai port closures because of a couple of cases, you kind of have trouble to move or get any alternative.

Well, if you're only buying a little bit and go out find them you can find them in the in store systems of the system and we have our guys are actively doing that that's why we're not seeing so much so much in terms of shortage that may.

So little cost increase, but then we're agile pricing.

So we don't have such a big problem in that regard I'm not saying, we're not actively.

Because boy our people are putting a lot of energy into it but if you look at the numbers.

Well managed.

Thank you for that and then maybe this might be a question for Aldo curious what insights you draw looking at your current credit metrics in terms of any mechanic customer health and borrowing capacity from.

Here I guess, specifically I'm looking at the fact that the finance bad debt expense was down quite a bit the last couple of quarters now and while originations are up the tools group topline is certainly growing quite a bit faster than origination and especially if I look on say a two year stack basis. So yeah, just any thoughts there as well as you know if theres any qualitative feedback from.

From franchisees that'd be interesting as well.

So my view would be.

I think technicians themselves are in a better financial position to where they were maybe a year or two years.

<unk> I think that's a broad statement that applies to <unk>.

Many industries I think you hear that out of the big banks, I mean customers are better servicing their debt than they were before.

I think they have more discretionary power spending and so far they've been applying it to their indebtedness and I think we see the same trends.

It's our job to capture that incremental savings that they might be seeing if they're not borrowing as much as before and capturing business with the tool sales and I think you'll see that snap on tool sales.

Being up more than originations I think as I applaud the tools group, but being able to entice customers to buy more stock because they have more money, but what you read from the Bureau of Labor statistics technician wages, it feel pretty darn. Good so they seem to be strong they seem to have more flexibility in what they choose to buy.

They seem to like to buy.

Products, so again, they're in a better position I think than they were a year or so ago and of course every quarter brings potential new changes, but right now it's been running very favorable and as a result of that.

Our going forward provision rates are lower than they might they might have been a year or two years ago was going back pre pandemic simply because of the debt servicing trends.

Thank you Pat and I will go ahead and leave it there. Thank you.

Thank you next we Miss Gary pressed the piano with Barrington Research. Please go ahead.

Yeah.

Good morning, everyone.

Eric.

Got it got a series of questions here first of all.

As you as you talk to your.

Okay.

Hey, there there really I mean.

What can you cite like two or three reasons why they are so optimistic.

About.

Repair industry for the next year or so that's reflected in their order rates.

I think I think it's a couple of things I think one is that.

You know, they're seeing their customers with technicians in the garages.

The benefits of people sort of pivoting back toward individual transportation. So people are driving more you look at the miles driven are.

Yeah.

That and that makes them feel good I think.

This was something that you could logically figure out, but they are seeing the fruits of it now.

You can see that boy their wages are rising there's a lot of there's a lot of stories out of route and what the rack, but they are clearly rising the BLS data.

Shows them rising both for year over year, and the Rolling 12 months and you can see it in the garages and and that's a reflection, yes of the dirt maybe but there's always been a dearth of mechanics. It's it's a reflection I think of it's not so easy to get people in there because what they're doing now is a is a particularly advanced.

Rob kill and this is starting to dawn I don't know Don on them is the wrong word, but starting to be reinforced in their mind about that.

And then I think they're feeling what I would say as a general optimism that comes out of having felt like they've engaged and manage the COVID-19.

Garage as had been working for the whole time.

So wow Wow Wow.

The news you know when you consider the news and everybody is appropriately worrying about delta and all these things people are it's not that they're not keeping themselves safe, but they're saying hey, we can deal with this we're not getting shocks again, whatever happens we're not gonna be interrupted we're going to keep going our upward trajectory is happening.

I know.

In a crazy way I suppose some of this is sort of you can see this sort of prosperity that came out of the you know in the twenties. After the the flu. The last time I can feel that in the garages I feel with them a lot of different places, but you certainly feel in a garage and a field where a franchisee.

And that's translating back to them and then finally I think our franchisees in particular.

Ah recognizing that our products are more effective than ever they have great faith in those products and they're feeling.

I was with the national National franchisee itself a national lab.

F C National Franchisee Advisory Council 12, guys from all over the country and they're feeling they're the things they're doing in terms of social media in terms of RCI and the van at terms that are better training are giving them more selling time, so you'll get on a van like it was not just on a van in California.

And countless Guy says yeah, I now find out if I follow.

This program I can I can reach more technician, he's talking about reaching more technicians than they could before those are the things that are making.

Okay, that's very encouraging and then in terms of your so strong double digit growth in orders out of the snap on franchisee conference what what was the growth in waters.

Well, the 2020 conference I'd, even particularly in the 2019 conference.

Do you remember how you came out of that.

No, but it wasn't double digits.

And it wasn't it wasn't as you know it was probably I. If I remember last year was kind of a little bit less cross sort of across the board at 19.

It was probably different ups and downs. So some guys are up some products I'm talking about God, because I'm thinking of the product manager. Some some some areas were up double digits and others were down. This thing was across the board double digits. It was Basel.

This is a lesson.

Great and.

Just lastly on the diet carrying before you go away from that I want to emphasize like I said before this is the orders not sales you know, it's it's directionally indicative not you know, but better than a poke in the night with a sharp stick. It tells you you come away feeling good about this we feel good about this better than we have of any SFC that ive been around here.

And then Josh.

Yeah, that's fine and then just lastly on the diagnostic side.

As older cars come into the park.

That had a das is that directly affecting.

You were in demand for some of your diagnostic products.

Yeah well.

Hopefully broadly spoken I think it at first it its certainly as its affecting the first it's affecting the demand for Mitchell, which is up nicely because Mitchell has got a very complete a D S suite and at that.

And then its also helping to drive.

Its an equipment business.

The equipment in memory.

Business is holding up this conference. This conference call is going to the dogs.

And so.

And so the.

The two fit a D. A S a system, which I talked about I think is something that is helping drive that.

Ive via our equipment growth and that's where you set up a system that helps caliber that physically calibrate the system in the garage and that's also driving some of the diagnostics, but the diagnostics with their intelligence features are are are probably yet to feel the the impetus from that.

You'll see it coming.

You know in future quarters.

Okay. Thank you sorry about that.

Okay no problem.

Okay.

Thank you we will now move to Liz Suzuki with Bank of America. Please go ahead.

Great. Thanks for squeezing my question could you talk about what.

What you're seeing in in cost inflation and how much of the organic growth in the tool segment is impacted by price increases as you pass through those cost increases.

Uh huh.

I you know, we're not going to go into that necessarily I would say you know there is some price increase in there I wouldn't say it's the.

The major portion of the the the organic growth.

Because the biggest price rolls through the system, we're seeing some cost increases, but the tools group has been able to manage that somewhat.

You do get pricing offsetting cost increases it tends to depress your tends to knock down your margins because of course, you get a dollar.

Sales and a dollar of cost that tends to do it but it hasn't but it wasn't a major effect in this quarter.

Got you and then you know Nick and although I think you both touched on this a little bit in the prepared remarks and in the Q&A I'm you know just about supply chain disruptions I mean from a competitive standpoint does this create an opportunity for snap.

Dollar it meet the needs of your customers, while some of your competitors. It may do more importing maybe more constrained on inventory.

Sure well I don't know I don't I can't speak for my competitors about being constrained.

Actually in reality.

I'll tell you the truth Liz.

Ah.

Snap on is kind of interesting.

It kind of works on itself.

Our technicians either decide to buy snap on.

Or they decide to buy another group of products, they hard to choose from but another group of products. They hardly ever say, Oh I'm going to buy another product and then say Oh I'll settle for the snap on has the other one isn't available so I'm not sure.

How much that helps it certainly puts us in a better position to grow and probably capture new customers, who might not be serviced by these people. There's some of that I think but I don't really like to talk about the competition, because we really compete against ourselves pretty much the better we get the more the more franchisees capability. We have the more they are able to sell the better our product is.

The more it grows regardless of what the competition does.

Great I understood. Thanks very much.

Sure.

Thank you next we go to David Macgregor with Longbow Research. Please go ahead.

Yes, good morning, everyone.

Hey, good morning.

I wanted to just start off.

Building on.

On the last question and I guess it would appear now so you're offsetting a lot of the cost inflation with volume growth in RCI.

I was just wondering what your expectations are for pricing going forward and your ability to price.

Cost inflation going forward, rather than relying on volume growth and our CFO.

Hi.

Well look I think I think.

First of all I think I tried to make the case and I think it's quite true that we have a lot of insulation against that we we believe that we can price.

As we need to.

Because you have you have.

No. We have we have a direct model in a lot of cases, where we're direct to the end customer versus some other people who are going through several layers.

And secondly, the brand position allows us always to be the price leader.

So are we pretty much priced relative to our prior products.

When we're doing normal pricing David.

We're bringing out a new product, we look at where we are.

Really where the competition so <unk>.

Generally I think to the extent, we see court costs are rising we can price against that.

I don't have much to worry about that.

Not in every nook and cranny of our business, but I think it's a it's true in most.

Of our business, particularly given that given our brand position.

Got it.

Our next question really is there a way to sort of help us understand just what sales growth was off the truck with the sell through growth was in the quarter I can tell you exactly it was about the same as the sales growth to the truck.

Okay.

Sure.

I don't I can't give you much insight on what was sold off the trucks, so much with such precision, but whether it is pretty much the same.

It was pretty close.

I'll just characterize how would you characterize truck level inventories right now.

So anyway.

Hum.

Hand tools versus you know the bigger ticket items that would be helpful.

You know I don't I would say everybody I talk to seems to be looking at for tool storage.

Now of course, that's a windshield survey your kind of familiar with us, but but the thing is is that you.

You you you seem to see I think there's a need people.

You want a little more tool storage I think inventory if anything are probably down some versus historical levels. Because yes. This quarter, we had equal but in past quarters sales off the truck kind of exceeded.

Our sales to the truck. So I think we've had you know he looked.

Over the last 345 quarters six quarters, you've seen that sales off the truck exceed it. So I think the inventories are kind of down I don't know what that means you know I'm not sure that there's going to be a restocking or not I kind of get the feel that maybe you know they may restock certain project tool storage was nice this quarter I didn't go up.

Two the ban we had a nice big ticket was nice double digits. This quarter. So it was kind of little bit of a reversal of what's been happening previously you haven't seen it yet fully in the in the in our in the in the originations I guess, but look I think there's a couple of things I think one it takes a while to work through that and then secondly.

Back people are you know kind of a paid down their credit so they've got they're kind of in a situation where they are able to buy some things that they are able to finance themselves.

Right.

Just to play it out to pick up on your comment about credit. It seems like there's been you've talked about this yourself, there's been more rotation towards <unk>.

Evolving your count.

Credit as opposed to extended credit over the last year or so and.

And just thinking about how that's playing out now your franchisees, obviously, they're a little more liquid and.

And so it may be in a better position to be able to provide the revolving account Oh credit.

I was just wondering what if you could update us in terms of what credit penetration rate.

Its look like for Big ticket right now once upon a time I think you've told US big ticket was up.

About 90% credit diagnostics was 50 to 60 per cent credit.

Credit penetration look like in kind of this new world and I really have no I don't really have that number but it is somewhat lower now.

That'd be sure if it is part of it is part of it.

I think just when you say plus one was a little more from the franchisees are a little more liquidity, but but also make no mistake about this optimism floats in this.

The franchisees get a little bit more optimistic and they say hey, if I can put a dollar in our a I'm going to get it back. It's a great investment for me why would I put it in the bank.

Or something like.

There is some there is some of that flow through the franchise system.

What we view is I think for sure is that the customers themselves have unused credit our untapped credit capacity.

So that will come up we haven't really seen there wasn't rotation at the beginning of the of the.

Of the virus period toward our array, but this quarter I would say, it's kind of stayed solid raw and E. C have been same as last quarter and maybe the quarter before that was the same way. So it's kind of and found that right.

Equilibrium right now, we'll see how it plays out going forward.

And then happens whenever it does it has it whatever it is it has it.

In fact, our big ticket sales this time.

Yeah, congratulations there and on the contract nine five versus the finance receivables five seven.

In terms of originations growth contracts went out in front of finance receivables for a while now do you expect that to continue or do you see that at some point you are nearby kind of getting back to a more equal level or maybe funding.

It didn't have any rubles getting to a faster level of growth in contract.

So our contract receivables tend to run up a little bit with the snap on franchisee conference because it gets some short term loan financing arrangements there, but no. There's nothing structurally there that would say that the EC will not get back to higher levels and actually you see was pretty decent.

The U.

<unk> was above the average in this case so they had strong performance in there was nice originations David in both tool storage and diagnostics in the quarter.

Last question for me is just a social media sales and I guess, you've kind of alluded to this in your comments, Nick about online sales, but.

Don't.

Financials look very far online to see franchisees.

Selling tools to Facebook.

And in other platforms can you just talk about how you foresee that growing and does that accelerate does that help you in terms of are they actually going forward.

David David I wasn't in my comments I wasn't talking about the seller.

He was talking about.

Using social media to inform customers about product and promotions and other things, which.

Face to face time for actual selling.

I don't really see social media sales is growing that much I mean, it's not.

Not much of a factor right now now it might but I think generally the buying.

By and large the overwhelming use of electronic media via the franchisees.

Franchisees are just that to try to orchestrate. Okay. I want you to know about this when I come in and I'm going to tell you why you need it.

That kind of thing.

Activity going there, yes sure.

Thanks, very much gentlemen.

Okay.

We have time for one additional question. Our final question comes from Bret Jordan with Jefferies. Please go ahead.

Rhett Jordan.

Hi, Good morning, this is actually Ethan only on for Brett.

Okay.

Could you just provide any color on the sales cadence throughout the quarter.

Say that again I didn't quite hear did you say it again, please sales cadence.

That's correct yes.

Yeah, well it was a pretty much the same as.

As past quarters.

You know I think I think.

Generally.

Little bit interrupted.

You want to go back to <unk>.

Give you. This if you go back.

Two years beyond the Covid era.

The third quarter was.

Any aberration by the franchisee conference.

So you get kind of a week.

Early couple of months you know certainly early one month in the quarter July was like a wasteland.

So then things would come Roaring back when you got the SFC people would be keeping our powder dry pretty much.

Particularly the last two years, we've been able to get out of that by a number of artifices and so it's a much more standard.

You'd have a course of quarters for four five and and so you get kind of that kind of distribution, maybe with a little a little higher number in the in the last quarter, but it's.

<unk>, particularly special.

You know I think this quarter of course is above so each quarter, it's kind of going upwards, you know versus its prior numbers and so you feel like the.

The upward trajectory you can see it if you look very very closely at the month to month numbers in a quarter.

Quarter, as you're going through as we're going through the months and the quarters and the years upwards, but not much difference in distribution.

Except for that sort of general monotonic trends.

Understood that's helpful. Thanks.

And then another one here on the corporate expenses.

That would be high 34 million Bucks up about $10 million year over year, and 5 million sequentially and I know you mentioned sort of <unk>.

Performance based comp and some brand building costs, but anything outside of those two buckets.

Yeah, you know that.

Well the SFC was live this year.

So you'd think.

Think of it this way Okay, we had brand.

We had a we had expect we had start with we had comp expense base caught and this was our celebration of our 100th anniversary. So the SFC and you know the you know what your celebrations, we had there were bigger than better bigger and better than any prior year. So you have some of that into your situation because.

Because of the franchisees are investing in the company I think I said they are positive about the days and decades ahead.

With snap on and so that merits a little bit of celebration when you reach a centennial milestone. So there's some of that in there.

Sure. Thank you and then just one last one if you don't mind you know given the.

Strong business performance and cash flow and I know you sort of mentioned Opportunistically repurchasing repurchasing shares, but where does share repurchases stand in terms of capital allocation capital allocation, given where the stock's trading wherever we are a core piece of capital allocation, we were where we tend to be working capital investors you know what I mean I know this is a working capital intense company. So when we grow.

And the Covid as you know.

I'll kind of changed not changed but obscure that dynamic somewhat but generally as you grow you have working capital then we look at acquisitions. We believe we have we have runways for growth, particularly in the repair shop owners and managers in the garages are in and maybe in C&I in some places and we've done some of that a dealer FX as an example.

We have a dividend that we've.

We've we've paid a dividend every quarter since 1939, and we've never reduced it. So when we take a look at our dividend with the intent of perpetuity and whether we should increase it or not and when you look at that carefully and then we are agile about share purchases or you have kind of a four way.

We have that and Theyre all.

So all a draw on what we might do with cash depending on the situation.

Great. Thank you very much.

That concludes today's question and answer session. Mr. <unk> at this time I will turn the conference back to you for any closing remarks.

Thank you all for joining us today, a replay of this call will be available shortly on snap on dot com as always we appreciate your interest in snap on good day.

Thank you all for your attention. This concludes today's conference call. All participants may now disconnect.

[music].

Yeah.

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Yeah.

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Good day and welcome to the snap on incorporated third quarter 2021 results conference.

Today's conference is being recorded.

This time I would like to turn the conference over to Sara <unk>, Vice President Investor Relations. Please go ahead.

Thank you Olivia and good morning, everyone. Thank you for joining us today to review snap on third quarter results, which are detailed in our press release issued earlier this morning.

We have on the call today, Nick Pinchuk snap ons, Chief Executive Officer, and although probably are a snap ons 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 have provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our web site staff on Dot 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.

<unk> estimates or beliefs, or otherwise state 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.

Morning, everybody.

As usual I'll start the call by covering the highlights of our third quarter in a long away all I'll give you my perspective on our results they are incurred.

Our markets there are positive and more than resilient and I'll speak about our progress.

Considerable each.

Each period, demonstrating increasing strength, even when in the midst of seldom seem too.

And will also speak about what it all means for our future is incredibly promising and then Aldo will move into a more detailed review of the financials.

Our reported sales in the quarter were 1 billion $37 7 million they were up 10.

10, 2%, including nine 6% $9 6 million of favorable foreign currency and $19 5 million of acquisition related sales organic sales growth was up 7% with 7% gains in every group. It was our fifth straight quarter of above pre pandemic.

Performance and snap on value creation processes safety quality customer connection innovation and rapid continuous improvement or RCI as we call. It all combined to drive that process and progress of Woods Opco operating income of $201 3 million was up $15 6 million from last year. The Oi margin was 19, 4%.

Basis points impacted negatively by acquisitions, but still very strong at a strong level for financial services operating income of $70 6 million increased seven 6% and the delinquency in the delinquencies were down.

Even below the 2019 three pandemic levels are continuing testimony.

Due to our unique business model and its ability to navigate the most threatening of environments.

First quarter EPS was $2 57 up 29 cents or eight 8% from last year.

And as I said before.

We believe snap on is stronger now than when we entered this great win.

Two in our third quarter results testifies to just that.

Compared with the 2019 before we ever heard of the virus. Our new sales grew our sales grew a $135 9 million or 15, 1%, which includes 21 million from acquisition related sales $13 6 million of favorable foreign currency.

Whether it's $1 3 million and an $801 3 million or 11, 1% organic game.

And that 2021, Apple Opco operating margin of 19, 4% was up 80 basis points from the pre pandemic levels, even while in EM.

Absorbing the impact of new acquisitions.

Physicians and while meeting our what we could call the considerable disruption of these days.

Now, let's talk about the markets.

Auto repair remains quite resilient.

The technicians are prospering, they know they've weathered the depth of the Covid shock learn to accommodate the virus environment and are well along the cycle.

Illogical recovery techs.

A resilient they've been out there post for the last 18 months on doing it and they won't be shocks again and they are optimistic about the future of their profession about the outlook of individual transportation and about the greater need for their skills as the vehicle park changes with new technology.

Vehicle repair a strong is a strong.

And resilient market you can hear it in the franchisees voices and you can see it written clearly a crushed our numbers every quarter.

Also on auto repair there our shop owners and managers different from the text, that's where our our repair systems information group our F&I plays its trade.

Demand for new and used cars is highest.

Despite limited supply and Bill was your prepared maintenance and warranty is rebounding as dealers are starting to invest again.

And we've been able to make a.

We've been able to take advantage with groundbreaking products like our award winning a two point advanced driver assistance calibration system, our new our new diagnostic are new.

Right.

Diagnostic Triton D 10, intelligent diagnostic unit and our acclaimed Mitchell one pull demand repair estimating guidance, all representing new technologies and data deployed to make work easier in the shop.

Vehicle repair looks more promising than ever and.

And snap on is poised to capitalize.

Now, let's talk about critical.

Critical industries, where Stefan rolls out of the garage solving task of consequence.

Commercial and industrial or C&I operate the virus had a much longer impact on these customers there was slower to accommodate but they are recovering and in the quarter. Our results showed that trim gains in North America, Europe and Asia all over the globe. So.

So overall I'd describe our C&I markets as improving and coupled with the strength of the auto repair sector as our markets are beyond resilient and we are ready and well positioned to make progress along those run regular color at the same time.

At the same time, it's clear that we have ongoing potential.

On our runways for improvement.

The snap on value creation classes they'd never.

Never been more important helping to counter the turbulence of the day, especially important with customer connection.

Standing to work of professional technicians, and innovation matching that insight with technology driving new products in just this quarter snap on was.

Prominently represented with nine professional tool <unk> equipment news, we call. It <unk> 10 People's Choice Awards, where the actual users the technicians make the collections were also recognized with two P. 10 Innovation Award and we were honored with two motor magazine top tool aboard an essential driver of snap on growth is innovative product that makes work easier and the awards.

Hard one are a testimony that great snap on products, just keep coming maxing matching the growing complexity of the task, becoming more central to technicians and driving our forward progress.

Fluffy environment.

Pretty positive now.

Now, we'll move to the operating groups and C&I.

In the quarter Rose 13, 9% or 42 million versus 2020, our significant growth across all divisions, reflecting a 32, it reflected a $32 9 million or 10, 6% organic uplift and seven and a half million for my auto crib acquisition.

And double digit growth in our European.

Mansell business businesses and a high single digit rise in critical industries led the way see I see.

Operating income of $52 6 million.

It was up $10 5 million or 24, 4% and the operating margin was 15, 3%, that's an increase of 130 basis points.

Last year I would say, that's an attention getting rise against the wind.

No one can compare to the.

The pre pandemic 2019 results sales were up four 8%, including a 9% organic gains and that'll weigh margin of 15, 3% was up 90 basis points against the 70.

Point impact of acquisitions and unfavorable currency.

Once again, SNA Europe delivered double digit growth beyond three double digit growth beyond pre virus levels, I guess, a complex and very varied marketing environment propelled by the customization power of their backhaul to a management system in our industrial Division Rose in critical industries.

Recording nice gains in general industry heavy duty education in U S aviation.

A positive sectors, overcoming weakness and continuing weakness in the military and natural resources P&I.

C&I is rising and we're enthusiastic about the possibilities, we'll keep strengthening our position to capture those opportunities and enabling that intent.

As our expanding lineup of innovative new products in the third quarter did see some great new offerings like our 14 four volt three agents drive brushless erection the CPR at 61.

So really popular.

And it's no wonder.

It's a powerful combination of strength and speed high torque 60 foot bumps to bust loose very sudden.

Albert Bolles and rapid operations 275, RPM forgetting those fashion resource in quick time.

Our Murphy North it's made our Murphy North Carolina plant and it features a whole claim brushless motor for a longer run time and durability. It includes the safety switch that shuts. It ended a clinical safety switch that shuts down such down the tulip.

Two minutes of continuous use that's eliminating the chance of overheating. It also has a super bright eating aluminum front facing liked that stays illuminated after the the trigger is released allowing easy an immediate inspection of the work.

Lets ratchet also features are built and break that stops a tool from throwing her.

Our fasteners.

Tulip is it seems like not much but it's an important safety feature for technicians and it's and it also was a great cushion grips that makes you more comfortable tool control even during extended use C. D are at 61 power speed and comfort.

In a very compact package, it's a mighty Mike for accomplishing critical paths.

Which in the professionals love it.

Well that's C&I.

Turning upward exceeding pre pandemic volumes strong.

Strong profitability and positioned for more.

Now onto the tools group.

So you have a $471 4 million up $21 8 million.

That's including $4 9 million of favorable currency, and a $16 9 million or three 7% organic gains growth in the U S. Both in the U S and the international operations and the operating margin.

It was 28% one of our highest effort and up a 140 basis points from last year.

And compared with a pre virus 2019 level, the organic gain was $80 4 million or 26% and 28% operating margin was up 700 basis points compared with the pre pandemic level 700.

Basis points in the midst of operating target.

Yeah.

Tools group is responding to the challenges of the day, increasing its product advantaged fortifying its brand its brand for an further enabling its franchisees, giving them more selling capacity, it's all working.

Five strong quarters of above pre pandemic performance.

So there's it's so.

Now the third quarter is when we hold our most of you know there's other third quarters. When we we hold our annual snap on franchisee conference. Our SFC. This year. So we're back again in person at the Gaylord and and Orlando, Florida, Florida over 9000 attendees a record we are training seminars and sales.

<unk> growth in intelligent diagnostics, they were well attended and well received and we had several football fields of products. So our franchisees could get up close and personal with our latest innovations for the franchisees.

<unk> is an opportunity for learning for.

Touching on ordering new products and for recharging their snap on batteries.

And believe me they are charged.

For the company the SFC isn't as an opportunity to gauge the franchisees' outlook on the business.

One quantitative ways orders well they were up.

Strong double digits over last year's virtual live from the floor to vent and from the 2019.

SFC live in Washington, D C and when I say up I mean, all of our product categories showed substantial gains over both of those events.

So that's the quantitative look at it qualitatively I spoke with many of our franchisees and I can attest that they were booming.

Throwing a lot confidence in our business and.

Considerable optimism on their future and their future days in the decades ahead with snap on we do believe our franchisees are continuing to grow stronger each quarter and we continue to invest in our future.

And if you were with us in Orlando.

You would've seen is unmistakably.

And we are investing.

Clara building, our franchisees' ability to use the direct interface with technicians, enabling them to better communicate their unique capability unique capability and growing technology of satellite product lines, we have great confidence in the power of our products and there are real reasons for the confidence you heard about the product awards well beyond that there's a continuous.

Cream of terrific New Walker.

During the epilepsy.

Yeah.

The tools group unveiled its new J H P. For 15 portable 40 inch substation power card, it's targeted at entry level technicians, the ones working on a narrow scope of repairs. It's built in.

And with the Iowa factory and the new card enables young mechanics to invest in snap on storage at a value price while at the same time getting some very attractive professional features are laughable comp compartment for full doors of stored and adjustable power tool rack that holds up the 10, two and a power strip with five outlets and two USB ports for battery and device charging.

New car.

It was well received and it's quickly read reaching what we call a hit product status over $1 million of sales, it's racing upward on a steep trajectory.

Beyond products.

We spent time working to scan franchisee selling capacity harnessing social media improving product training.

And Archie eyeing the van operations and is working selling capacity is up and you can see it clearly in the five straight gangbuster quarters for our van network.

The tools group is on a very positive trend.

Sending and leaving pre pandemic levels way behind.

Now onto our Tonight.

Sales were up 14, 8% or $46 9 million.

Including a $31 7 million or nine 9% organic.

Growth was weighted towards the under car equipment, but our diagnostics and information businesses also chipped.

Chipped in with the double digit increases for 2000.

'twenty RCI operating earnings were 83.3 million, representing a rise of $3 2 million.

Comparing with 2019 sales grew $41 7 million or 12, 9%, including $24 2 million or seven 4% organic green nice growth the arsenide Oi margin Oi margin.

It was down versus the last two years attenuated by business mix acquisitions and currency, but it was still a strong 22, 9%.

So we clearly see the potential of a runway with our C&I expanding snap ons presence at snap on's presence in the garage with coherent acquisitions and are growing.

Your line of powerful products.

Third quarter annual growth was broad based but a strong double digit rise in under car equipment was an especially welcome turn that's a nice turnaround and it was led by by innovative products like our 15 K for post alignment list.

It's really taken a hold in the repair shops.

<unk> resumed investing there's this new 15 K provides professional great alignment lifting for a variety of vehicles sizes with open front columns best in class Ultra wide 26 inch runways and integrated hundred inches long were placed it suited to accommodate vehicles from compact passenger cars putback passenger cars to the big pickup.

And it's it's low easy on approach angled mix of great even for low profile sports cars that are often a challenge for other lifts.

I mean, our Louisville, Kentucky plants on an assembly line number it gets made at our Louisville, Kentucky plant an assembly line I'm very familiar with I participated in RCI event for that process.

Our new 15, K has helped it helped drive the recovery for under car equipment, and it's driven the rise in our F&I volumes were quite positive about <unk> possibilities with repair shop owners and managers as the vehicle industry evolves.

It's got a great future.

So that's the highlights of our quarter.

<unk> strong.

Yes.

Great period exceeding pre pandemic levels C&I on track with strong sales and interesting and increasing profitability are tonight undercard coming back that tools group strong pumpkin moving vertically at credit companies solid in a storm and profitable the overall corporation organic sales rising 7%.

Long propco operating margin of 19, 4% and EPS $3 50 to $3.57 a considerable rise in most important.

More testimony that snap on has emerged from the turbulence much stronger than we entered.

It was an encouraging quarter.

Now I'll turn the call over to Aldo.

Aldo Aldo.

Nick Arkansas with operating results are summarized on slide six.

Third quarter of 2021 exhibited another period of solid financial performance.

<unk> also compared favorably with the third quarter of 2019, which being a pre COVID-19 time period and in some cases may serve to be the more meaningful baseline.

Net sales of $1 $37 $7 million in the quarter increased 10, 2% from 2020 levels, reflecting a 7% organic sales gain $19 $5 million of acquisition related sales and $9 $6 million of favorable foreign currency translation.

Additionally, net sales.

Period increased 15, 1% from $901.8 million in the third quarter of 2019, including an 11, 1% organic gain $21 1 million of acquisition related sales and $13 $6 million of favorable foreign currency translation.

Consolidated gross margin of 50.

Sales in the 2% improved 30 basis points from 49, 9% last year.

The gross margin contribution from the higher sales volumes 60 basis points of favorable foreign currency effects and benefits from the company's RCI initiatives more than offset higher material and other costs.

Operating expenses as a percentage of net sales of 38% increase.

60 basis points from 32% last year, primarily due to 60 basis points of unfavorable acquisition effects.

From the higher sales volumes were offset by increased brand building travel and other costs, including the restoration of our annual impersonal snap on franchisee conference.

<unk> operating earnings before financial services of $201 $3 million compared to $185 $7 million in 2020, and $167 $7 million in 2019, reflecting an eight 4% and a 20% improvement respectively.

As a percentage of net sales operating.

Margin before financial services of 19, 4% compared to 19, 7% last year and 18, 6% in 2019.

Financial services revenue of $87 $3 million in the third quarter of 2021 compared to $85 $8 million last year, while operating earnings of $76 million increase.

The $5 million from 2020 levels, reflecting the higher revenue as well as lower provisions for credit losses.

Consolidated operating earnings of $271 $9 million increased eight 2% from $251 $3 million last year, and 18, 9% from $228 $7 million in 2019.

<unk> as a percentage of revenues the operating earnings margin of 24, 2% compared to 24, 5% in 2020 and 23, 2% in 2019.

Our third quarter effective income tax rate of 23, 7% compared to 23, 4% last year.

Net earnings of 190.

$6 $2 million or $3 57 per diluted share increased $16 $5 million or 29 cents per share from last year's levels, representing an eight 8% increase in diluted earnings per share.

As compared to the third quarter of 2019 net earnings increased to $31 $6 million or.

<unk> 61 per share representing a 26% increase in diluted earnings per share.

Now, let's turn to our segment results.

Starting with the C&I group on slide 11.

Sales of $351 $4 million increased 13, 9% from $308 $4 million last year reflect.

Reflecting a 10, 6% organic sales gain $7 $5 million of acquisition related sales and $2 $6 million of favorable foreign currency translation.

Again, it gain reflects higher activity at all of the segments operations and includes high single digit increases in sales to customers in critical.

Industries.

Within the critical industries year over year sales gains were achieved in general industry heavy duty and technical education, but were partially offset by declines in sales to the military and international aviation, both of which had particularly robust sales in the prior year period.

As a further comparison.

Sales in the period increased four 8% from 2019 levels, reflecting a $3 million organic sales gain $7 $5 million of acquisition related sales and $5 6 million of favorable foreign currency translation.

As compared to 2019 sales in our European based hand tools business were up mid teens with respect.

The critical industry sales activity in that period are lower sales to the military international Aerospace and natural resource segments offset gains in our sales to technical education heavy duty and general industry customers.

Gross margin of 38, 2% improved 90 basis points from 37, 3%.

The third quarter of 2020.

Contributions from the higher sales volumes and benefits from RCI initiatives were partially offset by higher material and other costs.

Operating expenses as a percentage of sales of 22, 9% improved 40 basis points as compared to last year, primarily due to the improved volumes which were partially.

And that would be offset by higher travel and other costs.

Operating earnings for the C&I segment of $53 $6 million compared to $43 $1 million last year, the operating margin of 15, 3% compared to 14% a year ago.

Turning now to slide eight.

Sales in the snap on tools group of four.

Partially $71 $4 million increased four 8% from $449 $8 million in 2020, reflecting a three 7% organic sales gain and $4 9 million of favorable foreign currency translation.

The organic sales increase reflects a mid single digit gain in our U S business and a low.

400, such a gain in our international operations.

Net sales in the period increased 22, 4% from $385 $2 million in the third quarter of 2019, reflecting a 26% organic sales gain and $5 $8 million of favorable foreign currency translation.

Gross margin.

Single would be five 8% in the quarter improved 30 basis points from last year, primarily due to the higher sales volumes and a 130 basis points from favorable foreign currency effects, which offset higher material and other cost.

Operating expenses as a percentage of sales of 25% improved from 26, 1% last year, primarily reflecting.

And a 40 hour sales.

Operating earnings for the snap on tools group of $98 $2 million compared to $87 $1 million last year.

The operating margin of 28% compared to 19, 4% a year ago, an improvement of 140 basis points.

Turning to the Arsenide group insurance.

<unk> hi.

Sales of $364 $4 million compared to $317 $5 million, a year ago, reflecting a nine 9% organic sales gains of $12 million of acquisition related sales and $3 $2 million of favorable foreign currency translation.

The organic increase reflects double digit.

Slide three pieces and sales of under car equipment and in sales of diagnostic and repair information products to independent shop owners and managers.

While activity focused on OEM dealerships was essentially flat.

As compared to 2019 levels net sales increased $41 7 million from $322 7 million.

Reflecting a seven 4% organic sales gain $13 $5 million of acquisition related sales and $4 million of favorable foreign currency translation.

Gross margin of 46, 8% declined from 47, 3% last year, primarily due to the impact of higher sales and lower gross margin.

Businesses increased material and other costs and 10 basis points of unfavorable foreign currency effects. These.

These declines were partially offset by savings from RCI initiatives, and 60 basis points of benefits from acquisitions.

As a reminder, under car equipment, which had healthy sales increases in the quarter typically has a gross margin rate.

That is below the arsenide segment's average.

Operating expenses as a percentage of sales of 23, 9% increased 180 basis points from 22, 1% last year, primarily due to 170 basis points of unfavorable acquisition effects.

Operating earnings for the Arsenide group of $83 3 million compared.

Compared to $80 $1 million last year.

The operating margin of 22, 9% compared to 25, 2% a year ago.

Now turning to slide 10.

Revenue from financial services of $87 $3 million.

Compared to $85 $8 million last year.

Services.

Operating earnings of $70 6 million compared to $65 6 million in 2020.

Financial services expenses of $16 $7 million decreased $3 $5 million from 2020 levels, primarily due to lower provisions for credit losses, resulting from favorable loan portfolio trends, which support.

Lower forward looking estimate of reserve requirements.

As a percentage of the average portfolio financial services expenses were eight tenths of 1% and nine tenths of 1% in the third quarters of 2021 and 2020, respectively.

And the third quarters about 2021 and 2020, the average yield on finance receivables.

<unk> was 17, 8%.

Expect a average yields on contract receivables were eight 5% and eight 4% respectively.

Total loan originations of $269 3 million in the third quarter increased $16 $5 million of six 5% from 2020 levels reflect.

At five 7% increase in originations of finance receivables and a nine 5% increase in originations of contract receivables.

Moving to slide 11.

Our quarter end balance sheet includes approximately $2 2 billion of gross financing receivables, including $1 9 billion from our U.

Reflect ratio.

Our worldwide gross financial services portfolio increased $7 $5 million in the third quarter.

The 60 day, plus delinquency rate of one 4% for U S extended credit compared to one 5% in the third quarter of 2020, and one 7% in the third quarter of 2000.

Our team.

On a sequential basis the rate is up 20 basis points, reflecting the typical seasonal increase of 20 to 30 basis points, we experience between the second and third quarters.

As it relates to extended credit or finance receivables trailing 12 month net losses of $42 $7 million represented too.

98% of Outstandings at quarter end down 22 basis points as compared to the same period last year.

Now turning to slide 12.

Cash provided by operating activities of $186 $4 million in the quarter reflects 92, 5% of net earnings.

While this represents a decrease.

$7 $6 million from 2020 levels. This cash conversion rate compares favorably with 77, 5% of net earnings in both the third quarters of 2019 and 2018.

The decrease from the third quarter of 2020, primarily reflects the higher net earnings being more than offset by net changes.

Of 30, <unk> assets and liabilities, including a $61 $9 million increase in working capital. This change in working capital is largely driven by the more typical seasonal inventory build in the third quarter of 2021 as compared to the reduction of inventory you experienced in the period last year.

Inventory additions also reflects.

And aqua increases and buffer stocks and higher levels of in transit inventories associated with the supply chain dynamics being seen in the macro environment.

Net cash used by investing activities of $29 7 million included net additions of finance receivables of $7 6 million and $16 2 million of capital expenditures.

Flex.

Net cash used by financing activities of $385 $8 million included $250 million in senior note repayments.

Cash dividends of $66 $3 million and the repurchase of 300000 shares of common stock for $66 $5 million under our existing share repurchase programs.

As of quarter end, we had remaining availability to repurchase up to an additional $197 1 million of common stock under existing authorizations.

Turning to slide 13.

Trade and other accounts receivable increased $12 $5 million from 2020 year end.

Days sales outstanding.

Standing at 56 days compared to 64 days at 2020 year end inventories.

<unk> increased $43 1 million from 2020 year end on a trailing 12 month basis inventory turns of $2 seven compared to two four at year end 2020.

Our quarter end cash position of $735 $5 million.

Compared to $923 4 million at year end 2020.

Our net debt to capital ratio of 10, 3% compared to 12, 1% at year end 2020. In addition to cash and expected cash flow from operations, we have more than $800 million in available 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 third quarter performance I'll now briefly review a few outlook items for the balance of 2021.

We now forecast that capital expenditures will approximate $90 million.

In addition, we currently anticipate.

Absent any changes to U S tax legislation that our full year 2021 effective income tax rate will be in the range of 23% to 24%.

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

It's out.

The snap on third quarter can be summarized in one word.

Momentum.

Our markets are showing extraordinary possibilities almost across the board with auto repair the most advanced going beyond resilience.

We saw the COVID-19, playing out with our customers in three phases shock interruption in the face of virus uncertainty accommodation of gradual.

Learning to pursue essential work, while staying safe and psychological recovery of competence in the future and a return to normal buying.

But now we're seeing a fourth phase exhilaration of certainty that were that we were moving sharply to higher levels ignited by the conviction that we have met and manage.

The virus and they won't and that we won't get shocked again, it's a bright outlook and snap on with continuing invest investment in product and brand and people is well positioned to serve that trend.

Of course, the Covid is still lingering and its side effects inflation supply disruption around the loose, but snap on as strongly or rates are right.

Page those challenges.

Our direct selling model and strong brand position enables agile pricing our vertical integration in shorter supply chains make us less vulnerable to sourcing viscosities, our broad product line more than 80000, Sku's supports flex a flexible marketing to guide around shortages and our RCI culture drives.

Cost offsets.

We found opportunities on a runway for growth and improvement even amidst these challenging times and you can see it in our numbers.

Encouraging.

C&I sales up from both from last year in 2019, Oi margin of 15, 3% strong and rising 130 basis points.

280 basis points versus 2020 in 2019, respectively, our C&I up organically nine 9% versus last year and seven 4% beyond the pre pandemic levels Oi margins of 22, 9% in the tools group organic volume rising three 7% versus last year's record level and up 20.

6% versus the days before the virus Oi margin. It was 28% up 140 basis points from last year and up 700 basis points from 2019.

It all led to a corporation being organically up 7% compared with last year and a strong 11, 1%.

Versus pre pandemic numbers.

Overall Oi margin was 19, 4% solid in the face of turbulence in our credit company navigating the uncertainty without disruptions.

Profit is up delinquencies down and.

And EPS $3 57.

Rising emphatically versus all comparisons.

We have emerged from the virus stronger than when we entered in the numbers confirmed.

We've now recorded five.

Five straight quarters of above pre pandemic performances, and we believe that with our markets, reaching beyond resilience to exploration with the capabilities of our model to overcome the challenges of the environment and with a considerable advantage.

Intrigued by our continuing investment in product brand in and people will continue to rise maintaining our upward trajectory through through the end of this year and well beyond.

Now before I turn the call over to the operator.

I want to speak directly to our franchisees and associates I always know you listen.

This.

And it's not a period of great momentum or snap line.

You are the fuel that has ignited and fan that drive forward and upward.

Success in creating this encouraging performance.

You have my congratulations for the capabilities, you bring to bear and achieving our progress everyday you have my admiration.

And for your commitment to our press.

And your confidence in our future you have my thanks.

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

Thank you.

If you would like to ask a question at this time, please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function is turned off.

Off to allow your signal to reach our equipment.

Again press Star one to ask a question we will pause for just a moment to allow everyone the opportunity to signal.

Our first question is coming from Christopher Glynn with Oppenheimer. Please go ahead.

Hey, Thanks, good morning.

Chris So.

Snap on tools like what's really good sequentially.

Usually down about 5% seasonally I think it was down about half that suggests little incremental commercial execution taking place.

Wondering if you think I'm looking at that a little too closely or you know how you might characterize that well I think look I think I think we're certainly on an upward trajectory. So that would include better sequential performance I think that that's quite true where freight.

As I've used many times in my comments, we were encouraged by this performance and.

And they seem to be rising.

If you looked at pre pandemic levels, which is the appropriate comparison uptake.

And their operating margins are strong.

And you know this is a turbulent time and they're managing over it.

I'm doing well.

Okay.

Curious.

You talked about vertical integration in shorter supply chain, that's clearly characteristic but.

Not necessarily for every product you have so I'm wondering if you did kind of have kind of a general kind of quantification of any revenue gaps in the quarter that created some backlog build given.

Given the widespread die now CFO.

You know I I.

Not that I can put my finger on and look I mean, the thing is the place you would you would expect to see that might be in the critical industries, where we have a huge range of products. We put together. These big kids and you have to ship them complete and I'll say it might have a kit.

With a thousand.

Items in it and you have to ship it completely at that business was up pretty well in the quarter C&I was up nicely in the quarter and that let critical industries led the way, but I don't think I can put my finger on any of that of course, we had some of that.

We overcame it.

Part of it is like I said agile marketing allowed allowing yourself.

Okay, I've got something else to sell.

So I think generally it's not it's not like we weren't without impact.

We kind of overcame but it's sort of like you remember you probably don't remember this a Saturday night live Rosanna Rosanna Diana it's always something and is this just a something of the day and it's our job as managers to get through it.

[laughter].

School of management and so.

So also just to comment on the balance sheet. The stock's down five 6%. This morning, you've got actually a T compounding nicely off a 16% prior year organic.

Any kind of a fresh thoughts on using the balance sheet too.

Yeah.

Address what's maybe like a little disconnect between performance and reaction.

Well I don't know the electrodes that are implanted in my body, giving me the stock price at every moment I.

I haven't looked at yet no actually we didn't see that it was down as a thoroughly but look I don't know we take advantage of we take advantage of situations.

Situations. So I don't know if we say that we're trying to be agile in terms of share buyback. So I'll just leave it at that.

Thank you we will now move to our next caller next we have Scott timber with C. L. King. Please go ahead.

Good morning, guys and thanks for taking my questions.

Sure.

Could you break out within the tools group I don't know if you gave us before.

And tools versus some of the bigger ticket items, so how those two <unk>.

I'm trying to get off the quarter by quarter train of.

Looking at product line.

Because I don't know that I mean that much but I will tell you that hand tools were down this quarter actually versus what we're you know I would say incandescent levels of Q3, and the bigger ticket items, we're up in aggregate double digits.

So I think I think that kind of sets a sort of a reversal of what's been happening lately.

And that I think that gray actually even though their margins to 28, 8%, 28% that's kind of a drag on margins because of the highest margin businesses handfuls for us.

And in the tools group, so that's kind of an interesting.

Observation I think to that regard, but it seemed like at least for our franchisees.

Tool storage and diagnostics were getting a little more prominent at this time of course euro versus the pre pandemic levels. They were all up nicely.

They'd have to be to contribute at a 26%.

Yeah.

Right, so but at least on a year over year basis, we're talking like last year's to hand tools were just through the cancels were down.

Now, but you know okay like I said before just kind of it's always something they go up and down like that you can't read too much into a quarter, but that's what happened, but we kind of think that boy. It was encouraging to us to see tool storage come back double digits in diagnostics would be nice as well.

Alright, and then the SFC.

Anything that stood.

That sounds like everything was up year over year or even versus two years ago.

More importantly is there anything any products or any one area with lower line that really stood out I don't know no I wouldn't say I don't see I don't think so it seem to all be good I couldnt parts between though of course, there are variances in that I.

It's all sorts of different popular rest of SFC actually.

But you know I want to point out Scott. These are all in their.

Their orders.

And so you never know the SFC, great SFC doesn't guarantee a great finish to the year or first quarter next year, our bad SFC. It doesn't doesn't dorm you to a bad one because you have a lot of.

I think that goes on between August and the end of the year in terms of selling and ordering and so on but it's better than a poke at it I would a sharp stick when everything is everything is up double digits and if you were there you would've been impressed I mean.

The franchisees are pop I really mean, it they were I've never seen a more enthusiastic that's.

I think you get the idea of acceleration I think.

We're going beyond resilience when youre looking at the auto repair market in this situation.

Got it and then last question on the EV side I know you guys have worked with Oems and have gained some I guess a bit.

Business related to tool.

That's why we put our specific and diagnostics to Evs.

Some of that embedded in some of the artists and I of increases that you talked about for this quarter. Yeah. It's a it's actually yes. We are we have a couple of projects in this in this quarter I think they are extending.

We have one project is extended for a couple of quarters.

Kids, but it added a couple I think another vehicle this quarter, where we have from one big manufacturer, we don't like the name them, but they are four or five EV models that are coming out and we're providing a package to dealerships and metered out proportion.

Across the country. So there's some of that there and then of course, you've got dealer FX.

That is.

Quarters come into fruition, but was up nicely quarter over quarter still a little bit of a drag in terms of margin and it sounds like here year over year, so that that was pretty nice.

We're seeing ourselves kind of get on that EV trained getting any early warnings of all these things are early warning I mean, when you are with the when you're when you're getting projects with the OEM. That's an early warning on what the.

Still it's going to need by the time, they get into the business and as <unk> grows we have a sort of like a neural network of early warning to see whats happens in the garage. So we're kind of positive about that but as you know there aren't that many on the road yet.

Got it that's all I have thanks again, okay sure.

Vietnam, you'll go to Luke junk with Baird. Please go ahead.

Good morning.

Good morning, Hey, Scott two questions. This morning first Nick you touched on the benefits of vertical integration in your comments to wrap up the prepared piece.

A lot of investor attention right now being paid to the supply chain issues.

Issues in environment generally speaking.

Hoping you could expand on any steps that you've taken going into the fourth quarter next year of course, we can see overall gross margin up 30 basis points year on year. This quarter, you mentioned RCI related benefits I'm sure. There are some other factors going into that would it be safe to say that you feel like you're on the front foot in terms of.

Dressing the current supply chain environment.

You know who knows you know I mean every day, there's something new but I think what I was trying to say was Lukas we do take steps and our model enables those steps to be particularly efficacious.

The vertical integration means that we don't buy that much.

The stuff is in our house you know if you think about a handful raw steel comes in the back of the factory and basically we had very little when it comes out so you're worried about steel we buy steel in the U S source of supply chain, we buy we buy some of our chips in the U S.

You know and and closer places so that's that's not bad.

At that board those kinds of things so we have those things.

As well as one of the advantages we have a look and we do this we're very aggressive in spot buying.

So we go out spot buy because we don't buy we don't buy large quantities of any one thing.

If you're an auto manufacturer you know I used to be import youre buying something for the new Mustang or for for the Ford focus or wherever it is you're buying a lot of stuff.

Most of it's hard to it once that once that supply chain.

Disrupted because of the Shanghai Port closes because there were a couple of cases, you kind of have trouble to move or get any alternative well, if you're only buying a little bit you can go out and find them you find them in the stores just because of the system and we have our guys actively doing that that's why we're not seeing so much so much.

Stop at a shortage that may maybe so little cost increase, but then we're agile pricing.

So we don't have such a big problem in that regard I'm not saying, we're not actively working because boy our people are putting a lot of energy into it but if you look at the numbers pretty well managed.

Thank you.

And then maybe this might be a question for Aldo curious what insights you draw looking at your current credit metrics in terms of any mechanic customer health and borrowing capacity from here I guess, specifically I'm looking at the fact that the finance bad debt expense was down quite a bit the last couple of quarters now and while originations are up.

The tools group topline is certainly growing quite a bit faster than origination, especially if I look on a two year stack basis.

Just any thoughts there as well as you know if theres any qualitative feedback from franchisees that'd be interesting as well thanks.

My view would be that I think technicians themselves are in a better financial position than where they were maybe a year or two years.

For them back ago, I think that's a broad statement that applies to.

Many industries I think you hear that out of the big banks I mean customers are better servicing their debt than they were before I think they have more discretionary power spending and so far they've been applying it to their indebtedness and I think we see the same trends.

It's our.

Up to capture that incremental savings that they might be seeing if they are not borrowing as much as before and capturing business with the tool sales and I think you'll see that so the snap on tool sales being up more than originations I think as I applaud the tools group, but being able to in place customers to buy more stock because they have more money from what you read from the Bureau of Labor statistics.

Our job at visual way does it feel pretty darn good so they seem to be strong they seem to have more flexibility in what they choose to buy and they seem to like to buy our products. So again, they're in a better position I think than they were a year or so ago of course every quarter brings potential new changes, but right now it's been running very favorable.

<unk> result of that our going forward provision rates are lower than they went they might've been a year or two years ago was going back prepayment on it simply because of the debt servicing trends.

Great. Thank you Pat and I will go ahead and leave it there. Thank you.

Thank you next we.

Mr. Gary pressed the piano with Barrington Research. Please go ahead.

Yes.

Good morning, everyone.

Hi, Eric.

Got it got a series of questions here first of all.

As you as you talk to your franchisees you say they are like really pumped.

What can you cite like too.

Those are three reasons why they are so optimistic.

About.

Per industry for the next year or so that's reflected in their order rates.

Well I think I think it's a couple of things I think one is that.

You know, they're seeing their customers with technicians in the garages.

Feeling the benefits of people sort of pivoting back toward individual transportation. So people are driving more you look at the miles driven are up.

So you can see that and that makes them feel good I think.

This.

So something that you could logically figure out, but they are seeing the fruits of it now.

You can see that boy their wages are rising theres a lot of there's a lot of stories out of route and what the rack, but they're clearly rising the BLS data shows them rising both for year over year and the Rolling 12 months and you can see it in the garage.

And that's a reflection, yes of the dirt, maybe but there's always been a dearth of mechanics. It's a reflection I think of it is not so easy to get people in there because what they're doing now is a particularly advanced skill and this is starting to dawn I don't know Don on them is the wrong word, but starting to be reinforced.

In forest in their mind about that.

And then I think they're feeling what I would say as a general optimism that comes out of having felt like they've engaged and manage the COVID-19.

Garages had been working for the whole time, so why Wow Wow.

The news you know when you consider the news and everybody.

Rogers appropriately worrying about Delta and all these things people are it's not that they're not keeping themselves safe, but they're saying hey, we can deal with this we're not getting shocked again whatever happens we're not gonna be interrupted we're going to keep going our upward trajectory is happening.

In a crazy way I suppose some of this is sort of you can see the sort of.

As <unk> heard of that came out of the you know in the twenties. After the the flu. The last time I can feel that in the garages I feel with them a lot of different places.

You certainly feel in a garage in your field, where a franchisee and that's translating back to them and then finally I think our franchisees in particular.

Ah recognizing that our products are more effective than ever they have great faith in those products and they're feeling.

I was with the national National franchisee itself a national lab.

National Franchisee Advisory Council 12, guys from all over the country and they're feeling there.

The things we're doing in terms of social media in terms of RCI and the van at terms that are better training are giving them more selling time, so you'll get on a van like was that just on a van in California.

Southern Cal and this Guy says yeah, I now find out if I follow the program I can I can reach more technician, he's talking about reaching more technicians than they could before.

One of the things that are making.

Okay, that's very encouraging and then in terms of you saw strong double digit growth in orders out of the snap on franchisee conference what what was the growth in orders.

Well, the 2020 conference and even particularly in the 2019 conference.

Off the top of your head do you remember how you came out.

But it wasn't double digits.

And it wasn't it wasn't as you know it was probably I. If I remember last year was kind of a little bit less cross sort of across the board at 19, It was probably dip.

Different ups and downs. So some guys are up some.

I'm talking about guys, because I'm thinking of the product manager.

Some areas were up double digits and others were down this thing was across the board double digits. It was Basel.

This is Dan.

Yeah, Great and then just lastly on the diet.

Before you go away from that I want to emphasize like I said before this is the orders not sales.

It's directionally indicative not you know, but better than a poke in tonight with a sharp stick intelligence you come away feeling good about this we feel good about this better than we have of any at SFC that ive been around here.

Okay, No that's fine and then just lastly on the diagnostic side.

As older cars come into the park that has a Dallas is that directly affecting.

You're in demand for some of your diagnostic products.

Yeah, well, it's actually broadly spoken I think its if at first it its certainly as its affecting that firstly.

It's affecting the demand for Mitchell, which is up nicely because Mitchell has got a very complete suite and at that kind of thing.

And then its also helping to drive the equipment business because the equipment I remember I talked about the equipment business is holding up this conference. This conference calls go.

What you do and so.

And so the the.

The truth with Eas system, which I talked about I think is something that is helping drive that under car equipment growth and Thats, where you set up a system that helps caliber that physically calibrate the system and.

I wanted to touch and it's also driving some of the diagnostics, but the diagnostics with their intelligence features are are are probably yet to feel the the impetus from that.

You'll see it coming in in the you know in the future quarters.

Okay. Thank you sorry about that.

Okay.

No problem.

Yeah.

Thank you we will now move to Liz Suzuki with Bank of America. Please go ahead.

Great. Thanks for squeezing my question could you talk about what you're seeing in cost inflation and how much of the organic growth in the tools segment is impacted by price increases.

The garage through those cost increases.

Uh huh.

I you know, we're not going to go into that necessarily I would say you know there is some price increase in there I wouldn't say, it's the the major portion of the the the organic growth.

Because the biggest price rolls.

The Paas system, we're seeing some cost increases, but the tools group has been able to manage that somewhat.

You do get pricing offsetting cost increases it tends to depress your tends to knock down your margins because of of course, you get a dollar of sales and a dollar of cost that tends to do it but it doesn't but it wasn't a major effect in this quarter.

Got it and then you know Nick and although I think you both touched on this a little bit in the prepared remarks and in the Q&A.

About supply chain disruptions I mean from a competitive standpoint does this create an opportunity for snap on to meet the needs of your customers. While some of your competitors. It may do more importing maybe more constrained on inventory.

Sure well I don't know I don't I can't speak for my competitors about being constrained actually in reality.

I'll tell you the truth lives.

We.

Snap on is kind of interesting it kind of works on itself, our technicians either decide to buy snap on.

Or they decide.

<unk> to buy another group of products.

Hard to choose from another group of products, they hardly ever say, Oh, I'm going to buy another product and then say Oh I'll settle for the snap on has the other one isn't available so I'm not sure how much that helps it certainly puts us in a better position to grow and probably capture new customers, who might not be serviced by these people.

Some of that I think but I don't really like to talk about the competition, because we really compete against ourselves pretty much the better we get the more the more franchisees capability. We have the more they are able to sell the better Alkalotic says the more it grows regardless of what the competition does.

Great I understood. Thanks very much.

Sure.

Kim next we go to David Macgregor with Longbow Research. Please go ahead.

Yes, good morning, everyone.

Alright.

Wanted to just start off by building on the last question.

And I guess it would appear now so you're offsetting a lot of the cost inflation with volume growth in RCI.

Hi.

And I'm just wondering what your expectations are for <unk>.

Pricing going forward and your ability to price some of that cost inflation going forward rather than relying on volume growth.

Hi.

Well look I think I think.

First of all I think I tried to make the case and I think.

I think true that we have a lot of insulation against that.

We believe that we can price.

As we need to.

Because you have you have you know we have we have a direct model in a lot of cases, where we're direct to the end customer versus some other people who are going through.

It's quite layers and then secondly, the brand position allows us always to be the price leader.

So we pretty much priced relative to our prior products.

When we're doing normal pricing David.

Bringing out a new product, we're looking at where we operate.

Really where the competition so generally I.

Several of them to the extent, we see court costs are rising we can price against that.

I don't have much to worry about that you know this is probably not in every nook and cranny of our business, but I think it's a it's true in most of our business, particularly given that given our brand position.

Got it.

Next.

I think it really is there a way to sort of help us understand just what sales growth was off the truck with the sell through growth was in the quarter I can tell you exactly it was about the same as the sales growth to the truck.

Okay.

Sure.

I don't I can't give you much insight on Huawei.

Next question goes up and off the truck so much with such precision, but whether this is pretty much the same.

Pretty close.

I'm just characterize how would you characterize truck level inventories right now and maybe it anyway.

Hand tools versus you know the bigger ticket items that would be helpful.

You know I don't I would say.

Say, everybody I talk to seems to be looking at for tool storage.

Now of course, that's a windshield survey your kind of familiar with us, but but the thing is is that you.

You you seem to see I think there's a need people want a little more tool storage I think inventory if anything.

Probably down some.

Versus historical levels, because yes, this quarter, we had equal but in past quarters sales off the truck kind of exceeded.

Our sales to the truck. So I think we've had you know if you look back over the last 345 quarters six quarters, you've seen that sales off the truck exceed it so.

So I think the inventories are kind of down I don't know what that means you know I'm not sure that there's going to be a restocking or not I kind of get the feel that maybe you know they may restock certain practice.

George was nice this quarter I didn't go up you know.

Two the ban we had a nice big.

Big ticket was nice double digits this quarter. So it was kind.

And a little bit of a reversal of what's been happening previously.

<unk> seen it yet fully in the in the in AR and the and the originations I guess, but look I think there's a couple of things I think one it takes a while to work through that and then secondly, I think people are you know kind of a pay down their credit so they've got they're kind of in a situation.

Asian, where they're able to buy some things that they are able to finance themselves.

Great.

To put it out to pick up on your comment about credit it seems like there's been and you've talked about this yourself, there's been more rotation towards revolving account credit as opposed to extended credit over the last year or so.

And just thinking about.

And how that's playing out now your franchisees, obviously, they're a little more liquid.

So maybe in a better position to be able to provide the revolving account Oh credit.

Just wondering what if you could update us in terms of what credit penetration rates look like for big ticket right now once upon a time I think you've told US Big ticket was up was about 90% credit.

Diagnostics was 50 to 60 per cent credit.

Hum.

Penetration has looked like and kind of this new world and I don't really have nothing I don't really have that number but it is somewhat lower now.

That'd be sure. If it is part of it is part of it is because I think it's just what you say question was a little more frosch. The franchisees are a little more liquidity, but.

But make no mistake about this optimism floats in this.

I mean, the franchisees get a little bit more optimistic and they say hey, if I can put a dollar in our a I'm going to get it back. It's a great investment for me why would I put it in the bank.

So they're there theres some theres some of that flow through the franchise system I what I.

Well I'll give you is I think for sure is that the customers themselves have unused credit our untapped credit capacity.

So that will come up we haven't really seen there wasn't rotation at the beginning of the of the of the virus period toward our rate, but this quarter I'd say, it's kind of stayed solid.

I will weigh in and you see it.

As last quarter and maybe the quarter before that was the same way so it's kind of and found that equal.

Equilibrium right now, we'll see how it plays out going forward.

And then add onto wherever it goes it hasn't whatever it is it has it didn't impact our big ticket sales this time.

Yeah, congratulations on the contract <unk> nine.

0.5 versus the finance receivables of $5 seven.

Originations growth.

Contracts went out in front of the finance receivables for a while now do you expect that to continue or do you see that at some point you're nearby.

Getting back to a more equal level, and maybe finance receivables getting to a faster level of growth in contract.

Contract receivables tend to.

Run up a little bit with the snap on franchisee conference because it gets some short term loan financing arrangements there, but no. There's nothing structurally there that would say that the E. C will not get back to higher levels and actually she was pretty decent.

The U S was above the average in this case so they had strong performance in there was nice originations.

David in both tool storage and diagnostics in the quarter.

Last question for me is just a social media sales and.

You've kind of alluded to this new comments, Nick about online sales, but.

Don't have to look very far online dispute franchisees.

Selling tools to Facebook.

And in other platforms.

Just talk about how you foresee that growing and does that accelerate does that help you in terms of money actually.

David David I wasn't in my comments I wasn't talking about the seller.

Talking about using social media to inform our customers about.

About product and promotions and other things, which.

These up face to face time for actual selling.

I don't really see social media sales is growing that much I mean, it's not much of a factor right now now it might but I think generally the you know.

By and large.

The overwhelming use of electronic media via the <unk>.

Franchisees are just that to try to orchestrate. Okay. I want you to know about this when I come in I'm going to tell you why you need at.

That kind of thing.

Productivity builder.

Sure. Thanks.

Thanks, very much gentlemen.

Okay.

Thank you.

We have time for one additional question. Our final question comes from Bret Jordan with Jefferies. Please go ahead.

Rhett Jordan.

Hi, Good morning, this is actually Ethan only on for Brett.

Okay.

Yeah could you just provide any color on the sales cadence throughout the quarter.

Say that again I didn't quite hear did you say it again, please sales cadence.

That's correct yes.

Yeah, well it was a pretty much the same as past quarters.

You know I think I think are generally.

Lynn.

Little bit interrupted.

If you want to go back to I'll give you. This if you go back.

Two years beyond the Covid era.

Third quarter was particularly aberrate it by the <unk> conference.

You get kind of a week.

Early couple of months certainly early one month in the quarter July was like a wasteland.

So then things would come Roaring back when you got the SFC people would be keeping our powder dry pretty much. The last two years, we've been able to get out of that by a number of artifice isn't so it's a much more.

<unk> standard.

You'd have a course of quarters for four five and so you get kind of that kind of distribution, maybe with a little a little higher number in the in the last quarter, but it's nothing particularly special.

I think this quarter of course is above so each quarter, you know its kind of going.

Sports you know versus its prior numbers and so you feel like the.

The upward trajectory you can see it if you look very very closely at the month to month numbers in a quarter as you're going through as we're going through the months and the quarters and the years upwards.

But not.

Difference in distribution.

Except for that sort of general monotonic trends.

Understood that's helpful. Thanks.

And then another one here on the corporate expense it was pretty high at 34 million Bucks up about $10 million year over year, and 5 million sequentially and I know you mentioned sort of.

Performance based.

Not much has been some brand building costs, but anything outside of those two buckets.

Yeah.

Well the SFC was wide this year.

So you'd think let's.

Think of it this way Okay. We had brand building. We had expect we had start with we had comp expense base caught and this was our celebration.

One of our 100th anniversary.

So the SFC and you know the celebrations.

Celebrations, we had there were bigger than better bigger and better than any prior year. So you have some of that into your situation because of the franchisees are investing in the company I think I said they are positive about the days in decades.

<unk> com.

Snap on and so that merits a little bit of celebration when you reach a centennial milestone. So there's some of that in there.

Sure. Thank you and then just one last one if you don't mind.

Given the strong business performance and cash flow and I know you sort of mentioned opportunistically repurchasing repurchasing shares but.

Share repurchases.

Just stand in terms of capital allocation capital allocation, given where the stock's trading where we are a core piece capital allocation, where we tend to be working capital investors you know what I mean I know this is a working capital intense company. So when we grow we tend to the COVID-19.

Kind of changed not changed but obscure that dynamic somewhat but generally as you grow you have working.

Capital then we look at acquisitions, we believe we have we have runways for growth, particularly in and repair shop owners and managers in the garages are in and maybe in C&I in some place and we've done some of that the dealer FX. As an example, we have a dividend that we've.

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

So when we take a look at our dividend with the intent of perpetuity and whether we should increase it or not and when you look at that carefully and then we are agile about share purchases or you have kind of a four way look at that and they are all.

They're all a draw on what we might do with cash depending on the situation.

Great. Thank you very much.

That concludes today's question and answer session. Mr. <unk> at this time I will turn the conference back to you for any closing remarks.

Thank you all for joining us today, a replay of this call will be available shortly on snap on dot com.

Always we appreciate your interest in.

In snap on good day.

Thank you all for your attention. This concludes today's conference call. All participants may now disconnect.