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DATE

Thursday, Oct. 22, 2026

CALL PARTICIPANTS

• Head of Investor Relations-Sara Verbsky
• Chief Executive Officer-Nicholas T. Pinchuk
• Chief Financial Officer-Aldo J. Pagliari

TAKEAWAYS

• Net Sales -- $1,183.7 million, representing a 0.6% reported increase but a 2.8% organic decline driven by lower sales to the mobile van network.
• Operating Income -- $248.1 million, down from $278.5 million in the prior year which included a nonrecurring $22 million legal settlement.
• Gross Margin -- 51%, increasing 10 basis points primarily due to savings from RCI initiatives that offset higher material costs.
• Diluted EPS -- $4.64, compared to $5.02 last year, which included a $0.31 per share boost from a legal settlement.
• Commercial & Industrial Group Sales -- $404.3 million, an organic increase of 7.4% fueled by robust activity with the U.S. military and general industry end markets.
• Commercial & Industrial Operating Margin -- 18.5%, reaching an all-time record for the group and improving 290 basis points from the prior year.
• Snap-on Tools Group Sales -- $471.5 million, reflecting a 7% organic decline as franchisees destocked inventory to generate cash in response to rising diesel prices.
• Snap-on Tools Group Operating Margin -- 18%, decreasing from 21.7% due to lower sales volumes and continued investments in brand support.
• Repair Systems & Information Group Sales -- $454.7 million, a 5.5% organic decrease primarily reflecting reduced program-related activity with OEM dealerships.
• Repair Systems & Information Operating Margin -- 25.5%, remaining relatively stable compared to last year's adjusted margin of 25.6% excluding a legal settlement benefit.
• Financial Services Operating Earnings -- $68.3 million, compared to $68.9 million in the prior year on revenue of $98.6 million.
• Loan Originations -- $270.6 million, a decrease of 1.3% reflecting technician reluctance to commit to financial obligations for big-ticket items.
• U.S. 60-Day-Plus Delinquency Rate -- 2.1%, representing a 10-basis-point increase compared to the third quarter of 2025.
• Trailing 12-Month Net Losses -- 3.63% of outstandings, a sequential improvement from 3.7% in the second quarter of the current fiscal year.
• Cash Position -- $1.067 billion at quarter end, compared to approximately $1.6 billion at the end of the prior fiscal year.
• Share Repurchases -- 221,000 shares of common stock for $87.1 million, leaving $431 million available under the current authorization.
• Inventory -- $1,079.6 million, an increase of $54.4 million from year-end 2025 levels including $18.5 million from acquisitions.
• Capital Expenditures -- $24.7 million in the quarter, with the company expecting full-year 2026 expenditures to approximate $100 million.
• Effective Income Tax Rate -- 22.3% for the quarter, with management anticipating a full-year 2026 rate of approximately 22%.
• Specialty Torque Business -- Double-digit gains, including higher sales for the high-precision electronically controlled mounts product line.

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RISKS

• Pinchuk stated, "the precipitous and unprecedented acceleration in diesel fuel prices has grabbed their attention," noting that franchisees reduced inventory and slowed ordering to preserve cash for higher fuel costs.
• Pagliari warned that "substantial changes to the rollout of new OEM vehicle platforms impacted sales in the quarter," leading to a sharp reduction in program-related activity for the RS&I segment.
• Pinchuk noted that while technician spending remains stable, there is a "reluctance for committing to the extended financial obligations that are associated with big ticket items," which impacted loan originations and Tools Group sales.

SUMMARY

Snap-on Incorporated (SNA +0.16%) reported mixed third-quarter results as significant macroeconomic headwinds in the vehicle repair sector were partially offset by growth in industrial segments. Management reported that a rapid increase in diesel fuel prices led franchisees to reduce their inventory levels to preserve cash, directly impacting sales in the Tools Group. However, the company reported record-high operating margins in its Commercial & Industrial Group, driven by demand for customized solutions in critical industries such as the military and aerospace. The company maintained a 51% gross margin through efficiency initiatives while continuing to invest in product innovation and brand support despite the turbulence in the mobile van network.

• Pinchuk noted that technician markets remain stable with garages "constantly crowded and full," even as franchisees adjusted inventory to manage rising operating costs.
• The company reported that sales to independent shops remained flattish, while OEM dealerships saw lower repair department activity due to a lack of new model launches.
• Management launched several new quick-payback products, including the CT9050 18-volt cordless impact and specialized dust cap tools, to align with technician demand for faster ROI items.
• The C&I segment reached an all-time record 18.5% operating margin, aided by a 130-basis-point benefit from a building sale and strength in precision torque products.
• The company introduced new electronic parts catalog software utilizing large language models to translate technician jargon into SKUs using a database of 3.4 billion proprietary repair records.
• Management confirmed that the fourth quarter of 2026 will return to a 52-week fiscal year, unlike the 53-week fiscal year in 2025, which will impact year-over-year comparisons for interest income.

INDUSTRY GLOSSARY

• C&I: Commercial & Industrial Group, a segment focused on customers in critical industries such as military, aerospace, and natural resources.
• EPC: Electronic Parts Catalog, software used by dealership parts counters to identify and manage vehicle components and SKUs.
• Lumpy Business: Sales activity that is inconsistent or irregular, often tied to large, one-time equipment projects or OEM model launches.
• OEM: Original Equipment Manufacturer, companies that build the original vehicles and parts, often maintaining their own dealership networks.
• Opco: Operations-related financial results, excluding the company's financial services segment.
• PTEN: Professional Tool & Equipment News, an industry publication that evaluates and grants innovation awards for tools and repair equipment.
• RCI: Rapid Continuous Improvement, Snap-on's structured approach to driving operational efficiency and cost savings.
• RS&I: Repair Systems & Information Group, a segment providing diagnostic tools, software, and equipment to repair shops and dealerships.

Full Conference Call Transcript

Operator: Good day, and welcome to the Snap-on Incorporated 2026 Third Quarter 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 0. To ask a question, you may press star then 1 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 Sara Verbsky.

Sara Verbsky: Head of Investor Relations. Please go ahead.

Operator: Thank you, Chloe, and good morning, everyone. We appreciate you joining us today as we review Snap-on's third quarter results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, Snap on's Chief Executive Officer and Aldo J. 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 will take your questions. As usual, we have provided slides to supplement our discussion.

These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, 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.

Sara Verbsky: With that said, I would now like to turn the call over to Nick Pinchuk. Nick?

Nicholas T. Pinchuk: Thanks, Sara. Good morning, everyone. As usual, I will give you my thoughts on our markets, our results, and on the way forward. Then Aldo will provide a detailed review of the financials. Well, these are really are interesting times. I mean, you do not have to look any further for confirmation of that than the Snap on quarter. It takes some understanding. But our quarter is primarily marked by 3 major themes. The impact of diesel prices despite what is fundamentally a stable technician market. The continued rise in the critical industries reaching new heights, and Snap on's capability to absorb substantial turbulence and despite the difficulties keep margins strong.

The result of it all is that our numbers were mixed, marked by the turbulence, but with rays of light from the underlying strength of our enterprise shining through. Now for the results. For the third quarter, our sales were 1 billion 1 hundred and 83 point 7 million as reported, representing a 0.6% increase. Adjusting for currency and acquisitions, organic sales were short by 2.8% with mixed results across the corporation. We will talk about that later. Opco operating income or OI for the quarter was $248 million down from the $279 million of last year. Which is important to note, included $22 million from a 2025 non-recurring legal settlement.

The OI margin was 21%, lower by 240 basis points versus last year, but that included a 190 basis points from the legal gain. Adjusting for the onetime legal item, the OI margin was down by 50 basis points. Now the gross margin improved 10 basis points to what I consider a very robust 51%, strong despite the environment. it is a real demonstration of Snap on's resilience. In effect, our margin combined strong gross margins and a belief in our way forward, impelling continued spending on maintaining and strengthening our advantages in product, in brand, and in people, even in a wave of turbulence.

Executing on a belief that our belief that future holds considerable opportunity and our conviction that we want to attack that potential at full strength. For the financial services, operating income of 68.3 million was down slightly from last year's $68.9 million. And the overall as reported OI margin in the quarter, including both financials financial and opco was 24.7%. Quarterly EPS was $4.64, below last year's level of $5.02, which, again, included a legal item from the prior year. And that was worth a $0.31 boost in the 2025 numbers. Those are results. Now let's talk about the markets. Vehicle repair is a varying picture with subsectors of players having different perspectives. But the underlying market remains strong.

When we visit the shops, as we have during the quarter, the garages are constantly crowded and full, and the owners and managers are always looking for more techs. it is the first thing they mention when you see them. And the technicians themselves, they are busy and prosperous and see continued stability in both work and income. So at its core, at the grassroots level, repair is strong. And you can see the numbers. Household spending on fixing cars, up mid single digits, and technician wages continuing to rise. it is still a great time. To work in a garage. So in this environment, technicians remain cash strong. They can buy what they want or need.

But at the same time, there is still confidence-poor. Actually, it is based on a number of articles. actually, based on a number of articles in, I think, respective publications, papers and magazines, the loss in confidence in the near future is a perspective that appears now to be more commonly present across the economy. For the tax, this continues to play out as the reluctance for committing to the extended financial obligations that are associated with big ticket items. Our loan originations are down again this quarter, reflecting that sentiment.

So the focus is on quicker payback items, like power tools and hand tools, In effect, it is a story we have been telling you for some time. it is a stable story. So vehicle repair itself remains strong, as it has been. But Snap on's path to our tech customers are the franchisees. And up to this point, they have been relatively unaffected by the environment. But now the precipitous and unprecedented acceleration in diesel fuel prices has grabbed their attention. The result is that franchisees have built cash. To manage the rising fuel costs without stress by reducing inventory. You can see it in our results. Sales to vans were down.

While volume off the trucks to technicians is stable. The resulting ripple drove significant variations in our results as the reduction wave is passing. So while the numbers look turbulent, the underlying core tech market remains as it has been for some. As it has been for some time. On the upstream portion of vehicle repair, repair shop owners and managers, the market is mixed again. Independent shops are reasonably optimistic. recognizing what could be called the, I think, the great days of automobile repair. bounteous opportunities for more work as the car parc evolves even more complex vehicles. And they fully understand the need for more sophisticated systems that match those challenging trends.

And Snap on is just the product for the task. For OEM dealerships, the view is quite different. The repair bays are full, but dealerships tend to be heavily influenced by new car sales. And that picture is not as positive. Volume is down. I guess impacted by the reduced number of new car model launches. Car buyers are not so enthusiastic about buying older models. And as you might expect, the trials of those lower volumes spill over into repair departments kind of attenuating the appetite for shop upgrades. At the same time, lower vehicle introductions mean fewer tool up programs to support new models. Taking our already lumpy program business to lower levels.

And you can see it in RS&I. You know, in their numbers, overall volume is down, but much of that shortfall is driven by decreases in the EQS project driven business, the lumpy business. So overall, vehicle repair is robust. But various sectors have been influenced by in period challenges, I guess you could call it, now to the critical industries. This is where C and I operates. And I can tell you, it is looking good. Experts in these areas are really delivering. They are declaring the economy is strong. Well, this is part of all that.

Military, general industries, natural resources, places where the penalty for failure is high and the need for repeatability and reliability justifies a Snap-on level product. it is a segment where the growing emphasis on precision and efficiency is driving demand for greater and greater customized products. And this is the Snap on sweet spot. it is music to our ears. And you can see why when you look at the encouraging C and I numbers. it is not just this period. C and I keeps taking full advantage of the favorability, racking up gains, quarter after quarter. So that is the market. Vehicle repair, mixed but with a strong core. And the critical industries Booming.

Now let's move to the segments. Let's talk about C and I. It was an encouraging demonstration of strength. Sales were $404 million, an organic sales gain of 7.4% and that excludes the $10 million from the recent High-Fource acquisition. it is an all time high. it is a robust increase fueled by innovative new product launches. And by the gains piling up in the industrial business. Driven by growing demand for our custom solutions in the military and general industry, and in natural resources. Broad volume progress across critical industries. From an earnings perspective, the C and I results get even better Operating income of $74.7 million improved $17.3 million or 29.9%. And the operating margin was 18.5%.

Up 290 basis points, another record for the group. Gangbusters. And once again, the primary force was the industrial division, Continuing to forge the path forward, taking Snap-on out of the garage, very profitably. The C&I quarter was about leveraging customer connection, observing work? And identifying complexity and engineering solutions that make work easier. And at Murphy, North Carolina power tool plant executed that process with precision. See, our power tools are designed to match specific repair tasks, not a broad range within industries. For instance, in September 10, the first of its kind, our CTR 51 14.4-volt 3/8-inch drive flex head cordless ratchet.

Unlike any other tool in its category, the head pivots forwards and backwards 30 degrees, 60% of total movement. Specifically developed for tight engine compartments. Techs love this tool. Modern engines are packed in, often requiring additional work to remove the barriers to access the components that need replacement or repair. Now this gem is vertically narrow. Sliding between the hoses and frame rails with the pivoting head enabling the tech to set just the right angle of approach to reach the fastener. And once engaged, 60 foot pounds of torque and 275 RPMs make quick work of extracting or installing a bolt. And the tool also has a ring of fire LED system illuminating the workplace.

Another idea, especially powerful in confined space The CTRA 51, a quick payback item, just what techs are looking for. it is a great addition to our lineup for Murphy. Another Murphy special is the CT9.05 thousand 1/2-inch 18 volt drive cordless impact. it is a beast in a small frame. Access and power. And this tool is backed at 1.4 thousand foot pounds of torque, surpassing even pneumatic tool levels. This is the strongest half inch tool we have ever built.

It makes lightning work of suspension jobs and heavy duty application, and it is fueled by our new accelerate tablets battery platform, longer run time, and increased power. it is another innovation that is improving productivity and making complex tasks simple And our customers are impressed. Well, that is the overview of C and I, raising the bar Organic sales up 7.4%. OI up 29.9%. And operating margin a new all time high, 18.5%. A model quarter. C and I launching customized solutions, maintaining its strong momentum in the critical industries. Extending out of the garage and reaching new heights, and profitability. Now let's turn to the Tools Group. Sales were $472 million, down 7% organically.

Franchisees pulling down their inventory, freeing up cash, responding to the onset of accelerating fuel, responding to offset accelerating fuel prices. Even while technician spending remains stable. Operating income was $84.8 million compared to the $84.8 million compared to the $110 million last year. Lower volumes and continued investments in brand and product and people. off of that volume. Operating margin was 18%. Down 370 basis points. Now again, this quarter, we did see customer connection playing out in Tools Group. For instance, our Algona, Iowa tool storage plan. Rolled out the new. People often ask us, can, you know, is the pivot going to keep going? Yes. It will. rolled out our.

Algona, Iowa tool storage plant, rolled out the new KHP34A a roll cart. it is available in 9 colors. And it is a small but compact footprint that is ideal for moving tools around the shop floor, with 6 drawers and a deep 9 inch top compartment that organizes, large items and a power strip for chargers, lights, and electrical devices. it is quite. and when I say maneuvering tools, I mean a lot of tools. The 1 piece welded frame weighs in at 248 pounds. But it has a load capacity of 2.4 thousand pounds. We are not kidding when we say this is this will hold a ton of tools.

Plus, the 2 piece sliding bed liner top glides under lifted vehicles. Positioning the tech's arsenal of tools right at the workplace, improving productivity and reducing wasted motion, going back to a larger box to retrieve a needed tool. And it is at a price point that qualifies as a faster payback item. Progress is stretching quick payback. To a wider array of products. Another example of customer connection centers on a task. I think that seems pretty simple to everybody, but it can quickly become a bigger problem. Take wheel bearing dust caps. A small basic components that help keep the grease in a hub assembly while keeping the dirt out. Enabling the wheel to do its job.

It enables the wheel to do its job to roll smoothly down the road. You get the picture. You know? But replacement is usually a routine job. But when a dust cap does not seat properly, headaches start. A simple repair turns into damaged parts and rework and potential failure. Observing that challenge, our engineers developed our new A1.31 thousandDCT Especially for dust caps. It includes 3 different size adapters that can be used with a drive handle or paired with an air hammer. So it gives techs a wide range of flexibility depending on the app. What makes the tool effective is its simplicity.

The adapter cradles the metal cap and distributes the force evenly, helping push the part into place without deforming the outer shell. The result is an easier, more reliable seating of the component. But it creates a better feel with less risk of problems down the road. The kind of product that addresses common frustrations that common frustrations that technicians run into every day Nothing flashy. Just a smarter way to get the job done right, saving a lot of time, and it is based on feedback we receive. The technicians have noticed it. They like it. Well, that is the Tools Group; soaring diesel costs. Franchisees leveraging inventories.

Tech spending steady, and the group wielding insights and observations to design application specific products. Now let's turn to RS&I. Sales in the quarter were $455 million, down 2.2%, including $15.6 million from the recent Diesel Laptops acquisition. And on an organic shortfall of 5.5%, primarily due to the lower lumpy volumes in the OEM segment that derived from fewer new models from fewer new model release programs. But we did see progress. With our database and shop management solutions. And reflecting that somewhat, OI in the quarter was $116 million compared to the $141 million last year. But that included the $22 million from the legal settlement. from the legal payment. The group's operating margin was something else.

It was 25.5%. A strong number but down 490 basis points from last. Down 490 basis points from last year, but that is that 490 basis points included 490 basis points due to the legal settlement in 2025. Actually, margins were quite robust. Was 48.1%, up 110 basis points from last year. And the OI margin was 25.5% comparing pretty closely to last year's 25.6% as adjusted for the legal settlement. And that is all despite the reduced volume. You can see the core strength. You can see RS&I's core strength coming to life on our new electronic catalogs, our EPC, built by our team in Richfield, Ohio. This software helps dealership parts counters run much more smoothly.

You see a big parts department challenge. Is that every component on a vehicle could be described in at least a dozen different ways. You have got technician jargon, OEM descriptions, parts numbers, stock numbers, and repair manual terminology. And more. And They rarely line up. So when the phone rings, how does the part. Department take the tech speak and translate it into a hard-coded barcode that is on the shelf that translates to something on the shelf. Well, that is where we have an edge. A real edge, utilizing our 3.4 billion proprietary repair records We employ large language models to connect all of that. A parts representative can enter the phrase or terminology given and press star.

They locate just the part. Just the SKU regardless of nomenclature. And just as importantly, the system sees the part that is proposed, it recommends related items that should also be replaced or installed at the same time. Making sure the repair is done right the first time. it is, I guess it is a great efficiency driver, and it is fast becoming a must have. Making RS&I a vital cog in driving dealership success. We have great confidence in our RSI business. And our customers and PTEN share the same belief. That fact was on display as the professional tools and equipment News, PTEN, announced the. it is a esteemed 2026 innovation awards and People's Choice awards.

And the group, well, you know, RS&I was well represented on that front. With winning products like our TRITON handheld diagnostic platform. Our ProLink, the heavy duty diagnostic platform, Mitchell 1's Manager SE inspections feature. And Challenger's adapter cart. All recognized as winners by the techs who actually use the tools every day. In fact, collectively, the corporation was honored with a total of 23 PTEN Awards across the 54 possible categories. We believe it is a true testament to our competitive advantage and product. Across the corporation. RS&I, expanding its reach with repair shop owners and managers, confronting the increasing complexity, focusing on developing innovations, that simplify the difficult, and helping shops prosper along the way.

But those are the third quarter results. Tools Group. Sales below our standards, impacted by accelerated diesel turbulence, Tech demand remaining stable, launching new products, and maintaining the network. C and I, above our targets, standing resilient, 7.4% organic increase. Operating margin represents a new record of 18.5%, up 290 basis points, making great strides. And releasing our compelling power tools and precision torque products, purpose-built to make work easier, and an expanding array of customized solutions driving growth in the critical industries worldwide. RS&I, gross margin's up 110 basis points. Operating margin, 25.5%. Balancing the headwinds about equal to last year despite the turbulence. And overall, the corporation has reported sales about flat.

Gross margins though, 51%, strong and up 10 basis points. versus last year. OI margin, 21%. Snap on, navigating the wave of diesel turbulence holding steady against the wind. Now I will turn the call over to Aldo. Aldo?

Aldo J. Pagliari: Thanks, Nick. Our consolidated operating results for the third quarter are summarized on Slide 6. Net sales of $1.18 billion in the quarter represented a decrease of $7.1 million from 2025 levels. Reflecting a 2.8% organic decline, partially offset by $25.6 million of sales from acquisitions. Heightened turbulence related to the ongoing conflicts in The Middle East and Ukraine including the rapidly escalating price of diesel fuel during the quarter, dampened sales in our automotive repair markets, which led to lower sales to our mobile van network. With respect to our repair systems and information group, substantial changes to the rollout of new OEM vehicle platforms impacted sales in the quarter.

These declines were moderated by continued higher activity in our industrial facing end markets, within our Commercial & Industrial Group, or C&I. Consolidated gross margin of 51% remained steady and compared to 50.9% in the third quarter last year. The improvement of 10 basis points primarily reflected savings from the company's RCI initiatives partially offset by higher material cost. Operating expenses as a percentage of net sales of 30% rose from 27.5% last year primarily due to a 190 basis point nonrecurring benefit from a legal settlement in 2025, as well as from our continued investments in support of our brand and other business opportunities.

Operating earnings before financial services of $248 million in the quarter compared to $279 million in 2025, which included a $22 million benefit from the legal settlement. As a percentage of net sales, operating margin before financial services of 21% compared to 23.4% reported last year including the 190 basis point benefit that occurred in the third quarter of 2025. Financial services revenue of $98.6 million in the third quarter compared to $101 million last year, while operating earnings of $68.3 million compared to $68.9 million in 2025. Consolidated operating earnings of $316.3 million compared to $347.9 million last year, which included the benefit from the legal settlement.

As a percentage of revenues, the operating earnings margin of 24.7% compared to 26.9% in 2025, which included the benefit from the legal item. Our third quarter effective income tax rate was 22.3% in 2026 and 22.6% last year. Net earnings of $243 million or $4.64 per diluted share, compared to $265 million or $5.02 per diluted share in 2025, which included a $16.2 million or $0.31 per share after tax benefit from the legal settlement. Excluding the $0.31 legal benefit, earnings per share as adjusted in the third quarter of 2025 was $4.71. Now let's turn to our segment results for the quarter. Starting with the C&I Group on Slide 7.

Sales of $404 million rose $36.6 million compared to 2025 levels. Reflecting a 7.4% organic gain and $10 million from acquisitions. Sales to customers in critical industries rose mid single digits in the period, including robust activity with the U. S. Military, and continued higher sales in general industry end markets. The group also benefited from another quarter of double digit gains in our specialty torque business which included a strong performance from our high precision electronically-controlled mounts product line. Our Asia Pacific operation also grew registering a high single digit increase, advancing in both their cross border activities and in their local markets.

Overall, the C&I Group continues to make progress with gains across North America, as well as in Asia and other emerging markets. Gross margin improved 60 basis points to 41.5% in the quarter from 40.9% last year mostly due to the increased sales and savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 23% in the quarter improved 32 basis points from last year primarily reflecting the higher sales volumes and a 130 basis point benefit associated with the sale of a building. Partially offset by a 40 basis point impact from acquisitions. Operating earnings for the C&I Group were $74.7 million compared to $57.5 million in 2025, and the operating margin of 18.5% improved.

290 basis points from last year. Turning now to Slide 8. Sales in the Snap on Tools Group of $472 million compared to $506 million last year. Reflecting a 7% organic sales decline. The organic decrease was due to a high single-digit decline in the U.S., and a low single-digit reduction in the segment's international operations. During the quarter, we believe the deepening economic uncertainty and rapid increases in diesel fuel prices impact franchisees' willingness to expand their purchase. Leading to a drawdown in van inventory as they use destocking to generate cash. Gross margin of 46% in the quarter compared to 46.8% last year. 80 basis point decline primarily reflected lower sales volume.

Higher material costs were offset by 60 basis points of favorable foreign currency effects. Operating expenses as a percentage of sales of 28% compared to 25.1% in 2025. This increase is mostly due to the lower sales. But also included continued investment in supporting the Snap on brands. Operating earnings for the Snap-on Tools Group of $84.8 million compared to $110 million in 2025. Operating margin of 18% compared to 21.7% last year. Turning to the RS&I Group shown on Slide 9. Sales of $455 million compared to $465 million a year ago. Reflecting a 5.5% organic decline, partially offset by $15.6 million of acquisition related sales. The organic decrease largely reflects lower sales to OEM dealerships.

This resulted from a sharp reduction in program related activity in the period particularly across North American OEMs as they adjusting rollouts of new vehicle launches. Gross margin for the group of 48.1% improved 110 basis points from last year, primarily due to the favorable business mix. Operating expenses as a percentage of sales of 22.6% compared to 16.6% in 2025, which included a 480-basis-point benefit from the legal settlement. The remaining year over year increase of 120 basis points is mostly due to lower sales volume. Operating earnings of $116 million compared to $141 million last year, which included a $22 million benefit from the legal settlement. The operating margin of 25.5% compared to 30.4% reported in 2025.

Excluding the 480 basis point benefit from the legal item in 2025, the operating margin as adjusted declined 10 basis points versus last year. Now turning to slide 10. Revenue from financial services of $98.6 million decreased $2.5 million from last year primarily due to the lower interest income resulting from a year over year decrease in the size of the average finance receivable portfolio in the period. Financial services expenses of $30.3 million decreased from $32.2 million in 2025, mostly due to $2.3 million of lower provisions for credit losses. As a result, Financial Services operating earnings of $68.3 million compared to $68.9 million last year.

In the third quarters of both 2026 and 2025, the average yield on finance receivables was 17.7%, and the average yield on contract receivables was 9.1%. Total loan originations of $276 million in the third quarter represented a decrease of $3.5 million, or 1.3% from 2025 Moving to Slide 11. Our quarter end balance sheet includes approximately $2.5 billion of gross financing receivables with $2.1 billion from our U. S. Operations. For extended credit or finance receivables, The U.S. 60-day-plus delinquency rate of 2.1% is up 10 basis points from the third quarter of 2025.

Trailing 12 month net losses for the overall extended credit portfolio of $70.1 million represented 3.63% of outstandings at quarter end, down sequentially from 3.7% in the second quarter of this year. We believe that these portfolio performance metrics remain relatively balanced considering the current environment. Now turning to slide 12. Cash provided by operating activities of $248 million in the quarter, compared to $278 million last year. Net cash used by investing activities of $18.3 million in the quarter included capital expenditures of $24.7 million. Net cash used by financing activities of $205 million included cash dividends of $126 million and the repurchase of 221 thousand shares of common stock for $87.1 million under our existing share repurchase program.

As of quarter end, we have remaining availability to repurchase up to an additional $431 million of common stock under our existing authorization. Turning to Slide 13. Trade and other accounts receivable of $922 million represented an increase of $40.7 million from 2025 year end levels including $12.2 million from acquisitions. Days sales outstanding were 68 days in the third quarter, and compared sequentially to 70 days at the end of the second quarter and to 67 days at 2025 year-end. Inventories, including $18.5 million from acquisitions, increased by $54.4 million from 2025 year-end. On a trailing 12 month basis, inventory turns of 2.3 times at the end of the period compared to 2.4 at the end of last year.

Our quarter end cash position of $1.067 billion compared to $1.62 billion at the end of 2025. That concludes my remarks on our third quarter performance. I will now review a few outlook items. For the remainder of 2026. As a reminder, the fourth quarter of 2025 contained an extra week of operating results associated with the company's fiscal calendar. In 2026, we return to a 52-week fiscal year with 13 weeks in the fourth quarter. While the impact of this additional week was not material, to Snap on's consolidated fourth quarter 2025 total revenues or net earnings, our financial services segment did earn an additional full week of interest income from its financing portfolio.

At the consolidated level, net earnings benefit from the additional week of financial Services interest income was largely offset by a corresponding additional week of fixed expenses, primarily personnel related costs. We expect the capital expenditures for the year will be approximately $100 million and we currently anticipate that our full year 2026 effective income tax rate to approximate 22%. I will now turn the call back to Nick for his closing thoughts. Nick?

Nicholas T. Pinchuk: Well, thanks, Aldo. Well, that is the Snap-on quarter. Marked by 3 large First, the accelerating seemingly limitless rise in diesel during the quarter and the franchisees reducing inventory as a reaction to that unprecedented wave. Despite the fact that technician markets remain stable. And you can see that in Tools Group results. sales to the vans down 7%, even as the volume off the franchise trucks is stable. Second, the continuing rise of our critical industries business. wielding our advantages in customized products to a stronger effect. And that trend was quite visible in C&I's encouraging results. Sales up 10% as reported. Organic activity rising by 7.4%.

C and I volume reaching an all time high, and the group's OI margin 18.5%, up 190 basis points, another all time high. The C and I story again this quarter. Was a reminder that of the robust and rising potential in critical industry sector of our growing power to take advantage of that opportunity and of the capability of our team to bring or the capability that our team brings to bear in rolling the Snap-on brand out of the garage with strong profitability. Finally, the quarter is a demonstration of our ability to hold strong margins. Even in the midst of considerable and unusual headwinds, And that is all visible in our gross margins.

Strong in absolute and relative sense. 51% for the corporation, up 10 basis points to despite the burying environment. And looking forward, we believe we have a continuing opportunity to progress. The diesel wave appears to have flattened. And our principal markets, vehicle repair and critical industry, are both fundamentally strong. And we have the ability to capitalize, wielding our advantages in product, brand, and people. Strengths in which we have kept investing in the midst of turbulence. And as such, our product line keeps expanding, and the offerings really do make work faster and easier. Our brand stands alone. It really does represent the outward sign of the dignity of working men and women taking their profession.

We hear that every day. And our people really are experienced, battle-tested, and committed to Snap on success. So as we proceed on our path forward, we believe that with our markets and our clear advantages and product and brand and people, we will meet the turbulence and return to our well established positive trajectory throughout the quarters and in the years ahead. Now before I turn the call over to the operator, I want to speak directly to our franchisees and associates. I know many of you are listening, and resilience in these particularly challenging times is deeply rooted in your endeavors. So for your contributions to the advancement of our enterprise, you have my great respect.

For the energy and capability you bring to bear every day you have my admiration, And for your unwavering dedication to our team and its future, You have my thanks. Now I will turn the call over to the operator. Operator?

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are 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 today comes from Scott Stember with ROTH. Please go ahead.

Scott Stember: Good morning and thanks for taking my questions.

Nicholas T. Pinchuk: Good morning, Scott.

Scott Stember: Just wanted to dig into the commentary about sales off of the truck. When you say stable, are we talking flattish in the quarter? And then you also talked about how the diesel wave seems to be flattening. Have you seen a reversal in the in October Of orders?

Nicholas T. Pinchuk: First of all, we do not give guidance, so I will not comment on October. I will tell you this, though, is that the sales off the truck are up but not by much. You know? So. But they are positive. So that is that is where the. that is where you see all this playing out is the negative and the tools group and the sales to the van that are kind of as they were. that is what we call stable. And if you are talking about yeah, flatten, all you got to do is look at the diesel prices. The diesel prices are flat. So I do not know where they are going. You know?

But I think our people have mentally absorbed where the diesel prices are now. I do not know what they are gonna do about that going forward. Because if they stay at the current level, they will still wanna have some cash to make it easier when they stay at that level, or it comes down, I do not know what will happen. it is hard to predict what they will do with the inventory. But it does create a future potential at some time. But the timing of that potential is not necessarily clear.

Scott Stember: Got it. Good to hear that about the. Coming off of the van. So could you just give us an idea of what is moving? Has there been any. I imagine there is no. Has not been any breaking of that trend of, you not buying higher-ticket items? Is there anything in particular off the van that was noticeable?

Nicholas T. Pinchuk: That was positive? Yeah, look, I think power tools, power tools, power tools. I am talking about power tools because they seem to be incandescent. These days. They are really good. We have a good product line and we have had a series of, you know, I showed a guy in the SFC something I did not mention. They had a long neck ratchet. He sold 115 of them and I do not know how many customers he had, but that seems like every other customer. Per se. So power tools are selling well. It sold well in the quarter. And, you know, these carts are selling OK and so the.

Look, the carts I talked about, which is kind of reaching up, making them semi quick payback items, and they tend to be popular. Alright.

Scott Stember: And just last question on RS&I. Outside of the OEM dealer orders, can you give us an idea of how some of the other subsegments did?

Nicholas T. Pinchuk: Well, I think I think we say that in our. Basically, anything associated with the OEM dealers did not do that well. The parts catalog business, which is associated with. They did OK. But generally, it was sort of that. I mean, there was a lot of mixed diagnostics. It did not have its most robust quarter. It did not launch Mitchell 1 did great. You know? So you look at those kinds of things. So I think we say in our notes, that sales to the OEM dealership. OEM dealerships were down. And, you know, maybe to the independent shops was kind of flattish In this situation. Got it.

Scott Stember: that is all I have. Thank you.

Nicholas T. Pinchuk: Okay. Sure.

Operator: The next question comes from Bret Jordan with Jefferies. Please go ahead.

Bret Jordan: Hey, good morning, guys. Can you talk about sort of what your hearing about franchisee health and sentiment. I guess the largest public auto dealer reported yesterday and commented about negative car counts in service? Are they concerned beyond diesel that there is some softening at the absolute garage level?

Nicholas T. Pinchuk: You mean our franchisees? Yeah. No. I do not think so. I mean, look, Who knows? You know, I they do not seem that way. We just met with a bunch of franchisees in and we met with. During the quarter, we met with a bunch of them in the Northeast, franchisees and shop managers and technicians. And then we just met with a bunch of franchisees from the what we call the North Central Region. You know? Around Saint Louis. and the first thing out of their mouth was diesel prices. And then they started waxing eloquent about some of the power tools and some of the products we are taking out. So I did not get that feeling.

I got the feeling that it is just as I described. The underlying business was pretty good in repair. I do think, as I said, you probably know this better than I do, that I am not sure the dealerships are doing that well because they always pay attention to new car sales.

Bret Jordan: I do not know. I think. I have read a bunch of articles, and we have heard talks about that from my dealer friend about the lack of new models making a difference. And I do think is not car sales down this year? Are car sales down this year in The United States, a couple of percent?

Nicholas T. Pinchuk: Yeah. What they are seeing is customer pushback on pricing of the service.

Bret Jordan: So I think you are seeing some customer reaction to what is been in high inflation in labor. And parts pricing.

Nicholas T. Pinchuk: So you are saying. You are you are talking about the dealerships? Yeah, it is it is not it is not so much pre block cycle. it is the service bay. But you know, Bret, the dealerships. The dealerships, the repair shops are being are. You know, you feel like the management is a descendant of Jesse James when you go in there anytime. And get and get pricing, people are pushing back all the time. I think. Really. I mean, people have complained about it. it is why independent shops have held so long robustly against the dealerships. Is because the pricing drives everybody in the independent shops once it is off of warranty. This is not new.

Bret Jordan: And on that same topic of affordability, you said you are stretching quick payback. Are. If we think about, like, a same SKU tool price or is the incremental product offering targeting a lower selling price to make this more affordable or No.

Nicholas T. Pinchuk: What I meant by that? Look, right, What I meant by that, a good example of that is in tool storage, you got the big boxes. You know, these things are monsters. You know, there is a lot of sheet metal. there is a bunch of features in it. They go for I do not know, 5 figures, you know, stuff like that. And then but we are making a robust expansion. We are making robust expansion in the cart side of that. less sheet metal, cheaper. more within reach. So people need tool storage, They are not gonna be paying a huge amount of money. They can buy a cart.

By the way, the cart I talked about holds 2 tons of tool. So, I mean, I think a ton of tools, rather. Sorry. A ton of tools. So that is what I meant by that. We are stretching the designs to come down some, and in places and categories where we used to. People would say, oh, they are definitely big ticket. We are trying to get what maybe you could argue is middle ticket out of that.

Bret Jordan: Okay. And sorry. just to round out the first question. I guess is there a metric that you use internally to sort of measure the health of the franchisee or their liquidity? like delinquencies on contract receivables? Or I assume they are not. There are no delinquencies since you own that.

Nicholas T. Pinchuk: Yeah. No. We look at a bunch of different things, but a lot of the things are, you know, imprecise because they do not have to report everything on all these things. So generally, my best feeling is when I talk to them and so I feel. I always feel pretty good about I have felt pretty good about talking to him lately. Except for the diesel thing. You know, the diesel thing shook them up. You know, if you look at diesel, if you put yourself back in the third quarter, it was looking like it was going to the moon.

Bret Jordan: This is what Is their response to higher diesel visiting their customer less frequently or just No.

Nicholas T. Pinchuk: I think so. You would think maybe. I mean, look. There are there are thousands of franchisees. So probably someone is doing that. But I do not think it is a common phenomenon.

Bret Jordan: Okay. Great. Thank you. Appreciate it.

Operator: The next question comes from John Babcock with Barclays. Please go ahead.

John Babcock: Hi, good morning. Thanks for taking my questions. Just a quick follow on there from 1 of the questions earlier. Do you think that franchisees are now holding levels of inventory that they are happy with? Or do you think that there is still a little bit more that has to fall out there? And then also, have you guys started adjusting production to account for the pullback that occurred this last quarter?

Nicholas T. Pinchuk: Well, we already ate it. You know? But the thing but the thing is that look. The pullback, I do not expect them to go further. Although those would be famous last words. I do not know. But I think the way that. You know, if I look at the numbers in the pullback this quarter, that is got them OK for some time. So I do not think that is gonna happen in the near term. I do not see them doing that. I. look, I do not think franchisees like inventory. You know, they like to have it. And the reason is, John, is because it allows them to strike while the iron's hot.

If they go out and somebody says, oh, yeah. I like a new tool storage box, and I want a blue 1. If they do not have a blue 1, then they order 1. By the time they get back, the guy's wife may have talked them out of it or something like that. You know, he may have had second thoughts. And so they liked the strike, so they liked more inventory. I do not see them trying to re. I do not see them being satisfied with this level necessarily. I am not saying they are wildly dissatisfied.

They can get along without it, but it is not as powerful as when you have you know, a fairly robust inventory. on the van and in some maybe in a warehouse.

John Babcock: Alright. Thanks. And just in terms of, like, the products, did they pull back on any particular type of products? Was it higher priced products, lower priced products? Look, where was most of the investment?

Nicholas T. Pinchuk: Actually not, it was pretty much across the board. Okay.

John Babcock: Gotcha. Helpful. And then just last question before I turn it over. Material costs, you talked about that being a little bit of a headwind for the Tools Group. Was wondering if you might be able to provide a little bit more color there.

Nicholas T. Pinchuk: You know, material cost is. I think it is primarily associated with steel when we talk about material cost. I mean, there is some freight involved there, you know, freight costs when you shipping. But I. Look. I think I think our guys have managed over that. So while I have it and while we have it in the discussion material cost, really, if you look at the gross margins, it does not appear we are suffering. I would say. Think we are managing them. We have offsets, like, from rapid continuous improvement and other things. Yeah. Understood.

John Babcock: Thank you.

Operator: The next question comes from David MacGregor with Longbow Research. Please go ahead.

David MacGregor: Good morning, everyone.

Nicholas T. Pinchuk: Good morning, Nick. Hi, David.

David MacGregor: Hey. I wanted to start off by just asking about the SFC and just any observations you could offer on this use SFC. And then it seems as though there may have been a larger than normal order cancellation around that event this year. So if I could just start off by getting you to talk about that.

Nicholas T. Pinchuk: Sure. Look. The SFC in Washington is always by population, weaker. It is not 1 of the more. It is not the most popular You know, if you go to Orlando, more people go. that is that is simply it. You know? it is it is on the margins, but someone The SFC you know, I know that people get different views of it, but the SFC orders were not that strong. They were already down. People were pulling back at the SFC. So we came out of that somewhat lower than we might have expected. And that was what. that is what you are seeing. There.

Now I will say that the franchisee know, if you talk to the franchisees, you did not look at the order numbers, you might say, well, OK. Everything's hunky dory. They were pretty positive. But the numbers ended up metastasizing in that way. You know? And I think when we talk to people afterwards, which is why we went out and talked to people, was about diesel prices.

David MacGregor: Right. So on the SFC, it sounds like you had sort of good ticket response, but the traffic was down. And then talking about the cancel Also, the.

Nicholas T. Pinchuk: I would not say good ticket response. I would say, you know, it was OK. You know? But we. It was not up to our standard. I would I would say we are do not like to use words like disappointment or anything like that. But the thing is it was not where we hoped.

David MacGregor: Got it. And then what about the cancellation rates afterwards?

Nicholas T. Pinchuk: You know, I do not think they are, you know, I do not think they are any different. Actually in this situation. So it is not. This is not higher cancellations or anything. Mean, we started to see we started to see this for in you never know. Third quarter's squirrely. You know? So you never know an order pattern. As you go through the months. But when you get to the SFC, and you see week. You know, not where you think it should be you start to know that something's amiss. Got it.

David MacGregor: And then how do you maybe think about franchisee attrition here? Do these kind of conditions shake loose the marginal franchisee into retirement or what are you seeing?

Nicholas T. Pinchuk: You know? Yeah. It can. But, you know, the franchisees like I said, the sales of the van are not down. They are OK. So I do not think. I do not know. You know, I am not sure. I realize there is a lot of turbulence floating around, and people could say, oh, yeah. I want out or I get tired. Mostly, people retire at a certain age. that is what tends to drive this, and it tends to be the classes. That drive a lot of it. Of course, as you say, marginal franchisees get under pressure but a lot of those guys probably would have made it anyway. You know?

So I do not I do not think we see that What drives the what drives the up and down, I think, is the age Got it.

David MacGregor: And then on the. You just talked about the fact that franchisees are becoming a lot more cautious. Are the implications there for revolving account credit? Are we likely to see more flips in end of the year? Or how are you feeling about RA and I see the same.

Nicholas T. Pinchuk: Wait a minute. Wait a minute. I do not know. I do not think I said more cautious. About the franchisees. I am not sure. Do not think the franchisees are more cautious. I think, you know, I think this is a very specific phenomenon. They looked at this diesel price, and they said, this thing is bad. You know? it is gonna cost me more money. I do not wanna give up. I would still wanna give my son the GI Joe with the Kung Fu grip, as they say, you know, for Christmas. And so, therefore, I do not wanna cut back anything else. I just soon pull back a little bit now.

And give myself a little cushion for the future. But I think their attitudes are not really that bad. They are not. I do not think anything's changed at the basic fundamentally, 1 of the things we try to convey here not much actually changes the tools group except for the diesel price.

David MacGregor: Got it. And then last question is just capital allocation. Pretty lazy balance sheet right now with all that cash. What are your thoughts on bringing that to work?

Nicholas T. Pinchuk: Well, I think, look, I think we you know you know what we say. Our capital allocation is we are working capital intense, therefore, you need it for that. We like acquisitions. Acquisitions. We like the dividend. it is in perpetuity, so we are look at what dividend we are gonna. Then we look at share buybacks. We look at them all. Okay. Thanks very much, Nick. Sure.

Operator: The next question comes from Quinn Fredrickson with Baird. Please go ahead.

Quinn Fredrickson: Hey, good morning.

Nicholas T. Pinchuk: Morning.

Quinn Fredrickson: Question on Tools Group operating margins. Just the decremental margin there seemed kind of sharp. Wondering if you could just split out how much was just lower volume versus the brand building and other cost you called out? And would you expect to moderate some of your investment if the environment continues to remain somewhat challenging? Or do you see it attractive enough?

Nicholas T. Pinchuk: Look. I think I think the tools group there were a bunch of things that happened in the tools group. there is there is some product mix that is driving through that. You know, in other words, they had. If you look at gross margins, they had better sales of power tools and torque as part of its sale to the vans and they. And for those products, Quint, they split the margins with C and I. So their margins. While the margins are great for the corporation, they are not as good for any 1 particular division. So you have some of that rolling through.

There was a volume component in gross margin, and a volume component in the in the in the OE. I think I think gross margins were down, like, 80 basis points, 60 basis points, something like that. And so that was not bad given the volume. So volume and mix there, you look at that, the big kahuna in that was the OE margins. And there was volume, and we continued spending in things like training. You roll out the product. You roll out.

See, 1 of the things we found out is in trying to do the pivot, For lower payback items, you have got to keep rolling out a lot of new product and you need to train the field to be able to deal with this. You need to jack up the training. And so that is part of the cost. The SFC, even though even though, you know, I talked about it being a little bit down, we spent we spent money on the SFC, and maybe we could have pulled back on that. But we considered the effect. I think the numbers were pretty high for a Washington event.

So we kept that up there because we wanted the brand build. I mean, if you are if you are if you are selling the top of the line product, I think it is somewhat questionable whether you should pull back on investing in product and brand and people. So you will not see us pull back I do not think. I do not foresee that right now.

Quinn Fredrickson: Alright. Thanks, Nick. And then second question just in RS&I. On the OEM dealerships. You discussed delays to vehicle launches. Just as you look forward, are you seeing anything in the program pipeline, perhaps new year model launches that gives you confidence activity could improve ahead, or is visibility still fairly limited?

Nicholas T. Pinchuk: Visibility is kinda limited because I think the OEMs are kind of you know, trying to figure out what they wanna do around this. And having worked for Ford myself, you know, and then in engineering and finance, it is it is. You know, there is a lot that goes into launching 1 of these programs. So we know about programs, but we do not know about the timing when they launch. We are not confident of that timing because there is a whole bunch of variation. And secondly, more than that, we do not know when they pull the trigger on the programs. It does not necessarily happen on the day or the timing.

So we have that in place. I think we would expect it to improve somewhat, but I think we are in a flatter period for that business. Got it.

Quinn Fredrickson: Thank you. Sure.

Operator: The next question comes from Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino: Hi, good morning. Hey Nick, good morning. In your in your experience with running the company, ex-ing out what happened during the pandemic, have you ever had something of this magnitude, like an exogenous shock on the franchise channel that, you know, impacted their purchasing power? And if you did, how long did it take to correct that?

Nicholas T. Pinchuk: I never saw anything like this. so concentrated. I mean, diesel prices are going up have gone up before, but these things rose 40% in the third quarter. that is like a rocket ship. You know? And that is actually look, a lot of this, Gary, I do not think it was that they needed the cash. It was that they are pretty savvy small businessmen, and they say, this thing is getting out of control, this diesel. And by the way, you know, if you look at it, third quarter is about the time when I think America started thinking, wait a minute. The Ukraine thing looks like it has no resolution.

And so I think this kind of psyche surrounding the diesel got to them, and they said, gee. I wanna I wanna get some cushion. it is not it is not so much personal, but it is the fact that they wanted cushion. So I. You know, it they took back more inventory than they needed to pay 1 month's worth of higher diesel prices. But I think they are. You know, I think when we talk that they are cushioning against this going on for a while.

Gary Prestopino: Okay. But I guess what I am having a lot of problems squaring here is, and again, I am not the smartest guy in the world, but volumes were stable. Sales were down, which I guess that is indicative of maybe a product mix. Right?

Nicholas T. Pinchuk: But No, no, no, wait a minute. Will you. no, no, wait. Go ahead. Go. Keep going. No. No. Go ahead. If I am wrong on that point, then I can. no.

Gary Prestopino: No. So wait, wait, wait. I did.

Nicholas T. Pinchuk: Let me try to explain. Sales were down because they decided not to. You know, in general, it is kind of a group thing. Says, I wanna get ahead of this diesel thing, so I am not ordering that much. But they still sold to the van driver to the. they still sold to the technicians. And the sales for the technicians were up slightly. Year over year. So that is the thing. They pulled back despite the fact there was not any emergency in the technician mark.

Gary Prestopino: Okay. Well, what I was leading to is then. Okay. So the technician market is OK. the franchisees pull back their sales. I mean, are they gonna be short inventory going into this quarter? And, you know, that is kind of what. well, no.

Nicholas T. Pinchuk: I do not think they will be short. But inventory is about flexibility about what you sell. I can strike now. it is like an inventory is about. they have a catalog, and they get all kinds of electronic things to show people the tools. But the inventory is there so they can hit the guy right away. You know, you want this, I put it in your hand. And so if you reduce your inventory, you got less capability to do that. The effect on an individual branch is quite variable and it varies from time to time, depending on the situation that presents itself to him in the garage. Okay.

Gary Prestopino: Thank you. Sure.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.

Sara Verbsky: Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap on. Good day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.