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[speaker 0]: Good morning, and welcome to the Snap on Incorporated Fourth Quarter and Full Year twenty twenty five 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Sarah Verbsky, Vice President of Investor Relations. Please go ahead.
[speaker 1]: Thank you, Drew, and good morning, everyone. We appreciate you joining us today as we review Snap on's 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 on's Chief Executive Officer. And Aldo Pagliari, Snap on's chief financial officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we've provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. The slides will be archived on our website along with the transcript of today's call. Any statements made during this call relative to management's expectations, estimates, or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward looking statements, and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward looking statements are contained in our SEC filings. Finally, this presentation includes non GAAP measures of financial performance which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?
[speaker 0]: Thanks, Sarah. Good morning, everybody. Oh, well, I'll start by saying these times are some. Seems like every day brings a new twist of considerable Fluctuating tariffs with big swing. Unpresident in domestic and international events that dominate the news. Prolonged government shutdowns. We just avoided another one that hits just keep on coming. But as we speak about the period, I believe you'll see that in the middle of it all, snap on shine through. With strength. I'm gonna tell you, about that as we review the quarter. It's a story of resilient markets, sales progress, profitability, and continuing investments that further fortify our advantages in product and brand and in people. And so as I cover the highlights of the last three months, I'll give you my perspective on the reason on the on the performance. On the markets, and on the progress we've made. Then Aldo will move into a more detailed review of the financials. Our fourth quarter was incurred. We believe it emphatically serves as testimony that our balanced approach growth and improvement is effective enough. Our advantages are powerful enough and our team is experienced, capable, and committed enough to perform even in the most challenging of environment. So here are the numbers. In the fourth quarter, sales were 1,000,000,231,900,000.0. Up 2.8% from last year as reported, including 1.4, 1.4% organic increase and 15,600,000.0 favorable foreign currency. Positive growth against the wind. And our OpCo operating income, OI, for the quarter was of 265,200,000.0 was equal to last year's. And the OI margin for the period was 21.5%. 60 basis points short of last year. The impact of unfavorable currency combined with additional investments in brand building and product development development. For financial services, OI of 34,400,000.0 was up 7,700,000.0 or 115% from last year. Doing a large part to the fifty third week in the two thousand twenty five fiscal calendar being uniquely beneficial to the credit And when combined with Opco, the overall earnings for the corporation of $339,600,000 was up 2.3% versus 24 and total margin was 25.3%. Our overall quarterly EPS it reached $4.94, up 12¢ from the 42 recorded last year. The quarter shows the same resilience demonstrated over the years as as we've paid dividends every quarter since 1939. Without a single interruption or reduction. In fact, in November, it was with clear belief in our future. That we raised our dividend by 14%. The sixteenth straight year of increase. It was not a strong and tangible estimate
[speaker 1]: to Snap on's consistency,
[speaker 0]: right through a variety of environments. Well, those are the numbers. Now to the market. We believe the automotive repair remains very favorable. And that's validated by the average age of the car park. Now at eight twelve point eight years, and it's continuing to rise. By the growing numb by the growing complexity of new platforms driving more difficult and time consuming repairs, and by the ongoing climb in household spending on vehicle repair, it's up again. And the vehicles and fixers all over are cashing in on the surge. Tech wages are up. Again.
[speaker 1]: Extending a, you know, fairly positive trend.
[speaker 2]: Hours worked in the in in in the in the in the bays are also on the rise. We believe technicians are financially stronger than ever, and their prospects just keep getting better. It's unmistakable. There's a growing demand for for capable vehicle repair. Shop owners tell about tell us all the time. They need more tech, and we believe the need to continue for and we believe this this need will continue for several years. You know, in fact, there's a good piece, I think. A a recent article in The Economist ditched test books and leave how and learn how to use a wrench to AI proof your job. That piece emphasized the considerable need for more technicians and the solid security provided by the profession. And it cites vehicle repair as one of the most AI proof of jobs. Work is pretty challenging, both physically and mentally. Each repair is different with variations and conditions that never seem to be the same. And as such, a mechanic needs a mastery of a massive repertoire of procedures. Must summon the logic to troubleshoot puzzling failures, and must be able to navigate intricate mechanical setups. With precision. It's a job that's getting more
[speaker 0]: complex
[speaker 2]: every day. The techs need help and keep it up. And Snap on's well well positioned to do just that. Now, a related but different segment, shop owners and managers are also adapting, continuing to invest in in in the advanced commit equipment and specialty tools required to attend the latest vehicles. This is where repair assistance information or the RSNI group resides. It's a target rich environment. It's a target rich environment for our capable undercar and collision equipment, and it's a great and growing opportunity. For our expanding array of software and data products. It's an arena where Snap on is well positioned with our extensive line of proprietary and comprehensive databases. Billions of data points. Now leveraged with large language models, language machine learning programs that search the the exhaustive and complex information matching the problem signature with just the right repair procedure in a split section.
[speaker 0]: Second.
[speaker 2]: Greatly expediting the vehicle fix, increasing shop productivity, and getting the vehicle back on the road faster than ever. Again, this again, this quarter, I had the opportunity to meet with with our with franchisees from coast to coast. They're a great barometer. They were all positive about the new about the now. And very enthusiastic about their futures. Sure. They still encounter the the ongoing hesitation of text have toward long term payback for, you know, purchases. But at the same time, they're energized by the success of the tools group execution pivoting the faster payback items, rolling out a continuous steam of innovative offerings that are making difficult and critical repair work faster and much easier. Now in the current environment, tool storage remains the most category. But we do see demand for smaller boxes and our large range of accessories are starting to roar. In fact, the the fourth quarter showed kind of some significant improvement in originations. They were almost flat in the quarter. It's a clear game that bodes well for a future. It appears that our pivot is working. So despite the challenges, automotive repair remains robust, and we believe we're well positioned to capitalize. Now let's turn to critical industries where our commercial and industrial or C and I group operates with a focus on taking Snap on out of the garage to places where work is very critical. Justifying a Snap On level product. Complex tasks performed in in heart and grueling environments from oilfields to subsea subsea floors, the clean rooms for chip manufacturing, and to tightly controlled bays for rocket manufacturing. This arena relies on our extensive catalog of products that provide precision, durability, reliability, and repeatability, all characteristics required to get the job done where the tasks are essential and critical. We believe we have a decisive advantage in this critical areas, and we keep investing to make it even stronger. And the fourth quarter was no exception. This is also in the market where
[speaker 0]: with the largest global footprint for us.
[speaker 1]: And, you know, that creates challenges in navigating the international
[speaker 2]: headwinds like government protocols, varying economies, and currency fluctuation During the quarter, Europe saw the continuing impact of the Ukraine war, And Asia was marked by the general loss of confidence in the Chinese economy. And the impact of the evolving US terrorist terrorist regime. Changes all the time. More than any group, C and I encounters these logical these obstacles from country to country, and it does cause some adversities across the group. But we're confident we have the strengths to overcome the variation and keep progressing. Making the most of the abundant opportunities in this critical sector. So that's an overview of our markets. Resistance against turbulence filled with opportunities. And we're well put, I should say resilience and resistance. Against the turbulence and it's filled opportunities. And we're well positioned to leverage the possibilities. Progressing down our runways for growth, efforts that are fortified by our SNAPA evaluation processes, safety, quality, customer connection, innovation, and rapid continuous improvement or RCI. The core activities that underpin our perform performance, enabling it to hold fast despite the difficult headwinds of these days. Now for the operating groups. Let's start with C and I. Fourth quarter sales of $398.1 for the group were up $18,900,000 or 5% with our organic gain of 2,800,000.0 and seven point nine million of favorable foreign currency translation.
[speaker 0]: Our Power Dual division led the way with that growth
[speaker 2]: with double digit gains. Moving forward on the market enthusiasm for our new innovative power solutions that make work much easier. And especially torque business was also up, driven by the the ever growing need for precision instruments. And in the critical industries, come back. Our industrial operations overcame the impact of the prolonged US government shutdown. It kinda cut off things for a while. Things were kinda slow for a while. They they overcame that wielding, its increasingly powerful custom kitting operations like never before. To come roaring down the stretch, registering a positive volume and catching up. I mean, you should have seen this team seen them working on catching up. It was a wowza. A why for the for CNI was 60,600,000.0. Included in included a benefit of $4,500,000 related to the refinement of our footprint. And compared and it compared with the 63,500,000.0 registered last year. The OI margin was 15.2% versus the 16.7% in 02/2024, primarily due to material cost increase and stronger sales in some of the group's lower margin businesses. As I said, the sales group was the sales growth was fueled by new innovative power tools. Engineered by our team in Murphy, North Carolina and Kenosha, Wisconsin. In the back half of the quarter,
[speaker 0]: For example, in the back half of the quarter,
[speaker 2]: we launched our new NanoAxis cordless slugger. I mean, this baby is groundbreaking. Developed from insights gained from customer connections right in the shots at point of work. The Nano is a compact power tool. And when I say compact, I mean, small enough to fit right in the palm of your hand, and it can be carried everywhere in a a small pocket to be always on hand when the need arises. The big advantage is the techs change positions across the shop. Or venture out into the yard.
[speaker 3]: The unit has an internal also has an internal ampere
[speaker 2]: hour battery that that drives over 600 fasteners. 600 fasteners on a single charge. You see, from our customer connections, we know that most inspections and general repairs are low torque applications like removing panels, clamps, and fasteners under the dash and and in crowded engine compartments. For these common tasks, the nano has the power for rapid renewal removal, the control to avoid stripping the fastener, and has the right size to fit where no other power tool can go. It's a real time saver and a fast payback item And it's right on target for the environment.
[speaker 3]: The initial
[speaker 2]: release featured two two models, one straight and one ninety degree 90 degree pistol driver.
[speaker 3]: Both
[speaker 2]: and both units
[speaker 3]: set new records
[speaker 2]: for new power tool rollouts.
[speaker 3]: Pretty strong.
[speaker 2]: Also in the quarter, our city of industry factor in California launched our new Control Tech plus torque wrench. It's a unit that has high precision has the high precision needed for critical industries and performs a great liability in the harsh conditions that are often empowered outside the garage. It's it's robust. All steel construction is durable.
[speaker 3]: Perfect for heavy duty use. And the design includes a large LED
[speaker 2]: a large LED display that's visible in bright sunlight or in dark work areas. Anywhere an industrial tech plies their trade. And that unit is is intrinsic, and and the unit is intrinsically safe, meaning it's certified to work in flammable areas. An important feature for critical applications. And the internal rechargeable battery battery ensures the device is always powered up and ready for work. Our new Control Tech Plus, accurate, durable, easier to use, and safe. Taking Snap on out of the garage and helping deliver the C and I quarter. Well, that's C and I. Sales up. A powerful comeback wielding our critical custom kit capacity. Mighty Mike power tools and precision torque. Rising all rising to new levels. Now on to the tools group. Quarterly sales of 505,000,000. For instance, quarterly sales were of 505,000,000 were debt down from the we're at 505,000,000, down from the 506,600,000.0 of last year. But the OI was a 107,300,000.0, up from the 106,900,000.0 last year. And the OI margin was 21.2%, rising 10 basis points. The fluctuating tariffs, the prolonged shutdown, and the constant period of big bang actions and ideas coming out of Washington has stoked technician uncertainty and reinforced reluctance toward longer payback items. But the tools group but the tools group's ongoing visit
[speaker 3]: has
[speaker 2]: wanted a series of shorter payback items that that are are
[speaker 3]: bringing high value and strengthened margins for the shop.
[speaker 2]: And that positive is evidenced by the by the group's gross margins of 6.1%, a gain of a 150 basis points over last year despite the flat volume.
[speaker 3]: Boom shackalacka.
[speaker 0]: This is an eye pop.
[speaker 2]: And at the same time, even in the turbulence, we remain committed toward investing Even in the turbulence, we remain committed toward investing in the band network. Maintaining our advantage in product and branding and people. So the quarter in the tools group in the quarter, spending on on operating expenses rose a 140 basis points. Helping to ensure that the group will be at full strength when the uncertainty thaws
[speaker 3]: But the Snap on Pour the core of our business here is our powerful product line.
[speaker 2]: Now over 85,000 strong across the corporation, over 40,000 just in the tools group. And the period saw a number of great new examples in the tools group. During the quarter, our Milwaukee, Wisconsin facility released a new line of impact flex sockets. Customer connection identified a range of tasks. We're removing components We're we're removing components to access the fix was burning a lot of tech time. Arm to that insight, our engineers have designed the new three zero seven RIP LMS a seven piece impact socket set featuring extra long reduced diameter shafts. And low profile hex head.
[speaker 3]: Now its design enables easy access to deeply recess fasteners, and it provides a clearance around blocking obstruction. All without removing additional parts. It's an ideal tool for speeding up routine tests like like brake caliper removals, catalytic converter replacements, and extracting exhaust Our new long shaft impact socket set set is a winner. It increases productivity, creates quick paybacks, and the technicians have noticed. Making this design another hit product, $1,000,000 hit product.
[speaker 2]: Also rolling out of the Algona, Iowa plant,
[speaker 3]: a new two storage configuration. The KTL one zero two one, a 54 single bank master series role play cab. But with the unique features that all seven drawers span the full width of the box.
[speaker 2]: And those drawers are equipped with heavy duty
[speaker 3]: heavy duty dual bear ball bearing slides unit has the space and the strength to handle additional storage without within a compact footprint, 9,300 square inches to be exact. Now space and strength define a storage utility
[speaker 2]: and the new unit has plenty of space for for our foam organizing trades at TexFlub and a low capacity of nearly three and a half tons
[speaker 3]: Big.
[speaker 2]: It's an offering with powerful capabilities at a mid range price point, and it's just the storage product
[speaker 3]: for this environment. And as you might expect, it was a great success. Success. Some of what you see in the originations come from this. Well, that's the tools. Matching techno preferences, leveraging customer connection,
[speaker 2]: investing in our strengths. All in the turbulence. Now for RS and I. Sales in the quarter were 467,800,000.0. Up 11,200,000.0 compared to 2,022, and including on our organic sales gain of 4,800,000.0. The group's fifth consecutive quarter of growth against the turbulence.
[speaker 3]: Higher volume with vehicle OEMs and dealerships and gains within information databases
[speaker 2]: independent garages led the way, more than offsetting
[speaker 3]: lower sales and big ticket diagnostic units.
[speaker 2]: Morris and I are operating earnings for the quarter were 117,700,000.0 and the operating margin was a strong 25.2%. But
[speaker 3]: it was down 140 basis points
[speaker 2]: from the 26.6% recorded last year.
[speaker 3]: You know, that
[speaker 2]: that reduction represents very robust investment in software development and brand building. Similar to Tools Group, 46.9%, about equal to last year despite cost increases. And just like tools, the groups the group invested to build its advantage in both hardware and software software, helping the radio helping driving the operating expenses a 130 basis points over last year. Thus, the numbers. But we believe the spending will be well worth
[speaker 3]: and will make our advantages even stronger going forward. You see,
[speaker 2]: growing vehicle complexity paired with an aging car park makes understanding the different vehicle setups very difficult. Especially with the variations of creature comforts and safety equipment found in modern vehicles. And this is where RSI itself converting billions of data points within microseconds, and delivering it into the hands of the tech, enabling enabling them to diagnose the
[speaker 3]: problem and execute the fix.
[speaker 0]: Quickly.
[speaker 3]: And it's already happened.
[speaker 2]: In the quarter, the grocery the group released the all new MT. It's not about MT 2,600.
[speaker 3]: Diagnostic platform offering a quick payback unit position that's a powerful entry level device
[speaker 2]: for the for the diagnostic arena, for the automotive diagnostic arena. The new unit's capable of community communicating with 50 different OEMs from around the globe on models dating back to 1983. In other words, it handles a wide range of vehicles, and it is fast.
[speaker 3]: With live data graphs, functional tests, the capability to reset service and check engine and check engine lines. Plug into this vehicle's diagnostic data into a vehicle's diagnostic port, and press go. It's ready to go. No time wasted loading software.
[speaker 2]: It auto and it automatically identifies the vehicle VIN specific information. You know, just because the same make it just because it's the same make and model. Doesn't mean the vehicle's the same in the repair
[speaker 3]: world. Models are not the same in the repair world. One could have been
[speaker 2]: one could have been ordered with options like parking assist and the other with air ride suspension. But there's and and
[speaker 3]: but there's no need to look it up. Now. The m t 2,600 knows the unique differences instantly without any additional input. And it's a real time saver. It's a productivity advancer. And it's a pay raiser. For entry level techs. The Snap on m 2,600, a powerful feature set and a price aligned
[speaker 2]: to match current techno technician preferences. And it was a hit with franchisees and with the customers alike.
[speaker 3]: So that's RSNI.
[speaker 2]: Trends remain robust. Aging car park.
[speaker 3]: Vehicle technology. Continuing to advance, making repairs complex, abundant opportunities for growth. And Snap on is the position and the product lineup to take advantage and we're investing to extend that lead. That's our fourth order.
[speaker 2]: Performance in the midst of turbulence. C and I sales up, critical industries impeded by the shutdown, but roaring back to report a positive. Substantial gains with new power tools and precision torque products, The tools grew about flat
[speaker 3]: attenuated by tech uncertainty, by growing gross margins, up a 150 basis points without a volume boost,
[speaker 2]: Continuing investments in products, and brands and its people. RS and I, fifth straight quarter of growth gains with OEMs and independent shops, strengthening its database and its software and the overall business.
[speaker 3]: Sales up 2.8% as reported, 1.4% organically, and an EPS of $4.94 up again over last year. Progress in investment in a difficult market. It was an encouraging quarter.
[speaker 0]: Now I'll turn the call over to Aldo. Aldo? Thanks, Nick. Our consolidated operating results for the fourth quarter are summarized on Slide six. Net sales of $1,231,900,000 in the quarter represented an increase of 2.8% in 2024 levels. Reflecting a 1.4% organic sales gain and $15,600,000 of favorable foreign currency translation. Sales in our commercial and industrial sector or the C and I group increased year over year led by strong performances with critical industry customers and robust sales by our power tools operation. In our automotive repair market, sales gains with repair shop owners and managers were somewhat tempered by slightly lower activity our franchise van chain. Consolidated gross margin of 49.2% compared to 49% in the fourth quarter last year. The decline of 50 basis points primarily reflected higher material and other costs as well as higher sales and lower gross margin businesses within the C and I group. These headwinds were partially offset by benefits from the company's RCI initiatives And while Snap on is relatively advantaged in the current tariff environment, generally, manufacturing products in the markets where they're sold our costs can be affected by trade policies. Operating expenses as a percentage of net sales of 27.7% compared to 27.6% in 2024. Operating earnings before financial services of $265,200,000 in the quarter were unchanged from last year. As a percentage of net sales, operating margin before financial services of 21.5% compared to the 22.1% reported in 2024. As you may know, Snap on operates on a fiscal calendar, which results in an week being added to our fiscal year every five to six years. Accordingly, the 2025 fiscal year contained fifty three weeks of operating results
[speaker 3]: with the extra week
[speaker 0]: relative to the prior year occurring in the fourth quarter. While the impact of this additional week was not material, to Snap on's consolidated fourth quarter total revenues and net earnings, financial services segment did earn an additional full week of interest income from its financing portfolio. At the consolidated level, the net earnings benefit from the additional week of financial services interest income was largely offset a corresponding additional week of fixed expenses primarily personnel related costs. With that said, financial services revenue of $108,000,000 in the fourth quarter including $7,400,000 of revenue resulting from the extra week of interest income compared to $100,500,000 last year. While operating earnings of 74,400,000.0 compared to $66,700,000 in 2024. Consolidated operating earnings of 339,600,000.0 compared to $331,900,000 last year. As a percentage of revenues, the operating earnings margin of 25.3% compared to twenty five point five percent twenty twenty four. Our fourth quarter effective income tax rate was 22.3% in 2025, and 22.5% in 2024. Net earnings of $260,700,000 or $4.94 per diluted share compared to $258,100,000 or $4.82 per diluted share in 2024. Now let's turn to our segment results for the quarter. Starting with the C and I group on Slide seven, Sales of $398,100,000 rose $18,900,000 compared to 2024 levels, reflecting a 2.8% organic sales increase and $7,900,000 of favorable foreign currency translation.
[speaker 1]: The organic gain includes a mid single digit increase
[speaker 0]: in activity with customers in critical industries, a double digit rise in power tools, a mid single digit improvement in specialty tour.
[speaker 3]: These gains were partially offset
[speaker 0]: by lower sales to The United States markets by the Asia Pacific business. Overall, the organic sales gain largely reflects success new product launches from our power tools operation, and continued improving demand from our critical industry customers. Including those in The United States and international aviation, heavy duty, and technical education. Despite delays associated with the government shutdown in October and November, sales into military and defense applications rebounded, and were down only slightly for the quarter versus last year, with activity increasing as we exited the fourth quarter. Gross margin of 38.6% compared to 41% in 2024. This decline was primarily due to higher material and other costs increased sales and lower gross margin businesses and 30 basis points of unfavorable foreign currency effects, partially offset by savings from RCI initiatives. During the fourth quarter, the C and I group refined its footprint and go to market strategy resulting in a net benefit to operating expenses of $4,500,000. As detailed on Slide seven, these actions included a net gain on the sale of a building that was partially offset by cost to retire certain trademarks, and by restructuring charges.
[speaker 3]: As such,
[speaker 0]: operating expenses as a percentage of sales of 23.4% in the quarter including the net benefit, compared to 24.3% last year. Operating earnings for the C and I group of 60,600,000.0 compared to $63,500,000 in 2024, and the operating margin of 15.2% compared to 16.7% last Now turning to Slide eight. Sales in the Snap on Tools Group of $55,000,000 compared to $506,600,000 last year. Reflecting a seven tenths of a percent organic sales decline largely offset by $1,800,000 of favorable foreign currency translation. The organic decrease reflects a low single digit decline in The United States, partially offset by a high single digit gain in the segment's international operations. During the quarter, we believe our ongoing pivot to featuring the benefits of shorter payback items continued to mitigate the persistent uncertainty of technician customers in the current environment. Gross margin improved 150 basis points to 46.1% in the quarter, from 44.6% last year. Mostly due to a year over year shift in product mix, including higher sales of new products, and savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 24.9% compared to 23.5% in 2024 largely reflecting increased brand building and other costs. Operating earnings for the Snap on Tools Group of 107,300,000.0 compared to $106,900,000 in 2024. The operating margin of 21.2% improved 10 basis points from last year. Turning to the RS and I group shown on Slide nine. Sales of $467,800,000 compared $456,600,000 a year ago. Reflecting a 1% organic sales increase and $6,400,000 of favorable foreign currency translation. The organic improvement includes low single digit gains in activity with OEM dealers and in sales of diagnostics and repair information products to independent repair shop owners and managers. While our undercar equipment sales were flat with last year, the business experienced improving activity in all of our product lines outside of collision repair, continue to be down year over year. Gross margin for the 46.9% compared to 47% last year. The savings from RCI nearly offset the effects of tariffs, and higher material costs. Operating expenses as a percentage of sales of 21.7% compared to 20.4% in 2024, largely reflecting increased activity and higher expense businesses and a rise in other costs. Operating earnings of a 117,700,000.0 compared to a $121,400,000 last The operating margin of 25.2% compared to 26.6% reported in 2024. Now turning to Slide 10. Revenue from financial services of $100,000,000 compared to $100,500,000 last year. As previously stated, this includes $7,400,000 of higher revenue resulting from a full additional week of interest income due to our fifty third week fiscal year. Financial services operating earnings of $74,400,000 compared to $66,700,000 in 2024 largely reflecting the additional interest income. Financial services expenses of 33,600,000.0 compared to $33,800,000 last year. As a percentage of the average financial services portfolio,
[speaker 2]: expenses
[speaker 0]: were 1.3% in the 2025 and '24. In the fourth quarter, the average yield on finance receivables of 17.6% in 2025 compared to 17.7% in 2024 while the average yield on contract receivables was 9.1% in both years. Total loan originations of $285,100,000 in the fourth quarter were unchanged from last year and on a year over year basis reflected stable originations of tool storage products. Moving to Slide 11. Our year end balance sheet includes approximately $2,500,000,000 of gross financing receivables with $2,200,000,000 from our US operation. For extended credit or finance receivables, The US sixty day plus delinquency rate of 2.1% is up 10 basis points from the 2024. Additionally, it is also up 10 basis points from last quarter reflecting the typical seasonal increase between the third and fourth quarters. Trailing twelve month net losses for the overall extended credit portfolio of $72,100,000 represented 3.67% of outstandings at year end. We believe that these portfolio performance metrics remain relatively balanced, get considering the current environment. Now turning to slide 12. Cash provided by operating activities of $268,100,000.0 in the quarter decreased $25,400,000 from comparable twenty twenty four levels. Primarily reflecting a $52,700,000 increase in net cash paid for income taxes partially offset by a $23,000,000 decrease in working investment. Net cash provided by investing activities of $25,900,000 included proceeds from the sale of a building a net decrease in finance receivables of $11,200,000 as well as capital expenditures of $13,500,000 Net cash used by financing activities of 200 and $500,000 included cash dividends of 126,700,000.0 and the repurchase of 227,000 shares of common stock for $80,400,000 under our existing share repurchase programs. As of year end, we had remaining availability to repurchase up to an additional $260,000,000 of common stock under our existing authorizations. Turning to Slide 13. Grades and other accounts receivables of $881,400,000 represented an increase of $65,800,000 from 2024 at year end levels. And included $25,300,000 of foreign currency translation $19,800,000 related to the previously discussed sale of a building, and a higher mix of sales with longer payment terms. Day sales outstanding of sixty seven days compared to sixty two days at year end 2024. Inventories increased by $81,800,000 from 2024 year end levels, and that included $41,400,000 of foreign currency translation. On a trailing twelve month basis, inventory turns to 2.4 were the same as last year.
[speaker 3]: And
[speaker 0]: Our year end cash position of $10,000,006,245,000,000 dollars compared to $1,000,000,360,500,000 at the end of 2024. Addition to our existing cash and expected cash flows from operations, we have more than $900,000,000 available under our credit facilities, There were no amounts borrowed or outstanding under the credit facilities during the year. Nor was any commercial paper issued or outstanding in the at the end of the year. That concludes my remarks on our fourth quarter performance. Now have a few outlook items for 2026. With respect to corporate cost, we currently believe that the expenses will approximate $28,000,000 each order, We expect that capital expenditures for the year will approximate $100,000,000 and we currently anticipate that our full year 2026 effective income tax rate will be in the range of 22% to 23%. I'll now turn the call back to Nick for his closing thoughts. Nick?
[speaker 3]: Thanks, Aldo.
[speaker 0]: Bless the quarter.
[speaker 3]: Sales growth, solid profitability and expanded investments in fortifying our inherent advantages.
[speaker 2]: All in a time of turbulence, tariffs,
[speaker 3]: shutdowns, and conflicts,
[speaker 2]: considerable uncertainty. C and I sales, were up 5% as reported
[speaker 3]: 2.8% organically. A late comeback for
[speaker 2]: critical industries, recovering some of the shutdown impact, great and great new product
[speaker 3]: in power tools and specialty torque. Tools group,
[speaker 2]: volume down 0.3% as reported, 0.7 per percent organically, about flat. OI margin of 21.2%, up 10 basis
[speaker 3]: points, and gross margins of 46.1%, up a 150 basis up 150 basis points against the impact of higher material costs and inflation. And RS and I sales up 2.5% as reported
[speaker 2]: 1% organically. OI margin's down, but still strong.
[speaker 3]: At 25.2%, and gross margin's about flat. Resistant to the pressure of cost rises and tariffs. Making gains in on our making gains on our advantage in both software and data. It all came together for diluted EPS of $4.94, up from the $4 and 82 percent cents reported last year.
[speaker 2]: It was
[speaker 3]: as I said, many times, this
[speaker 2]: this call an encouraging quarter.
[speaker 3]: Going forward,
[speaker 2]: we believe we'll benefit from our continuous investment in building our advantages. The uncertainty appears to be in for a thought, and we believe the resilience of a
[speaker 3]: of our markets will continue essential and critical. As as they are. We are
[speaker 2]: in this we are
[speaker 3]: building our advantages. And they are in our all our advantages, and they are powerful. With our advantage in product to tools really do solve critical tasks we have more than 85,000 of them with new entry entries always coming. Our advantages in brand. Step on really is the outward sign of pride and dignity of working that working men and women take in their professions. It's re it's a respected and preferred and preferred many. And with our advantages in people. Skill, committed, battle tested, and enlisted in the expectation of success as a standard. We believe these strengths will set us apart, will enable us to overcome the turbulence and will drive Snap on to extend its positive trajectory throughout this year and well beyond.
[speaker 2]: Before I turn the call over to the operator, I'll just speak directly to our franchisees and associates. When I refer to our advantages, both now and in the future, I think of you. The quarter was encouraging. And your conviction and hard work has made it so.
[speaker 3]: For your success, once again,
[speaker 2]: in offering another positive performance, you have my congratulations. For the intense energy and extraordinary capability you bring to bear every day
[speaker 3]: you have my admiration. And for your continued commitment to our team, and your unfailing confidence in our shared future. You have my thanks.
[speaker 2]: Now I'll turn the call over to the operator. Operator?
[speaker 0]: Thank you. We will now begin the question and answer session. To ask a question, on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Stember with ROTH Capital. Please go ahead. Good morning, and thanks for taking my questions.
[speaker 3]: Mister Scott Stemper, how are you?
[speaker 0]: Good. Thank you. Thank you. Hopefully, the the same for you. Question on the the tools group. You know, we you know, saw a little bit of a rebound in the previous couple of quarters, and returned a little bit negative here. Just trying to get a sense, are you seeing any increased level of technician softness, or is this you guys just having a greater availability of these quicker payback item and we're just seeing a little a little bit more of a mix towards the lower Actually ticket items?
[speaker 3]: That's a great question. I look. I I think I think this. I think you know, it's about flat.
[speaker 2]: We're up a little bit the last time. You know? So you could look at that as a back
[speaker 3]: But we don't see it that way. We see that the quarter was pretty turbulent.
[speaker 2]: You know, you might think that the shutdown doesn't affect the tools group, but you should have been there talking to the the franchisees of Maryland and Virginia.
[speaker 0]: They didn't think it had any effect. They didn't think it was a no effect situation.
[speaker 2]: And then and then the tariffs are getting pretty turbulent. And just think about Canada. There have been 29 different presidential or prime minister pronunciations since the beginning of the year, about changing the tariffs with Canada. And the other tariffs are not are not
[speaker 3]: the way they are. And then you have this news every time you get up in the you look at the noise, you see things. So that affected
[speaker 2]: their
[speaker 3]: think, their general view. And then we heard a little bit about that. So I think that was part of it.
[speaker 2]: Now I think I said in the in the in in the in the call, I think sooner or later,
[speaker 3]: people gotta get used to this. So you could kinda expect a thought coming
[speaker 2]: You saw green shoots, I think, in one in the in the originations. The originations being kind of flattish
[speaker 3]: year over year and down a little bit,
[speaker 2]: but it it it but but
[speaker 1]: that's
[speaker 2]: better than it's been. So you kinda you kinda believe that, boy, things are that's a change. And part of it is pivot.
[speaker 3]: But some of it may be some thaw.
[speaker 2]: So we see that. And then one of the things I think that
[speaker 3]: eye popping, I said so in the call, is
[speaker 2]: jeez, in this time, your gross margins are up a 150 basis points.
[speaker 0]: Wowza.
[speaker 2]: You know? So they so whatever the tools group is doing and executing, they're doing pretty well within the conditions they've been handed.
[speaker 0]: Gotcha. And I think you alluded to tool storage, actually. I think you said it was kinda flattish in the quarter. Can you you talk about actual hand tools? Diagnostic, just some of the other subsegments?
[speaker 2]: Sure. Look. Look. I'm not gonna give you exact numbers. I don't wanna
[speaker 3]: you know, pin myself to that cross. But but but I think look. This I didn't really say that tool storage is up. I said that originations
[speaker 2]: which is not what the tools group does. Remember, group sells to the franchise and the franchisee on sells. And the and that's
[speaker 3]: becomes an origination.
[speaker 2]: So the originations are more an indication of what's happening at the level between the franchisee and the customer. So that was sort of flattish, which is, you know, all the same positives I said. The tool storage was still down some. Year over year in the in the tools group selling to the franchisees. Tool hand tools is better.
[speaker 3]: Diagnostics was down. Power tools is up.
[speaker 0]: Oh, okay. Sorry about that. And then just last question. Sales onto the van versus off of the van?
[speaker 2]: You know, I hate talking about this, Scott. You know, because no no month is significant, really. Fully significant. We always say that it has a lot of variations from month to month, but it all comes out in a wash in the end. And generally, what we sell on the van equals what we sell up.
[speaker 3]: But this quarter, sales were up
[speaker 2]: over up
[speaker 3]: you know, kinda substantially bigger
[speaker 2]: don't know if you call it substantial, but but, clearly, clearly with with with quite a bit of room bigger off the van
[speaker 3]: than our sails to the van. So I think that's a better I would say that's that's a nice data point, better than a pokemon eye with a sharp stick. But I'm not gonna hang my hat on it. But it is if you
[speaker 2]: if you wanna classify green shoots, maybe this is a green shoot.
[speaker 3]: I just hope the rabbits don't eat the green shoot. You know? But I but I but I think you know, it's a positive thing.
[speaker 0]: Got it. That's great. Thank you so much.
[speaker 3]: Sure.
[speaker 0]: The next question comes from Luke Junk with Baird. Please go ahead.
[speaker 3]: Good morning. Thanks for taking the question. Maybe if you could just jump off on one of the things you just said, Nick, diagnostics. I think you said it was down in the Tools Group in the quarter. Can we just maybe double click on that? I'm not sure if we should think there is some pull forward just from the launch strength that you saw in the middle part of this year, or is there just maybe some inherent lumpiness? Wanna kinda just separate the Well, there's kind of I think I think it's more I look. I think it's more inherent lumpiness driven by the
[speaker 2]: the the characteristics of the launch. You know? So in the third quarter,
[speaker 0]: second and third quarter, toward the end of the second quarter, we've launched the Triton. I think that's gotta
[speaker 3]: price. I don't know. It must be 4,000, $4,500. It's a massive and powerful unit. And this quarter, we we launched the MT 2,600, which is an entry level
[speaker 2]: thing, which is substantially lower in price. But, you know, a sale is sort of a sale for the franchisee.
[speaker 3]: You know? Yeah. Maybe he has to work a little harder for the bigger ticket item. You know? But not still probably gotta put in the same amount of time for either one.
[speaker 2]: And so he's
[speaker 3]: he spends he does his pitch.
[speaker 0]: You know? He does his his his show and
[speaker 2]: explains everything, and he gets $1,500 or $4,000. Think that's pretty much what you're seeing this quarter.
[speaker 3]: Okay. Helpful. I wanna switch gears to C and I. Critical industries. Do you know if you look a quarter ago, we returned to kinda modest growth, now tracking up mid single exiting 25. But it sounds like
[speaker 2]: actually maybe even was higher in December given what you mentioned around the shutdown. Any reason to think that that momentum doesn't now carry over into next year in critical industries?
[speaker 3]: Well, I think we have we have great optimism
[speaker 2]: for our power in critical industries. We think our
[speaker 3]: our array of custom kits keeps growing and therefore we have a greater span of sale. Our custom kitting capacity, we keep increasing it. And one of the things I I didn't fully, I suppose, tease out in this in this, in this comments is that's what allowed us to catch up at the end. We really pumped it up. I mean, if you looked at October and November, it was
[speaker 2]: a it wasn't the greatest time. You know? Things had had the military business, which is a nice business for them, had gone to a crawl.
[speaker 3]: And then they came roaring back. Like I said, you had to see these guys out there working.
[speaker 2]: The jet you know, the the the the head of the the division was out there and is younger, but he's working. Packet. So I I think I think this is you know, yes, you should see momentum coming out of this quarter. Now you know, we don't give guidance so this is one data point that we are positive. And they didn't fully catch up
[speaker 3]: So, therefore, you would expect to have some catch up coming out. We'll see how that plays out over three months. But I feel good about it.
[speaker 2]: Last thing kinda coming across in both
[speaker 4]: DNI and the tools group, just the our tool strength. I mean, that's been under pressure for a while here. Pretty short bounce back in the quarter. It's want to unpack maybe shorter term impacts given the product launch momentum that you mentioned and just maybe your historical experience in terms of the tails of that momentum leaking into into future periods? Thanks, Nick.
[speaker 3]: Well, I I know. I look. I think I think again, we don't give guides, buddy. You know? But but but the last time we've launched a product like this, like the Nano,
[speaker 2]: oh, years ago. You know, it's a while ago. This kind of uniqueness of it and it had quite a bit of legs.
[speaker 3]: It went on for a while.
[speaker 2]: It's not it's it's it's a whole different line. You know? So that tends to have more legs to it.
[speaker 3]: If you're talking about other products like the long neck ratchet, which which I didn't mention on this call, I mentioned last call, 13 inches of
[speaker 2]: neck long, 30% longer than anybody else, tremendous power at a distance.
[speaker 3]: But
[speaker 2]: that one, you know, can be more episodic. And so you have to you have to sell you know, find the people who don't have it already if you're a franchisee. And then to some extent, it is episodic, like
[speaker 0]: like,
[speaker 2]: the diagnostics. I do think, though, that you're gonna see that more and more in power tools today for us because there was a period when we turned our power tools engineers and some of our engineers partially away from new products and said, this is the period in which we couldn't get components. And so you had to re you had to use engineering time to re to to target
[speaker 4]: the
[speaker 2]: components that were actually you could actually get, where they actually were available. And that meant design change, and it eats up time. And so now we've got everything full strength, focused
[speaker 3]: on new product, and they seem to be hitting the ball out of the park with
[speaker 2]: repeatability.
[speaker 3]: So I feel pretty good about it. I think the nano's got legs
[speaker 2]: but generally, power tools can be upside.
[speaker 4]: Understood. I'll, I'll leave it there. Thanks, Nick.
[speaker 2]: Sure.
[speaker 0]: The next question comes from Sherif El Sabahi with Bank of America. Please go ahead. Hi. Good morning. I just wanted to touch on some of the brand
[speaker 4]: building expenses that you had had called out, particularly in the tools group.
[speaker 5]: What exactly is is in embedded in those costs, and how do you expect them to look how do you expect them to look going forward? Is that sort of an ongoing cost
[speaker 0]: I'm not gonna give you exactly what's in the cost. You know?
[speaker 2]: Because you'll be asking me how much I'm spending every quarter on each of those categories. I'm not gonna say that. But but look. Here's the kinds of things
[speaker 5]: we worked on.
[speaker 3]: We worked on training
[speaker 4]: You know, this is the kind of thing training in our in our business. We worked
[speaker 3]: some on advertising for the brand. The advertising is up. We worked on building software which spreads across this business and the RSNI business. We worked on social media
[speaker 2]: the use of social media more correctly. I mean, these guys are all individual businessmen. The the 3,400 bands. And, you know, some of them are great at this stuff, and some of them are not. So we worked on those things.
[speaker 3]: That's the that was the kinds of things we we spent on in
[speaker 2]: in the tools.
[speaker 5]: Understood. And I know the the fifty third week wasn't, necessarily impactful to the financials. Were you able to give us sort of a a ring fence the size of it and the impact of the year?
[speaker 3]: Sure. One thing you gotta know. It's vastly different between the financial company and the operating company. For the financial company, it's a bonanza. I think Aldo said it's like $7,000,000 extra profit. You know, that was pretty much fifty third week. If you look at the operating companies, you gotta understand where it is, and it's during the Christmas you know, the holiday period. And these are
[speaker 2]: these are expenseful
[speaker 3]: sales week.
[speaker 0]: Period.
[speaker 2]: So it generally is a loser. You have most you have a lot of the expenses flowed through your p and l. They're just there like clockwork. And you don't get any sales. That's what happens. So they're a negative. I will tell you that when you when you roll that out, it's not
[speaker 3]: it's not what do we call it? It's not significant. It's not a significant thing for us. Maybe yeah. But it's a little bit of a wait actually. A little bit of a negative, but not significant.
[speaker 5]: Understood. Thank you.
[speaker 3]: Sure.
[speaker 0]: The next question comes from David MacGregor with Longbow Research. Please go ahead.
[speaker 5]: Yes. Good morning, everyone.
[speaker 2]: Nick, I guess I wanted to
[speaker 5]: hey. Good morning. I I wanted to, just ask you about, last quarter, had talked about the SFC, and you had said there were great orders. You were up mid single digits. But that we're not getting money. I think that was the exact quote. You're not getting much of that at all. So, I guess I'm having trouble reconciling that with essentially flat second half sort of Snap on Tools segment organic growth. Can you just understand the dynamics and also maybe what you saw in the way of fourth quarter growth in the non SFC fulfillment business?
[speaker 3]: Yeah. Look. I think yes. It it remember, I think I say that the SFC are orders, not sales. So there could there could cancellation. That you fulfill in the second half, Nick. And so in and and so what second half? I don't know. Do you do you mean the second half or the quarter? For the fourth quarter? Second half of the year. You just
[speaker 2]: well, the second half of the year is is not
[speaker 3]: supported by the SFC. The SFC pretty much, you know, starts to starts to blink out in terms of effect just as you cross over the year end.
[speaker 2]: There isn't there isn't an effect You see what I mean? It's all in it's all in the half. So you could ask, why we didn't do better in the fourth quarter if we had mid single digits in the SFC.
[speaker 3]: And that and that's because
[speaker 2]: the actual orders end up being a cocktail of about three things. There are there are the they're the SSC for the
[speaker 3]: for that half that we refer to. There's the kickoff for the second half, the big bang events, and then there are a bunch of bunch of usual programs that that flow flow out at different times. They're big promotions. And then
[speaker 2]: there's the monthly meetings. For the franchisees that roll out promotions in each one of those. So the combination of those is what makes the quarter. So if you say, if you say that the SFC orders were 5.8 per you know, it was worth was like
[speaker 3]: mid single digits. And okay, you're not really not necessarily gonna get those. They could be canceled, but they could all be taken up.
[speaker 2]: And you could have weakness in one of the promotions. Or just everybody say every every month, oh, I got enough. I'm not gonna take anything this month, or I'm gonna take a lot less this month. That is that's what makes it so hard to predict. Now
[speaker 3]: SFC and kickoff, you you feel good if you get more orders, but it's not
[speaker 5]: definitive.
[speaker 3]: I think I say that
[speaker 2]: you know, when when when this happens. So that's that's a look at it.
[speaker 3]: So it's a it's a cocktail of a bunch of different selling efforts. That result in the flat quarter.
[speaker 5]: Yeah. Maybe I'll follow-up with you offline on that. Is there anything you can say about the regional kickoffs, Nick? And how they're going?
[speaker 0]: Well, they're over. First of all, so No. I know they're over. They're they're behind us. I'm asking how they went. They okay.
[speaker 3]: They they were they were in it.
[speaker 2]: Were in the first quarter, so don't comment on future.
[speaker 3]: But the one I went to was very positive. People people were people were very enthusiastic. And I would say that our reports from around the country, Aldo went to one.
[speaker 2]: And his his was similarly
[speaker 3]: positive. So we think they came out well. I think like the s I think the orders were reasonably robust. But like the SFC, they're not definitive.
[speaker 2]: You know? So if you were just gonna base your view of the future, on the on the kickoff, you would feel pretty good.
[speaker 3]: I I think I think, you know, what we what I'd say what I'd say, David, is
[speaker 2]: more or less
[speaker 3]: that this was a particularly turbulent time in terms of uncertainty. But if you look at the the gross margins, the execution seems to be pretty good. If you look at the or if you look at the
[speaker 2]: the originations, it seems like the pivot is working because people buying some of those small boxes. You know, at least off the van. If you look at the sales off the van, and you say, well, yeah, it's only one quarter, but it's you know, better than the sales to the van. That seems like a positive. And if you look at the the nature of the world, you wonder if people aren't getting tired of being uncertain, things won't go off. So I think we're kind of optimistic going forward.
[speaker 5]: Okay. Last question for me is just on the balance sheet. I mean, you get a billion 6 of cash.
[speaker 4]: You know, a little over 400,000,000 of net cash.
[speaker 5]: Generating a billion dollars a year of free cash flow. I mean, you're doing an extraordinary job here. Are you gonna go with the cash? What what remind us on your priorities for m and a. Okay. Priorities are like this. Well,
[speaker 3]: as you know, I bet you've been looking at it so long, you noticed dead nuts. But but the the if you if you look at it, we're we're working capital hogs. So we always have to have you know, a pretty good dollop of cash to make sure.
[speaker 2]: In case things should explode in terms of sales, we wanna be ready to fund it because we are not working capital
[speaker 3]: We're not among the small working capital. You know, great. Inventory turnover, for example. But we that's the bare that's our model. And so you got that. You got enough cash for that. Then the whole thing is the dividend. We have as I said in my call, we have we have declared dividends every year since 1939, and we have never reduced it.
[speaker 2]: So we think about the perpetuity of the dividend. And we think with sixteen straight consecutive increases, we always look at in those contexts. And then you've got acquisitions. We always review we're always reviewing acquisitions now. Quite often, you look closer and you find out so many warts you don't want it or it's selling into a segment we don't want. But we do look at acquisitions consistently, and we have made several of the car aligner, for example, Norbar.
[speaker 3]: Bunch of different things over the years. And then we look at is Aldo took you through, I think we spent 80,000,000 plus in share buybacks last year. Got it.
[speaker 5]: Well, thanks very much. Good luck. Sure. The next question comes from Bret Jordan with Jefferies.
[speaker 0]: Please go ahead. Hey, good morning, guys. This is Patrick Buckley on for Bret. Thanks for taking our question.
[speaker 4]: Within tools group in in The US, could you talk a bit more about what you're seeing in the competitive landscape? Any notable shifts in strategies as far as pricing or mix or marketing?
[speaker 2]: Why do you always ask about the competitors?
[speaker 3]: That's what I wanna know. But but anyway anyway, look. I no. We're not seeing I don't I don't think we're seeing so much about that. I mean, I think I think
[speaker 2]: we have less pressure from
[speaker 5]: from tariffs than almost anybody else.
[speaker 3]: I I'm not sure that everybody's gross margins are up in the tools group, but I'm not hearing people talk about pressures. But that's normal. I'll tell you this. When I get on a van,
[speaker 2]: and I do all the time or I meet franchisees or it's they never mention the competition.
[speaker 3]: They always you know, I I shouldn't say never.
[speaker 2]: But they seldom mention the competition
[speaker 3]: And it's because Snap on is kind of out
[speaker 2]: in a different area. People decide to buy a Snap on product. Or they decide to choose from a bunch of other alternatives.
[speaker 3]: That's really the way it is. We're not actually competing with those guys for the same people.
[speaker 0]: I don't I don't we don't we don't see our guys don't see it that way. Now I I don't know. I think I think
[speaker 2]: you know, knowing where they source from and you know, some have had difficulty in making in The United States. I think the tariffs have gotta give them
[speaker 3]: fits.
[speaker 0]: They haven't given us fits.
[speaker 2]: So I would think we'd be in a better position
[speaker 3]: Well, I'm not sure. I mean, they might absorb it in profitability. Nobody said to us that anybody's dropping price Nobody said to us, oh, people are raising a price, and it makes a difference to us.
[speaker 2]: Because we're always above them anyway.
[speaker 0]: Great. That that's all for us. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Sarah Verbsky for any closing remarks.
[speaker 1]: Thank you all for joining us today. A replay of the call will be available shortly on snapon.com. As always, we appreciate your interest in Snap on. Good day.
[speaker 3]: The conference has now concluded. Goodbye.
[speaker 0]: Thank you for attending today's presentation. You may now disconnect.