Q4 2023 Snap-on Inc Earnings Call

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

Thank you Gary and good morning, everyone. We appreciate you joining us today as we review snap on fourth quarter and full year results, which are detailed in our press release issued earlier. This morning, we have on the call Nick Pinchuk Snap ons, Chief Executive Officer, and Aldo probably are a snap ons Chief financial Officer, Nick will kick off our call. This morning with his perspective.

Good morning, and welcome to the snap on incorporated fourth quarter and full year 2023 results conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

On our performance Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts we'll take your questions as usual we've provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our website snap on dot com under the investors section these slides will be archived.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

It's 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 are that otherwise discuss management's or the company's outlook plans or projections are forward looking statements and actual results may differ materially from those made in such statements additional information and the factors that could cause of <unk>.

Please note this event is being recorded.

Sara M. Verbsky: Now, let's turn the conference over to Sarah verb ski Vice President of Investor Relations. Please go ahead.

Sara M. Verbsky: Thank you Gary and good morning, everyone. We appreciate you joining us today as we review snap on fourth quarter and full year results, which are detailed in our press release issued earlier. This morning, we have on the call Nick Pinchuk Snap ons, Chief Executive Officer, and Aldo probably are a snap ons Chief financial Officer, Nick will kick off our call. This morning with his perspective on our pro.

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

Sara M. Verbsky: Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts we'll take your question 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 snap on dot com under the investors section. These slides will be archived on here.

Our website with that said I'd now like to turn the call over to Nick Pinchuk Nick.

Good morning, everybody.

As usual I'll start with the highlights of our quarter and our full year.

Slide my perspective on the results.

Sara M. Verbsky: Website, along with a transcript of today's call any statements made during this call relative to management's expectations estimates or beliefs are that otherwise discuss management's or the company's outlook plans or projections are forward looking statements and actual results could differ materially from those made in such statements additional information and the factors that could cause our results.

Markets and our payable after that Al will then give you a detailed review of the financials.

The results for our fourth quarter represented we believe another period of forward progress again, we had opportunities encountered headwinds and the shape of the variegated landscape changed as it regularly does but in the end. We once again took advantage of the opportunities and overcame the turbulence.

Sara M. Verbsky: To differ materially from those in the forward looking statements are contained in our SEC filings. Finally this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our web site.

Sales in the quarter were $1 billion, $196 6 million or $1 2 billion sounds better that wake up three 5% as reported from last year, excluding $9 1 million of favorable foreign currency and a $5 5 million from the recent miles the acquisition organic sales increased two.

Sara M. Verbsky: With that said I'd now like to turn the call over to Nick Pinchuk, Nick Thanks, Sarah.

Nicholas T. Pinchuk: Good morning, everybody.

2% the results represent a positive trend of some significance demonstrate.

Nicholas T. Pinchuk: As usual I'll start with the highlights of our quarter and our full year.

Demonstrating snap ons ability to adapt and to overcome market disruptions.

Nicholas T. Pinchuk: Provide my perspective on the results on our markets and our path ahead. After that Aldo will then give you a detailed review of the financials.

From an earnings perspective, our Opco operating income for the quarter was $257 9 million, an <unk> margin for the quarter was $21 6 million up 10 basis points compared to last year for financial services operating earnings were $67 9 million rising from the $63 9 million recorded last year and the combination of the.

Sara M. Verbsky: The results for our fourth quarter represented we believe another period of forward progress again, we had opportunities encountered headwinds and the shape of the variegated landscape changed as it regularly does but in the end. We once again took advantage of the opportunities and overcame the turbulence.

Our results from Opco and from financial services offered in overall consolidated margin of 25, 2% also up 10 basis points.

Sara M. Verbsky: Sales in the quarter were up $1 billion, $196 6 million or $1 2 billion sounds better that wake up three 5% as reported from last year, excluding $9 1 million of favorable foreign currency and a $5 5 million from that.

And the overall EPS was $4.75.

<unk> of seven 5% from the $4 42 that was a registered a year ago.

Now I'll talk about more so let's turn to those markets and the trends, we're seeing based on our customer connections with customers all the time.

Sara M. Verbsky: At Mt. <unk> acquisition organic sales increased two 2% the results represent a positive trend of some significance demonstrating snap ons ability to adapt and to overcome market disruptions.

We believe.

Automotive repair continues to be clearly favorable.

Vehicle Oems continue to see the need for upgrading dealer repair shops, and enabling the shops in servicing the blizzard of new models and technologies, making their way to the market.

Sara M. Verbsky: From an earnings perspective, our Opco operating income for the quarter was $257 9 million and the <unk> margin for the quarter was $21 6 million up 10 basis points compared to last year for financial services operating earnings were $67 9 million rising from the $63 9 million recorded last year and the combination of the reserve.

And preparing for that futures OEM continue requiring dealership investments in new under car equipment and essential tools to meet the challenge its a considerable opportunity of which snap ons clearly taking advantage.

Sara M. Verbsky: From Opco and from financial services offered in overall consolidated margin of 25, 2% also up 10 basis points.

Activity independent shops.

Also robust.

You can see it in the vehicle and repair macros.

Car parks the car park is growing and getting older now over 12 years old on average cars are getting more complex and more difficult to fix and reflecting all of that.

Sara M. Verbsky: Overall EPS was $4 75.

Sara M. Verbsky: A rise of seven 5% from the $4 42 that was a registered a year ago.

Service hours are up household spending on repair was growing wages are rising the number of technicians is moving upward fast.

Sara M. Verbsky: Now I'll talk about more so let's turn to those markets and the trends, we're seeing based on our customer connections with customers. All the time, we believe.

Shop owners keeps shouting they want more technicians, even louder than they have over the past year. So the underlying repair business is strong its prosperity.

Sara M. Verbsky: Automotive repair continues to be clearly favorable.

Sara M. Verbsky: Vehicle Oems continue to see the need for upgrading dealer repair shops, and enabling the shops in servicing the blizzard of new models and technologies, making their way to the market.

It was a reality that kept the <unk> positive even in even as the financial World was chanting over the past years or months. The recession is coming recession is coming but cash is and everything.

Sara M. Verbsky: And preparing for that futures OEM continue requiring dealership investments in new under car equipment and essential tools to meet the challenge its a considerable opportunity of which snap on is clearly taking advantage.

Cash is and everything for the people of work personal confidence as a balance between your current environment. The garage, we see and the way you see the world evolving in sometime and sometime in the mid fall of last year, our franchisees sense that balance shifting negative.

Sara M. Verbsky: Activity and independent shops. It's also robust you can see it in the vehicle and repair macros.

Patrick Buckley: Our parks the car park is growing and getting older now over 12 years old on average cars are getting more complex and more difficult to fix and reflecting all of that.

In recent weeks I've been around that visited our franchisees all over the country in Nevada, South Carolina in Wisconsin, and they also had about the same thing the techs are cash rich, but because of the external bad news of getting for breakfast almost everyday the impasse in Ukraine. The war in the Middle East the dysfunction at the border and the.

Patrick Buckley: Service hours are up household spending on repair what's growing wages are rising the number of technicians is moving upward fast and shop owners keeps shouting they want more technicians, even wilder than they have over the past year. So the underlying repair business is strong it's prospering.

Uncertainty of the upcoming election, the weight of it all appears to be turning the Tex confidence poor.

Patrick Buckley: It was a reality that kept the text positive even in even as the financial world was camping over past years or months. The recession is coming recession is coming but cash isn't everything.

And when this happens based on what we've seen in other times, we've seen that happen before our customers keep purchasing but they they gravitate towards shorter payback items and so it appeared to be as the quarter progressed.

Patrick Buckley: Cash is and everything for the people of work personal confidence is a balance between your current environment. The garage, we see and the way you see the world evolving in some time and some time in the mid fall of last year, our franchisees since that balance shifting negative.

We saw that for mid to the end of the court and so repair is strong but.

But the techs are worrying about the way forward still cash rich, but they appear to be wavering in their competence.

A big change.

Patrick Buckley: In recent weeks I've been around that visited our franchisees all over the country in Nevada, South Carolina in Wisconsin, and they also at about the same thing the techs are cash rich, but because of the external bad news or getting for breakfast almost everyday the impasse in Ukraine. The war in the Middle East the dysfunction of the border and the <unk>.

Now, let's move forward to critical industries, that's a horse of a different color confidence seems to be abundance across that that business. This is where our commercial and industrial group of C&I place. We continue to see progress and the results in the quarter reflect that trend. It's a complex that segment a lot of you know this already but I'm going to say it that set the context it's complex.

Patrick Buckley: Uncertainty of the upcoming election, the weight of it all appears to be turning the Tex competence poor.

The segment.

Embedded with the central test, where the penalty for failure is high it's an arena that demands precision functionality and repeat ability.

Patrick Buckley: And when this happens based on what we've seen in other times, we've seen that happen before our customers keep purchasing but they they gravitate towards shorter payback items and so it appeared to be as the quarter progressed.

Under the most grueling environments covering a vast range of applications from the sensitive of micro world Chip manufacturing to China rugged Earth moving equipment to performance critical aviation.

Patrick Buckley: We saw that for mid to the end of the court and so repair is strong but.

I think even up to spaceships the.

The underlying need for customization, but in that segment the underlying need for customization and precision both snap on strength is clearly growing all across those sectors.

Patrick Buckley: But the techs are worrying about the way forward still cash rich, but they appear to be wavering in their competence.

Patrick Buckley: A big change.

Patrick Buckley: Now, let's move forward to critical industries, that's a horse of a different color confidence seems to be abundance across that that business. This is where our commercial and industrial group of C&I place. We continue to see progress and the results in the quarter reflect that trend. It's a it's a complex that segment a lot of you know this already but I'm going to say it to set the context it's complex.

C&I is also the most geographically dispersed operations and there are significant variations from country to country and you know.

Created by the uncertainties in the economic political policy. So as such we see mixed results in Europe and are continuing but slow recovery in Asia.

We also see differences from sector to sector with education aviation and the military the military and general industries, all showing nice improvements, where natural resources and heavy duty her off.

Patrick Buckley: The segment.

Patrick Buckley: Embedded with our central task with the penalty for failure is high it's an arena that demands precision functionality and repeat ability.

But shining through all of that variability as our expanding strengthen those critical industries. The advantaged snap ons holds and in product and brand and in people and in the quarter those drivers were on display.

Patrick Buckley: All under the most grueling environments covering a vast range of applications from the sense of a micro world chip manufacturing vagina rugged earth moving equipment to performance critical aviation.

Patrick Buckley: Even up to spaceships the.

So across our corporation I would characterize our market that our markets as mixed turbulence from period to period and from sector to sector.

Scott: The underlying need for customization, but in that segment the underlying need for customization and precision both snap on strengths is clearly growing all across those sectors.

Filled with ongoing opportunities.

And we believe we're well positioned to face the challenges of today, though in the end.

Scott: C&I is also the most geographically dispersed operations and there are significant variations from country to country and creative.

Up today and those that may arise in the future. We remain confident that we have continuing potential along we have continuing potential long our loan rates for growth.

Scott: Created by the uncertainties in the economic political policy. So as such we see mixed results in Europe and are continuing but slow recovery in Asia.

And we see significant powered overcome rooted in our snap on value creation processes safety quality customer connection innovation and rapid continuous improvement, especially customer connection.

Scott: We also see differences from sector to sector with education aviation and the military the military and general industries, all showing nice improvements, where natural resources and heavy duty or off.

One of our substantial competitive advantages is being right, where the actual payoffs are being pursued and an engineering our products to make the work easier by matching those insights the insights gained with technology applied.

Scott: But shining through all of that variability as our expanding strengthen those critical industries. The advantage snap onto holds and in product and brand and in people and in the quarter those drivers were on display.

We've seen that over time.

Scott: So across our corporation I would characterize our market our markets as mixed turbulent from period to period and from sector to sector what.

We've seen that innovative offerings creates a path to advance and to overcome any turbulence and in the quarter.

And in the year, our product line continue would advance just kept getting stronger and we continue to invest in snap on value creation to make that possible. We believe in fact that our product line has never been stronger and despite the turbulence we had more million dollar hit products in 2023 than ever before and we believe will move higher again in two.

Scott: Filled with ongoing opportunities.

Scott: And we believe we're well positioned to face the challenges of today, though.

Scott: Up today and those that may arise in the future. We remain confident that we have the continuing potential along we have continuing potential long our loan rates for growth.

Scott: And we see significant powered overcome rooted in our snap on value creation processes safety quality customer connection innovation and rapid continuous improvement, especially customer connection.

2023 than ever before.

We believe we will move higher again 2024.

Now, let's talk about our full year 2023 performance sales of $4 billion $730 2 million represented an increase of five 3% as reported and a rise of five 6% organically.

Scott: One of our substantial competitive advantages is being right, where the actual tests are being pursued and an engineering our products to make the work easier by matching those insights the insights gained with technology applied.

Opco Oi exceeded $1 billion I'm going to say that again $1 billion for the first time.

Scott: We've seen that over time.

Scott: We've seen that innovative offerings creates a path to advance and to overcome any turbulence and in the quarter.

Reaching 1 billion $39 9 million and our Opco Oi margin of 22%, 22% represented an average increase.

Scott: And in the year, our product line continue would advance just kept getting stronger and we continue to invest in snap on value creation to make that possible. We believe in fact that our product line has never been stronger and despite the turbulence we had more million dollar hit products in 2023 than ever before and we believe will move higher again in two.

An increase of 110 basis points of Gangbusters, we've never been a 22% a 110 is a great increase and when we include financial services earnings up 275 million. The consolidated operating margin for the corporations year was 25, 7% up 80 basis points.

Scott: 2023 than ever before and we believe will move higher again 2024.

Earnings per share with a year were $18 76 <unk> <unk>.

Scott: Now, let's talk about our full year 2023 performance sales of 4 billion $730 2 million represented an increase of five 3% as reported and a rise of five 6% organically.

<unk> dollars 94 or 11, 5%.

We believe these are good numbers.

Now for an individual for the individual operating now for the individual operating groups, let's see.

Scott: Opco Oi exceeded $1 billion I don't say that again $1 billion for the first time.

Start with C&I reported sales for the C&I group in the quarter were $363 9 million up $20 7 million or 6% that includes $5 5 million from the Bridger Mountain acquisition, $3 6 million of favorable foreign currency and our organic sales increase of $11 6 million or three 3%.

Scott: Reaching 1 billion $39 9 million and our Opco Oi margin of 22%, 22% represented an average increase.

Scott: An increase of 110 basis points at Gangbusters, we've never been at 22, and 110 is a great increase and when we include financial services earnings of 275 million. The consolidated operating margin for the corporations year was 25, 7% up 80 basis points.

All reflecting the strength in critical industries, partially offset by a slight in automotive power tools.

C&I is operating income for the period was $54 1 million. It was up 12, 9% of the Oi margin was 14, 9% rising 90 basis points and overcoming 50 basis points of headwind.

Scott: Earnings per share with a year were $18 76, rising a $1 94 or 11, 5%.

Russell stated with negative currency.

Ken.

Scott: We believe these are good numbers.

Again in this case the advance was driven by strong expansion in critical industries, and our increased kitting capacity for complex orders continue to play a large role in that progress, but significant advance was also spur as regularly as by new product.

Scott: Now for an individual for the individual operator now for the individual operating groups let's.

Scott: Start with C&I reported sales with the C&I group in the quarter were $363 9 million up $20 7 million or 6% that includes $5 5 million from the friends of mountain acquisition, $3 6 million of favorable foreign currency and our organic sales increase of $11 6 million or three 3%.

Innovations like our recently launched automated tool control or ATC portal.

It's the latest addition to our unique snap on ATC tool control product lineup. It's manufactured router audit crib operation acquisition Operation Alpha version that was recently acquired in California, and the portal significantly extends the reach of our ATC systems. It enables efficient control over a much wider range of <unk>.

Scott: We are all reflecting the strength in critical industries, partially offset by a slight in automotive power tools.

Scott: C&I operating income for the period was $54 1 million. It was up 12, 9% of the Oi margin was 14, 9% rising 90 basis points and overcoming 50 basis points of headwind of Russell's weighted with negative currency again.

By shapes and sizes in effect.

This portal as a doorway lined with radio frequency identification or RFID RFID antennas.

Is it typically place.

Yes.

<unk> two significant assets like <unk>.

Scott: Again in this case the advance was driven by strong expansion in critical industries, and our increased kitting capacity for complex orders continue to play a large role in that progress, but significant advance was also spurred as readily as buy new product.

Hydraulic pumps portable generators and valuable diagnostic equipment, often stored in common areas and factories or other places and enter a catalog by fixing an RFID tag as technician scan the badges to enter and exit the portal the system documents as devices moving in and out of the of the secured <unk>.

Scott: Innovations like our recently launched automated tool control our ATC portal.

Scott: It's the latest addition to our unique snap on ATC tool control product lineup. It's manufactured out of our auto group Operation acquisition Operation Apolo version that was recently acquired in California, and the portal significantly extends the reach of our ATC systems. It enables efficient control over a much wider range of.

Toward keeping close track of these critical items, just like the base ATC system keeps track of hand in power tools, moving in and out of a tool storage box.

We're a much wider set of areas, we anticipate that the new portal will be a big boost.

And a great opportunity with C&I and the growing in the growing area of tool control a very important area for us.

Scott: Device shapes and sizes in effect.

Scott: The doorway lined with radio frequency identification or RFID.

And in the fourth quarter, we saw some of that potential come to bear.

Scott: RFID antennas and it's typically place that.

So C&I mixed progress challenged with headwinds, but clear and overall advancement great momentum enabled by capacity expansion and by growing product power.

Scott: Yes.

Scott: Entered stood pool significant assets like <unk>.

Scott: Hydraulic pumps portable generators and valuable diagnostic equipment, often stored in common areas and factories or other places and our catalog by fixing an RFID tag as technician scan the way I've just to enter and exit the portal the system documents the devices moving in and out of the of the secured store.

Now to the tools group.

The tools group quarter not at our standard.

But we do see a path forward adjusting to the changing environment. As you may remember this is where we sell to detect those who told the wrenches punch the touch screens and those who appear to be wavering in macro confidence and those customer and those customers who under under these conditions shift the lower payback.

Scott: Keeping close track of these critical items, just like the base ATC system keeps track of hand, and power tools moving in and out of a tool storage box.

Scott: We're a much wider set of areas, we anticipate that the new portal will be a big boost.

<unk> are quicker payback items.

Scott: And a great opportunity with C&I and the growing in the growing area of tool control a very important area for us.

While the fourth quarter reflects our franchisees in the tools group pivoting to match that movement that customer movement sales in the quarter were $513 3 million included and are they included an organic decrease of five 7% compared to last year now more to our standard Grupo why margins were 12.

Scott: And in the fourth quarter, we saw some of that potential come to bear.

Scott: So C&I Mitch.

Scott: Mixed progress challenged with headwinds, but clear and overall advancement great momentum enabled by capacity expansion and by growing product power.

One, 6% up 20 basis points, overcoming 10 basis 10 basis points of negative currency and the gross margin percentage rose 200 basis points.

Scott: Now to the tools group.

Scott: The tools group quarter.

David S. MacGregor: Not at our standard.

Nice gains.

David S. MacGregor: But we do see a path forward adjusting to the changing environment. As you may remember this is where we sell to detect those who told the wrenches punch the touch screens and those who appear to be wavering in macro competence and those customer and those customers who under under these conditions shift to lower.

The quarter played out the franchisees since the change and redirected their ordering and selling focus to match the customer shift the lower.

The faster payback items.

And snap on is doing the same defining a way forward redirecting factory capacity adopting smaller ticket mark a smaller ticket marketing focus and launching innovative new short up quicker payback products.

David S. MacGregor: Payback or quicker payback items.

David S. MacGregor: While the fourth quarter reflects our franchisees in the tools group pivoting to match that movement that customer movement sales in the quarter were $513 3 million included in and they included an organic decrease of five 7% compared to last year now more to our standard Grupo <unk> margins were 20.

That 50 environment.

Steady there are designs like our new ratchet forged manufactured in Elizabethton, Tennessee factory the next level.

This next evolution and a ratchet line is 102 design, we've named the synergy series. We believe it's a game changes for technicians are significant improvement. It helps make repair work much easier the synergy is a short payback items.

David S. MacGregor: One, 6% up 20 basis points, overcoming 10 by 10 basis points of negative currency and the gross margin percentage rose 200 basis points.

I'll make a clear difference right away.

15% Werner head and inch longer handle a three five inch a degree swing area, 20% more compact all for easier access and quicker work in tight quarters that it won't come out like chassis chassis areas.

David S. MacGregor: Nice gains.

David S. MacGregor: As the quarter played out the franchisees since the change and redirected their ordering and selling focus to match the customer shift the lower.

David S. MacGregor: The faster payback items and snap on is doing the same.

Modern vehicles.

Synergies internal mechanisms were re engineered to engage the primary drag with 10 contact points versus the seven in the previous design greatly reducing the chances slippers slippage, improving the tools reliability and quality, even while under maximum loads.

David S. MacGregor: Finding a way forward redirecting factory capacity adopting smaller ticket mark a smaller ticket marketing focus and launching innovative new shore up quicker payback products.

David S. MacGregor: That 50 environment.

David S. MacGregor: Steady there are designs like our new ratchet forged manufactured in Elizabethton, Tennessee factory. The next this next evolution in our Ratchet line is 102 design. We've named the synergy series. We believe is a game changer for technicians are significant improvement. It helps make repair work much easier the synergy is a short payback ita.

Missions may be uncertain about the way forward, but they're confident about the synergies. They know the synergy they know it will provide a quick payback, it's thinner longer stronger and going forward, we'll expand that new 100 technology. The new 100, <unk> technology throughout the step on lineup and we believe it will quickly become a must have all.

David S. MacGregor: But that will make a clear difference right away, a 15% thinner head and inch longer handle a three five inch a degree swing area, 20% more compact all for easier access and quicker work in tight quarters that they're often come up like chassis chassis areas.

Across the industry.

Yeah.

Also in the quarter are all going to Iowa manufacturing facility to reach the new quick payback Kers C. <unk>.

$24 30, a 36 inch deluxe shop cart with its smooth with smooth mobility and a substantial payload it offers.

David S. MacGregor: Modern vehicles.

David S. MacGregor: Synergies internal mechanisms, we're reengineering to engage the primary drag with 10 contact points versus the seven in the previous design greatly reducing the chance of slippers slippage, improving the tools reliability and quality, even while under maximum loads technicians may be uncertain about the way forward, but they're.

The technician is economical and attractive way to store the tools, but it also allows them to position their instruments adjacent to the workplace, increasing productivity, eliminating the time walking to and from the job.

And as a particularly special feature.

The vessel lid on this card serves as a durable workbench that one when opened separates into two sections, showing full and easy, allowing full and easy access to it.

David S. MacGregor: And about the synergies they know the synergy they know it will provide a quick payback.

Deep eight inch top compartment, that's underneath the unit also includes a complete power strip, where Texas charged a cordless tools diagnostic platforms of lights and other electronic devices.

David S. MacGregor: Dinner longer stronger and going forward, we'll expand that new 100 technology, the new 100, <unk> technology throughout the snap on lineup and we believe it will quickly become a must have all across the industry.

The innovative cards also configured with two additional George this is kind of just two additional george underneath the sliding drop top providing quick accessibility for essential and small items, preventing loss times from treasure hunting and large draws for small scale items.

David S. MacGregor: Also in the quarter are all going to Iowa manufacturing facility, we use the new quick payback Kers C 20.

David S. MacGregor: $24 30, a 36 inch deluxe shop cart with its smooth with smooth mobility and a substantial payload. It offers a technician or an economical and attractive way to store the tools, but it also allows them to position their instruments adjacent to the workplace, increasing productivity, eliminating the time walking to and from the job.

It is a common problem with with with other units and so this will really save time for the text. Unlike our.

Like our top of the line tool storage boxes technicians can customize their cart selecting from array of colors and trims and so they can project their own personal identity throughout the shop. The KFC 242, 430 economical storage attractive features convenient mobility, we expect it'll have strong in <unk>.

David S. MacGregor: And as a particularly special feature.

David S. MacGregor: The vessel lid on this card serves as a durable workbench that one when opened separates into two sections showing full when these allowing full and easy access to it.

David S. MacGregor: The deep eight inch top compartment. That's underneath the unit also includes a complete power strip, where Texan charged a cordless tools diagnostic platforms of lights and other electronic devices.

Annual appeal in this uncertain environment.

And shifting our product focus also required some repositioning in the factory expanding.

The capacity to match customer preferences, we're doing just that move into currently popular items more dedications of short payback to products like our flex and swivel sockets and the new long nosed pliers in Milwaukee additional cart welding breaking bottleneck for economical storage card options in our Ghana, and doubling down on synergy production of <unk>.

David S. MacGregor: The innovative cards also configured with two additional George this is kind of just two additional george underneath the sliding drop top providing quick accessibility for essential and small items, preventing loss times from treasure hunting and large draws for small scale items.

David S. MacGregor: It's a common problem with with with other units and so this will really save time for the text. Unlike our.

It wasn't in Tennessee.

Finally, our sales teams are being deployed to help franchisees, giving them added energy and more time and selling shorter payback items off their truck.

David S. MacGregor: Like our top of the line tool storage boxes technicians can customize their cart selecting from array of colors and trends and so they can project their own personal identity throughout the shop, the K RFC to four to $4 30 economical storage attractive features convenient mobility, we expect it'll have strong in <unk>.

Well, that's the tools group.

Shifting tech preferences pivoting operations to ensure the way Ford adapting products capacity and sales focus making the most of our strengths and the turbulence now for ours Tonight.

David S. MacGregor: Turning to appeal in this uncertain environment.

Group results confirmed the group results confirmed what we've been saying all along snap on is well positioned to support repair shops dealers and independents and keeping pace with the with the growing complexity of the car Park arsenide sales on a quarter of 458 million up $12 9 million versus last year, including on organic sales rise of $8 eight.

David S. MacGregor: And shifting our product focus also required some repositioning in the factory expanding the capacity to match customer preferences. We're doing just that move into currently popular items more dedications of short payback to products like our flex and swivel sockets and the new long nosed pliers in Milwaukee additional cart welding breaking bottleneck for our.

And that was authored by volume with vehicle OEM programs for new models and platforms and by strong progress in under car for both dealership. It independent shops gains that served to offset the decrease in the big ticket diagnostic items.

David S. MacGregor: Economical storage card options in our Ghana, and doubling down on synergy production Elizabethton, Tennessee.

David S. MacGregor: Finally, our sales teams are being deployed to help franchisees, giving them added energy and more time and selling shorter payback items off their truck.

<unk> operating earnings for the quarter were $113 3 million in the operating margin was a still strong 25, 1%, but down 20 basis points, reflecting the mix shift to lower margin on the car and OEM facing and the OEM facing activities.

David S. MacGregor: Well, that's the tools group.

David S. MacGregor: Shifting tech preferences pivoting operations to ensure the way Ford adapting products capacity and sales focus making the most of our strengths and the turbulence now for ours Tonight.

Just like other segments Rsi advances advair.

Advances are driven by by new product and in even the aging car park is filled with diverse and ever changing models light duty trucks and full size Suvs are busier than ever requiring a range of wheel configurations and sizes somewhere over 100 pounds and at the recent repair industry Sema show in Las Vegas, we have one of our App.

David S. MacGregor: Group results confirmed the group results confirm what we've been saying all along snap on is well positioned to support repair shops dealers and independents and keeping pace with the growing complexity of the car Park arsenide sales on a quarter of 458 million up $12 9 million versus last year, including organic sales rise of $8 8 million.

To that challenges challenge on prominent.

David S. MacGregor: If that was authored by volume with vehicle OEM programs for new models and platforms and by strong progress in under car for both dealership. It independent shops gains that served to offset the decrease in the big ticket diagnostic items.

<unk>, our new automated armored Omron series wheel Balancers, specifically designed for high volume shop that require precision and reliability made from robust steel for enhanced and rugged durability, even if small compact footprint. The balancers intelligent operating system uses sonar.

David S. MacGregor: <unk> operating earnings for the quarter were $113 3 million in the operating margin was still strong 25, 1%, but down 20 basis points, reflecting the mix shift to lower margin on the car and OEM facing and the OEM facing activities.

<unk> to automatically measure both the wheel and rim, eliminating the need for manual intervention, a great time saver in the shop and for improved safety. The unit also includes our heavy duty pneumatic gross debt positions cumbrance cumbersome tyres on the spindle, making it unnecessary protects the physically lift.

David S. MacGregor: But just like all the segments Rsi advances.

David S. MacGregor: Advances are driven by new product and in even the aging car park is filled with diverse and ever changing models light duty trucks and full size Suvs are busier than ever requiring a range of wheel configurations and sizes somewhere over 100 pounds and at the recent repair industry Sema show in Las Vegas, we have one of our App.

Manipulate that the heavy assembly substantially avoiding the risk of stream.

The balance are also includes.

A high resolution touch screen and intuitive.

<unk> interface and an effective ergonomic design, it's a powerful combination of accuracy speed durability and safety.

David S. MacGregor: To that challenges challenge on prominent.

David S. MacGregor: <unk>, our new automated armored wheel armrests series wheel Balancers, specifically designed for high volume shop that require precision and reliability made from robust steel for enhanced and rugged durability, even if small compact footprint. The balancers intelligent operating system uses sonar.

And the Sema crowd clearly knows.

So that's our F&I shop repair remains robust vehicle complexity continues to advance abundant opportunities for a great future. It has they have built the group as abundant opportunities for a great future and are awesome.

<unk> has the products to take advantage.

David S. MacGregor: <unk> to automatically measure both the wheel and rim, eliminating the need for manual intervention, a great time saver in the shop and four improve safety. The unit also includes our heavy duty pneumatic was that positions cumbrance cumbersome tyres on the spindle, making it unnecessary protects the physically lift.

Well, that's our quarter and our year for the quarter sales up three 5% as reported two 2% organically Oi margin reached 21, 6%.

10 basis points and the EPS is $4 75.

Rising seven 5%.

Against the turbulence.

David S. MacGregor: Manipulate that the heavy assembly substantially avoiding the risk of strain.

The period was marked by extraordinary positives in the critical industry in the critical industries that our C&I the tools group not reaching our standards, but displaying margin gains and pivoting to match the technician's shifting focus and our C&I, enabling both dealerships and independent shops to meet the <unk>.

David S. MacGregor: The balance are also includes.

David S. MacGregor: A high resolution touch screen and intuitive.

David S. MacGregor: <unk> interface and an effective ergonomic design, it's a powerful combination of accuracy speed durability and safety.

David S. MacGregor: And the Sema crowd clearly knows.

David S. MacGregor: So that's our F&I shop repair remains robust vehicle complexity continues to advance abundant opportunities for a great future. It has they have the group is abundant opportunities for a great future and our awesome team has the products to take advantage.

<unk> does have higher complexity of new technologies and the full year.

2023 sales of 4 billion 730, $30 2 million up five 6% organically in Hawaii over $1 billion.

David S. MacGregor: Well, that's our quarter and our year for the quarter sales up three 5% as reported two 2% organically Oi margin reached 21, 6% up 10 basis points and the EPS is $4 75 <unk>.

Rising 10, 5% and Oi margin of 22% an increase of 110 basis points or 110 basis points, we like that.

And the EPS $18 76 up $1 90 411, 5%.

David S. MacGregor: Rising seven 5%.

David S. MacGregor: Against the turbulence.

It was another encouraging here.

David S. MacGregor: The period was marked by extraordinary positives in the critical industry in the in the critical industries that our C&I the tools group not reaching our standards, but displaying margin gains and pivoting to match the technician's shifting focus and <unk>, enabling both dealerships and independent shops to meet the <unk>.

Now I'll turn the call over to Aldo Aldo Exec, our consolidated operating results are summarized on slide six net sales of $1 billion $196 $6 million in the quarter represented an increase of three 5% from 2022 levels, reflecting a two 2% organic sales gain of $9 $1 million of favorable foreign currency.

David S. MacGregor: <unk> has a higher complexity of new technologies and the full year.

Translation and $5 $5 million of acquisition related sales sales were strong in our businesses serving critical industries this quarter, while activity at our automotive repair markets was mixed consol.

David S. MacGregor: 2023 sales of 4 billion 730, $30 2 million up five 6% organically in Hawaii over $1 billion.

Consolidated gross margin of 48, 3%, including 20 basis points of unfavorable foreign currency effects compared to 48, 5% last year benefits from lower material and other costs and savings from the company's RCI initiatives were offset by the effects of a higher mix of lower sales and lower gross margin businesses.

David S. MacGregor: Rising 10, 5% and Oi margin of 22% an increase of 110 basis points or 110 basis points, we like that.

David S. MacGregor: And the EPS $18 76 up $1 90 411, 5%.

David S. MacGregor: It was another encouraging here.

Operating expenses as a percentage of net sales improved 30 basis points to 26, 7% from 27% last year, primarily due to lower corporate expenses and benefits from higher sales volumes, partially offset by increased investment in personnel and other costs opt.

Aldo: Now I'll turn the call over to Aldo Aldo Exec, our consolidated operating results are summarized on slide six net sales of $1 billion $196 $6 million in the quarter, representing an increase of three 5% from 2022 levels, reflecting a two 2% organic sales gain of $9 $1 million of favorable foreign currency.

Operating earnings before financial services of $257 9 million in the quarter compared to $248 million in 2022 as a percentage of net sales operating margin before financial services of 21, 6%, including 20 basis points of unfavorable foreign currency effects compared to 21, 5% last year.

Aldo: Z translation and $5 $5 million of acquisition related sales sales were strong in our businesses serving critical industries. This quarter, while activity in our automotive repair markets was mixed consolidated gross margin of 48, 3%, including 20 basis points of unfavorable foreign currency effects compared to 48, 5% last year.

Financial services revenue of $97 2 million in the fourth quarter of 2023 compared to $88 $3 million last year, while operating earnings of $67 9 million compared to $63 $9 million in 2022.

Aldo: Benefits from lower material and other costs and savings from the company's RCI initiatives were offset by the effects of a higher mix of lower sales and lower gross margin businesses.

Consolidated operating earnings of $325 $8 million in the quarter compared to $311 $9 million last year as a percentage of revenues. The operating earnings margin of 25, 2% compared to 25, 1% in 2022, our fourth quarter effective income tax rate of 21, 4% compared to <unk>.

Aldo: Operating expenses as a percentage of net sales improved 30 basis points to 26, 7% from 27% last year, primarily due to lower corporate expenses and benefits from higher sales volumes, partially offset by increased investment in personnel and other costs.

Aldo: Operating earnings before financial services of $257 9 million in the quarter compared to $248 million in 2022 as a percentage of net sales operating margin before financial services of 21, 6%, including 20 basis points of unfavorable foreign currency effects compared to 21, 5% last year.

One 2% last year, while our full year 2023 tax rate of 22, 5% compared to 22, 8% last year.

Net earnings of $255 3 million or $4.75 per diluted share reflected an increase of $16 4 million or 33 per share from 22 levels and represented a seven 5% year over year improvement in diluted earnings per share now.

Aldo: Financial services revenue of $97 $2 million in the fourth quarter of 2023 compared to $88 $3 million last year, while operating earnings of $67 9 million compared to $63 9 million in 2022.

Now, let's turn to our segment results for the quarter.

Starting with the C&I group on slide seven.

Sales of $363 9 million increased from $343 $2 million last year, reflecting an $11 6 million or three 3% organic sales gain $5 5 million of acquisition related sales and $3 6 million of favorable foreign currency translation.

Aldo: Consolidated operating earnings of $325 8 million in the quarter compared to $311 $9 million last year as a percentage of revenues. The operating earnings margin of 25, 2% compared to 25, 1% in 2022, our fourth quarter effective income tax rate of 21, 4% compared to <unk>.

Organic growth includes a double digit gain in sales to customers in critical industries, partially offset by a double digit decline in sales of power tools with respect to critical industries sales to the military were robust as was activity in the aviation sector.

Aldo: 82% last year, while our full year 2023 tax rate of 22, 5% compared to 22, 8% last year.

Aldo: Net earnings of $255 3 million or $4.75 per diluted share reflected an increase of $16 4 million or <unk> 33 per share from 22 levels and represented a seven 5% year over year improvement in diluted earnings per share now.

As previously announced during the quarter snap on acquired Mountain, Inc. A leading developer manufacturer and marketer of high precision torque tools, the acquisition complements and expands snap ons torque offering for a variety of critical industry applications. The operating results of amounts are reported within the C&I group.

Speaker Change: Now, let's turn to our segment results for the quarter.

Speaker Change: Starting with the C&I group on slide seven.

Gross margin improved 150 basis points to 39, 2% in the fourth quarter from 37, 7%. In 2022. This is largely due to increased sales volumes of the higher gross margin critical industry sector pricing actions savings from RCI initiatives, and 30 basis points of benefits from acquisitions.

Speaker Change: Sales of $363 9 million increased from $343 $2 million last year, reflecting an $11 6 million or three 3% organic sales gain $5 5 million of acquisition related sales and $3 $6 million of favorable foreign currency translation.

These improvements were partially offset by 60 basis points of unfavorable foreign currency effects.

Speaker Change: Organic growth includes a double digit gain in sales to customers in critical industries, partially offset by a double digit decline in sales of power tools with respect to critical industries sales to the military were robust as was activity in the aviation sector.

Operating expenses as a percentage of sales rose 60 basis points to 24, 3% in the quarter from 23, 7% in 2022, primarily due to a 30 basis point impact from acquisitions as well as from the investments in personnel and other costs.

Speaker Change: As previously announced during the quarter snap on acquired mounts, Inc. A leading developer manufacturer and marketer of high precision torque tools the acquisition complements and expands snap on historic offering for a variety of critical industry applications. The operating results of amounts are reported within the C&I group.

Operating earnings for the C&I segment of $54 $1 million, including $1 4 million of unfavorable foreign currency effects compared to $47 $9 million last year.

The operating margin of 14, 9%, including 50 basis points of unfavorable currency effects compared to 14% in 2022, reflecting an improvement of 90 basis points.

Speaker Change: Gross margin improved 150 basis points to 39, 2% in the fourth quarter from 37, 7%. In 2022. This is largely due to increased sales volumes of the higher gross margin critical industry sector pricing actions savings from RCI initiatives, and 30 basis points of benefits from acquisitions.

Turning now to slide eight.

Sales in the snap on tools group of $513 $3 million compared to $542 7 million a year ago, reflecting a five 7% organic sales decline, partially offset by $1 6 million of favorable foreign currency translation.

Speaker Change: Improvements were partially offset by 60 basis points of unfavorable foreign currency effects.

Speaker Change: Operating expenses as a percentage of sales rose 60 basis points to 24, 3% in the quarter from 23, 7% in 2022, primarily due to a 30 basis point impact from acquisitions as well as from investments in personnel and other costs.

The organic decrease reflects a high single digit decline in the U S business, partially offset by a mid single digit gain in our international operations.

Gross margin improved 200 basis points to 45, 2% in the quarter from 43, 2% last year. This improvement primarily reflects decreased sales of lower gross margin products, which includes lower sales of items, where the snap on tools group serves as a distributor for products made by our C&I and <unk>.

Speaker Change: Operating earnings for the C&I segment of $54 1 million, including $1 4 million of unfavorable foreign currency effects compared to $47 $9 million last year.

Speaker Change: The operating margin of 14, 9%, including 50 basis points of unfavorable currency effects compared to 14% in 2022, reflecting an improvement of 90 basis points.

Krish and I groups.

Operating expenses as a percentage of sales rose 180 basis points to 23, 6% in the quarter from 21, 8% in 2022, largely due to the lower sales volume.

Speaker Change: Turning now to slide eight.

Speaker Change: Sales in the snap on tools group of $513 3 million compared to $542 7 million a year ago, reflecting a five 7% organic sales decline, partially offset by $1 6 million of favorable foreign currency translation.

Operating earnings for the snap on tools group of $111 million compared to $116 $1 million last year. The operating margin of 21, 6% compared to 21, 4% in 2022.

Speaker Change: The organic decrease reflects a high single digit decline in the U S business, partially offset by a mid single digit gain in our international operations.

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

Sales of $458 million compared to $437 $9 million in 2022, reflecting a 2% organic sales gain at $4 1 million of favorable foreign currency translation. The organic increase includes a high single digit increase in activity with OEM dealerships and a mid single digit gain in <unk>.

Speaker Change: Gross margin improved 200 basis points to 45, 2% in the quarter from 43, 2% last year. This improvement primarily reflects decreased sales of lower gross margin products, which includes lower sales of items, where the snap on tools group serves as a distributor for products made by our C&I and <unk>.

Those are under car equipment.

These gains were partially offset by a high single digit decline in sales of diagnostic and repair information products to independent shop owners and managers.

Speaker Change: Krish and I groups.

Speaker Change: Operating expenses as a percentage of sales rose 180 basis points to 23, 6% in the quarter from 21, 8% in 2022, largely due to the lower sales volume.

Gross margin was unchanged from last year with benefits from lower material and other costs and savings from RCI initiatives offset by increased sales and lower gross margin businesses.

Speaker Change: Operating earnings for the snap on tools group of $111 million compared to $116 $1 million last year. The operating margin of 21, 6% compared to 21, 4% in 2022.

Operating expenses as a percentage of sales rose 20 basis points to 19, 9% from 19, 7% last year, primarily reflecting increased personnel and other costs.

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

Operating earnings for the Arsenide group of $113 3 million compared to $110 6 million last year. The operating margin of 25, 1% compared to 25, 3% reported last year.

Speaker Change: Sales of $458 million compared to $437 $9 million in 2022, reflecting a 2% organic sales gain at $4 1 million of favorable foreign currency translation. The organic increase includes a high single digit increase in activity with OEM dealerships and a mid single digit gain in <unk>.

Now turning to slide 10.

Revenue from financial services increased $8 $9 million at $97 2 million from $88 $3 million last year, primarily reflecting the growth of the loan portfolio.

Speaker Change: Those are under car equipment.

Speaker Change: These gains were partially offset by a high single digit decline in sales of diagnostic and repair information products to independent shop owners and managers.

<unk> services operating earnings of $67 9 million compared to $63 9 million in 2022.

Financial services expenses were up $4 9 million from 2022 levels, including $3 9 million of higher provisions for credit losses the.

Speaker Change: Gross margin was unchanged from last year with benefits from lower material and other costs and savings from RCI initiatives offset by increased sales and lower gross margin businesses.

The year over year increase in provisions reflects both the growth of the portfolio as well as a return to what we believe to be a more normal pre pandemic reader provision for.

Speaker Change: Operating expenses as a percentage of sales rose 20 basis points to 19, 9% from 19, 7% last year, primarily reflecting increased personnel and other costs.

For reference our gross worldwide extended credit or finance receivables portfolio has increased eight 5% year over year, and we believe the delinquency and portfolio performance trends currently remains stable.

Speaker Change: Operating earnings for the Arsenide group of $113 3 million compared to $110 6 million last year. The operating margin of 25, 1% compared to 25, 3% reported last year.

And the fourth quarters of 2023 and 2022, the respective average yield on finance receivables were 17, 8% and 17, 6% in the fourth quarters of 2023 and 2022, the average yield on contract receivables were eight 9% eight 6% respectively.

Speaker Change: Now turning to slide 10.

Speaker Change: Revenue from financial services increased $8 $9 million at $97 2 million from $88 $3 million last year, primarily reflecting the growth of the loan portfolio.

Speaker Change: Financial services operating earnings of $67 9 million compared to $63 9 million in 2022 financial services expenses were up $4 9 million from 2022 levels, including $3 9 million of higher provisions for credit losses.

Total loan originations of $303 1 million in the fourth quarter represented an increase of $3 $4 million or one 1% from 2022 levels.

Moving to slide 11.

Our quarter end balance sheet includes approximately $2 5 billion of gross financing receivables with $2 2 billion from our U S operation.

Speaker Change: The year over year increase in provisions reflects both the growth of the portfolio as well as a return to what we believe to be a more normal pre pandemic reader provision for.

<unk> 60 day, plus delinquency rate of one 8% for U S extended credit was up from one 6% in 2022, but was the same as in the pre pandemic period of 2019 on a sequential basis. The rate is up 30 basis points, reflecting the seasonal uptick we typically experience between the third and fourth quarters.

Speaker Change: For reference our gross worldwide extended credit or finance receivables portfolio has increased eight 5% year over year, and we believe the delinquency and portfolio performance trends currently remains stable.

Speaker Change: And the fourth quarters of 2023 and 2022, the respective average yield on finance receivables were 17, 8% and 17, 6% in the fourth quarters of 2023 and 2022, the average yield on contract receivables were eight 9% eight 6% respectively.

As it relates to extended credit or finance receivables trailing 12 month net losses of $54 million represented two 5% and 90% of Outstandings at quarter end, which compares to $2 five 1% as reported at the end of last quarter.

Speaker Change: Total loan originations of $303 1 million in the fourth quarter represented an increase of $3 $4 million or one 1% from 2022 levels.

Now turning to slide 12.

Cash provided by operating activities of $296 $9 million in the quarter represented 114% of net earnings and compared to $210 $6 million last year.

Speaker Change: Moving to slide 11.

Speaker Change: Our quarter end balance sheet includes approximately $2 5 billion of gross financing receivables were $2 2 billion from our U S operation.

The improvement as compared to the fourth quarter of 2022, largely reflects lower year over year increases in working investment, which included a reduction in inventory in 2023 as well as higher net earnings net.

Speaker Change: <unk> 60 day, plus delinquency rate of one 8% for U S extended credit was up from one 6% in 2022, but was the same as in the pre pandemic period of 2019 on a sequential basis. The rate is up 30 basis points, reflecting the seasonal uptick we typically experience between the third and fourth quarters.

Net cash used by investing activities of $104 $6 million included $42 6 million for acquisitions net additions to finance receivables of $42 2 million and capital expenditures of $21 1 million.

Speaker Change: As it relates to extended credit or finance receivables trailing 12 month net losses of $54 million represented.

Net cash used by financing activities of $149 million included cash dividends of $98 million and the repurchase of 217000 shares of common stock for $69 million under our existing share repurchase programs.

As of yearend, we had approximately.

$282 9 million of common stock under our existing authorizations available for repurchase.

Turning to slide 13 trade and other accounts receivable increased $29 6 million from 2022 year end days sales outstanding of 60 days compared to 61 days as of 2022 year end <unk>.

Speaker Change: Yeah.

Inventories decreased $27 2 million from 2022 year end and on a trailing 12 month basis inventory turns of two three compared to $2 five at year end 2022.

Our year end cash position of 1 billion $1 $5 million compared to $757 2 million at year end 2022, our net debt to capital ratio of three 8% compared to 9% at year end 2022.

In addition to cash and expected cash flow from operations, we have more than $900 million available under our credit facilities as of year end. There were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.

That concludes my remarks on our fourth quarter performance.

I'll briefly review a few outlook items for 2024, we expect that capital expenditures will be in the range of $100 million and $110 million. In addition, we currently anticipate that our for our full year 2024 effective income tax rate will be in a range of 22% to 23%.

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

The snap on fourth quarter and full year.

Geographic variation shifting customer perspective, growing macro uncertainties, all overcome by snap ons ability to wheel disadvantages, making the most of opportunities continuing its positive in upward trend now demonstrated over multiple quarters.

<unk> number of years.

The quarter did see change in technicians perspective in.

And then pivoting to adjust the tools group volume did not meet our standards, but the tools team did block the difficulty with favorable mix and RCI driving improvement of Oi margins up 20 basis points with the gross margin rising 200 basis points.

The story with repair shop owners and managers with somewhat different they recognize the need to upgrade and our Tonight increase this ryzen participation at OEM program and extended its gains in under car equipment, particularly in the expanding collision space.

And finally, we saw our C&I registered another quarter of increasing importance to the corporation with a critical industries rising double digits in achieving another leap in margin, reaching new margins, reaching new insignificant levels and in all resulted in a fourth quarter advancement against some substantial headwinds.

Sales were up three 5% as reported two 2% organically Oi margins of 21, 6% increased 10 basis points and an EPS of $4 75, rising seven 5% all representing progress at a time when all was not where we'd like it to be.

Okay.

But I believe the bright line story of this period as the full year sales for the corporation increased five 6% organically Opco Oi margin Rose 110 basis points. Another significant advance in a long line of gains reaching 22% for the first time and the EPS was $18 76 up versus.

All comparisons.

And it was all losses by some noteworthy performance.

<unk> group.

Not encountering the smooth sailing.

But still achieving an oi margin of 23, 6% an increase of 150 basis points.

<unk> sales up six 7% organically and Hawaii, and an Oi margin of 24, 3% up 70 basis points off a strong base.

In C&I.

Facing a landscape of challenges, but growing four 2% as reported 5% organically with an Oi margin of 15, 5% up 140 basis points against 50 basis points of negative currency and perhaps the biggest story of wall.

Is the emergence of the critical industry business growing strong double digits in all four quarters, demonstrating that we really can roll the snap on brand out of the garage at considerable margins.

We see the quarter and the year is demonstrating that snap on does have multiple runways for progress and if one of our segments is challenged we can still move forward achieve.

Achieving clear and continuing the advancement driven by the other parts of the enterprise.

And as such we're in.

Encouraged by a prison and by our future.

We believe that with our advantages in product everyone recognizes we know work and we do make tasks easier.

And brand everywhere you go among everywhere you go among the people of work the snap on signage displayed and spoken up.

With great Pride.

And in our people our team battled tested who find the way forward and upward. Despite the challenges. The results of 2023 say itself and we believe enabled by those advantages snap-on will overcome will achieve and will advance continuing the positive trend throughout 2020.

And well beyond.

Now before I turn the call over to the operator, I'll address our franchisees and associates I know, they're all listening.

I've spoken today with belief and confidence on our current situation on our way forward.

I do so principally but I do so principally because I know the capability and the quality quality demonstrated over and over by all of you.

For your contributions and authoring our achievement.

My congratulations.

For the skills and energy you bring to our corporation everyday.

My admiration.

And for the commitment you consistently displayed to the future of our mutual enterprise.

Mike Thanks.

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

We will now begin the question and answer session.

24, and well beyond.

To ask a question you May press Star then one on your telephone keypad.

Now before I turn the call over to the operator, I'll address our franchisees and associates I know their wallets.

If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.

I've spoken today with belief and confidence on our situation on our way forward.

At this time, we will pause momentarily to assemble our roster.

I do so principally but I do so principally because I know the capability and the quality quality demonstrated over and over by all of you.

Okay.

Our first question comes from Luke Young with Baird. Please go ahead.

For your contributions and authoring our achievement you have my congratulations.

Good morning, everyone. Thanks for taking the question here.

Nick for starters, hoping you could just expand I know you mentioned some of these things in the prepared remarks already but if you could just expand on snap on most important growth drivers in the tools group as we go into 2024 here really irrespective of what the market is giving you and you pivoted aggressively enough do you think that.

For the skills and energy you bring to our corporation everyday.

My admiration.

And for the commitment you consistently displayed to the future of our mutual enterprise.

My Thanks, and now I'll turn the call over to the operator operator.

We will now begin the question and answer session.

That you can grow the tools business this evening.

To ask a question you May press Star then one on your telephone keypad.

Yes, I think we can I mean, I think I think we've done it we did it and you did it in in the in the Pan.

If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Pandemic era coming out of the pandemic when.

When confidence was kind of stilted in the in the tools group. If you look at the first four quarters. After the pandemic. It was mostly on shorter payback items. So we can make good business out of that we made at the tail end of the financial recession as well. So we think that the capability. We were simply as you might say, what we saw coming out of the.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Luke Young with Baird. Please go ahead.

Good morning, everyone. Thanks for taking the question here.

Nick for starters, hoping you could just expand I know you mentioned some of these things in the prepared remarks remarks already but if you could just expand on snap ons. Most important growth drivers in the tools group as we go into 2024 here really irrespective of what the market is giving you and you pivoted aggressively enough do you think that.

The SFC, everybody was sort of business as usual pumped up and they're ordering a general mix of product and then.

Late October or November things started to look a little different to our franchisees and they wanted to make a pivot because they had been through this rodeo before and so they wanted to redirect that's what we're doing we think we have great things in hand tools and in diagnostics and tools storage cards and maybe some of the some of the lower lines a tool storage box.

That you can grow the tools business this evening.

Yes, I think we can I mean, I think I think we've done it we did it.

You did it in in the in the.

Themselves like it's the classic series, so we're going to focus on that and that doesn't mean, we're going to abandon the bigger ticket items.

Pandemic era coming out of the pandemic when.

When confidence was kind of still in the.

Things like <unk> things like.

In the tools group if you look at the first four quarters. After the pandemic. It was mostly on shorter payback items. So we can make good business out of that we made at the tail end of the financial recession as well. So we think that the capability. We were simply as you might say, what we saw coming out of the.

Maybe triton and so on and diagnostics or <unk>, which we believe is very strong, but or our boxes, but we're going to shift our focus and it's important to talk about the capacity Lucas I remember, we were already kind of bump it up with capacity and we're fighting to expand it and so what you want to do in this situation is try to use that expanded capacity.

The SFC everybody was sort of business as usual pumped up and they were ordering a general mix of product and then you know in mid late October and November things started to look a little different to our franchisees and they wanted to make a pivot because they had been through this rodeo before and so they wanted to redirect that's what we're doing we think we have great things in hand tools.

And Ah redirected manner. So we actually have the volumes in the places we think are selling now so we feel pretty good about that our product lineup is good we've got a good rule as I said product leads the way we've got a grant a great array of handfuls coming forward, we've got new Toolboxes diagnostics power tools all of those things are going to work for US we believe so the way.

And in diagnostics and in tool storage carts, and maybe some of the some of the lower lines a tool storage box themselves like the classic series. So we're going to focus on that and that doesn't mean, we're going to abandon the bigger ticket items.

Forward is one continue to drive the products make sure we can actually deliver them.

And then thirdly as always to try to help the franchisees and selling given them more time to sell and maybe sometimes it might take a little different a little longer in this situation. So that's why we are deploying our our field guys to get out there and provide a little bit more energy.

Things like <unk> things like.

Maybe triton and so on and diagnostics or <unk>, which we believe is very strong, but or our boxes, but we're going to shift our focus and it's important to talk about the capacity Lucas I remember, we were already kind of bump it up with capacity and we're fighting to expand it and so what you want to do in this situation is try to use that expanded.

<unk>.

To the actual selling process. So we think it's a reasonable pivot. This is again, it's not our first rodeo its not in the tools group first rodeo. So we think okay things have changed a little bit we know how to respond.

And Ah redirected manner. So we actually have the volumes in the places we think are selling now so we feel pretty good about that our product lineup is good we got a good rule as I said product leads the way we've got a grant a great array of handfuls coming forward, we got new Toolboxes diagnostics power tools, all those things are going to work for US we believe so the way.

Thanks for that and then I guess a related question would be this shift in mechanics I meant that you saw mid fall.

How do you think that influences the appetite for credit here and as you track either originations or just other trends.

I'm thinking more from the demand side, Nick well, yeah, you'd probably see less credit used in that situation. I mean, the originations were I think I think that I think al a set down 1% and in the United States in the quarter. So I mean, I think you see that kind of thing and if you go back and you look at our numbers say coming out of the Covid say quarter, three and $4 1 million.

Forward is one continue to drive the products make sure we can actually deliver them.

And then thirdly as always to try to help the franchisees and selling given them more time to sell and maybe sometimes it might take a little different a little longer in this situation. So that's why we are deploying our our field guys to get out there and provide a little bit more energy.

For the second quarter of 2021, you'll see that kind of phenomena.

That could be the case now this is early days for this our people sense that one of the good thing about this is are people sensed it right away and so sensing it they changed there or does that put a little strain on our factory because when you change the orders it makes it capacity shrink a little bit yeah. So so you have those kinds of things so I believe that.

<unk>.

To the actual selling process. So we think it's a reasonable pivot. This is again, it's not our first rodeo so that the tools group first rodeo. So we think okay things have changed at all but we know how to respond.

Thanks for that and then I guess a related question would be the shipped and mechanics and meant that you saw mid fall.

I believe you may see a little pivoting away from that now you know I think this is a this is right in tune with everything I do believe I've said it many times that there is a kind of bifurcated economy that there is a financial economy. The kinds of people that I said in my my my talk that my remarks that we're talking about the recession has come in a recession is key.

How do you think that influences the appetite for credit here and as you track either originations or just other trends.

I'm thinking more from the demand side, Nick well, yeah, you'd probably see less credit used in that situation. I mean, the originations work I think I think that I think they all have a sit down 1% in the United States in the quarter. So I mean, I think you see that kind of thing and if you go back and you look at our numbers say coming out of the Covid say quarter, three and four of $20.

And the people are saying, we're going to have a soft landing now, but the people at the grassroots level have a different view of the world.

And you know.

If you if you look at the Wall Street Journal the front page say paper addition, there was an article saying just this.

Sara M. Verbsky: For the second quarter of 2021, you'll see that kind of phenomena.

Sara M. Verbsky: That could be the case now this is early days for this our people sense that one of the good thing about this is are people sensed it right away and so sensing it they changed or where does that put a little strain on a factory because when you change the orders it makes it capacity shrink a little bit yeah. So so you have those kinds of things so I believe that.

Actually I've met a bunch of franchisees and I met a huge number of people in the factories and in our garages in places like Conway and <unk> and <unk>.

Louisville, and Elizabethton, Tennessee, and Milwaukee So.

They all kind of say the same thing.

Sara M. Verbsky: I believe you may see a little pivoting away from that now you know I think this is a this is right in tune with everything I do believe I've said it many times that there is a kind of bifurcated economy that theres a financial economy. The kinds of people that I said in my my my talk that my remarks that we're talking about the recession is coming in recessions.

They're they've got jobs, they've got the cash coming in but every day, they get up and get bad news for breakfast.

And you start to wonder about what's going to happen. So it's not that things are fine today, but.

But people worry about how things are going to happen and what's going to happen in the future and I think all of US looking at the events might say that's true.

Sara M. Verbsky: And the people are saying, we're going to have a soft landing now, but the people at the grassroots level have a different view of the world.

Okay, and then maybe a final question soon might be for Aldo just unpack what's happening in the power tools business, specifically this quarter, if we look at the.

Sara M. Verbsky: And you know if you if you look at the Wall Street Journal the front page 30 on the paper addition, there was an article saying just this.

Sara M. Verbsky: Actually I've met a bunch of franchisees and I met a huge number of people in the factories and in our garages in places like Conway and <unk> and <unk>.

No the intersegment sales things like maybe stepped down quite a bit and just trying to reconcile what you saw.

Your trends versus your impression of underlying trends in power tools is it possible that there was sort of a one time adjustment in orders.

Sara M. Verbsky: Louisville, and Elizabethton, Tennessee, and Milwaukee So.

The inventory on the Dean and power tools, and I'm thinking about that right.

Nicholas T. Pinchuk: They all kind of say the same thing.

Nicholas T. Pinchuk: They're they've got jobs, they've got the cash coming in but every day, they get up and get bad news for breakfast.

Subways is another buffer stock in between the tools group maintained its own levels of inventory. So you're right look simply the tools group, having less need to buy as much.

Nicholas T. Pinchuk: And you start to wonder about what's going to happen. So it's not that things are fine today, but.

Nicholas T. Pinchuk: But people worry about how things are going to happen and what's going to happen in the future and I think all of US looking at the events might say that's true.

Power tools and diagnostics in the quarter. It doesn't mean necessarily that close one to one through to the band because you have inventories in between both inventories at the band itself and that inventories in the hands of the tools group, but you have the lower sales from C&I and for Morris and I to the tools group reflects actually pretty much power tools and.

Speaker Change: Okay, and then maybe a final question soon might be for Aldo just hoping to unpack what happened in the power tools business, specifically this quarter, if we look at the.

Related products.

Speaker Change: Now the interesting until it seems like the <unk>.

Actually yes.

Yes.

Sara M. Verbsky: Maybe stepped down quite a bit and just trying to reconcile what you saw.

Offer that what youre seeing a phenomena as you're seeing as al said some adjustment there and if you looked at if you actually look a careful look at C&I you'd see they actually had a bottle quarter to their traditional customers, but but what happened in the power tools business as our new CD 1938 came out 18 vaulted it sold great.

Sara M. Verbsky: Order trends versus your impression of underlying trends in power tools is it possible that there was sort of a one time adjustment in orders to level set inventory on the van and power tools and I'm thinking about that right.

Sara M. Verbsky: Oh, it's subways is another buffer stock between the tools group maintained its own levels of inventory. So you're right look simply the tools group, having less need to buy as much.

Then this happened and that kept selling but the bigger ticket items and power tools like the 18 volt just kind of dropped off and people tenants want the 14 four volt our supply chain is a little longer for that we couldnt supply all of that so you had you had that kind of situation, but if you look at the tools group level power tools.

Sara M. Verbsky: Power tools and diagnostics in the quarter. It doesn't mean necessarily that close one to one through to the band because you have inventories of between bulk inventories of the bed itself that inventories in the hands of the tools group, but yeah, the lower sales from C&I and from ours and I to the tools group reflects actually pretty much power tools and.

Or not down, especially an outstanding amount, it's mostly between the tools group and and C&I.

Sara M. Verbsky: Related products.

Got it I'll leave it there thank you.

Sara M. Verbsky: Actually you know.

Sara M. Verbsky: Yes.

The next question is from Bret Jordan with Jefferies. Please go ahead.

Sara M. Verbsky: Offer that what youre seeing a phenomena as you're saying as Albert said some adjustment there and if you looked at if you actually look a careful look at C&I you'd see they actually had a bottle quarter to their traditional customers, but but what happened in the power tools businesses, our new Cte 90, 38 came out 18 volt it solve great.

Hey, Good morning, guys. This is Patrick Buckley on for Brad Thanks for taking our questions.

Okay can you talk a bit more on <unk>.

Pricing versus units within the tools group.

And then looking ahead.

Our pricing actions on the table here or is it more focused on pushing that the shorter payable tools.

Sara M. Verbsky: Then this happens and that kept selling but the bigger ticket items and power tools like the 18 volt just kind of dropped off and people tenants want the 14 four volt our supply chain is a little longer for that we couldn't supply all of that so you have to have that kind of situation, but if you look at the tools group level power tools.

Pricing.

We generally have.

Have you know acceptance.

Inflationary exceptional inflationary times, which we've all been through more or less recently.

As we get 30 to 40 basis points of pricing.

Like that most of our advancement.

Sara M. Verbsky: Are not down, especially on the outstanding amount, it's mostly between the tools group and and C&I.

Comes from RCI, and new product, which gets its margins you know we get we get our margins from new product, we don't plan changing that approach.

Speaker Change: Got it I'll leave it there thank you.

We're not we're not really going to make a major adjustment in pricing going forward. This is more about shorter payback versus longer payback. It's the I think of it. This way if you just take a simple thing as a tool storage unit. Okay. You can buy a big epic and Boyd are great people love them, they bring people up and shown their box and they say this is <unk>.

Sara M. Verbsky: The next question is from Bret Jordan with Jefferies. Please go ahead.

Sara M. Verbsky: Hey, Good morning, guys. This is Patrick Buckley on for Brad Thanks for taking our questions.

Bret Jordan: Could you talk a bit more on pricing versus units within the tools group.

Bret Jordan: And then looking ahead.

Patrick Buckley: Our pricing actions on the table here or is it more focused on pushing that the shorter payable tools.

My Dream.

But that's not a quick payback, that's a longer payback you've got to work a long time and get efficiency from the size of that and in that features in that to get a payback, but if you get yourself a cart.

Patrick Buckley: Pricing.

Patrick Buckley: We generally have.

Patrick Buckley: Have you know acceptance.

Patrick Buckley: Inflationary exceptionally inflationary times, which we've all been through more or less recently.

You can move from your workplace out into the shop, particularly in some of these independent shops out into the shop yard or all over the shop and that gives you immediate savings and time just there.

Patrick Buckley: As we get 30 to 40 basis points of pricing.

Patrick Buckley: Something like that most of our advancement.

Patrick Buckley: It comes from RCI, and new product, which gets its margins, we get we get our margins from new product, we don't plan changing that approach.

So that's the kind of thing I'm talking about is that shift to the idea is this thing going to pay for me right away pay me back right away wrenches do that particularly like the synergy I talked about here, which is a leap forward in terms of reliability and access and swing arc and making jobs easier unable to beat the beat the flat rate fat.

Speaker Change: We're not really going to make a major adjustment in pricing going forward. This is more about shorter payback versus longer payback. It's the I think of it. This way if you just take a simple thing as a tool storage unit. Okay. You can buy a big epic and Boyd are great people love them.

So those are the kinds of things, we're betting on and we've seen it work before.

Patrick Buckley: Bring people up and show them their box and they say this is my dream, but that's not a quick payback that's a longer payback you've got to work a long time and get efficiency from the size of that and in that features in that to get a payback, but if you get yourself a cart.

So I think the good thing about this is tools group saw it started to move on.

Got it that's helpful. Thank you and then was there anything notable to call out in the corporate expense line in Q4 is going to take a step down from the run rate we saw for the past few years.

So we have lower spending in the quarter on <unk>.

Patrick Buckley: You can move from your workplace out into the shop, particularly if somebody's independent shops out into the shop yard or all over the shop and that gives you immediate savings and time, just there and so that's the kind of thing I'm talking about is that shift to the idea is this thing do I pay for me right away pay me back right away wrenches do that.

Legal expenses in particular, we had a favorable settlement on a matter. So it was able to reduce our expenditures in the quarter, but the run rate for corporate expenses running in typical fashion actually in total it's about up $113 million, it's $113 million in the year that's up.

$5 million to $6 million year over year or one.

Patrick Buckley: I'm thinking like the synergy I talked about here, which is a leap forward in terms of reliability and access and swing arc and make the jobs easier and able to beat the beat the flat rate faster. So those are the kinds of things we're betting on and we've seen it work before.

13 versus about one way yeah yeah.

Got it that's all for US thanks, guys.

The next question is from Scott <unk> with Roth MTM. Please go ahead.

Good morning, and thanks for taking my questions sure.

Patrick Buckley: So I think the good thing about this is tools group saw it started to move on.

Nick could you split out the different sub segments within tools.

Tools power tools, obviously sounds like power tools were down but.

Speaker Change: Got it that's helpful. Thank you and then was there anything notable to call out in the corporate expense line in Q4, it seemed to take a step down from the run rate we saw for the past few years.

And.

And the storage units things like that.

One being down five five.

Speaker Change: So we have lower spending in the quarter on legal expenses in particular, we had a favorable settlement on a matter.

And there's not a lot of good news to go around you know.

The big Kahuna, moving downwards was diagnostics.

Patrick Buckley: It was able to reduce our expenditures in the quarter, but the run rate for corporate expenses is running in typical fashion.

They saw the diagnostics and we had you know we have we have several ranges of diagnostics in the latest introduced was a soulless. It's the low end of the day I don't want to say low and it's because it's the lowest priced version of our product and that.

Patrick Buckley: Actually in total it's about up $113 million, it's $113 million in the year that's up.

Patrick Buckley: $5 6 million year over year, or 113 versus about one way yeah yeah.

Speaker Change: Got it that's all for US thanks, guys.

<unk> in the quarter not as well as we might have hoped in all situations, but what kind of went down was Zeus the top of the line in the next one down the Triton and Zeus had been had been introduced last last year in the fourth quarter. So those comparisons but the biggest kahuna down was was that and then after that I think <unk>.

Patrick Buckley: The next question is from Scott <unk> with Roth MTM. Please go ahead.

Scott: Good morning, and thanks for taking my questions sure.

Scott: Nick could you split out the different sub segments within tools hand tools power tools, obviously sounds like power tools were down but in.

Actually tool storage was up slightly but all because of cards pretty much because of cards and sharper tech items were down so.

Scott: And the storage units things like that.

Scott: But what's being down five five.

Speaker Change: Not a lot of good news to go around you know.

<unk> were down some but if you looked at it the thing that one of the things that drove the margins I think the important point out of that Scott what drove the margin improvement in the tools group. Despite the lower volume was that the stuff they make.

Scott: The big Kahuna, moving downwards was diagnostics.

Scott: Sort of diagnostics and we had.

Scott: We have several ranges of diagnostics in the latest introduced was the solas.

Scott: The low end of the day I don't want to say low end it's.

The the cart at El Ghana, the tool storage items, and the hand tools were a bigger portion of their sales than in prior year in the prior year and so that.

Scott: It's the lowest priced version of our product and that did okay in the quarter not as well as we might have hoped in all situations, but what kind of went down was Zeus the top of the line in the next one down the Triton and Zeus had been had been introduced last last year in the fourth quarter. So those comparisons.

That wielded a much greater mix because it enhances it.

What the tools group sells for hand tools and tool storage they get both distribution.

Scott: But the biggest kahuna down was the was that and then after that I think actually tool storage was up slightly but all because of cards pretty much because of cart shopping tech items were down so.

And manufacturer of margins.

Things like diagnostics, and power tools and shop and tech stuff. They only get the distribution margin. So it is a pretty big difference between those so you can get you can get some pretty good news or bad news, depending on how that mix works.

Scott: Hand tools were down some but if you looked at it the thing that one of the things that drove the margins I think the important point out of that Scott what drove the margin improvement in the tools group. Despite the lower volume was that the stuff they make.

So going forward, obviously, you're focusing on quicker payback items. So.

Obviously that would be hand tools, you're going to start cranking that up.

Well you would say he would say it this way I mean, there's we like to thank Scott that we could find quicker payback items and everything and towards clearly mostly.

Scott: The the cart at all Ghana, the tool storage items and the hand tools were a bigger portion of their sales than in prior year in the prior year and so that that wielded a much greater mix because it from enhanced tools and that's what the tools group sells for hand tools and tool steel.

Often I should say often are quick payback. The technicians can see quick payback certain versions of tool storage as I've said the cards in particular, which tend to be substantially cheaper and more efficacious because they're kind of at an option to add on to a big box and then or somebody can't afford a lot and wanted to just get it.

Speaker Change: George they get both distribution and manufacturer margins for things like diagnostics and power tools and shop and tech stuff. They only get the distribution margin. So it is a pretty big difference between though so you can get you can get some pretty good news or bad news, depending on how that.

Snap on tool storage in some way at a affordable level and then the lower end of that product. The classic series, which were which were working on have in terms of in terms of programs coming up which we've got scheduled for February and March and and so that would be the case diagnostics. It all tends to be bigger ticket items. So.

Scott: Mix works.

Scott: So going forward, obviously, you're focusing on quicker payback items. So obviously that would be hand tools, you're going to start cranking that up.

There are there is the solas at the lower end and we have some we'll able to bring out a new diagnostic at some point during the year, which creates interest, but the lower ticket items that just at the bottom end of diagnostics and then power tools can have.

Speaker Change: Well you would say he would say it this way I mean, there's we like to think you know Scott that we could find quicker payback items and everything and towards clearly mostly.

Speaker Change: Often I should say often are quick payback. The technicians can see quick payback certain versions of tool storage as I've said the cards in particular, which tend to be substantially cheaper and more efficacious because they're kind of at the option of add on to our big box and then or somebody can't afford a lot and wanted to just get into <unk>.

I don't want to take big ticket items, but the 18 volts or a little more expense of 14 four is a lot more affordable and you tend to have a very focused app that application for it where the 18 volt tends to be broader applications, you bring that power to any place, whereas the 18, well at 14 volts tend to be saying I got this.

Scott: <unk> tool storage in some way at a affordable level and then the lower end of that product. The classic series, which were which were working on have in terms of in terms of programs coming up which we've got scheduled for February and March.

<unk> particular chassis area of the cars I see so I'm going to use that 14, four volt, so that tends to be quick payback as well.

Those are the kinds of things you see.

Got it and then just the last question on the on the bigger picture you said that.

Scott: And so that would be the case diagnostics. It all tends to be bigger ticket items. So there are there is the soulless at the lower end and we have some we'll able to bring out a new diagnostic at some point during the year, which creates interest but the lower ticket items are just at the bottom end of diagnostics and then power tools can have.

The overall market the underlying conditions look pretty strong you're not seeing any.

Warning signs for the businesses themselves demand O'reilly reported.

Last night, they said that there.

They are professional business was up double digits. So I just want to make sure that we're.

Scott: I don't want to take big ticket items, but the 18 volts or a little more expense of 14 four is a lot more affordable and it tends to have a very focused app application for it where the 18 volt tends to be broader applications, you bring that power to any place, whereas the 18 volt as a 14 vaults tend to be saying I got this.

We're not look this.

This is not a canary in the coal mine that the underlying business I don't think so.

Everybody says the business is good.

No first of all I have two answers to that one is.

The metrics if you look at the data.

That all seems positive I mean, the the.

Scott: <unk> particular chassis area of the cars I see so I'm going to use that 14th portfolio. So that tends to be quick payback as well.

The miles driven are up and that's a long wavelength.

The spending on household spending on repair up 4%.

Scott: Those are the kinds of things you see.

Speaker Change: Got it and then just the last question on the bigger picture you said that.

Year over year, it's a pretty good number the number of tests up four 5% I used to be 1% or growing at four 5% the technician wages up at 7%. So those kinds of things as good things and the car Park of course keeps growing and so they keep pumping it in and the auto industry. While this doesn't make a difference too much is.

Scott: The overall market the underlying conditions look pretty strong you're not seeing any.

Scott: Yes.

Scott: Warning signs for the businesses themselves demand O'reilly reported.

Scott: They said that there.

Scott: They are professional business was up double digits. So I just want to make sure that we're.

Starting to come back and they are still rolling out those new technology. So all that seems to be from a met from a quantitative point of view seems to be positive now the bureau of labor data can trail. So I don't know if people have questions about that but then when you go out in the windshield survey and you talk to not only the people our franchisees who were out there every day, but.

Scott: We're not look.

Speaker Change: This is not a canary in the coal mine that the underlying business I don't think so I mean, the thing is everybody says the business is good.

Speaker Change: I don't know first of all I have two answers to that one is the.

Scott: The metrics if you look at the.

Scott: Data.

Talk to the general people to work they think.

Scott: Yes.

Scott: That all seems positive I mean, the the the.

Our cash is rolling for them, they're not going to say the cash rich, but they are and so I think I think things look good right now.

Scott: The miles driven are up and that's a long wavelength.

Scott: The spending on household spending on repair up 4%.

And I don't expect that to change.

Scott: Year over year, that's a pretty good number the number of tests up four 5% I used to be 1%. They are growing at four 5% the technician wages up at 7%. So those kinds of things are good things and the car Park of course keeps growing and so they keep pumping it in and the auto industry. While this doesn't make a difference too much is.

Got it and just just to affirm a follow up on something you said earlier, you would not be surprised to see the tools group.

Returned to positive organic growth.

No we don't give guidance, but you know I think I said like four times in my in my remarks.

Scott: Is starting to come back and they are still rolling out those new technology. So all that seems to be from met from a quantitative point of view seems to be positive now the bureau of labor data can trail. So I don't know when people have questions about that but then when you go out in the windshield survey and you talk to not only the people our franchisees. So we're out there every day.

They werent at standards.

Scott So.

All.

Okay.

We expect them to grow if we don't if we don't grow they will be below our expectations.

Got it that's all I have thank you sure.

And our last question today comes from David Macgregor with Longbow Research. Please go ahead.

Speaker Change: But just talk to the general people to work they think you know.

Speaker Change: Cash is rolling for them, they're not going to say the cash rich, but they are.

Yes, good morning, everyone and thanks for taking my questions. Let me just start by sort of picking up on the last line of questioning it sounds like hand tools.

Speaker Change: And so I think I think things look good right now.

Speaker Change: And I don't expect that to change.

Storage doing maybe a little bit better.

Speaker Change: Got it and just just to affirm a follow up on something you said earlier, you would not be surprised to see the tools group.

In relative terms.

But that's also where you were adding capacity and Elizabeth in Milwaukee.

Or was it doing a little bit better because you finally, just have a little more capacity would you be able to liquidate some of that backlog or is there maybe a better underlying demand storage categories.

Scott: <unk> returned to positive organic growth.

Speaker Change: We don't give guidance, but you know I think I said like four times in my in my remarks.

Scott: They werent at standard.

That's a complicated question because of the situation you know.

Scott: Gotcha.

Scott: Wow.

Yeah.

Scott: Okay.

I guess I.

Scott: We expect them to grow.

Don't know I think this way, though I'm.

Speaker Change: We don't if we don't grow they will be below our expectations.

I'm pretty sure was doing better because we had in the queue some ability to adjust for shorter.

Speaker Change: Got it that's all I have thank you sure.

Scott: And our last question today comes from David Macgregor with Longbow Research. Please go ahead.

Shorter payback items in those areas.

That's pretty much the way I can answer it now what I will tell you is.

Speaker Change: Yes, good morning, everyone and thanks for taking my questions.

David This is an operating guys song is that when youre thinking that youre going to have big you're going to have promotions roll them out of your factories and all of a sudden you're customers come up and say.

Speaker Change: Let me just start by sort of picking up on the last one of questioning it sounds like hand tools.

Speaker Change: And storage doing maybe a little bit better.

Speaker Change: In relative terms.

Speaker Change: But that's also where you were adding capacity as Elizabeth in Milwaukee.

Never mind, we wanted to go over here this tends to create a lot of <unk>.

David S. MacGregor: Are they doing a little bit better because you finally, just have a little more capacity than you were able to liquidate some of that backlog or is there maybe a better underlying demand storage categories.

While I say inefficiencies.

And so you have to adjust to that so I don't think we got the full result of.

Speaker Change: That's a complicated question because of the situation you know I mean.

The capacities, we had hoped the capacity expansions, we had hoped to get in the fourth quarter.

David S. MacGregor: I guess I do.

David S. MacGregor: No I think this way though.

Because of those changes.

Speaker Change: I'm pretty sure was doing better because we had in the queue some ability to adjust for.

They just.

Optimize what you have that and so that's part of it that's a factor in all of this yes, the backlog for the back some of the backlog for tool storage was down so we liquidated some of that but we still have backlog in those areas.

David S. MacGregor: Short payback items in those areas.

Speaker Change: That's pretty much the way I can answer it now what I will tell you is.

Speaker Change: David This is an operating guys song is that when youre thinking that youre going to have big you're going to have promotions roll them out of your factories and all of a sudden you're customers come up and say.

<unk>.

It's a complicated answer.

Thank you might have some of that but on the other hand, we couldnt fulfill it as much we couldnt have liquidated as much as we would have had we had full had been able to roll in the way, we had planned to roll and our production plans coming out of the SFC.

Speaker Change: Never mind, we wanted to go over here this tends to create a lot of <unk>.

David S. MacGregor: While I say inefficiencies.

Okay.

David S. MacGregor: And so you have to adjust to that so I don't think we got the full result of.

Just a couple of other questions for you Nick.

Trucks.

We'd love to get your sense.

David S. MacGregor: The capacities, we had hoped the capacity expansions, we had hoped to get in the fourth quarter.

Organic growth was down $5 seven what do you think the trucks sell through was.

I sort of know what it was and it was better than that.

David S. MacGregor: Because of those changes.

David S. MacGregor: They just.

David S. MacGregor: Sorry, optimize what you have that and so that's part of it that's a factor in all of this yes, the backlog for the back some of the backlog for tool storage was down so we liquidated some of that but we still have backlog in those areas.

In the in the quarter and for the year generally is better.

This all tends to come out in the wash, though.

So in the long run, but in the fourth quarter.

Trucks were not down.

Hey, you know.

David S. MacGregor: No.

David S. MacGregor: It's a complicated answer I think you might have some of that but on the other hand, we couldnt fulfill it as much we couldnt have liquidated as much as we would have had we had pool has been able to roll in the way, we had planned to roll and our production plans coming out of the SFC.

Substantial they were still down but not anything like the tools group.

Down low single digits, Yeah sure yeah.

Yeah.

So you would say maybe that you don't know but.

They've kind of liquidated some things and part of it is.

You have delivery, if you pick a particular product and as say a shift to that product, we do have inventory, but the but the point is sometimes you don't have that product and you have to make changes and the fact that sometimes we couldn't even deliver what they wanted.

David S. MacGregor: Okay.

Speaker Change: Just a couple of other questions for you Nick.

Speaker Change: Trucks.

Nicholas T. Pinchuk: We'd love to get your sense of.

Speaker Change: Organic growth was down five seven what do you think the trucks sell through was.

David S. MacGregor: Yeah.

Speaker Change: I sort of know what it was and it was better than that.

Okay.

Let me just shift to credit for a second if I could.

David S. MacGregor: In the in the quarter and for the year generally is better.

Although you normally share the breakdown on originations between finance receivables and credit receivables.

David S. MacGregor: This all tends to come out in the wash, though.

You have to do that for US again this quarter.

David S. MacGregor: In the long run, but in the fourth quarter.

Receivables of the originations were down and that was more than offset by a contract receivables and similar to the results of the tools group you see originations in the United States were down more than what we saw internationally was actually up in terms of EC originations. So that's kind of gives you some of the blend.

David S. MacGregor: Trucks were not down.

David S. MacGregor:

David S. MacGregor: No.

David S. MacGregor: Substantial they were still down but not anything like the tools group.

David S. MacGregor: Down low single digits, Yeah sure yeah.

Okay.

David S. MacGregor: Yeah.

And.

Speaker Change: So so you would say maybe that you don't know but.

Yes within those origination numbers.

Distinguished between merchandise versus.

David S. MacGregor: They've kind of liquidated some things and part of it is you know.

Franchisees flipping our a M D C.

David S. MacGregor: You have delivery if you pick a particular product and you see a shift to that product, we do have inventory, but the but the point that sometimes you don't have that product and you have to make changes and the fact that sometimes we couldn't even deliver what they wanted.

Actually I was pleased to see I know youre asking David actually in the quarter was less than what would be the typical mix of what we call transfer is already transfers where they transfer items from the revolving accounts over to EC, There's actually a less of an effect of that but for the full year.

David S. MacGregor: Okay.

Speaker Change: Let me just shift to credit for a second if I could.

David S. MacGregor: Although you normally share the breakdown on originations between finance receivables and credit receivables.

Very consistent with where we expect it to be so theres been no signs of franchisees using the credit company to finance their operations by moving things from the revolving accounts across I think that's what you're after.

Speaker Change: You have to do that for US again this quarter.

Speaker Change: Receivables of the originations were down and that was more than offset by a contract receivables and similar to the results of the tools group you see originations in the United States were down more than what we saw internationally was actually up in terms of EC originations. So that's kind of gives you some of the blend.

Yes.

Do you get a sense, if there's an opportunity here to maybe I mean, you've got some very high quality credit portfolio I don't think that's ever been a dose.

Certainly.

Certainly that's our sense.

David S. MacGregor: Okay.

Can you give us a sense as maybe an opportunity here to relax a little on the credit standards in order to reinvigorate demand.

David S. MacGregor: And.

David S. MacGregor: Yes within those origination numbers.

David S. MacGregor: Distinguish between merchandise versus.

David S. MacGregor: Franchisees flipping our a M D C.

No.

David S. MacGregor: I was pleased to say I know youre asking David actually in the quarter. It was less than what would be the typical mix of what we call transfer is already transfers where they transfer items from the revolving accounts over to EC. There's actually you have less of an effect of that but for the full year.

It was a nice tight answer Nick.

Well that was.

So if you think about it.

Sure.

People are lacking confidence to some degree for big ticket items.

I think the way Paul was that discount the interest rate youre going to charge those to provoke a sale. So we're not into the discounting isn't usually our style. It doesn't mean, we might not come up with creative promotions of bundling and things like that but.

David S. MacGregor: Very consistent with where we expect it to be so theres been no signs of franchisees using the credit company to finance their operations by moving things from the revolving accounts across I think that's what you're after.

This accounting as a way to go.

David S. MacGregor: Yes.

So what's your take on the regional Kickoffs.

Speaker Change: Do you get a sense, if there's an opportunity here to maybe I mean, you've got very high quality credit portfolio I don't think that's ever been a dose.

Just help us think through first half.

Speaker Change: Certainly.

What are you seeing in Barton Creek.

Speaker Change: Certainly that's our sense.

We usually comment on the Kickoffs, usually in the first quarter call, but but in general in the.

David S. MacGregor: Can you give us a sense as maybe an opportunity here to relax a little on the credit standards in order to reinvigorate demand.

And we tried to shift the kick offs at the last moment before we took a different approach to kick off. This time. We saw this problem, we try to concentrate on shorter payback items that seem to go reasonably okay with those items and then we established a little more program in February and March thinking that if we kind of stretch the kick.

David S. MacGregor: No.

Speaker Change: It was a nice tight answer Nick.

Nicholas T. Pinchuk: Well that was maybe.

Nick Pinchuk: If you think about it.

David S. MacGregor: Okay.

David S. MacGregor: People are lacking confidence to some degree for big ticket items I don't think no way home is to discount the interest rate youre going to charge volt to provoke a sale. So we're not into the discounting isn't usually our style. It doesn't mean, we might not come up with creative promotions and bundling and things like that but oh.

Co ops into other months, then we would be able to have better adjustments to the current situation. So that's sort of what we did in a kickoff I was at one in Las Vegas.

Yeah, I, usually send me the Deadwood South North Dakota at this time I got to go to Las Vegas, and we had the Canadian guys. There that seem to go okay. They seem to be positive the franchisees don't seem to be.

David S. MacGregor: This accounting as a way to go.

Speaker Change: So what's your take on the regional Kickoffs.

Speaker Change: Help us think through first half.

David S. MacGregor: Yeah.

Speaker Change: Would you say.

Daunted by this they just report what they see.

Alright last question for me is just maybe on the competitive dynamics.

Fairly steady in terms of the number of trucks you have all the right now for quite a number of years I guess.

Maybe there's a few more company owned versus franchisee owned within the mix overall.

At the same time your competitors have been increasing the number of trucks on the road you. Since this is starting to have a little bit of an impact on your do you feel like maybe there was a little bit of share loss this quarter versus some of your peers.

I don't know I don't like I never like to talk about share I never talked about share when our numbers were booming upwards and I don't talk about it now I. You know you could you could think that but I don't think so I think look we got we have you know.

I don't think I think we're covering the universe with a 3400 or so franchisees that we have.

So you could argue that some locations might be seeing competition, where they haven't but there are few locations David that don't have any competition.

So what does happen sometimes is okay somebody one or two or three at one of the other competitors will put somebody in place.

But that guy our guy in that territory has already been dealing with people and the other guys on competition and it might create more more business, but I never heard of the franchisees, saying that.

Okay.

So while I can just tell you.

Why are logically might think that would be the case and we think about it all the time and I asked the question all the time.

They almost never say that fact never.

But are you seeing are you seeing any are you seeing any change in franchisee attrition rates.

No that's pretty held the same pretty much the same in the quarter.

So the franchisee.

In the quarter that we saw more I think we saw more longer in the tooth guys.

In the quarter.

And the interesting phenomenon, but I mean, but that was.

That's just a sort of anecdotal view of it but I don't I'm not sure where that could make some difference, but I don't I don't think we worry about that in particular in terms of the day to day dynamics of the competition.

Thanks, very much that's all I've got to correct them.

Thanks.

This concludes the question and answer session I would like to turn the conference back over to <unk> for any closing remarks.

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