Q1 2022 Snap-On Inc Earnings Call

April 21, 2022

Please standby we're about to begin.

Good day and welcome to the snap on incorporated first quarter 2022 results Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Excuse me, Mr. Arab Ski Vice President of Investor Relations. Please go ahead ma'am.

Thank you Jos and good morning, everyone. Thank you for joining us today to review snap ons first 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 already snap ons Chief Financial Officer.

Well kept kick off our call. This morning with his perspective on our performance Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts we'll take your questions as usual we've provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our web.

Site staff on Dot com under the investors section.

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 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 those measures is included in our earnings release issued today, which can be found on our website with that said I'd now like to turn the call over to Nick Pinchuk, Nick Thanks, Sarah.

Good morning, everybody.

As usual I'll start the call by covering the highlights of our first quarter and along the way I'll give you my perspective on our results they are encouraging.

Our market still looking positive and our progress we believe we are stronger than ever.

Well I'll just speak about what it all means and we believe it means that we're positioned for more much more.

Then Aldo will move into a more detailed review of the financials.

These are interesting times.

Filled with multiple axes of turbulence, but you know this isn't our first rodeo we know it's always some.

And it's our job to confront them to overcome with the resilience of our markets the strength of our strategic and tactical advantages and the insight and energy of our consistent a capable team.

And we've done just that.

Here are the numbers that support that view.

Our reported sales in the quarter of 1 billion $97 8 million were up seven 1%, including eight five.

Five 5 million in acquisition related activity of $15 7 million of unfavorable foreign exchange organic sales growth was 8% with gains in every group.

And compared to the pre pandemic levels in 2019 are clear upward drive shines right through versus 2019 sales in this past quarter Rose 19, 1% as reported and 16, 9% organically.

In fact, it's our seventh straight quarter being above the pre virus levels.

We believe we're continuing an ongoing trend of accelerating expansion momentum, increasing higher and higher demonstrate that we're only getting stronger.

Every day.

And contributions from our snap on value creation processes safety quality customer connection innovation and rapid continuous improvement or RCI, all combined to drive that progress and progress there was.

Opco operating income of $223 1 million increased $22 2 million from last year the operating margin.

It was 23% up 70 basis points from last year, and 120 basis points from 2019 as adjusted for the favorable legal settlement in that period.

For financial services operating income of $70 4 million increased 7.8% and credit losses were down continuing the positive trends. Despite the lingering effects of the pandemic and.

And that result, combined with Opco for a consolidated operating margin of 24, 8%, a 90 basis improvement from last year and 120 basis points from the as adjusted 2019 results.

First quarter EPS.

It was $4 up 14, 3% from last year's $3 50, and 32, 9% above the as adjusted $3 <unk> recorded in 2019.

The risk of repeating myself.

We believe snap on is stronger now than when we entered this great weathering in our first quarter results are solid testimony.

Now, let's talk about the markets.

Yeah.

Auto repair remains.

Resilience I think we'd say spending on vehicle maintenance and repair was up and technicians are earning more than ever they've been working performing a central task, making a nice living there. They are undaunted by the turbulence 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.

<unk> changes with new technology, and all of that all of that has led to an expansion in the ranks with automotive with the automotive repair technician count moving upward at its highest point, where I think at least third three decades and.

In the shop owners and managers will tell you theres a need for many more.

Vehicle repair a straw is a strong and resilient market you can hear it in our franchisees' voices you could feel it in the technician's wallets and you can see it written across our numbers.

Also in auto repair you know spin are right next to the attacks are there our shop owners and managers were repair systems, where our repair systems and information group, our C&I applies at St <unk>.

<unk> for new and used cars is high despite the limited supply despite the limited supply.

Dealership repair maintenance and warranty is rebounding and dealers are starting to invest again, new vehicles are being released with a greater variety of drive trades with a greater variety of drivetrains and ever from internal combustion engines.

From internal combustion hybrid plug in electric the full electric and the range of options is growing more driver assist more vehicle automation increasing vehicle complexity.

I'll tell you, it's all music to our ears, and we've been able to take advantage with our lineup of intelligent diagnostic products, including the Zeus the Triton and the Apollo handheld units with our celebrated Mitchell one pro demand repair information Our award winning two point advanced driver assist calibration system and our three D alignment systems.

The new Hoffman G aligner, all representing new technologies, and big data deployed to make work easier right in the shop.

Vehicle repair looks more promising than ever.

And snap on is poised to capitalize.

Finally, let's talk about critical industries with snap on rolls out of the garage solving tests of consequence.

This is where C&I operates the most international of our operations and these are the customers that continue to be impacted hardest by the lingering virus, but they remove they've been recovering and in the quarter. Our results showed that trends. Despite some significant headwinds like supply chain disruption commodity cost increases some.

<unk> business sectors like the military and international Aviation Interdigital Aviation Aerospace and trouble geographies conflict impacted countries and those more pronged business interruptions that the mean as a means to control the virus.

C&I had at all.

Despite the despite the variation, though we did see growth improvement in a number of geographies Asia and Europe and in a range of sectors like general industry education, and natural resources. The all combined to author organic growth against the continuing turbulence.

Overall I describe our C&I markets is challenged but unfolding and looking forward. We believe they represent clear opportunity feeling in the overall picture. We believe there has been substantial progress along our runways for growth enhancing the van network <unk>.

Expanding with repair shop owners and managers extending to critical industries and building in emerging markets, leveraging our broadening product lines wielding our strong brand and deploying the increasing understanding of the work that is the hallmark of snap on people even in the throes of the pandemic shock.

Two years ago.

As we entered the virus.

You all remember this.

Two years ago, when we entered the virus.

We recognize the resilience of our market and the strength of our model.

And projected a V shaped recovery.

And that's how it played out.

You can see it in the trends.

Now, let's turn to the segments in the C&I group first quarter sales were.

We're at $340 1 million down $5 6 million due to $9 2 million unfavorable currency.

And $3 6 million or one, 1% and a $3 6 million or one 1% organic grower.

As we said across C&I results were mixed but the period did see gains in Asia, with Japan, India, South Korea, Thailand, Indonesia rising in Europe was also up with Sweden, Belgium, Poland, and France, leading the way C&I operating income was $45 7 million.

Down $5 million, reflecting $2 2 million of unfavorable foreign currency with the organic volume grain gains more than offset by supply chain efficient inefficiencies.

And when compared with the pre pandemic levels of 2019 sales were up five 5%, including a three 6% organic gains in the Oi margin of 13, 4% was down 100 basis points, but against the 150 basis points impact of acquisitions and unfavorable currency.

C&I has simply been more affected by the difficulties macroeconomic challenges geopolitical uncertainty varying COVID-19 conditions it makes sense.

Operation is spread over more countries and more industries, it's challenging.

But we are making some headway.

We're enthusiastic about the possibilities going forward as part of that view, we remain committed to extending in critical industries, and we will keep strengthening our position to capture opportunities as they arise.

And enabling that it turns is because our expanding line of innovative new products designed to match the demands of the industries industries that we serve and to make critical work easier.

One example.

As our family of Microelectronic torque wrenches and I've been talking about snap on electronic torque products for some time, but the smaller versions of our flagship offerings are gaining particular strength in the critical markets. Our latest connected Bluetooth model offers customers a solution when they need towards certification data in RA.

Real time the <unk>.

<unk> control Tec micro Bluetooth rich fills that requirement and combines it with the benefits of reduced size and lower weight shorter than 12 inches and less than a pound better accessibility and reduced operator fatigue, all wow, while allowing users to interface with a snap on app or directly with customers with it.

Customers operating system.

Okay.

The control Tec micro Bluetooth offers a wide range of towards 5% to 240 inch pounds and all steel body construction of progressive Leds for an <unk>.

<unk> user guidance and a 72 inch quarter inch drive, enabling efficient operation in tight areas, all with a plus or minus plus or plus or minus 2% accuracy. It's a package well suited to critical sectors like aviation and in the first quarters quarter, our customers order.

Firm that belief emphatically.

Well, that's C&I hard one progress against the turbulence.

Now onto the tools group sales.

Sales of $512 1 million up $33 $8 million, including $3 million of unfavorable currency and a $6 $36 8 million or seven 7% organic gains and double digit growth in the U S being partially offset by challenges in the international operations. The operating margin was 20.

Two 7% up 200 basis points from last years historically high levels.

27%.

And compared with a premium with a pre virus levels sales grew 24, 8% and this year is 22, 7% operating margin was up 630 basis points compared with 2019.

Tools group.

The tools group is responding to the challenges of the day, taking advantage of increasing vehicle complexity, increasing its product advantages fortifying its brands and further enabling its franchisees and the results show it.

I keep saying that but that's what's written across our performance this quarter.

We do believe our runway for coherent growth enhancing the franchise network represents a resilient and expanding opportunity and we are realizing some of that potential across the across the van channel. The evidence is unmistakeable in our franchisee metrics again this quarter they remain clearly favorable and based on those measurements we.

Believe the franchisees have never been stronger.

And they still show themselves.

And statically pumped and plans for more.

That's what they are and in our direct interactions at events like the past January to kick off.

<unk> is back again this year in person it was a great a fair well attended strong orders visible commitment to our brand our franchisees entrepreneurs.

Professionals all are enabled by their by their increased selling capabilities broadly and deeply confident in our product in there and their prospects and the company's prospects and eager to reach higher that's an important factor.

Yes.

And Theres a number of reasons for that optimism.

But a big one is rooted in snap on value creation customer connection and innovation.

All three new products, clearly, making work easier born out of a dessert observing changing work in shops on an everyday basis, just like the franchisees.

Okay.

And Thats the reason our tool storage sales were up nicely in the quarter.

Driven in part by our a buyer. It was they were driven in part by our exciting new line of mobile cards over the last several years, we've been enhancing our cards. One example is our Trs see a range of mobile storage solutions. The only professional grade cards in the market built them Theyre built in Arizona, Iowa plant I just saw.

All of them running them.

I was just there seeing those units roll down the line.

K RSC.

Our our designed for maximum strength and durability, they're construct and constructed with the with a heavy gauge steel to form a one piece fully welded body with reinforced corners, and thats, a significant and unique benefit in the mobile storage arena.

The sturdy car to make it easy to move even the heaviest tools from database.

Come in are attractive range of colors and trims.

Just like there are.

They're they're full size big brother boxes.

And they are offered in either a a sliding split top providing a usable work surface.

While allowing substantial access to the top drawer or a single piece flip flop, allowing quicker and broader access to the to the most frequently used tools. Our new card. Also has also features full wide drawers for.

Sure.

Maximum flexibility and offer a power options for charging cordless tools. The kers sees the KFC you can just say it in these three words durability versatility and functionality they are great for meeting.

Great for newer mechanics.

As an affordable way to to own some serious snap on tool storage and at the same time there were attractive for veterans.

Tractive for veterans.

Giving them.

The opportunity to improve productivity by expanding their mobility around the shop this quarter as repair work and tech wages around the rise we received record orders.

Proving that one innovation.

Meets a resilient market demands follows.

We said that vehicle repair was growing in flight was growing and it is complexity would accelerate the market upwards and it has and we're working hard to position our franchisees to take advantage and you can see it in the tools group results seven straight above pre pandemic gangbusters quarters.

Now, let's speak of ours and I <unk>.

First quarter sales rose, 56% or $50 6 million or 14, 6% with gains across the board organic growth was 13, 3% driven by under car equipment in the end.

The OEM dealership activity delivering double digit expansion in and buys the diagnostics and information products and independent shops, advancing low single digits compared with 2019 sales.

Compared with 2019.

Sales grew $73 million 21, 4%, including 56, 9%, including a $56 nine.

$1 million or 17, 4% organic gain $15 2 million from acquisitions and $1 8 million of unfavorable foreign currency operating earnings of 91, 6% increased $10 2 million from 2021, and the Oi margin was 23% down 40 basis points, but primarily due to acquisitions and <unk>.

<unk> of lower margin under car equipment.

We clearly see the potential of our our runways for growth in the <unk> group.

Spanning snap ons presence in the garage, which coherent acquisitions and a growing line of powerful products.

Organic growth in the quarter was broad based but once again under car equipment expanded at double digits and progress in one of our newest product groups collision repair helped author that positive.

And we're doubling down on that but the potential in that arena by utilizing the same broad database with deep content as used in our pro demand vehicle repair solutions Big data aimed specifically at the body shop vehicle measurements to guide bodywork repair information.

<unk> and standard shop work and calibrations to restore the sensor networks that support Aes or advanced driver assistant systems. It's a combination of rep increasingly essential for every collision shop.

And we believe it's going to be a big seller.

Lawrence and I also got a nice a nice boost from winning a number of significant extension tools and equipment programs, where OEM dealerships as we expected we started to see launches for both electric power and for internal combustion vehicles and our C&I is right at the front.

So we're quite positive about <unk> expanding position with vehicle repair shop owners and managers and are very confident in the opportunities as the vehicle industry evolves.

So thats the highlights of our quarter.

Progress in the turbulence.

C&I growing despite the headwinds the tools group strong and confident arsenide solid overall organic sales rising 8% Opco operating margin of 23%.

And EPS $4 up significantly.

And most importantly.

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

It was an encouraging quarter.

Now I'll turn the call over to Algo Aldo Thanks, Nick Arkansas related operating results are summarized on slide six.

Net sales of $1 $97 $8 million in the quarter increased seven 1% from 2021 levels, reflecting an 8% organic sales gain and $8 $5 million of acquisition related sales, partially offset by $15 7 million of unfavorable foreign currency translation, the organic sales gain this quarter principally.

The double digit growth in the repair systems <unk> information group and high single digit growth of the snap on tools group.

Consolidated gross margin of 48, 7% declined 140 basis points from 51% last year higher material and other costs were partially offset by contributions from the higher sales volumes pricing actions benefits from the company's RCI initiatives at 30 basis points of favorable foreign currency effects in the quarter.

We believe the corporation through pricing and RCI actions continued to navigate effectively the cost of other supply chain dynamics of the current environment.

<unk> expenses as a percentage of net sales was 28, 4% improved 210 basis points from 35% last year.

The improvement is primarily due to higher sales volumes savings from RCI initiatives and lower costs associated with stock based expenses. These improvements were partially offset by 40 basis points of unfavorable acquisition effects operating earnings before financial services of $223 $1 million in the quarter compared to $200 9 million.

2021 as.

As a percentage of net sales operating margin before financial services of 23% improved 70 basis points from last year.

Financial services revenue of $87 $7 million in the first quarter of 2022 compared to $88 $6 million last year operating earnings of $70 4 million increased $5 $1 million from 2021 levels, primarily reflecting continued favorable portfolio performance, which resulted in lower provisions for credit.

Losses.

Consolidated operating earnings of $293 5 million compared to $266 2 million last year.

As a percentage of revenues the operating earnings margin of 24, 8% improved 90 basis points from 23, 9% in 2021.

Our first quarter effective income tax rate of 23, 7% compared to 23, 5% last year.

Net earnings of $217 4 million or $4 per diluted share increased $24 8 million or <unk> 50 per share from last year's levels, representing a 14, 3% increase in diluted earnings per share.

Now, let's turn to our segment results.

Starting with the C&I group on slide seven.

Sales were $340 $1 million decreased from $345 $7 million last year, reflecting a $3 $6 million or one 1% organic sales gain which was more than offset by $9 2 million of.

Unfavorable foreign currency translation.

Again, a growth primarily reflects a double digit increase in sales in the segment's Asia Pacific operations, partially offset by a mid single digit decline in sales to customers in critical industries within critical industries lower sales to the military more than offset solid gains in general industry and technical education.

Gross margin of 36, 4% declined 230 basis points from 38, 7% for the firm.

First quarter of 2021, primarily due to the higher material and other input costs, partially offset by benefits from pricing actions and the segments RCI initiatives operating expenses as a percentage of sales of 23% in the quarter improved 100 basis points from 24% in 2021, primarily reflecting savings from cost efficiency.

These.

Operating earnings for the C&I segment of $45 7 million compared to $57 million last year.

The operating margin of 13, 4% compared to 14, 7% a year ago.

Turning now to slide eight.

Sales in the snap on tools group of $512 $1 million increased seven 1% from $478 $3 million in 2021, reflecting a seven 7% organic sales gain partially offset by $3 million of unfavorable foreign currency translation.

The organic sales increase reflects a double digit gain in our U S business, partially offset by a low single digit decline in our international operations.

Sales in the United States were up over Q4, 2021, as well, reflecting strong sequential performance in power tools and tool storage.

Gross margin of 45, 5% in the quarter declined 40 basis points from last year, primarily due to higher material and other costs, which were more mostly offset by the higher sales volumes and pricing actions and 30 basis points from favorable foreign currency effects.

Operating expenses as a percentage of sales of 22, 8% improved 240 basis points from 25, 2% last year, primarily reflecting the higher sales savings from RCI initiatives and lower stock based expenses related to the company's franchisee stock plan.

Operating earnings for the snap on tools group of $116 million compared to $98 $9 million last year. The operating margin of 22, 7% improved 200 basis points from 27% last year.

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

Sales of $398 2 million compared to $347 $6 million, a year ago, reflecting a 13, 3% organic sales gain and $8 $5 million of acquisition related sales, partially offset by $3 6 million of unfavorable foreign currency translation.

Again again is comprised of double digit increases in sales of under car equipment and in sales to OEM dealerships as well as low single digit gains in sales of diagnostics and repair information products to independent shop owners and managers.

Gross margin of 44, 6% declined 140 basis points from 46% last year.

This was primarily due to increased sales and lower gross margin businesses and higher material and other input costs.

Partially offset by benefits from pricing actions and 50 basis points from acquisitions as well as from 30 basis points of favorable foreign currency effects and savings from RCI initiatives.

Operating expenses as a percentage of sales of 21, 6% improved 100 basis points from 22, 6% last year.

Primarily due to benefits from sales volume leverage, including higher volumes in lower expense businesses and savings from RCI initiatives.

These improvements were partially offset by 110 basis points of unfavorable acquisition effects.

Operating earnings for the F&I group of $91 6 million compared to 81 $4 million last year.

The operating margin of 23% compared to 23, 4% a year ago.

Now turning to slide 10.

Revenue from financial services of $87 $7 million decreased $900000 from $88 $6 million last year.

Primarily due to a decline in the size of the average financial services portfolio during the quarter as compared to last year.

Financial services operating earnings of $74 million compared to $65 $3 million in 'twenty towards the one five.

Financial services expenses of $17 $3 million were down $6 million from 2021 levels, primarily due to $5 $6 million of decreased provisions for credit losses, resulting from favorable loan portfolio trends, including reduced year over year net charge offs, which support low.

Your forward looking estimate of reserve requirements.

As a percentage of the average portfolio financial services expenses were eight tenths of 1% and one 1% in the first quarters of 2022 and 2021, respectively.

And the first quarters of 2022 and 2021, the average yield on finance receivables was 17, 6% in both years.

While the average yield on contract receivables was eight 5% and eight 4% respectively.

Total loan originations of $245 $6 million in the first quarter decreased to $16 2 million or six 2% from 2021 levels.

Reflecting a five 1% decrease in originations of finance receivables and 11, 5% decrease in originations of contract receivables.

In the United States finance receivable or extend the credit originations were down low single digits.

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 S operation.

The 60 day, plus delinquency rate of one 6% for U S extended credit remains the same as both the fourth quarter of 2021 and as in the first quarter of 2021.

As it relates to extended credit or finance receivables.

Trailing 12 month net losses of $39 9 million represented 234% of Outstandings at quarter end down 21 basis points as compared to the same period last year.

Now turning to slide 12.

Cash provided by operating activities of $193 $9 million in the quarter compared to $319 $3 million last year.

The decrease from the first quarter of 2021, primarily reflects a $106 $7 million increase in working investment and higher payments for variable compensation, partially offset by increased net earnings.

The change in working investment dollars is largely driven by greater demand.

<unk> and increased receivables and higher levels of inventory this year as compared to a reduction of inventory in 2021 and.

In addition to demand base requirements. The increase also reflects higher in transit inventory amounts as well as incremental buffer stocks associated with the supply chain dynamics in the current macro environment.

Inventory turns at the end of the first quarter of 2022 are unchanged sequentially.

Net cash used by investing activities of $6 $6 million included $22 million of capital expenditures and net collections of finance receivables of $10 $1 million.

Net cash used by financing activities of $106 3 million included cash dividends of $75 7 million and repurchase of 136000 shares of common stock for $28 $8 million under our existing share repurchase programs.

As of year end, we had remaining availability to repurchase up to an additional $442 2 million of common stock under existing authorization.

Turning to slide 13 trade and other accounts receivable increased $49 million from 2021 year and.

Days sales outstanding of 61 days compared to 58 days at 2021 year end.

Inventories increased $60 3 million for 2021 year and on a trailing 12 month basis inventory turns of two eight were the same as year end 2021, and compared to two six at the end of the first quarter in 2021.

Our quarter end cash position of $861 $1 million compared to $270 million at year end 2021, our net debt to capital ratio of seven 4% compared to nine 1% at year end 2021.

In addition to cash and expected cash flow from operations, we have more than $800 million under our credit facilities.

Quarter end, there were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.

That concludes my remarks on our first quarter performance I'll now briefly review a few outlook items for 2022.

We anticipate that capital expenditures will be in a range of 90 million to $100 million. In addition, we currently anticipate absent any changes to the U S tax legislation that our full year 2022 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 Paolo.

Well, that's our first quarter.

At some level we can.

To summarize the environment by these are interesting times and the hits they just keep on coming.

But despite the challenges the quarters are pretty much playing out as we said they would.

The snap on team is prevailing against multiple axes of turbulence our markets are resilient with their essential nature shining through we expect repair spending is up tech numbers growing wages rising and the increasing complexity electric vehicles plug in hybrids improved internal combustion power plants and Eas, it's all driving demand.

Yeah.

And our continuing investments in product and brand.

And people all through the pandemic is paying off our franchisees are selling more effectively and are prospering.

And we've come out of this great withering stronger than when we entered C&I seeing the most turbulent born out of the multiple geographies a range of industries and a wide product footprint serious challenges, but still progress up one 1% organically in the quarter the tools group prospering sales up seven 7%.

As last year rising 24, 1% over 2019, Oi margin 22, 7% up 200 basis points from last year, our C&I 13, 3% growth Oi margin, 23% down 40 basis points, but more than explained by acquisitions and business mix the credit company profits up losses.

And it all came together for an overall organic growth of 8% and.

In optical Oi margins of 23% up 70 basis points year over year, and rising 120 basis points compared with before the the prepayment before the pandemic as adjusted and <unk>.

And EPS of $4.

Up versus every comparison.

It was an encouraging quarter, we have momentum and looking forward we are optimistic.

And confidence.

Confident in a special resilience and potential of our market confidence in the power of our strategic and tactical advantages.

And.

Confident in the capability of our people and experienced team that seize progress against turbulence as fundamental to their expectations.

And we believe.

That unique combination of that.

That unique combination turbulence test it will propel us to a consistent and ongoing positive trend throughout 2022 and.

And well beyond that.

Before I turn the call over to the operator out I'll speak directly to our franchisees and associates.

Many of you I know are listening.

When we say we are encouraged.

Optimistic and confident.

It's deeply rooted in your extraordinary capability and energy.

The part you've played in our success you have my congratulations.

For the skills you bring to our enterprise you have my admiration and for the commitment you unfailingly display to our team.

Have my thanks.

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

Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure it'd be a function is turned off to allow your signal to reach our equipment.

It gets starwood to ask a question.

We'll move to our first question comes from Gary <unk> Barrington Research Gary Your line is open. Please go ahead.

Everyone.

Good morning, Gary.

Nick could I, just get or from Aldo a couple of Ah I couldnt write down fast enough.

On both the C&I and the RFS and I.

What was the growth in organic sales versus Q1, 19 pre pandemic levels.

For C&I It was three 6% and I think in our us and I believe 17, 4%.

Yes by $17, four but right right right. Thank you okay. Okay. Thank you.

Could you maybe maybe just talk about how the cadence of your business.

Trended.

On on Continental Europe , and the U K throughout the quarter did it start off strong and start to wane because of the impacts of what was going on in <unk>.

Brain.

In the Russia sanctions.

No.

Look I don't think I don't think the Ukraine reached that far for US we didn't see that the conflict in eastern Europe region Fr UK was soft in this quarter.

Much a lot of different places and what we see happening I think is our opinion is the the problems or the turbulence associated with the Brexit problems Werent solved during the pandemic and they are starting to emerge a little bit more than that in that place. So I don't know.

Don't really see that it was pretty much off throughout the quarter and it was down I think it was kind of weaker last quarter too I think the international business had some some issues last quarter, particularly in the tools group so that.

We really didn't see any I would say landscaping by <unk> in this quarter.

Okay, and then a couple more questions here on in the tools group itself will really across all of your automotive related.

Segments, what kind of demand are you seeing for specialized tools and if you could cite some things that deal with Evs plug in Evs hybrids things like that.

I think they were about made up about 9% of all new car sales last year. So they are starting to get to a bigger percentage of what's being reduced.

They are those are new car sales, but they are relatively micro percentage of the car park itself. So right. So we are worlds reaction. They are new car sales you remember I like what I think they are fork. They were 14 and change last year 2015, and change this year and nine variety of that but that's versus 283 million.

Total vehicle part, but where we see them is where we see the most Gary is we're getting a lot of business and what I would call. The early warning where the Oems are seeing the idiosyncrasies associated with electric vehicles, asking us to provide different kinds of tools for dealerships that aren't normally there to accommodate them as they come.

In when they come in and so that's what I mentioned in RF deny.

That business actually was up strong that particular business. The project business was up strong double digits in the quarter.

And it led the way for US and is one of the things that drove it and a big portion of that was electric vehicles like I said, we have things. Some people will ask us to do the hand tools in particular types of products that deal with the battery and other things that tend to be as I said specifically.

To electric vehicles, and the Oems figure that they wouldn't be available in the dealership. So they ask us sort of the size of the dealership in those ways.

Is there anything on the diagnostic side that you're seeing there is there is.

Demand or need for that you supply to that segment of the market.

The diagnostic system.

Although.

The category diagnostics electric vehicles roles right in that naturally there isn't anything, particularly about electric vehicles that are different for our diagnostic systems, except for the data load on the diagnostics and so those things are happening for us, but but at the same kind of bodies and so on we'll we'll we'll work the.

Same kind of approach in terms of diagnostic is just you have to expand that what do we have like.

$2 5 billion repair records in 240 or $50 billion repair data points and that just keeps growing to include electronics electronic electric vehicles, including plug in hybrids. If you look at the plug in hybrid volume in the hybrid volume they exploded last year or two in Europe .

Okay and then.

I'm, sorry, Nick I didn't need to work through.

And just last question.

Okay last question I'll jump off in terms of tool storage.

Years ago, when tool store, which is really driving the boat.

In the tools segment has that.

Come down as a percentage of sales overall.

It's become a little bit more diversified on the growth side.

Actually well every quarter is a new story and it's you can't get excited about any quarter, but I would say the word to describe tool storage sales for us in this quarter as Boon <unk>. The thing is it was up strong.

It was one of our strongest category. So big ticket was up the thing is you might ask why weren't originations up and part of the reason is is that what I was talking about tool tool cards are lower or lower in terms of their per unit sales price that's why they.

Sweep in all these new technicians, so via via the cards, we're getting new customers as well as selling some and raising the raising our sales to old customers because their veterans and they want more in mobility, but the new guys couldn't afford it maybe I can't afford to snap on box, where am I going to get a snap on.

Snap on quality professional cart that passes for a snap on box, that's partially why our tool storage is weren't great in the quarter.

Okay. Thank you very much.

We'll take our next question from Christopher Glynn with Oppenheimer. Your line is open. Please go ahead.

Yeah. Thanks, good morning.

Yes.

So T and this kind of growth that's been enabled here.

<unk> seen some of the administrative processes and driving front end production needs for the franchisees as part of the story curious your response to that and.

Theres any specific color in sense of headroom on that curve.

Well the franchisees are telling me demand is off the charts, they're telling me. They want more I was just on a van down in Arkansas and as Guy tells me. He says you know at the SFC I order 45 full sized boxes 45 boxes and he already CE order them at the SFC and they get.

Over the phone he said out of him and he wants more because those guys are asking them. So I'm telling you I think this is why we tried to emphasize this people are driving after the pandemic and the new technology is driving demand focusing on driving a need for people who can handle the complexity focusing on the importance of technicians in there.

And their wallets are burgeoning with higher wages and more work and they're looking for more of this stuff. So our task is to be able to get our franchisees to deal with the higher sales to be more efficient and it seems like thats working and to crank up the capacity to match that situation. That's what we're doing and of course, you have to have new products one of the great.

Advantage, that's why I talked about the cards, because we had that all segment that we.

We were getting too, but we wanted to get two more in the carts hit right at the bullseye.

And so that worked pretty well for us. So those are the kinds of things that are happening there I think we could have.

I think.

Look the tools group is leaving pre pandemic levels behind if you think of if you think about their numbers look I think they are if you think about the last five quarters. They were 10, 15, 2021, and 24 versus pre pandemic levels.

We're just expanding and expanding their lead the second derivative is growing in the tools group.

So and that's driven by this resilient markets and our ability our new ability to expand the franchisees capabilities and our new products.

We're running to try to keep up.

Yeah.

Great. Thank you for that color just a couple on price in the 8% organic any sense of what the mix split of volume and price was there and.

Go ahead, yeah okay.

Okay. So just any comment there and also curious if you've seen any pockets within that where you're seeing.

This area is elastic to price this area looks completely inelastic will price more.

So we don't we don't see that at all.

<unk> sets the price one of the things is we control the customer interface, so fundamentally where the price leader and so we can do that I mean, you have to keep in.

There is a point of irritation I suppose, but we're not seeing that in this situation, but the thing about it Chris is we have three mechanisms for pricing and they arent also straightforward to the customer or even easy to measure first we do have for at list price increases, which we do do.

Then we have the idea we rollout new products like these new products associated with new cards newly enhanced card while I assure you in an inflationary time, we get our value for those new cards, and so that tends to give us a nice margin and then there is the idea of every week on a van or a couple of promotions and those promotions can be rich or lean now.

Is the the list price if it can be there can be variations of discounts off the list price that happened there can be there can be take up on promotions that are higher LOE, depending on the individual promotion and there can be variations around the margins and what do you call. It whether you would say that price comes out of the fact that I've got the new power tool power.

Power apps power bank option on a tool storage or just because I've pushed up the pricing it's hard to measure those things, but what I will offer is whatever happened and we like it.

Because the margins in the tools group were 22, 7% all time high.

Great. Thank you.

Sure.

We'll move next to David Macgregor with Longbow Research. Your line is open. Please go ahead.

Yes, good morning, everyone.

Nice quarter, Nick Yes.

Remarks remarkable given the 25% year ago growth.

The systems outage during the quarter.

How much of this growth was due to the timing of shipments.

Turning to the previous question you were talking about your guide down in Arkansas waiting for his boxes I mean, how much of the growth was due to the timing of shipments that were delayed from <unk>.

When you reported.

Actually actually you could ask that question in the same way I mean, the point is is that I would say our calendar <unk> of shipments where because of the interruption were pushed a little bit deeper into the quarter.

So we might you might have argued we could have shipped more if we didn't have if we didn't have.

I think.

The way the the way the interruption occurred we kept pretty much kept selling you know in a variety of ways, but I would call non standard work in the terms of kaizen.

And it could cause a little inefficiency in our factories kept rolling pretty much but the shipping was a little bit.

Up and down in this period. So there was a little bit of backend loading in this so it didn't come out of the fourth quarter. It wasn't it wasn't an overrun from the fourth quarter and diminishing if anything things are getting higher I think probably if you ask the franchisee to franchisee I talked to were all screaming telling me can you give me more what.

Do you have any influence in our factories Nick Pinchuk.

And so those kinds of things are those question, yes, Dallas is no, but but that's really I don't think theres anything I don't think there's any story there actually.

In that situation.

Hey, Nick how much we're off the truck sales.

Now off the truck sales were up.

Not as high as our own sales you know did they go up and down in situations, but a lot of that some of that had to do with the late the counters nation of deliveries that came off over there, but you know inventories are I think inventories are in a nice level.

No.

Inventory turnovers are up nicely from pre pandemic levels. So we feel pretty good about that situation you could argue whether we want large inventories on a truck or not.

Im more for a large inventory guy and it's a little bit lower than I'd like it to be but but still I think our sales off the truck, we're moving along not as high as the tools group, though in this quarter, but if you look back at every year. It always evens out every quarter Theres, some little story around it but it always generally evens out we wouldn't let it get out of whack.

Okay.

Can you just talk about the systems outage during the quarter and the impact that might have had.

The growth in profitability and did that Otis results and maybe a little bit of push forward into <unk>.

You know David I don't know.

You get one of these things and it's like Red alert.

I remember I stayed up all night.

On this situation watching the effect and we were a credit to our team. They were really professional we were back up able to do stuff right away now and a nonstandard way, but part of it is it didn't really interrupt this very much the big interruption I think was the calendar <unk>.

Of the of this of the shipping and I would say Wow nonstandard work is less efficient that's why we call. It standard work in terms of continuous improvement. So it's inefficient, but just still accomplish our goal. We said the number one priority was to deliver to our customers and we generally did.

Maybe we could've done a little more I don't know, but but the point is so I don't think if you step back and look at the numbers you say well it doesn't look like I can see a lot of effect there, but I assure you there's extra cost in those numbers associated with this I don't know if we've dimension at all because it's hard to capture it all when franchisees have to be serviced by the field.

Cause there their approach is non standards are still servicing theres still sell them, but it is non standard.

Then what's that cost it is hard to capture it but we don't really spin our wheels thinking about that because 27% Oi margin.

Alright.

Just on those costs I mean, your operating expenses and tools of 22, 8% down 240 basis points, which is pretty remarkable but despite the systems outage in all of the incremental costs, you just referenced youre, saying it would've actually been better.

Well you know yeah, I think I think there might have been some of that I don't know I don't want to comment on that and we're not giving we're not giving guidance on what they what they OE margins will be I may decide to spend or we may decide to have a big party or something at some point I don't know, but for the franchisees, but look I think we certainly in the quarter.

We don't manage David we don't manage the gross margin or the OA Oi OE, we manage the Oi, that's how we measure it because when you're in an inflationary time.

The price goes up there is no real court, usually when you have commodity price goes up there is no real cost increase and your support.

On top of that we have the we have as you said the interruption, which would have cost us something so there's a complex cocktail. There. So we look at boy and our divisions look at give me or.

Give me Oi.

Okay. Good.

That's all I got thanks, very much for taking my questions. Thanks, David.

Yes.

Our next question comes from Luke junk of Baird. Your line is open. Please go ahead.

Good morning.

Morning.

Wanted to start this morning, with the market turbulence, you're going through right now and what I'm wondering is to what extent is the fact that inflation is obviously very highly visible right now helping you to manage through the current environment and specifically are there ways that you changed your approach to price cost in an environment, where inflation is top of mind.

It is right now for franchisees and your customers.

Well it makes a lot easier we've always set for for a dog's age that are that we can price for visible inflation.

Yeah. So it helps if everybody is getting up and looking at the paper watching TV or looking at their iPhone and getting inherent aid its collapse or going through the roof inflation's going wow. So people tend to be more receptive to those kinds of things and they tend to realize that that's still a bargain even at a higher price. So we do that the other thing is as I said, the saying our first roadie.

And one of the things I learned back in the Carter era, which I hate to say that even though I was sentient during that period.

It's about urgency, it's about riding to the sound of guns, and we get right on when we see costs going up we're out there working on it right away.

Either as a continuous improvement either redesigning for example, we've done a lot of effort redesigning our products around the around chips that are available. It's not so it's not even the cost steel is starting to peak a little bit, but you can't get stuff. So you are out buying it on a stock market. So it's not the base cost of things, but it's how you have to buy it we tend.

To make sure we can deliver so we buy on the stock market. So for example, I just reviewed them a bunch of new air conditioning units, where we redesign a mall and redesigned particularly three or three or four all the electronics inside to get chips that we could use we're doing the same kind of thing in diagnostics and in and are under car equipment. So those are the kinds of things you got to do but you got to do.

With alacrity.

Okay.

Okay. Thanks for that and then maybe a related question for Aldo and I'm wondering if we look at outside the tools group to what extent does your ability to manage price cost differ by segment. If I look at some of the key considerations in C&I in RSA relative to the dynamics in the tools group are there any key differences.

<unk>, which we should be thinking through either tax fiscal years structurally.

Well I'd say broadly speaking lukas that our C&I and C&I when they do have to entertain pricing actions. There is a lag basis and the reason for that is unless youre going to invoke force majeure, which you don't want to if you don't have to.

Sometimes you have one year contracts in place with certain key customers, a national accounts or a certain large industrial customers.

Oftentimes when you have a distribution relationships, who have a requirement of 60 to 90 day advance notice. So you have to be more measured and because they don't use as exclusively the snap on brand snap on brand is a very powerful brand, which are tools group doesn't enjoy.

You can make the case that C&I and ours and I are a little bit more mortal when they walk around the immortal and mortality of the tools group they have to be cognizant of what's happening in and around them because they don't operate in a vacuum there are some big competitors in and around them. So they cannot.

Make pricing decisions in a vacuum so to speak as Nick mentioned earlier, you could argue snap on in the tools group as the price leader and as such the umbrella for others in the case of C&I and ours and I I think they have to be cognizant that there are a major player and they are an influencer, but they do not work alone.

Okay really appreciate that all of those Super helpful. Color last question I, just want to ask something a little bigger picture. Nick you had mentioned last quarter that you were taking a more refined approach to data mining as an area of emphasis right now and just wondering if theres any color you can share there.

Specific areas, where you see the opportunity to be I guess I'll call. It smarter in the tools business or alternatively, any areas, where you're already seeing traction ultimately just trying to get a feel for where youre leaning in with this initiative.

The whole purpose of that is to try to.

Model the individual customer.

By individual <unk>.

To try to call in the air strikes of the selling approach for the van driver. So that is selling will be more efficient and therefore, he can call him spend more times with tougher customers reach more customers and that is the principal focus of that that's what I can share to you and we're making progress in that regard.

But I don't really have any palpable things to report we've been a little busy this quarter. So so.

But still you know we're working on that.

I don't have anything to lay out just.

Just about the principal focus and we're kind of optimistic that it will work because if anybody's got a database about people about technicians, if anybody knows technicians at snap on.

Okay, great well interesting stuff, we will stay tuned thanks for that Nick.

Sure.

We'll go next to Bret Jordan with Jefferies. Your line is open. Please go ahead hey, good.

Morning, guys.

Hi, Greg one more question I guess on pricing trying to sort of distill it down some obviously lots of labor and materials and supply chain expenses.

And I get your point about sort of mix can change where you throw in a free chart extra charger to enhance the value proposition, but is there any sort of base way to look at like a like for like screwdriver versus a screwdriver in the prior year period on price. So just sort of trying to get a feeling for what that contribution was to organic.

And we've thought about that I don't think I can help you.

I mean, it's just too.

Just too complex I mean, we raise we raise the these list price, but even the list price raise it doesn't necessarily make it through it tends to move it up in varying places depending on the product lines. So it's hard to measure really and the point about the point about the individual promotions they.

Very all over the place we simply manage in a macro basis, because when you got when you got trucks that have 4000 skus on the truck and have a catalog of 40000 Skus, it's kind of a fool's errand to try to figure all this out and try.

Try to get macro out of the individual we simply tried to measure how we're doing and try to see what worked before and try to make sure that we get pricing along all of those quarters list promotions and new products and believe that it's going to get us in the in the right situation and generally so far to add our own our own our own sales if you look at.

Sales for for snap on in terms of growth.

Yeah, I think our five quarters were 910, 11, 13, and now 16, 9% above pre pandemic levels. So somehow it's expanding growth and not all of that is pricing because you can see the margins go up right in tune with it.

Okay, and then one big picture question I guess as you talk about the increasing vehicle complexity and sort of the shortage of technicians and the aging demographics are you seeing any sort of change in total <unk>.

Shop.

Rooftops and are big.

But techniques big groups getting bigger as they've got access to the diagnostics and the technology or is it pretty even.

I would have said that maybe before the pandemic.

But I'm not seeing it now so much.

I don't know if Matt you might say I do think I.

I will say to you I think service doesn't scale so easily.

It has that that's been a.

Problem in many industries, so I'm not so sure collision scales, because it's almost like manufacturing and a lot of ways, but the service a little tougher to scale I think so I don't know how much of that will see unless you see like a specialized group now maybe we will and we have those as our customers do we do see.

Shops, but they don't seem to be very long very let's say nationwide or anything like that sometimes we're seeing some opportunities in what I would call a localized multilocation situations Mitchell one has made a made a meal out of that with their pro demand and those things have worked there but in terms of the franchisees I don't think.

They report that so much.

Okay, great. Thank you.

We'll take our final question from Sarah Park with Bank of America. Sir Your line is open. Please go ahead.

Hi.

On for Chris.

I think I mentioned that earlier, but.

I have to just kind of wondering if you could please.

Any kind of material disruption in March.

The security breaches that works.

If you have any more color on that.

Wow.

No actually I don't think.

There were there were what I would call non standard ways of operating and serving our customers for a matter of days not weeks.

And.

As I said before it principally setback the shipping processes, whereby the calendar nation of the quarter shipments tended to coagulate around the rear at the rear end, but generally we did not.

We didn't.

We didn't have any we didn't really have real disruption.

And as I spent a lot of speculation but.

We were we were hacked.

Ransomware company, we didn't pay we didnt pay rents and we didn't have to pay ransom in this situation and so so we.

We felt we got out of this and managed it pretty well.

So that that's really the story there is inefficiencies more than disruption and recalibration.

Thank you.

Right.

With no other questions holding I will now turn the conference back to Mr. Eric He for any additional or closing comments.

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.

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may just.

[music].

Yes.

Yeah.

[music].

Thank you Jos and good morning, everyone. Thank you for joining us today to review snap ons first 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 already snap ons, Chief Financial Officer, Nick will kick off our call. This morning with his perspective.

On our performance, although will then provide a more detailed review of our financial results.

After Nick provides some closing thoughts we'll take your questions as usual we've provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our website <unk> dot com under the investors section. These slides will be archived on our website along with a transcript of today's call any.

Shipments 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 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.

Information regarding those measures is included in our earnings release issued today, which can be found on our website with that said I'd now like to turn the call over to Nick Pinchuk, Nick Thanks, Sarah.

Good morning, everybody.

As usual I'll start the call by covering the highlights of our first quarter and along the way I'll give you my perspective on our results they are encouraging.

In our markets, so looking positive and our progress we believe we are stronger than ever.

Well I'll just speak about what it all means and we believe it means that we're positioned for more much more.

Then Aldo will move into a more detailed review of the financials.

These are interesting times.

Filled with multiple axes of turbulence, but you know this isn't our first rodeo we know it's always some.

And it's our job to confront them to overcome with the resilience of our markets the strength of our strategic and tactical advantages and the insight and energy of our consistent and capable team.

And we've done just that.

Here are the numbers that support that view.

Our reported sales in the quarter of 1 billion $97 8 million were up seven 1%, including eight five.

Five 5 million in acquisition related activity of $15 7 million of unfavorable foreign foreign exchange organic sales growth.

8% with gains in every group.

And compared to the pre pandemic levels in 2019 are clear upward drive shines right through versus 2019 sales in this past quarter Rose 19, 1% as reported and 16, 9% organically.

In fact, it's our seventh straight quarter being above the pre virus levels.

We believe we're continuing an ongoing trend of accelerating expansion momentum increasing higher and higher demonstrate that we're only getting stronger every day.

<unk> operating income of $223 1 million increased $22 2 million from last year the operating margin.

It was 23% up 70 basis points from last year, and 120 basis points from 2019 as adjusted for the favorable legal settlement in that period.

For financial services operating income of $70 4 million increased seven 8% and credit losses were down continuing the positive trends despite the lingering effects of the pandemic.

And that result, combined with Opco for a consolidated operating margin of 24, 8%, a 90 basis improvement from last year and 120 basis points from the as adjusted 2019 results.

First quarter EPS.

Was $4 up 14, 3% from last year's $3, 50, and $32, 9% above the as adjusted $3 <unk> recorded in 2019.

The risk of repeating myself.

We believe snap on a stronger now than when we entered this great weathering in our first quarter results are solid testimony.

Now, let's talk about our markets.

Auto repair remains quite resilient. So I think we'd say spending on vehicle maintenance and repair is up and technicians are earning more than ever they have been working performing essential task, making a nice living there. They are undaunted by the turbulence 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 and all of that all of that has led to an expansion in the ranks with automotive with the automotive repair technician count moving upward at its highest point, where I think at least third three decades and.

In the shop owners and managers will tell you theres a need for many more.

Vehicle repair a straw is a strong and resilient market you can hear it in our franchisees' voices you could feel within the technician's wallet and you can see it written across our numbers.

Also in auto repair spin are right next to the attacks are there our shop owners and managers were repair systems, where our repair systems <unk> information group Rs and I apply that straight <unk>.

Demand for new and used cars is high despite the limited supply despite the limited supply.

Dealership repair maintenance and warranty is rebounding and dealers are starting to invest again.

New vehicles are being released with a greater variety of drive trades with a greater variety of drivetrains and ever from internal combustion engines.

From internal combustion hybrid plug in electric to full electric and the range of options is growing more driver assist more vehicle automation increasing vehicle complexity.

I'll tell you, it's all music to our ears, and we've been able to take advantage of with our lineup of intelligent diagnostic products, including the Zeus the Triton and the Apollo handheld units with our celebrated our Mitchell one pro demand repair information Our award winning <unk> advanced driver assist calibration system and our three D alignment systems like the.

Hoffman <unk> liner, all representing new technologies, and big data deploy to make work easier right in the shop.

Vehicle repair looks more promising than ever.

And snap on is poised to capitalize.

Finally, let's talk about critical industries with snap on rolls out of the garage solving tests of consequence.

Challenged business sectors like the military and international Aviation International Aviation Aerospace and trouble geographies conflicts impacted countries and those more pronged business interruptions as a mean to as a means to control the virus.

Our C&I had at all.

Despite the despite the variation, though we didn't see growth improvement in a number of geographies Asia and Europe and in a range of sectors like general industry education, and natural resources. They all combine to author organic growth against the continuing turbulence.

So overall I'd describe our C&I markets is challenged but unfolding and looking forward. We believe they represent clear opportunity viewing the overall picture. We believe there has been substantial progress along our runways for growth enhancing the van network <unk>.

Two years ago.

As we entered the virus.

You all remember this to.

Two years ago, when we entered the virus.

We recognize the resilience of our market and the strength of our model.

Projected a V shape request recovery.

And that's how it played out.

You can see it in the trends.

Now, let's turn to the segments in the C&I group first quarter sales were.

<unk> $340 1 million down $5 6 million due to $9 2 million unfavorable currency.

And $3 6 million or one, 1% and a $3 6 million or one 1% organic growth.

Down $5 million, reflecting $2 2 million of unfavorable foreign currency with the organic volume grain gains more than offset by supply chain efficient inefficiencies.

And when compared with the pre pandemic levels of 2019 sales were up five 5%, including a three 6% organic gains and the Oi margin of 13, 4% was down 100 basis points, but against the 150 basis points impact of acquisitions and unfavorable currency.

C&I has simply been more affected by the difficulties macroeconomic challenges geopolitical uncertainty varying COVID-19 conditions. It makes sense with the <unk>.

Operation is spread over more countries and more industries, it's challenging.

But we are making some headway and we are enthusiastic about the possibilities going forward as part of that view, we remain committed to extending in critical industries, and we will keep strengthening our position to capture opportunities as they arise.

And enabling that it turns is because our expanding line of innovative new products designed to match the demands of the industries industries that we serve and to make critical work easier.

One example.

As our family of Microelectronic torque wrenches and I've been talking about snap on electronic torque products for some time, but the smaller versions of our flagship offerings.

We are gaining particular strengths in the critical markets.

Latest connected Bluetooth model offers customers a solution when they need towards certification data in real time, the snap on control Tec micro Bluetooth rich fills that requirement and combines it with the benefits of reduced size and lower weight shorter than 12 inches and less than a pound better accessibility and reduced operator fatigue.

Oh, Wow, while allowing users to interface with a snap on app or directly with customers with the customers operating system.

The control Tec micro Bluetooth offers a wide range of torque $5 to 240 inch pounds and all steel body construction progressive Leds for an enhanced user guidance and a 72 inch quarter inch drive, enabling efficient operation in tight areas, all with a plus or minus plus or plus or minus 2% accuracy. It's a package.

Well suited to critical sectors like aviation and in the first quarter quarter, our customers order confirm that beliefs emphatically.

Well, that's C&I hard one progress against the turbulence.

Now onto the tools group.

Was 22, 7% up 200 basis points from last years, historically high level, 27%.

When compared with the premiums with a pre virus levels sales grew 24, 8% and this year is 22, 7% operating margin was up 630 basis points compared with 2019. The tools group is re spot. The tools group is responding to the challenges of the day taking <unk>.

<unk> of increasing vehicle complexity, increasing its product advantages fortifying its brands and further enabling its franchisees and the results show it.

I keep saying that but that's what's written across our performance this quarter.

Clearly favorable and based on those measurements, we believe the franchisees have never been stronger.

And they say so themselves.

Emphatically pumped and plans for more.

That's what they are and in our direct interactions at events like the past January to kick off <unk>.

<unk> is back again this year in person it was a great a fair well attended.

<unk> orders visible commitment to our brand our franchisees entrepreneurs.

Professionals all are enabled by their by their increased selling capabilities broadly and deeply confident in our process.

Their prospects and the company's prospects and eager to reach higher Thats an important factor.

And Theres a number of reasons for that optimism.

But a big one is rooted in snap on value creation customer connection and innovation authoring new products, clearly, making work easier born out of reserve observing changing work in shops on an everyday basis, just like the franchisees.

And Thats the reason our tool storage sales were up nicely in the quarter.

Driven in part by our our buyer they were driven in part by our exciting new line of mobile cards over the last several years, we've been enhancing our cards. One example is our K RFC a range of mobile storage solutions. The only professional great cards in the market built them is they are built into our <unk> plant.

Just sort of running down I was just there seeing those units roll down the line.

The K RSC are designed for maximum strength and durability theyre construct and constructed with the with a heavy gauge steel the former a one piece fully welded body with reinforced corners, and thats, a significant and unique benefit in the mobile storage arena.

The sturdy car to make it easy to move even the heaviest tools from database.

They come in.

The range of colors and trims.

Just like they're they're they're full size big brother boxes.

And they're offered in either a sliding split top providing.

Usable work surface.

While while allowing substantial access to the top drawer or a single piece flip flop, allowing quicker and broader access to the to the most frequently used tools.

Our new card also has.

<unk> also features full wide drawers for.

Four.

Maximum flexibility and offer power options for charging cordless tools. The KFC is the KFC begin to say it in these three words durability versatility and functionality, they're great for meeting their great.

For newer mechanics.

As an affordable way to to own some serious snap on tool storage and at the same time the attractive for veterans.

They are attractive for veterans.

Giving them.

The opportunity to improve productivity by expanding their mobility around the shop this quarter as repair work and tech wages around the rise we received record orders for <unk>.

Moving that one.

Bashan <unk>.

It's a resilient market demands follows.

We said that vehicle repair was growing in flight was growing and it is complexity would accelerate the market upward and it has and we're working hard to position our franchisees to take advantage and you can see it in the tools group results seven straight above pre pandemic gangbusters quarters.

Now, let's speak of ours and I.

First quarter sales rose, 56% or $50 6 million or 14, 6% with gains across the board organic growth was 13, 3% driven by under car equipment in <unk> and <unk> and Oems.

OEM dealership activity delivering double digit expansion in and buys the diagnostics and information products and independent shops, advancing low single digits compared with 2019 sales.

Compared with 2019.

Sales grew $70 3 million 21, 4%, including 56, 9%, including a 56 nine.

Or 17, 4% organic gain $15 2 million from acquisitions and $1 8 million of unfavorable foreign currency operating earnings of 91, 6% increased $10 2 million from 2021, and the Oi margin was 23% down 40 basis points, primarily due to acquisitions and rise.

<unk> of lower margin under car equipment.

We clearly see the potential of our our runways for growth in the <unk> group, expanding snap ons presence in the garage, which coherent acquisitions and a growing line of powerful products. The organic growth in the quarter was broad based but once again under car equipment expanded at double digits and <unk>.

<unk> in one of our newest product groups collision repair helped author that positive.

And we're doubling down on that and the potential in that arena by utilizing the same broad database with deep content as used in our pro demand vehicle repair solutions Big data aimed specifically at the body shop vehicle measurements to guide body work repair information to aid in standard shop work and calibrations.

To restore the sensor networks that support Aaas are advanced driver assistant systems, it's a combinations of increasingly essential for every collision shop.

And we believe it's going to be a big seller.

Lawrence and I also got a nice a nice boost from winning a number of significant extension tools and equipment programs for OEM dealerships as we expected we started to see launches for both electric power and for internal combustion vehicles and art and I is right at the front.

So we're quite positive about <unk> expanding position with vehicle repair shop owners and managers and are very confident in the opportunities as the vehicle industry evolves.

So thats the highlights of our quarter.

Progress in the turbulence.

C&I growing despite the headwinds the tools group strong and confident rsi solid overall organic sales rising 8% optical operating margin 23%.

And EPS $4 up significantly.

And most importantly.

More testimony that snap on has emerged from the turbulence much stronger than when it enters.

It was an encouraging quarter.

Now I'll turn the call over to Algo Aldo Thanks, Nick our consolidated operating results are summarized on slide six.

Flex the double digit growth in the repair systems and information group and high single digit growth of the snap on tools group.

We believe the corporation through pricing and RCI actions continued to navigate effectively the cost of other supply chain dynamics of the current environment.

<unk> expenses as a percentage of net sales of 28, 4% improved 210 basis points from 35% last year. The improvement is primarily due to higher sales volumes savings from RCI initiatives and lower costs associated with stock based expenses. These improvements were partially offset by 40 basis points of unfavorable acquisition.

<unk> effects operating earnings before financial services of $223 $1 million in the quarter compared to $209 million 2021 as.

As a percentage of net sales operating margin before financial services of 23% improved 70 basis points from last year.

Financial services revenue of $87 7 million in the first quarter of 2022 compared to $88 $6 million last year operating earnings of $74 million increased $5 $1 million from 2021 levels, primarily reflecting continued favorable portfolio performance, which resulted in lower provisions for credit.

Losses.

<unk> operating earnings of $393 5 million compared to $266 2 million last year.

As a percentage of revenues the operating earnings margin of 24, 8% improved 90 basis points from 23, 9% in 2021.

Our first quarter effective income tax rate of 23, 7% compared to 23, 5% last year.

Net earnings of $217 4 million or $4 per diluted share increased to $24 8 million or <unk> 50 per share from last year's levels, representing a 14, 3% increase in diluted earnings per share.

Now, let's turn to our segment results.

Starting with the C&I group on slide seven.

Sales of $340 $1 million decreased from $345 $7 million last year, reflecting a $3 $6 million or one 1% organic sales gain which was more than offset by $9 2 million of.

Unfavorable foreign currency translation.

Gross margin of 36, 4% declined 230 basis points from 38, 7% for the first quarter of 2021, primarily due to higher material and other input costs, partially offset by benefits from pricing actions for the segments RCI initiatives operating expenses as a percentage of sales of 23% in the quarter.

100 basis points from 24% in 2021, primarily reflecting savings from cost efficiencies.

Operating earnings for the C&I segment of $45 7 million compared to $50 $7 million last year.

The operating margin of 13, 4% compared to 14, 7% a year ago.

Turning now to slide eight.

The organic sales increase reflects a double digit gain in our U S business, partially offset by a low single digit decline in our international operations.

Sales in the United States were up over Q4, 2021, as well, reflecting strong sequential performance in power tools and tool storage.

Gross margin of 45, 5% in the quarter declined 40 basis points from last year, primarily due to higher material and other costs, which were more mostly offset by the higher sales volumes pricing actions and 30 basis points from favorable foreign currency effects.

Operating earnings for the snap on tools group of $116 million compared to $98 $9 million last year. The operating margin of 22, 7% improved 200 basis points from 27% last year.

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

Sales of $398 2 million compared to $347 $6 million, a year ago, reflecting a 13, 3% organic sales gain and $8 5 million of acquisition related sales, partially offset by $3 6 million of unfavorable foreign currency translation.

The organic gain is comprised of double digit increases in sales of under car equipment and sales to OEM dealerships as well as low single digit gains in sales of diagnostics and repair information products to independent shop owners and managers.

Gross margin of 44, 6% declined 140 basis points from 46% last year.

This was primarily due to increased sales and lower gross margin businesses and higher material and other input costs.

Partially offset by benefits from pricing actions and 50 basis points from acquisitions as well as from 30 basis points of favorable foreign currency effects and savings from RCI initiatives.

Operating expenses as a percentage of sales of 21, 6% improved 100 basis points from 22, 6% last year primarily.

Primarily due to benefits from sales volume leverage, including higher volumes in lower expense businesses and savings from RCI initiatives.

These improvements were partially offset by 110 basis points of unfavorable acquisition effects.

Operating earnings for the RF, F&I group of $91 $6 million compared to $81 $4 million last year.

The operating margin of 23% compared to 23, 4% a year ago.

Now turning to slide 10.

Revenue from financial services of $87 $7 million decreased $900000 from $88 $6 million last year.

Primarily due to a decline in the size of the average financial services portfolio during the quarter as compared to last year.

Financial services operating earnings of $74 million compared to $65 $3 million in 2021 financial services expenses of $17 $3 million were down $6 million from 2021 levels, primarily due to $5 $6 million of decreased provisions for credit losses.

Resulting from favorable loan portfolio trends, including reduced year over year net charge offs, which support lower forward looking estimated reserve requirements.

As a percentage of the average portfolio financial services expenses were eight tenths of 1% and one 1% in the first quarters of 2022 and 2021, respectively.

And the first quarters of 2022 and 2021, the average yield on finance receivables was 17, 6% in both years.

While the average yield on contract receivables was eight 5% and eight 4% respectively.

Total loan originations of $245 $6 million in the first quarter decreased to $16 2 million or six 2% from 2021 levels.

Afflicting, a five 1% decrease in originations of finance receivables and 11, 5% decrease in originations of contract receivables.

In the United States Finance receivable or extended credit originations were down low single digits.

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 S operation.

The 60 day, plus delinquency rate of one 6% for U S extended credit remains the same as both the fourth quarter of 2021 and as in the first quarter of 2021.

As it relates to extended credit or finance receivables trailing 12 month net losses of $39 9 million represented 234% of Outstandings at quarter end down 21 basis points as compared to the same period last year.

Now turning to slide 12.

Cash provided by operating activities of $193 $9 million in the quarter compared to $319 $3 million last year.

The decrease from the first quarter of 2021, primarily reflects a $106 $7 million increase in working investments and higher payments for variable compensation, partially offset by increased net earnings.

The change in working investment dollars is largely driven by greater demand, resulting in increased receivables and higher levels of inventory this year as compared to a reduction of inventory in 2021 and.

Inventory turns at the end of the first quarter of 2022 are unchanged sequentially.

Net cash used by investing activities of $6 6 million included $22 million of capital expenditures and net collections of finance receivables of $10 1 million.

As of year end, we had remaining availability to repurchase up to an additional $442 2 million of common stock under existing authorization.

Turning to slide 13 trade and other accounts receivable increased $49 million from 2021 year end date.

Days sales outstanding of 61 days compared to 58 days at 2021 year end inventories increased $60 3 million for 2021 year and on a trailing 12 month basis inventory turns of two eight for the same as year end 2021, and compared to two six at the end of the first quarter in 2021.

Our quarter end cash position of $861 1 million compared to $270 million at year end 2021, our net debt to capital ratio of seven 4% compared to nine 1% at year end 2021 and.

In addition to cash and expected cash flow from operations, we have more than $800 million under our credit facilities.

Quarter end, there were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.

That concludes my remarks on our first quarter performance I'll now briefly review a few outlook items for 2022.

We anticipate that capital expenditures will be in a range of 90 million to $100 million. In addition, we currently anticipate absent any changes to U S tax legislation that our full year 2022 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 Hello.

Oh, that's our first quarter.

At some level, we can summarize the environment by these are interesting times and the hits they just keep on coming.

But despite the challenges the quarters are pretty much playing out as we said they would.

<unk>.

And our continuing investments in product and brand.

And people all through the pandemic is paying off our franchisees are selling more effectively and are prospering.

And we've come out of this great weathering stronger than when we entered C&I seeing the most turbulent born out of the multiple geographies a range of industries and a wide product footprint serious challenges, but still progress up one 1% organically in the quarter. The tools group prospering sales up seven 7% versus.

As last year rising 24, 1% over 2019, Oi margin 22, 7% up 200 basis points from last year, our C&I 13, 2% growth Oi margin, 23% down 40 basis points, but more than explained by acquisitions and business mix the credit company profits up losses down.

And it all came together for an overall organic growth of 8% and.

<unk> margins of 23% up 70 basis points year over year, and rising 120 basis points compared with before the the prepayment before the pandemic as adjusted and.

And EPS of $4.

Up versus every comparison.

It was an encouraging quarter, we have momentum and looking forward we are optimistic.

Confidence.

Confident in the special resilience and potential of our markets confident in the power of our strategic and tactical advantages.

And.

Confident in the capability of our people and experienced team that seize progress against turbulence as fundamental to their expectations.

And we believe.

That unique combination of that.

<unk> unique combination turbulence tested will propel us to come to a consistent and ongoing positive trend throughout 2022 and.

And well beyond that.

Before I turn the call over to the operator out I'll speak directly to our franchisees and associates.

Many of you I know are listening.

When we say we are encouraged.

Optimistic and confident.

It's deeply rooted in your extraordinary capability and energy.

For the part you've played in our success you have my congratulations.

For the skills you bring to our enterprise you have my admiration and for the commitment you unfailingly display to our team.

You have my thanks.

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

Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure your immune function is turned off to allow your signal to reach our equipment.

It gets starwood task of question.

We will move to our first question comes from Gary <unk> Barrington Research Gary Your line is open. Please go ahead.

Morning, everyone.

Good morning, Gary.

Nick could I, just get or from Aldo a couple of I couldnt write down fast enough.

On both the C&I and the RFS and eye business, what was the growth in organic sales versus Q1 19 pre pandemic levels.

For C&I It was three 6% and I think in Orange and I believed 17 $4 24.

Slide 17 orphan drugs. Thank you okay. Okay. Thank you.

Could you maybe maybe just talk about how the cadence of your business.

Trended.

Is on on Continental Europe , and the UK throughout the quarter did it start off strong and start to wane because of the impacts of what was going on in <unk>.

Crane.

The Russia sanctions.

No.

Look I don't think I don't think the Ukraine reached that far for US we didn't see that the conflict in eastern Europe region Fr UK was soft in this quarter.

We really didn't see any I would say landscaping by <unk> in this quarter.

Okay, and then a couple more questions here on in the tools group itself, we're really across all of your automotive related.

Segments, what kind of demand are you seeing for specialized tools and if you could cite some things that deal with Evs plug in Evs hybrids things like that.

I think they were about made up about 90% of all new car sales last year. So they are starting to get to a bigger percentage of what's what's the lease being reduced.

They are those are new car sales, but they are relatively micro percentage of the car Park itself also right. So we are worlds reaction. They are new car sales you remember are like what I think they are fork. They were 14 and change last year 2015, and change this year and nine Brian that but that's versus 283 million.

Total vehicle park, but where we see them is where we see the most Gary is and we're getting a lot of business and what I would call. The early warning where the Oems are seeing the idiosyncrasies associated with electric vehicles, asking us to provide different kinds of tools for dealerships that aren't normally there to accommodate them as they come.

In when they come in and so that's what I mentioned in RF deny that.

That business actually was up strong that particular business. The project business was up strong double digits in the quarter.

And it led the way for US and is one of the things that drove it and a big portion of that was electric vehicles like I said, we have things. Some people will ask us to do things hand tools in particular types of products that deal with the battery and other things that tend to be as I said specifically.

Up to electric vehicles, and the Oems figure that they wouldn't be available in the dealership. So they asked us silica.

Size of the dealership in those ways.

Is there anything on the diagnostic side that Youre seeing there is there is.

Demand or need for that you supply to that segment of the market.

The diagnostic system.

Although.

Same kind of approach in terms of diagnostic is just you have to expand that what do we have like.

$2 5 billion repair records, and 240 or 50 billion repair data points and that just keeps growing to include electronics electronic electric vehicles, including plug in hybrids. If you look at the plug in hybrid volume in the hybrid volume they exploded last year or two in Europe .

Okay and then.

Alright.

And just last question and ill.

Okay last question I will jump off in terms of tool storage.

Years ago with tool storage is really driving the boat.

In the tools segment has that.

Come down as a percentage of sales overall.

It's become a little bit more diversified on the growth side.

Actually well every quarter is a new story and it's you can't get excited about any quarter, but I would say the word to describe tool storage sales for us in this quarter's boom shack a lack of the thing is it was up strong.

It was it was one of our strongest category. So big ticket was up the thing is you might ask why weren't originations up.

Part of the reason is is that what I was talking about tool tool cards are lower or lower in terms of their per unit sales price. That's why they sweep in all these new technicians, so via via the cards, we're getting new customers as well as selling some and raising the amazing.

Our sales to old customers, because they are veterans and they want more mobility, but the new guys couldnt afford it but maybe I can afford a snap on box, where we're going to get a snap on.

Snap on quality professional cart that passes for a snap on box, that's partially why our tool storage is weren't great in the quarter.

Okay. Thank you very much.

We will take our next question from Christopher Glynn with Oppenheimer. Your line is open. Please go ahead.

Yeah. Thanks, good morning.

Yes.

So in this kind of growth that's been enabled here.

<unk> seen some of the.

Mistreated processes and driving front end production needs for the franchisees as part of the story curious your response to that and Theres.

If theres any specific color in sense of headroom on that curve.

Well the franchisees are telling me demand as is off the charts, they're telling me. They want more I was just on a van down in Arkansas and as Guy tells me. He says at the SFC I order 45 full sized boxes 45 boxes and he already CE ordering at the SFC and they get deliver.

Over the full he's out of him and he wants more because it's guys or ask them. So I'm, telling you I think this is why we tried to emphasize this people are driving after the pandemic and the new technology is driving demand focusing on driving a need for people who can handle the complexity focusing on the importance of technicians in there.

Advanced that's why I talked about the cards, because we had that all segment that we.

We were getting too, but we wanted to get two more in the carts hit right at the bullseye.

So that worked pretty well for us. So those are the kinds of things that are happening. There I think we could have I think.

So just expanding and expanding their lead the second derivative is growing in the tools group.

So and that's driven by this resilient markets and our ability our new ability to expand the franchisees capabilities and our new products.

We're running to try to keep up.

Great. Thank you for that color just a couple on price in the 8% organic any sense of what the mix split of volume and price was there and.

Yes.

Okay. So just any comment there and also curious if youre seeing any pockets within that where you're seeing.

This area is elastic to price this area look completely inelastic oil price more.

So we don't we don't see that at all.

<unk> set the price one of the things is we control the customer interface, so fundamentally where the price leader and so we can do that I mean, you have to keep in.

There is a point of irritation I suppose, but we're not seeing that in this situation, but the thing about at Christmas We had three mechanisms for pricing and they arent also straightforward to the customer or even easy to measure first we do have for at list price increases, which we do do.

Then we have the idea we rollout new products like these new products associated with new carts newly enhanced card while I assure you in an inflationary time, we get our value for those new cards, and so that tends to give us a nice margin and then there is the idea of every week on a van or a couple of promotions and those promotions can be rich our lean now.

Is the the list price can be there can be variations of discounts off the list price that happened there can be there can be take up on promotions that are higher LOE, depending on the individual promotion and there can be variations around the margins and what do you call. It whether you would say that price comes out of the fact that I've got the new power tools power.

Power apps power bank option on a tool storage or just because I've pushed up the pricing it's hard to measure those things, but what I will offer is whatever happened and we like it.

Because the margins in the tools group was 22, 7%.

All time high.

Great. Thank you.

Sure.

We'll move next to David Macgregor with Longbow Research. Your line is open. Please go ahead.

Yes, good morning, everyone.

Nice quarter, Nick Yes.

Remark remarkable given the 25% year ago growth in them.

The systems outage during the quarter.

How much of this growth was due to the timing of shipments.

Responding to the previous question you were talking about your guide down in Arkansas waiting for his boxes I mean, how much of the growth was due to the timing of shipments that were delayed from <unk>.

When you reported U S completions actually actually you.

You could ask that question in the same way I mean, the point is is that I would say our calendar as Asian of shipments were because of the interruption were pushed a little bit deeper into the quarter.

So we might you might have argued we could have shipped more if we didn't have if we didn't have.

I think.

The way the the way the interruption occurred we kept pretty much kept selling.

There are a variety of ways, but I would call non standard work in the terms of kaizen.

And it could cause a little inefficiency in our factories kept rolling pretty much but the shipping was a little bit.

Up and down in this period. So there was a little bit of backend loading in this so it didn't come out of the fourth quarter. It wasn't it wasn't an overrun from the fourth quarter and diminishing if anything things are getting higher I think probably if you ask the franchisee the franchise as I talked to were all screaming telling me can you give me more what.

Do you have any influence in our factories Nick Pinchuk.

And so those kinds of things those question, yes, Dallas is no, but but that's really I don't think theres anything I don't think there's any story there actually in that situation.

Hey, Nick how much we're off the truck sales up.

Now off the truck sales were up.

Not as high as our own sales did they go up and down in situations, but a lot of that some of that had to do with the late the calculation of deliveries that came off over there, but inventories are I think inventories are in a nice level.

Inventory turnovers are up nicely from pre pandemic levels. So we feel pretty good about that situation you could argue whether we want large inventories on a truck or not.

More for a large inventory guy and it's a little bit lower than I'd like it to be but but still I think sales off the truck, we're moving along not as high as the tools group, though in this quarter, but if you look back at every year. It always evens out every quarter Theres, some little story around it but it always generally evens out we wouldn't let it get out of whack.

Okay. Thank you.

Just talk about the systems outage during the quarter and the impact that might have had.

Other growth and profitability and did that Otis results and maybe a little bit of push forward into <unk>.

David I don't know.

You get one of these things and it's like Red alert.

I remember I stayed up all night.

On this situation watching the effect and we were it's a credit to our team. They were really professional we were back up able to do stuff right away now and a nonstandard way, but part of it is it didn't really interrupt this very much the big interruption I think was the calendar <unk>.

The other of the shipping and I would say Wow nonstandard work is less efficient that's why we call. It standard work in terms of continuous improvement. So it's inefficient, but just still accomplish our goal. We said the number one priority was to deliver to our customers and we generally did.

Maybe we could have done a little more I don't know, but but the point is so I don't think if you step back and look at the numbers you say boy. It doesn't look like I can see a lot of effect there, but I assure you there's extra cost in those numbers associated with this I don't know dimension at all because it's hard to capture it all when franchisees have to be serviced by the field.

Because they are their approach is non standards are still servicing theres still sell them, but it is non standard.

And what's that cost it's hard to capture it but we don't really spin our wheels thinking about that because 27% Oi margin.

Great.

Well, yeah, I think there might have been some of that I don't know I don't want to comment on that and we're not giving we're not giving guidance on what they what they OE margins will be I may decide to spend.

Decides to have a big party or something at some point I don't know for the franchisees, but look I think we certainly in the quarter, we don't manage David we don't manage the gross margin or the OE.

<unk> OE, we manage the Oi, that's how we measure it because when you're in an inflationary time.

<unk> goes up there is no real cost usually when you have commodity price goes up there is no real cost increase and your support.

On top of that we have the we have as you said the interruption, which would have cost us something so there is a complex cocktail. There. So we look at boy and our divisions look at give me or.

Give me Oi.

Okay. Good.

That's all I got thanks, very much for taking my questions. Thanks, David.

Our next question comes from Luke junk of Baird. Your line is open. Please go ahead.

Nicole good morning.

Good morning.

Right now for franchisees and your customers.

Well it makes a lot easier we've always said for for a dog's age that.

That we can price for visible inflation.

So it helps if everybody's getting up and looking at the paper are watching TV or looking at their iPhone and getting inherent <unk> collapse or going through the roof inflation going wow. So people tend to be more receptive to those kinds of things and they tend to realize that thats still a bargain even at a higher price. So we do that the other thing is as I said the Sane our first road.

And one of the things I learned back in the Carter era, which I hate to say that even though I was sentient during that period.

It's about urgency, it's about riding to the sound of guns, and we get right on when we see costs going up we're out there working on it right away either.

Either as a continuous improvement either redesigning for example, we've done a lot of effort redesigning our products around the around chips that are available. It's not so it's not even the cost steel is starting to peak a little bit, but you can't get stuff. So you are buying it on a stock market. So it's not the base cost of things, but it's how you have to buy it we tend to.

Make sure we can deliver so we buy on the stock market. So for example, I just reviewed a bunch of new air conditioning units, where we redesign a mall and redesigned, particularly three or three or four all the electronics inside to get chips that we could use we're doing the same kind of thing in diagnostics and in our under car equipment. So those are the kinds of things you got to do but you got to do.

With alacrity.

Any key differences.

Should we be thinking through either technically or structurally.

Well I'd.

I'd say broadly speaking look is that our C&I and C&I when they do have to entertain pricing actions. There is a lag basis and the reason for that is unless youre going to invoke force majeure, which you don't want to if you don't have to.

Sometimes you have one year contracts in place with certain key customers, a national accounts or a certain large industrial customers oftentimes when you have a distribution relationships who have a requirement of 60 to 90 day advance notice. So you have to be more measured and because they don't use as exclusively the snap on brand Stefan brands are very powerful brands.

The tools group doesn't enjoy.

Make pricing decisions in a vacuum so to speak as Nick mentioned earlier, you could argue snap on in the tools group as the price leader and as such the umbrella for others in the case of C&I and <unk> I think they have to be cognizant that there are a major player and they are an influencer, but they do not work alone.

B I guess I'd call it smarter in the tools business or alternatively, any areas, where you're already seeing traction ultimately just trying to get a feel for where you are leaning in with this initiative.

The whole purpose of that is to try to.

Model the individual customer.

By individual to try to call in the air strikes of the selling approach for the van driver.

So that is selling will be more efficient and therefore, he can call him spend more times with tougher customers reach more customers and that is the principal focus of that that's what I can share to you and we're making progress in that regard, but I don't really have any palpable things to report we have been a little busy this quarter. So so.

But still working on that but I don't have anything to lay out just.

Just about the principal focus and we're kind of optimistic that it will work because if anybody's got a database about people about technicians, if anybody knows technicians at snap on.

Okay, great well interesting stuff, we will stay tuned thanks for that Nick Okay sure.

We will go next to Bret Jordan with Jefferies. Your line is open. Please go ahead, hey, good morning, guys.

Hi, Greg.

More question I guess on pricing trying to sort of distill it down some obviously lots of labor and materials and supply chain expenses.

I get your point about sort of mix can change where you throw in a free chart extra charger to enhance the value proposition, but is there any sort of base way to look at like a like for like screwdriver versus a screwdriver in the prior year period on price.

Trying to get a feeling for what that contribution was to organic.

And we've thought about that I don't think I can help you.

I mean, it's just too.

Two complex I mean, we raise we raise the.

List price, but even the list price raise it doesn't necessarily make it through it tends to move it up in varying places depending on the product lines. So it's hard to measure really and the point about the point about the individual.

Promotions. They just vary all over the place we simply manage in a macro basis, because when you got when you got trucks that have 4000 skus on the truck and have a catalog of 40000 Skus, it's kind of a fool's errand to try to figure all this out.

Try to get macro out of the individual we simply tried to measure how we're doing and try to see what worked before and try to make sure that we get pricing along all of those quarters list promotions and new products and believe that it's going to get us in the right situation and generally so far it has our own our own our own sales if you look at.

The sales for snap on in terms of growth.

I think our five quarters were 910, 11, 13, and now 16, 9% above pre pandemic levels. So somehow it's expanding growth and not all of that is pricing because you can see the margins go up right in tune with it.

Shocked.

Rooftops and are big.

But techniques big groups getting bigger as they've got access to the diagnostics and the technology or is it pretty even.

I would have said that maybe before the pandemic.

But I'm not seeing it now so much.

I don't know that you might say I do think I.

I will say to you I think service doesn't scale so easily.

That's been a problem in many industries, so I'm not so sure collisions scales, because it's almost like manufacturing and a lot of ways, but the service a little tougher to scale I think so I don't know how much of that will see unless you see like a specialized group now maybe we will and we have though.

As our customers too, we do see multiple shops, but they don't seem to be very large very let's say nationwide or anything like that sometimes we're seeing some opportunities in what I would call a localized multilocation situations Mitchell one has made a made a meal out of that with their pro demand and those things have worked there.

There, but in terms of the franchisees I don't think they report that so much.

Okay, great. Thank you sure.

We'll take our final question from Sara <unk> with Bank of America. Sir Your line is open. Please go ahead.

Hi.

Mark on for Chris.

I think I mentioned this earlier, but.

I'm wondering if you could correct.

Any kind of material disruption in March.

The security breaches that Richard.

If you have any more color on that.

Wow.

No actually I don't think.

There were there were what I would call non standard ways of operating and serving our customers for a matter of days.

Not weeks.

And.

So as I said before it principally setback the shipping processes, whereby the calendar <unk> of the quarter shipments tended to coagulate around the rear at the rear end, but generally we did not.

We didn't.

We didn't have any we didn't really have real disruption.

<unk> spent a lot of speculation but.

We were we were hacked a.

Ransomware company, we didn't pay we didnt pay rents and we didn't have to pay ransom in this situation and so so we felt we got out of this and managed it pretty well so that that's really the story there.

Efficiencies more than disruption and recalibration.

Thank you okay.

With no other questions holding I will now turn the conference back to Mr. <unk> for any additional or closing comments.

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

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may just.

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