Snap-on Incorporated (SNA) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Snap-on Incorporated 2024 Annual Meeting of Shareholders. My name is Richard Miller, I am the Vice President, General Counsel and Secretary of Snap-on, and I have the honor of being the parliamentarian for today's meeting. I would like, at this time, to ask everyone to please turn off or silence your cell phones. Today's meeting is being webcast and recorded, and a recording will be available on our website shortly following the meeting. I now call the 2024 Annual Meeting of Shareholders to order. We have made the order of business and rules of order available to everyone, so please abide by these rules. It is now 10:06 a.m. on April 25, 2024, and the polls are officially open. If anyone has not yet voted and would like to vote, our inspectors of election, Abby Cowart and John Ruocco of Computershare, are in the back of the room and will record your vote. Attending today's meeting are the following members of our Board of Directors. When I call your name, please stand. David Adams, Director since 2016 and retired Chairman of the Board and Chief Executive Officer of Curtiss-Wright Corporation; Karen Daniel, Director since 2005 and retired Division President of Black -- Chief Financial Officer of Black & Veatch Corporation; Ruth Ann Gillis, Director since 2014 and retired Executive Vice President, Chief Administrative Officer of Exelon Corporation; James Holden, Director since 2007 and Snap-on's Lead Director, retired President and Chief Executive Officer of DaimlerChrysler Corporation; Henry Knueppel, Director since 2011 and retired Chairman of the Board and Chief Executive Officer of Regal Beloit Corporation; Dudley Lehman, Director since 2003 and retired Group President of Kimberly-Clark Corporation; Gregg Sherrill, Director since 2010 and retired Chairman of the Board and Chief Executive Officer of Tenneco Inc.; Donald Stebbins, Director since 2015 and retired President and Chief Executive Officer of Superior Industries International, Inc; Nick Pinchuk, Director since 2007, Chairman of the Board, President and Chief Executive Officer of Snap-on. Nick will present an update on the status of your corporation and the performance at the end of the meeting. Also here today are James Stewart and Owen McCormick, representing our auditors, Deloitte & Touche LLP. They will be available to answer any questions following the meeting. We have an affidavit that notice of the meeting was mailed as required, and it will be entered into the meeting minutes. Since all shareholders have had an opportunity to vote, will the inspectors of election please confirm that all votes have been tabulated. Thank you. It is now 10:08 a.m., and the polls are officially closed. 52,838,375 shares of common stock, each having 1 vote on each proposal are entitled to vote at this meeting. I've been advised by our inspectors of election that we have a quorum, with more than 89.5% of all shares outstanding represented at the meeting. Votes are stated as a percentage of those voting unless otherwise noted. We have 3 agenda items today. Our first is the election of directors. The Board nominated the following candidates to serve until the 2025 Annual Meeting: David C. Adams, Karen L. Daniel, Ruth Ann M. Gillis, James P. Holden, Nathan J. Jones, Henry W. Knueppel, W. Dudley Lehman, Nicholas T. Pinchuk, Gregg M. Sherrill and Donald J. Stebbins. Each of the nominees received votes in their favor of at least 77.9% of the shares represented and each has therefore been elected. Our second item is the ratification of the Audit Committee selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2024. Over 90% of the shares represented voted in favor of the proposal, and therefore, the Audit Committee selection of Deloitte has been ratified. The final agenda item is the advisory vote to approve the compensation of Snap-on's named executive officers as presented in the proxy statement. With over 92.7% of the votes cast voting for the approval of the compensation of the named executive officers, the non-binding right resolution presented in the proxy statement is affirmed. That completes the official portion of our meeting. It is now 10:10 a.m., and the meeting is adjourned. We will now watch a short video. Please enjoy. [Presentation]

I didn't think the lights were ever going to come on there for a minute. Welcome to the Annual Meeting again this year. I always enjoy these things. They're great events for us. We get to meet old friends and make new ones. It's really special. I'm standing here thinking, what does it mean when your Chief Legal Counsel blows your title on the introduction? Does it mean something? I don't know. And chokes when he's given you a title. We may need more rehearsals next time, maybe. Look, it is a great, a great event. We always enjoy. And I always enjoy telling you about Snap-on in our past year. It's a unique corporation. And we say those words, corporation, and that word, corporation. I think it's worthwhile thinking about what does it really mean? It means a lot of different things to different people, but I'll tell you what it means to me and to the people of Snap-on, it means that a corporation is a place where people come together from all over to create a value for themselves and for others that they couldn't achieve individually. That's why we have these annual meetings. We gather people from all over, investors and associates and franchisees and customers and community, representatives of the community and retirees on whose shoulders we stand as we reach further. And I'm here to tell you that as we come together, I'm happy, I'm pleased and proud -- well, not proud, but I'm satisfied, I'd say, but proud to announce to you that your company, our company, your enterprise has never ever been stronger. My job today is to tell you of the story of the past year and how we've all come together to create that strength and reach new heights. But before I do, I know that you saw the Board of Directors here, but I want to tell you that one of the groups that does influence our trajectory forward and provides counsel and support and advice and gravitas to our corporation is our Board of Directors. They are imminent and terrific people and they have helped us make the way. So I'd like you to give them another round of applause. Now in this particular event, it's probably the only one that I appear at or talk at, my Chief Legal Counsel is sitting to my left. And therefore, I must show you this cautionary statement here, which I urge you to study and understand. That's enough. Okay, on to the next one. Okay. Snap-on is a unique company. A part of the -- I think part of the uniqueness is we keep reinforcing it every day because we know who we are. We have this placard up in every major location, every major room in the company, across the company. And it talks about our mission. We provide the most valued productivity solutions in the world. It talks about our beliefs and our values and our aspirations, our goals and our beliefs. We believe in safety, we believe in quality. We believe in connecting with the customer, we believe in innovation, and we believe in rapid continuous improvement. That means improving every day. We hold values. I think these values are just table stakes for being a human being, but we place them up there to remind ourselves that we should act decently. We believe in integrity, and we believe in teamwork, and we believe in telling the truth, and we believe in listening, and we believe in respect. And we aspire, we aspire to be the interlocutor of choice of all we touch. This is who we are, and we see it every day. And one of our great advantages is sometimes when things get dark and you don't know where you're going, knowing who you are as a guiding principle. This helps us. We're founded a long time ago, 104 years ago now. And it really did -- we say this, it really did start with a spark. And the spark was an idea, and the idea forged to dream, and the dream shaped lives and it reached across the nation and the world, and we all know it's true. That spark, that idea was 5 handles, brought to us by an engineer from Milwaukee, Wisconsin. His name was Joe Johnson. We moved here in 19 -- we started in Milwaukee, we moved here in 1929. I think we show the 1929 first office, some of the structures are still standing here. We've kept them restored. That engineer named Joe Johnson. He said, "I can revolutionize tool sets. I can help mechanics. I observed them working, and I know I can help them and he took 5 handles of different size, different configurations, a T, a crank and an ellipse and put them together with 10 sockets of different dimensions. It was an innovation, an idea, a spark that revolutionized tool sets all over this country. We had 4 founders. But Joe Johnson -- we have ties, living ties to those founders. And we have here with us once again, for every annual meeting since I've been officiating at these annual meetings, a living tie, the living ties to our founder, Joe Johnson, the guy who had the spark and the idea. The grandson and granddaughter-in-law of Mr. Joe Johnson, Greg and Kathy Johnson, stand up, please, and let's give them a round of applause. Greg, it's not only -- it's not every company that has a living tie to their founders and what makes us we think, special. Thank you for being here, Greg and Kathy, because you do make us feel special when you come here. Greg's not only the grandson of Joe Johnson. He's a Snap-on guy in himself. He is with us almost 30 years. He worked in Australia for us. He worked in the United States, a long time worked in Australia. He was a Director of Internal Audit and was our Corporate Controller for a period of time. We thank him for his contribution. We stand on his shoulders. Snap-on as a company founded all those 104 years ago. It was dedicated to a timeless proposition. The respect for the dignity of work. And it was enlisted in the idea of helping working men and women perform critical tasks easier. This is a cause which is as relevant today as it was 104 years ago. And the idea is that we celebrate those people, what we call the makers and fixers. Historians have said that because America has had more makers and fixers in -- from its very birth, that is why America has been ascendant over all other countries in the Western Hemisphere, why it's most successful. And it's true. The makers and fixers are the essential people of our environment, our society. And we've seen it play out many times, in good times and bad, many times through many wars, and we saw it most recently in an existential threat we call the pandemic. We're the makers and fixers. We're called to stand their post in the factories, in the distribution centers, on the bands, in the garages, in some cases in the offices, standing their posts so that our society would not disintegrate while we engaged and defeated the COVID. We were all witnesses. And we are part of that because -- and we are the people of work, we are those who make and we are those who fix. We wield insight and experience. We make the day special, the minutes count and the years rewarding. We are the bringers of prosperity and satisfaction. We are the bearers of pride and dignity. We are the deliverers of dreams, and we are the shapers of lives. We are those who make a difference. These are the words of the video. And for Snap-on people, they ring with truth and they scream with emotion. Like I say, every year, we do not make these videos with outside people or marketing consultants, we use inside people because only the people who live the Snap-on experience would understand that truth and emotion. So I have here with us today the, basically, the producers, the directors and the writers of this year's video, which I thought was pretty good. Over here, [ Ms. Bridget Perea ] from the Marketing Department and over here. It pains me to have them stand up, but I'm going to have them do it anyway. [ Mr. Sam Bottum ]. Please stand up. Let's give them a round of applause. I love that video, I tell you what. But the guy I love the best, I think his name is [ Patrick Traman ] from Shelbyville, Kentucky. He stands there. They got with the beard and he says. "If I don't have a tool to do the job, I can't do the job, if I can't do the job, I can't make a living." You remember that quote? It's one of my favorites. I've seen the video like 100 times. So therefore, I have it written on my shorts, I think. But in any case, it's quite a video. Look, as we go forward in Snap-on, we believe -- I'm going to talk about 2023 in a minute, and I think we can call it a success. And why it's -- we are able to go forward in good times and bad is we are powered by advantage. This is from the annual report. That's what we declare in the annual report. And just a little more specificity about that advantage, we are powered by deciding advantage and product, brand and people. By -- what we mean by deciding means when things are important, when people are making a choice, when interlocutors like we had and who we are decide who they want to do business with, these things tip it in our favor. We have defining product, or not defining product but delivering products. And what I mean by that, our product, we observe work. We get insights from that. We create a product that will allow the essential people, the makers and fixes of the world to perform critical tasks. That is the pass -- the tasks that are important that -- where the penalty for failure is high and the need for repeatability and reliability justifies a Snap-on level product. We have up here some of our products and the awards. We got 3 magazines. MOTOR Magazine gave us 2 top 20 awards. PTEN Innovation Awards gave us 6 awards. And when they ask technicians what their favorite tool was, 8 of our tools got the favorite tool of the year. So we do have delivering product. In other words, it moves the world forward. We have defining brands. We have up here some examples of the brand, babies with -- newborn babies with Snap-on wrenches in it, wedding cakes and a number of different things, people burying their ashes in Snap-on boxes. But what the defining brand really is, is that people want to put the Snap-on brand on their chest to declare that they are a serious professional. It is today the outward sign of the pride and dignity that working men and women take in their profession, and it has been since our very founding, when Joe Johnson and the other founders got the idea to put those 5 handles and 10 sockets out on green felt, as if they were as precious as surgeons knives. Maybe the most important advantage we have, though, is differentiating people. Snap-on people are capable, they are dedicated and they are experienced. I'm showing off here the Challenger factory in Louisville, Kentucky, who had just hosted successfully the Smart Manufacturing Summit, where over 150 CEOs came, hosted by Chief Executive Magazine to see a factory that was advanced in manufacturing. Now we have robots, but we aren't particularly advanced. How we made our -- how we impressed them that day, and they said it was the best factory they ever saw, was based on the idea that our people keep improving every day, not based on technology, based on the people. I have some examples of this in the audience. I'd like to ask you to stand when I call your name. First, Mr. Joe Chwan. Joe Chwan is the ATC, the automated tool control guy. He's like the guru of this, the wizard of this. He has led us to have thousands of these all over the country. And I learned today that years ago, he was one of the original designers or innovators around custom foam tool organizers. Joe Chwan has been with us 48 years. Give him a round of applause. And next, I've got Ms. [ Louise Fitch ] from our IT department. [ Louise ], stand up. [ Louise ] started all those years ago. Are you standing? No, no. Okay. You look like you're hiding there, [ Louise. ] Right, right. [ Louise ] started all those years ago as a librarian, and then she became a programmer. And I have had the almost intend to have her ride her Harley into the room today, but she didn't. She's been with us 50 years. Give her a round of applause. And now from Algona, Iowa, our plant in Algona, Iowa, of the Shipping Department of Algona, Iowa. I have a man who all -- many years ago, I think it was in 1984, applied for his father's position. His father had worked here and was -- had worked at Algona for 24 years. He applied for that position and he got it. And he's been working in the Shipping Department, driving a forklift truck for all those years since then. He was at Snap-on before then. Mr. [ Dwayne Hayes ], 52 years with Snap-on. Give him a round of applause. And I think he's here with his wife over here, [ Ann and Chris ] and his two sons, [ Chris and Joe ] are here as well, I think. So therefore, thank you for coming. Boy, 48, 50, 52 years, differentiating people. Experience counts. So now we'll talk about 2023 results or overview. Okay, overview. Anyway, it's results. Let's talk about sales. So sales last year reached $4.730 billion. I don't know about you, but it sounds like a lot of money to me. And compared to $4.49 billion the year before, and that's an increase of 5.3% as reported. Organically, if you adjust for currency, it was like 5.6%. And then if you look at the profitability, what we call the operating company, excluding finance, the OI margin, in other words the profitability, we reached a profitability, a record profitability for a year at 22% flat. And that compares to 20.9% the prior year, and that is up 110 basis points in a place when people would sacrifice part of their digits to get 10 basis points. Your team got 100. And I've got the management team right here, out here. So what I'm going to do is ask them. I'm going to call out their names, I'm going to ask them to stand up, and I ask you to hold your applause, if any, to the end. Okay. First, I've got a man I've known for over 35 years. From the home of Joe Biden and Aldo Pagliari, our Chief Financial Officer, Mr. Aldo Pagliari. All right. Okay. Give him a round of applause. No one can stand -- no one can stop, no one can stop, can't hold back, people can't hold back, right? Okay, next to him. I think, North Jersey, a fan -- maybe it's South Jersey, I'm not sure, South Jersey, sorry, South Jersey. My accent was a little off. He's a fan of all things Philadelphia, the President of our Repair System Information Group, Mr. Tom Ward. You've got to give him applause now. You've crossed the Rubicon. And then after that, I got from parts unknown, otherwise known as Iowa, Mr. Tim Chambers, the President of our Tools Group. Stand up there, Tim. Tim, I think you got to work on your wave. Okay. Okay. Next to him, I have the President of our Commercial Group, from the vast country of Spain. Mr. Jesus Arregui. And then after that, from Shanghai, China. A man who, during the pandemic, spent over 150 days in quarantine without ever having the COVID. And he has attended several of these by Zoom, he attended our 100th anniversary by Zoom. But today, like last year, he's back here with us. So I'm introducing from Shanghai, China, live from the Forge, Mr. James Ng. That wasn't good enough. I think I need more like. I'm practicing for Saturday Night Live, right? Okay, and next to him, the man who, by the way, played basketball, division one basketball for Market -- the Market -- at that time, the Warriors, now the Golden Eagles, and is the man who scored the last point of the 1980s for that team. I'm not sure he told me once it might have been the only point he scored, president of our Repair Systems business, Mr. John Wolf. And then newly appointed Senior Vice President of Human Resources and former quarterback of our -- one of the quarterbacks for our response to the pandemic, Ms. Mary Bauerschmidt. Okay. So I guess I'm on the earnings per share, and last year, the earnings per share was $18.76 compared to $16.82 the year before, up 11.5%. Now it isn't just the management team that's helped us. When you have these kinds of things, it's other people. I just want you to remember that everyone in the audience has contributed to this. And it just isn't last year. We have a trend of performance. Let's look back to 2011. In 2011, the sales of the corporation were $2,850 million. A year after, they were $2,940 million. Then it was 3.06, 3.28, 3.35, 3.43, 3.69, 3.74, 3.73, 3.59 in the pandemic, then it went to 20. Then it went to 4.25, then it went to 4.49, and the aforementioned 4.73. And if you look at the margins, the margins back in 2011, a week ago all the way back to -- we're going to show you a slide later that goes all the way back much further into the single digits. But by 2011, we were at 14.5%, then it was 15.2% and 15.8% and 16.6% and 18.1% and 19.3% and then 19.3%, 19.4% and then 19.2%. In the pandemic, it was 17.6%. Then it went to 20%, 20.9% and then the aforementioned 22%. And everybody who looks at these trends knows that I am simply the fortunate beneficiary of greater predecessors. And I have the living link of one of those predecessors here, the seventh President of Snap-on was Mr. Norm Lutz, who actually was the President who brought us public. And we have his daughter here from Libertyville. Ms. Susan Lutz-Kenyon and her husband, [ Bill Kenyon ]. They always join us every year. Please stand up. Let's give them a round of applause. Welcome back. We have a man who needs no introduction, but I'm going to give a little introduction. He's the guy who literally saved the company. We were on the way down and he turned us around. He taught us who we are. And the plaque that you just saw is his brainchild. He was the one who put the name on rapid continuous improvement and started on the path to be enabled by that improvement going forward. He's here today as he has been many times, but he's here today, especially and newly with his new bride, [Jennie ]. Ladies and gentlemen, welcome back the legend, Mr. Jack Duane Michaels. Okay. So we have -- I guess, we have earnings per share -- no, yes, earnings per share up next. And so you can see way back $4.71, I guess, $5.20 and $5.93 then $7.14 and $8.10. And then $9.20 then $9.54 then $11.87 then $12.41 then $11.41. And then the year after, starting out of the pandemic, back to $14.92, $16.82, and then last year, $18.76. And to the extent we reach higher. As we reached higher for that $18.76, we stand on the shoulders of our retirees. So we have 3 of them here with us today. First of all, I'd like to have stand, [ Mr. James Gamble ], who is 20 years with us in the Milwaukee plant. [ James Gamble ], please stand up. Let's give him a round of applause. He's here with his wife, [ Stella ]. And then we have [ Pete Schwali ], 33 years from Snap-on in the Quality Department. He's with his wife, [ Alice ]. [ Pete ], stand up. He's here. Okay. So we have retirees with us. And then we have a dividend. We have dividends started 2011, I think they were $1.30, $1.40, $1.58, $1.85, $2.20, $2.54, $3.41, $3.93, $4.47, $5.11, $5.88, and this year, $6.72, up I think, 14.8% year-over-year. And we have 2 retirees over here that I'd like to especially welcome back. First, our former General Counsel, Mr. Irwin Shur. Irwin, stand up. And then we have -- we have someone who, I guess, once again, needs no introduction. The former President of our Tools Group, Mr. Tom Kassouf, Tom Kassouf Tom, stand up. Tom, stand up, stand up, stand up. Actually, it's funny. I'd just remind you at the time because I don't know if you notice Tom, but in the Kenosha paper, in the Kenosha paper, Sunday, they credited you as being -- they recognized you, you were awarded a patent for the mini plater once again. So congratulations. Let's give him another round of applause. And then just to finish it all off, I'd like to have [ Mr. Jim Basler ] and his and his wife, [ Cathy ], stand up. They've been with us 32 years. Stand up, please. Well, now that's the past. How are we going to go forward? Well, the way forward for us is runways for improvement and runways for growth. And we can't do this without the support of our community. We say we're in many communities, but we're fortunate to have our headquarters here in Kenosha. And we always talk about the power of place. And we have here with us the new mayor, David Bogdala. We have here John Morrissey, the City Administrator. We have here the President of Local Carthage College. We have the President of Gateway College, Mr. John Swallow, the President of local Carthage College. We have the President of Gateway College, Ms. Ritu Raju. We have the new chancellor of Parkside College, Ms. Lynn Akey. And we have community leader and old friend of mine, Mr. Tim Mahone, who is a great community leader and rumored at Snap-on to be a former Green Bay running back. He is actually -- we have a resume for him and we've got it on there somehow, and somehow objects to being taken off. All right. Let's give them a round of applause for all the support for the community. Okay. So when we save runways for improvement, everybody on Snap-on knows this, and we call it Snap-on value creation. Safety, quality, customer connection, innovation and rapid continuous improvement. This is the processes by which we move forward every day. And let's talk about safety. People ask me, you want to meet with investors and say, why are you talking about safety? Do you make any money for you? It isn't that. If you make -- first of all, you want to keep your people safe because they are most important. They are a differentiating advantage for us. And secondly, because if you make things for people who do things for -- work for a living, you want to make sure that you can keep your own people safe. So safety. 83 locations last year had no lost time accidents, out of the 105 locations we have across Snap-on. And our people our people are -- if you compare it to maybe 15 or 16 years ago, our people are less 90% less likely to have an accident. Safety, quality. When you look at quality, we ask -- there's a lot of different ways you can think about quality. You can think about, oh, I don't know, factory critical defects and assembly critical defects and a number of different things. We just asked customers we asked Frost & Sullivan in a blind test to ask people what their preferred form of tool was, what their preferred tool was. And when we ask them, what's their tool of choice. When we ask them, what's the most innovative tool. We ask them what's premium quality. And when we ask them, what tool we get the job done because you got to make a living, if you don't have the tool to get the job done, you can't make a living if you don't have that job -- you don't have that tool. If you look at the numbers, Snap-on was between 55% and 60% of all people, and 60% in all 4 of those for all those questions. And number 2 was between 15% and 20%. That's number 2. So there's a big gap there. And we still have quality. There, we have customer connection. Customer connection is about going into the work and observing it and getting insights from that, that will make work easier. We do that all the time. We have 4,700 franchisees that help us do that. We have multiple direct sales forces. We have -- we have -- we're in 700,000 garages in North America and Europe. We have 2.7 billion real fix repair records that we share with technicians that allow them to fix cars. We're in 3,700 community colleges or schools, technical schools. And we have 4,000 visitors to the innovation works right out here every year that gives us insight in connection with customers and the result in significant innovation. Those insights allow us great innovation. And one of the themes of this is we have -- what I'm trying to tell you today is we have a lot of new products. Look at these products. And we have some of the people who author these products. Please stand up when I call your name. Hold your applause in the end here on this one. I have Jeremy Zorns, who is responsible for our microlithium aircraft drill. We have [ Adam Brown ] from -- Jeremy is right here in Kenosha, the in the Power Tools business, we have Adam Brown from Conway, Arkansas for under-car equipment. And he helped design what we call the true point calibrator now. You might not know what this does, but if you recognize that you have advanced driver assist systems like iterative cruise control or adaptive cruise control or lane departure warnings or blind spots, they all need sensors. And when those sensors get disrupted, they need a calibrator and this will put you right on target for all makes and all models. If you doubt this, get in an accident, slightly dent your bumper, dent your bumper, and see what the bill is. You will see that disrupting that neural network of sensors is not cheap. All right. We also have [ Peter Groopfelt ], who helped design our torque control system that allows -- that enables from start of enrichment down in Carol Stream, Illinois, that allows us to manage and keep quality along an assembly line. We have Dao Thao from Milwaukee, who helped design the triple joint pliers. The triple joint pliers allows those plier jaws to remain parallel, tightening or getting a tighter grip on anything you feel without a lot of pain in your hand. We have Chris Hale, the Engineering Manager from Elizabeth, Tennessee, who helped pioneer our new synergy ratchet, 100-tooth ratchet, which means it's only 3.6% arc. It means you can get into tight spaces and tighten it as powerful as any other ratchets. We have Adrian Robillard, who helped design our new air hammer. And what this does basically is it saves technicians arms by virtue of if they had a bash on things that, with a hammer, this thing will do 3,500 hammer blows a minute. There's a lot less sore arms and garages who use this. We have Fred Severson, who helped design our new SOLUS+ -- who are you waving to there, by the way? Okay. I know somebody in the back there. Stand up, stand up. You guys all stay standing. Stand up again. Good. It looks good like that. Okay. Fred Severson, who helped design our SOLUS+, our low end but achievable for starting techs diagnostic, it's faster, 2 second move up, it's smarter and it's easier to use. And then finally, I have Rich Bothmann from the Power Tools, and [ Fitch and Lincolnshire ] are down here in Illinois. And I have Rich Bothmann from -- for our Power Tools business who helped design our stubby 18-volt impact, 525-foot pounds of breakaway torque power in a 5-inch compartment accessing power at the same time. We have a lot of new products. These guys that are reason. Let's give them a round of applause. Then we have rapid continuous improvement. Part of the legacy of Mr. Jack Michaels. You look at rapid continuous improvement. We adopted a new badge this year. You can see it, I think, on the left of the slide. And it has -- if you look around, it says rapid continuous improvement. And then it says Kaizen. What that means is we look at the situation, we analyze the difficulty. Then what we do is we summon maybe some technology to do that. And then what we do is we train the people in the technology, we make an advancement and then we celebrate it. But the most important thing here is people in the center. You see when we conduct rapid continuous improvement, we are doing it to make the most of the people who are working in that area. Our most important -- one of our greatest advantage, probably our most important advantage is our people, our differentiating people. So therefore, we look always to make the most of their hours. We don't try to replace them. We try to use those hours to better advantage. And this is what rapid continuous improvement is about. And you can see the motion from way back when our OI margin, our margins were in the 6% range, all the way up to 22% last year. This is an improvement of 1,550 basis points, an average of 85 basis points a year and it's all due to rapid continuous improvement. And one place where we're able to put it on display was for the Chief Executive Magazine Smart Manufacturing Summit. They call me up and say, "We want to go to your Louisville plant. We want to see what you do because we know you're a great manufacturer." And what they were looking for is how we use robots or how we're using AI. We use all this stuff there. But in reality, what we told them is there is no one item that will deliver you from evil. You need to keep improving every day. And what they did when they got there, these 150 executives got there is they saw that every cell, every department, every division of that plant expected themselves to improve every day and thought about it every day. Rapid continuous improvement, advantage expansion improvement, Kaizen, technology, training, driven by the people every day. And what we have in the background here, if you can see it, is that picture I showed you earlier of the people of Challenger celebrating after the people, after this -- the Chief Executive people had left, and I have back here the Plant Manager from the Challenger operation, Mr. Brett Mitchell. Stand up, Brett. Let's give him a round of applause with quite a feat. If you're a Snap-on person, you should feel good about this because the people left and the editor of Chief Executive Magazine called me up and said, "You know, I'm confident you've got some new shareholders out of that. I'm confident you've got some new customers." This worked well for us. Okay. So those are the runways for improvement. Now one of the things you step back and think about Snap-on. We thought hard, we've thought a lot hard about Snap-on over the years. And Snap-on had a great heritage. We were the company that made great wrenches and sold them through vans to technicians, and we did it great. But that was only a narrow description of what we really did. What we really did, and a more broad -- Snap-on broadly described is that we observed work in those shops. We took those insights, and we turned them into tools that would make work easier for critical tasks, make it done easier, move the world forward. And so what that meant was, we had to observe the work. We observed the work and the pass have to be critical, but we can use a wrench or a piece of software. We sell through the vans, and we do great, but we don't have to sell through, then we can sell direct or through distributors, and we don't have to sell to car mechanics alone, we can sell to anyone who's working on a critical task where the penalty for failure is high and the need for repeatability and reliability justifies a Snap-on level product. This is what we learned. And what we learned is in doing that, we could bring more products into the fold, and we did. We have -- I have up here, 16 brands. You can see the latest one, you can see Bahco and Snap-on and so on. We are not necessarily a single brand house. We are -- we are a house of brands, and we just added one called Mounts. And it is critical. It does solve critical problems in a low torque position, sort of a pulse tool, pulse power tool business in North Carolina, and we know it's going to do well for us, and we have a number of other brands like Car-O-Liner or others. So that has done great things for us. Go ahead. And I think I just want to emphasize this here. It sort of comes out of Snap-on more broadly described. This is our principal value-creating mechanism. And what it is, is it's observing work, using insight to make a particular item, a particular tool, a piece of software that will make work easier, and that make critical work easier. Now the interesting thing about that definition is if you're an investor or someone who wants to think about where the company is going, I said our principal value creating mechanism are those things, and they do not depend on a type of technology, all technologies apply. They do not depend on a distribution system, all distribution applies. They do not depend on a particular industry as long as it's critical, can be aviation or oil and gas or mining or anything else in that way. So this is one of the things that drives us forward. Go ahead. Okay. Runways for growth. We had runways for improvement. Now we have runways for growth on the way forward. And there are 4 here. Enhance the van channel, expand with repair shop owners and managers, extending critical industries and building emerging markets. Let's talk about enhance the van channel. This is the tools business, the van business. It's a business where it all started. And so we look at trying to make sure that the van drivers are healthy. We look to try to make sure that they have the products they need. We look to try to make sure they're enhancing, that they are productive and therefore, can reach more customers. And we have with us now, this is a channel that's under a little duress these days because customers or technicians seem to be cash-rich but confidence-poor this environment. We have with us one of our best franchisees from Indianapolis, Indiana Mr. Denny Sears. He has 6 franchises under his tutelage. Please stand up, Denny. I talked to Denny outside. And he says to me, I said, "You've been with Snap-on 35 years." He worked in the company and as franchisees a couple of times. I said, what do you think about that? What should I tell the audience? Here's what he told me. He said, "Snap-on is my home. I'm proud of being associated with this company. I can't imagine myself doing anything else." The outward sign of pride and dignity, indeed. So that's one runway for growth. Then we have expand with repair shop owners and managers. This is selling to -- van drivers sell to technicians. The guys and gals who actually twirl the wrench, hit the keys or punch the screens and repair shop owners and managers are people who kind of organized the shops. This is the repair system information world. And in that, we want to leverage what we know about auto mechanics or vehicle repair because there are 600 people in this building and 300 of them think of themselves as senior mechanics or advanced mechanics. I understand last night at the Board meeting, somebody was solving -- one of our associates was solving one of the Board members problems just by him describing the noise. This is advanced manufacturing -- advanced vehicle repair. So look, that's true. So we have tried to expand that. And what we've done is we keep expanding the products we have. Car-O-Liner was a reasonably recent acquisition. We just acquired Dealer-FX, a software company to do shop management for dealers, dealerships, and we're expanding the products and expanding in that base. That business, the RS&I business went up in the quarter, 5.8% organically. Extend to critical industries. This is basically -- what this is rolling the Snap-on brand out of the garage to places like military, aviation, education, oil and gas, mining, any place where tasks are critical. The military is a classic example. I mean, to me, it's critical if the 50-caliber bullets are going overhead, and you have to repair your vehicle, you want to have the right tool, and we have expanded that business. This business grew at 16.5% last year in terms of the critical industry business. And so we keep doing that. We keep expanding that business by building a greater and greater number of products that will solve those problems and embracing a number of different customers. It's the reason why we expanded out here, the new expansion was for this business, and it's worked. Now build in emerging markets. James Ng is here for this. And basically, what we're doing there is building the physicals, building product lines, building manufacturing and building distribution because those people need critical tools as well. So those are the runways for improvement and runways for growth. Now the thing -- another thing I want to tell you about our business, we are going forward, expanding, down our runway for improvement, enabled by improvement and down our runways for growth. But we have something on our side, that is our markets are resilient. We have resilient markets because critical markets, just like I talked to you about the pandemic, they -- why do you think the people, the makers and fixers have to work through the pandemic because what they did was critical. It was essential and a society would disintegrate without it. And that means that our markets are resilient and resistant to almost any external problem. You can see this in some ways, let's just talk about the vehicle repair market. Vehicle repair market the number of cars. The number of cars keep growing, but the cool thing about it is they keep aging. Look back to 2001, the average car in the United States was 9.5 years old. This year, it's 12.5 years old, I believe. I think it may be going to 12.6 pretty soon. And so cars keep aging, and they need more repair. And it's true across the garage, the warranty repairs and the regular repairs are carrying a bigger dollar content. And you can see it in the Bureau of Labor Statistics because technician wages are up, the technician count is up, the technician hours are up, an amount of cash that people spend on repair every year is growing. So these are good news for us. Now we're going forward to the future. And I introduced you to a number of people in the audience who are part of our company. But we have some -- and they have -- we talked about the 50-year people, and 48, 50 and 52 down here, but we have some people who are newly joined us, and I'd like to introduce some of those to you. They are, after all, part of our future. They're over here. All right. first person I'd like to introduce you is Ms. Chelsea Riesterer. She's with us only 1.5 years. And I first met her, the retirees in this audience may relate to this, I first met her in a German garbed outfit. She was -- I wasn't in a German garbed outfit, she was in the German garbed outfit in our Octoberfest retiree retiring event. Then next to her, I have [ Evelyn Newman ]. She's been with us about a year here, and she's from benefits in HR. [ Evelyn Newman's ] from HR as well. And she is celebrating today her second anniversary with Snap-on. She's an HR as well. And then next to her is [ Jenna Gilliland ], who has been with us 3 years and she, against all odds, is from the legal department. And then next to him, I have [ Vibolt Delucca Brelai ], who's been with us 2.5 years, and he is an industrial designer, helping us create the silhouettes that you saw on all these products. They are our future. Ladies and gentlemen, thank you for being with us. Let's give them a round of applause. So one last thing about resilience going forward. One of the things that drives us and one of the things we always tell investors about us is the demand for our products just keep going up because cars just get more and more complex. In the 1990s, you can measure the number of trouble codes on a car in a dozens. Now there's almost 100,000. So this is a complexity that makes car repair one of the most advanced sciences in the world, a combination of art and science and technicians have trouble keeping up and we can help put them right on target. So that's my story about 2023. Now I think we'll move on to 2024 first quarter results. And of course, these are turbulent times. There was a lot of difficulty in the land, in our principal customer base, the technicians. We find our cash rich because the garages keep rolling, but they're confidence poor. They don't know what's going to happen in the next 6 months. So our sales were flat in the first quarter, but what we're happy about is the profitability. The profitability, you look at the OI margin, it was 22.9% versus 22% last year. Now the 22.9% had a legal benefit in it. We had a great legal win courtesy of -- your name is Rich -- Rich Miller, I guess. Yes. Thank you. That will teach you to get my title wrong. Okay. So courtesy of Rich Miller in the legal department. So -- but still even without that benefit, this was one of our best quarters in terms of profitability. And our EPS was $4.91 versus $4.60 of last year. And of course, even with that, it had the legal benefit in, but without it, it was $4.75, which is substantially above, 3.5% above last year. So we still -- we had a great 2023. We had momentum into 2024 against the wind. Your company has never ever been stronger. So in sum, I guess I'd like to say to you that, look, this is a unique company. It has a storied past, exciting now, and a promising future. And these are turbulent times. You're going to see it. I mean, today, it just came out, the GDP was 1.6% today, big disappointment. But I think we've been seeing a long time in the faces of the technicians who are now thinking about what's going to happen in the next 6 months. Every time I go to buy food, it's a little bit higher or it seems to be a little bit higher. There are 2 wars now in which we are involved in. The border, I guess you could describe it charitably as in chaos, not as ordered as it had been in years before. You can talk about the Red Sea that's getting bombarded in interdicting problems. And everybody is thinking about the election, and I don't think I'm a partisan in any way by saying that it's probably the election with the most uncertainty we've had in decades, at least in my lifetime, in truth. And so these things have created a kind of worry. And on top of it, on top of it, the temperature today in Kenosha will reach 49 degrees. It will -- it will reach 50 degrees and 53 degrees in Anchorage, Alaska, in Juneau, Alaska. This is not good. Why are we here? No, we have a power of this place. It's a great place. Okay. Look, so it's a turbulent time, but we believe that we will be able to rise above that. We believe we can encounter any challenge and go forward. And we believe that's so because we are enabled by improvement, rapid continuous improvement, depending on the people, the Kaizen, the technology and the training spread across the corporation, people coming to work day by day, thinking we're going to advance. We believe that we will rise above any challenge because we are powered by advantage, decisive advantage. Delivering product, the product you saw that makes critical work easier, allows us through customer connection to summon in the future out of the now and move the world forward. We believe we rise above it because we are powered by defining brand. People actually do believe in our product. People wear our logo on their chest. They ascribe it to their families. They want to associate with it. Denny Sears says it's so. We are -- believe we will rise above any challenge because we have a special people, differentiating people. People who make a difference. And we believe that empowered by improvement, by enabled by all those advantages, we will keep creating value as a corporation. So creating value for ourselves and for the number, the great number of people who depend on us. We will keep creating that value for many decades and many days to come. Thank you all. All right. I think as a tradition, I'm supposed to take some questions. So let's ask for some questions.

Nick, great presentation, great meeting. My name is [ Sandy Jones ].

Sandy Jones. Are you wearing green?

No, not today. Oh, yes, yes, my green coat. Sorry. My question is...

Sandy, you don't know what color you're wearing?

Right now, I'm looking at myself and I'm wearing this and a black sweater, so.

I saw you on the way in, right? Okay.

My question is, we've all been in love with EVs. However, the press lately has been rather negative. My question to you, Nick, is what is the outlook for Snap-on currently when it comes to electric vehicles?

Well, look, I mean, electric vehicles are part of the complexity we're talking about. One of the -- one of the accelerations we saw in complexity was the changing of the powertrains. The idea that the internal combustions were getting more and more efficient. The idea that electric vehicles were starting to rise. The idea that people are starting to look at plug-in hybrids, which have both an electric battery to do the first 30, 40, 50 miles and an internal combustion engine. And then super hybrids, which a lot of people like Toyota have said are going to come forward to fruition. So all those things create different requirements in a garage. And when they say different requirements, I say it's music to our ears because it means more tools. So electric vehicles coming on, it just means more tools. What we know is that 80% of the repairs today are not done on the powertrain anyway. So powertrain itself doesn't drive more. But when you change everything, you need more tools and electric vehicles will do that. Plug-in hybrids will double down on that and regular hybrids will do this. And we don't anticipate internal combustion engine going away very quickly. So it's kind of a complex answer. I think the fate of electric vehicles doesn't really mean that much because if the world doesn't take full electric vehicles, I'm pretty sure they'll take plug-in hybrids. China seems to be, these days, electric vehicle headquarters. But last year, China added more plug-in hybrids than they added electric vehicles. So they're turning to a preference for plug-in hybrids. And the reason is there's no range anxiety. You get in, you get your 50 miles on a battery, the battery gives up. You got your gasoline. You don't have to worry about where a charging station is. So it seems to be an efficacious solution, and I think you're going to see more of that going forward. In any case, all of this is good news for us. We're going to keep -- every one of these things are going to need new tools. Just think about electric vehicles or plug-in hybrids, they all need different lifts because the things are heavier. They need insulating tools because you don't want to be poking around in the battery with the tool, with a steel tool, you'll fry yourself. They need a bunch of different things to deal with the motors. And to the extent they're more electronic, they drive more repair. How is your computer work compared to your car? Just think about that for a minute. Or how is your phone work compared to your car? The more electronic, the more software driven it is, the more problems you have. You turn on your phone, it doesn't work. Oh, there was a change in software. I don't know how it works. How would you like that if you're going and driving your child to school? You wouldn't like that. So people want that repair. So I think it's good news for us. All right. Next.

Richard Caskey, retired 13 years.

I thought you retired like 30 years ago.

That's debatable. My question is an international environment question. Given the war in Middle East and the war in Europe and tensions growing between China, U.S. and Taiwan in Asia, how has all that affect Snap-on and my pension?

Well, people have asked me this question before. Rich Caskey has a pension? I thought you had to do work actually in the company to have a pension. No, Rich and I are very old friends. In fact, he's one of the guys I worked with when I first came to Snap-on. He made great contributions to us, particularly in the Power Tools business. We wouldn't have the Power Tools business we had today if it wasn't for him. International, boy, there's a lot of variation is what I meant about the idea that people are confidence poor these days, it's the deterioration in the international environment, both in China and the Middle East and Eastern Europe and so on. But the advantage Snap-on has is that we tend to make in the markets where we sell. So if a particular market gets difficult, yes, we lose the sales in those markets, maybe or it's attenuated. But we usually don't get sourcing problems. So this is part of our advantage during the pandemic and its children of the idea of inflation and supply chain problems. And so we're able to get all over that because we didn't really get affected by it. So I think we're pretty well positioned for this kind of thing. But let's say, China and the U.S. have some conflict over Taiwan. Well, I don't think we have too many sales in China, an American company, and we already see some attenuation of government businesses not wanting to buy. So that tends to weigh on you. On the other hand, we do provide things that for all over the -- sometimes the economy tends -- the economic activity tends to shift. So it's hard to predict how that is, but I don't think we would be effective catastrophically by it because of the way we go to market, that is making in the markets where we sell. Therefore, any impact on any particular geography doesn't affect the whole system as much as it does in other companies. Okay. Next question.

Nick, [ Chad Sheets ]. The question I've got for you is, you've talked in the past about mainstream economy and financial economies and the differences between those. And being a legal guy kind of get into definitions a little bit. So I was curious a little bit more about how you differentiate those and how they impact Snap-on?

Yes. I have a lot of experience this explaining things to the lawyers. But look, here's the thing. We've seen this over about the last 18 months. I've talked about it on TV quite often. And it does seem to be a divergence between the financial community writ large, principally the people who are in places like New York and the coasts, but not only in those places, but people who are paying attention to financial markets like the stock market and interest rates and what the Feds are going to do, and people on the ground, what we call the grassroots economy. And I have concluded that they have diverged quite a bit. For example, about 18 months ago, the financial community were like so many Paul Reveres saying a recession is coming, a recession is coming, a recession is coming. And when you walk through the garages or factories, people are saying, zip-a-dee-doo-dah, there was whistling and stuff like that, and they were saying, "Look, I am confident, we got through the COVID. We withstood the COVID before even -- we were at our posts when people didn't even have masks, and I kept working all that time, and I am not financially deprived at this moment, and I see my garages filled." So they said, "What recession?" And they were right, didn't come. And then after a while, the financial community started to encourage themselves by looking at the actual data and saying, ugh, inflation is getting under control. Inflation is a large basket. It doesn't -- there's even inflation that doesn't include food or gas. Well, the average guy is always looking at food or gas. And so it depends on what number they're looking at. So they started to talk themselves into -- or not even talk themselves in, they started to see in the numbers soft landing, no recession. The Fed is going to reduce interest rates 3 times next year or 4 times next year. Hey, happy days are here again. The stock market goes up. Everybody is happy. But in the garages, almost not quite the same time, but a little bit later, people started to worry about the future more than the financial community, kind of flip-flopped because the people in the garages don't look at the numbers, they don't look at the Fed, they don't look at the interest rates necessarily unless they're buying a house this year or borrowing something, and they don't always do that particularly in bad times. So what they were looking at is, gee, now there are 2 wars, is that going to affect my future? Are we going to have a lot more taxes to fund them? Is there going to be a draft or something like that? The border is chaos. They looked at those macro things. Every day they get up and got bad news for breakfast. And so they started to worry and they started to say, geez, I can't see out more than 6 months, and therefore, I don't want to get myself -- or 6 weeks maybe, and I don't want to get myself embroiled in bigger ticket items, longer payback items. So you kind of had, at one point, the financial community was down here, the grassroots economy was up here. And as the financial numbers got better and the Fed started to get more under control, the financial community went up and the everyday community went down because other things happened. And it just comes down to what people pay attention to. If you're on Wall Street, you're paying attention to interest rates and how the market is and so on and what the narratives are. And you're buoyed, you're supported, you're encouraged by the arithmetic calculations that those numbers show. On the street, you just hear bad things, and there are no quantitative numbers that will solve your problem. You worry about them. And that's the difference. So right now, we see The Street pretty sanguine, pretty positive. You see the everyday person not cash poor but worried about what's going to happen in the future. And in fact, if you think about it, if you consider all those things, this is a time on a macro basis of considerable uncertainty. That's a difference. Okay. Next question. Any other questions?

Nick, it's [ Tanya Balanga ].

[ Tanya Balanga ]. Green Bay Packer, season ticket holder, by the way. This makes her a popular person here. Yes?

So my question is about our factories. We've added on to our factories in America. Are there additional plans to invest further in our U.S. plans?

Yes, there is. I would say, okay, everybody knows here that I goof up all the time. But one of my big mistakes, I think, or oversight was not to expand, in fact, expand the capacity of our factories earlier. We suffered through it all last summer and it's causing us problems now as we shift to become -- to move from long payback items to short payback items. It's any time to ship product lines, it causes capacity havoc in the factories. And it would be a lot better if we had more capacity. I didn't do that. So in last year, starting last year, we started to expand our factories. You saw this thing out here, the warehouse out here, the place out here for custom kitting, that helped us in industrial, in the industrial business, a critical industry business, rolling the Snap-on brand out of the garage. And in fact, that business was up 16.5% last year, baffo! That worked. We struggled a little more in the tools businesses where we didn't expand the factories quickly enough. But we started expanding last summer in Milwaukee, I think we added like 25% capacity, we're adding 25% capacity in Milwaukee. We're adding 30% capacity in Algona. In fact, that's pretty well done. We're adding 35% capacity in Elizabeth and we're adding new space in Conway, Arkansas for our under car equipment business. And so I think we are expanding now and we have a new view of expansion, maybe we want to have a little extra capacity. Part of the problem is you'd like to optimize your profitability. You'd like to have more than that 22.9% we had in the first quarter, the 22% last year. So you just try to run closer to the edge, maybe won't run quite so close to the edge in the future. But in fact, I love American manufacturing. A lot of people say, we were talking about this a day about, gee, if we onshore things, maybe costs will go up in inflation and that will be bad. I think that's good inflation because the more people that can get involved in manufacturing. There are something like 524,000 jobs open in manufacturing today. We can't find people to do it. If you can convince people that manufacturing is no longer dark, dumb and dirty, and actually, it was an essential task tantamount to being a hero based on how they performed in the pandemic, we would have people with great livings and great lives. We have to do that. I think sometimes we're too quick to say, we want to find a low-cost solution as opposed to a longer path, which would benefit America better. A lot of people say that the American worker, with all this union activity, is the question. I say the American worker is the answer to our future. So we're going to keep investing. Okay. Any other questions? Is that it? Okay. I guess that's it. All right. I'd just like to finish up. It's been a long talk, I suppose, and probably there are people mesmerized, asleep in the back out here, some place in the back, so far back that there, I can hear the snoring. But look, I believe I have done what I told you I would do. I have told you of a unique company, a unique company that is stronger than it's ever been, a unique company where we created value for ourselves and for others coming together. And in getting stronger, I told you I would tell you how we got there. And basically, I tried to show you that it was from a number of different people from all over. We benefited to get to today and to go forward in the future from the confidence of our investors, from the commitment of our associates, from the conviction of our franchisees, from the faith of our customers, from the support of our community leaders and from the legacy left to us by our retirees that we stand on their shoulders as we reach further. This is a great legacy for us that supports us even in this time. This is a company that does create value. And in doing so, we have made a difference for ourselves and for many. Ralph Waldo Emerson wrote once that to be successful -- he was a philosopher, I guess, in the 18th century, is that to be successful is to know that even one person will have a little bit better because you have done something for them. This is, in effect, saying, make a difference. When I was in Asia, I lived in Asia 11 years, I had a chance to spend a day with St. Mother Teresa of Calcutta. And she told me once a story that has never left me. She said he was walking down through an alley. She lived on an alley. She's walking down this alley, and there was a beggar on the side of the alley sitting in a hobble, and he got up and he ran up to her and he presented her -- presented mother, the beggar presented Mother Teresa with a coin. And it was a coin, her description was a coin of little value. And she said, Nick, why do you think he gave me that coin? Because he wanted to feel he could make a difference for Mother Teresa. Making a difference is everything. So philosophers and [ imminent ] people, as far apart as Emerson and St. Mother Teresa, have said the same thing, that making a difference is the essence of a life worth living. And we have that here at Snap-on. Joe Chwan, 48 years, [ Elise Fitch ], 50 years, and [ Dwayne Hayes ], 52 years, they say it's so. And this is an important advantage we have that I want everybody to realize and should hold on to. We have another advantage, which is sometimes not. We say we have differentiating people, and it's true. But we have people here right here in this room, and they weren't hard to find, 48, 50 and 52 years. And so what we have is experience. Experience may be one of the most underrated characteristics in any business. But if you look to the right and the left, I think you'll see people that you can have confidence in and admire and count on. We have people. I think the average person on Snap-on has been here almost 15 years. So what that means is we are empowered by the shared experience, the kinds of shared experience by which we say makes friendships. And the strength of that is what allows us to move forward and differentiate ourselves. And you know it's true. Snap-on has been successful, and we go to a promising future, and we are successful you create value. You create that success by your own hands. We are the people of work. We are those who make and we are those who fix. We make the minutes count and the days special and the years rewarding. We wheeled insight and experience. We bring prosperity and satisfaction. We deliver it. We bear pride and dignity. We deliver dreams and we shape lives and we make a difference. This is an important thing. We have had -- we had a storied past. We have an exciting now, and we go forth to a promising future. And it all depends on you because you are Snap-on. And the message of today is, you are Snap-on and you make the way. Thank you all, and I'll see you next year.