Good day and welcome to Snap-on the Snap-on Incorporated 2024 Second Quarter Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note, that this event is being recorded. I would now like to turn the conference over to Sara Verbsky, Vice President Investor Relations. Please go ahead.

Thank you, Cole and good morning, everyone. We appreciate you joining us today as we review Snap-on's second 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 Pagliari, Snap-on's Chief Financial Officer. Nick will kick-off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we provided slides to supplement our discussion. These slides can be accessed under the Downloads Tab in the webcast [ph], as well as on our website, snapon.com, under the Investors section. These 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 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 financial performance which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everybody. As usual, I'll start with the highlights of our second quarter and I'll provide my perspectives on the results on our markets and our path ahead. After that, Aldo will give you a detailed review of the financials. Our second quarter -- of course, there were challenges uncertainty remain prominent among our technician customers but our Repair Systems & Information, or RS&I Group, with repair shop owners and managers and our commercial and industrial or C&I group, enabling critical tasks outside the vehicle shop. They both progressed very nicely, taking full advantage of their opportunities and balancing the tech turbulence and tools. So our results in the second quarter are clear and unmistakable demonstration that Snap-on's principal value creating mechanism, observing work right in the workplace, using the insights learned to create products that make critical tests easier and more efficient, that works across many industries and in many environments. It highlights that our enterprise is not dependent on a particular customer base. We believe, it shows that as we move forward, reaching higher we do so with greater resilience and with expanding possibilities and with an enterprise that's broader and stronger than ever before. Like most quarters, we did have headwinds, we had opportunities with disparities from group to group and geography to geography. North America remained mixed with significant gains in critical industries. Internationally, our consolidated results were varied but reflected overall positive. Europe showed some signs of recovery among the scattered economic disruptions from region to region and the Asia Pacific markets registered progress overcoming the delayed recovery in China. So now, let's talk about the results. Second quarter sales of $1179.4 million was slightly down from the $1191.3 million of last year. on an organic basis, excluding $5.7 million in unfavorable…

Thanks, Nick. Our consolidated operating results are summarized on Slide 6. Net sales of $1.1794 billion [ph] in the quarter compared to $1.1913 billion [ph] last year. Reflecting a 1.1% organic sales decline and $5.7 million of unfavorable foreign currency translation, partially offset by $7.3 million of acquisition-related sales. Sales activity was similar to what we experienced in the first quarter, while our franchise van channel revenues continue to be dampened by afflicted technician confidence, our sales of repair shop owners and managers, again increased year-over-year. Encouragingly, activity with customers serving the critical industries remained robust. Consolidated gross margin of 50.6% compared to 50.7% last year, reflecting the lower sales volumes largely offset by savings from the company's RCI initiatives. Operating expenses as a percentage of net sales of 26.8% compared to 27.4% laser. In the quarter, as noted in our press release, operating expenses included an $11.2 million benefit for the final payments received associated with the legal matter. The 60 basis point improvement in the operating expense ratio is primarily due to the benefit from the legal payments, partially offset by the effects of lower sales volumes. Operating earnings before financial services of $280.3 million in the quarter included a benefit from the lead payments compared to $277 million in 2023. As a percentage of net sales, operating margin before financial services of 23.8%, including a 100 basis point benefit in the legal payments compared to 23.3% last year. Financial services revenue of $100.5 million in the second quarter of 2024 compared to $93.4 million last year, while operating earnings of $70.2 million compared to $66.9 million in 2023. Consolidated operating earnings of $350.5 million which includes a legal benefit compared to $343.9 million last year. As a percentage of revenues, the operating earnings margin of 27.4%, including…

Thanks, Aldo. Wow! that's our second quarter. A period of continuing turbulence borne out of the uncertainty in the grassroots detect, uncertainty on the near-term environment. Customers tech that are cash rich and confidence poor. But it was also a period where our value-creating mechanism observing past right in the workplace, connecting with customers and translating the insights in an innovation that can make critical tasks easier where that core of our business model demonstrated that if efficacy stretches well beyond our traditional customer -- technician customer base and it does so quite profitably. It was an interlude in which our Snap-on value creation processes showed its ongoing strength, particularly visible in the Tools Group, where it drove product value and operating efficiency that buttressed [ph] gross margins, that stayed close to about flat despite the lower volumes. And you can see that written all across the quarter. The Tools Group, an uncertainty driven decline in volume continuing an -- and continuing and unreduced support for its franchise network but with profitable quick payback products on RCI [ph] keeping gross margins at reasonable levels, offsetting some of the volume impact. RS&I, seizing the opportunity to help shop owners and managers, matching the rising vehicle repair complexity and doing it very profitably, achieving an OI margin of 25% one of its best C&I rolling out of the garage to -- in critical industries overcoming the recessions in Europe and the turbulence to grow in each feeder [ph], continuing the upward trajectory of its customized kitting business driving expansion in critical industries and achieving an OI margin of 16.7%, up 70 basis points; its highest ever. And it all came together for a positive performance for the overall enterprise. Sales; about flat against the uncertainty. OI margins, 23.8% -- 22.8%, excluding the legal payment, one of our very strongest, and EPS $5.07 -- $4.91 without the legal payment, the highest for any Snap-on quarter. It was an encouraging period. And we believe that with the strength of our business model, with the opportunities inherent in our broad markets and with the considerable and harm experience of our team, Snap-on will remain resilient in the turbulence, making the most of it is the abundant possibility to markets and we'll continue to advance making progress through 2024 and well beyond. Now before I turn the call over to the operator, I'll speak directly to our franchisees and associates. I know a lot of you are listening. The strength Snap-on has demonstrated in the turbulence and the associated advantages we carry into the days ahead have been created by all of you. the considerable capabilities you bring to bear every hour to have my admiration. For the significant success you've achieved in the quarter and for many periods before, you have my congratulations. And for the unwavering belief you hold in the future of our team, you have my thanks. Now, I'll turn the call over to the operator. Operator?

[Operator Instructions] And our first question today will come from Luke Junk with Baird.

To start with, just hoping we could get an update on the facility expansion projects that you have going on right now, both kind of progress incrementally timing and then how things are progressing versus your expectations? And to what extent you can leverage that to pivot the mix and really focus on those quicker payback items that folks are looking for?

[Indiscernible] is concerning what the...

Facility expansions -- I think -- both, Milwaukee -- yes [ph].

Okay. It's only expansion, I can talk about that. Look, Algona added some space that's in place. They're starting to use it now. Now the thing is you use it but you figure out how to be more efficient. So just because it's in place and you're in the saddle doesn't mean it's going to work at high efficiency. But that's breaking some bottlenecks out there and allowing us to build things like we're bringing on a new workbench. We're bringing out a 36-inch small Epic toolbox that's smaller than we ever saw before -- than we've had before and therefore, it's a lower price situation. In other words, quicker payback items. So that's working in Milwaukee. We're expanding 25% and we've got -- we've expanded the machining area. Some of the machines are in. We're still delivering others because they were ordered, frankly, to adjust to a pivot. So we've had partial expansion of some of our flexible socket impact line and also some of our bit line. And we -- so that will be sort of developing through the expanding and getting better and bigger during the quarter. And as we move out, we'll get more and more efficient. And then we're building probably for the fourth quarter and first quarter, we're building the more capacity into the plating line up there because we expand in Elizabeth on another hand, that's where we make the wrenches [indiscernible]. We've expanded the plating line already there and that's up and operating and we're putting more machines in there to fill another expansion to build more effective ranches using cold forming to reduce the near net ship and making -- raising our capacity for those -- for ratchets in that situation. And we're expanding our adjustable rent capacity down there because it's in demand and we can't build enough of them. So you have to -- that will give you some examples, I think, in terms of outgoing -- and it's I think it increases by about 25%. In Milwaukee increased by 25%, Alcon's 30%, and Elizabeth -- will be 35% at the end. So -- and then, so they're all in place. Some of it is working, some isn't. But what it has done is it broken some of the difficult workarounds we've had in the places. So part of the things you see in gross margin in some of the efficiencies that are coming out of the already partial expansions being completed and up and running.

That's very helpful. Could you maybe comment on tool storage, specifically in the quarter [ph] the benefit, I think, already in the first quarter of you having the capacity in place and flexing it like you just spoke to, did the growth continue in the second quarter?

The product line -- every product line in this quarter was more balanced. Every product line was down some in the quarter. And big ticket, you saw the originations. I think originations were down more originations which is a surrogate for big tool -- for big ticket sales and longer payback sales was down more than the Tools Group was down in the quarter. So the big scans were a smaller percentage of that. Now that was led, Diagnostics was probably the big player in that because diagnostics was comparing to a launch of the SOLUS+ last year. So a non-launch quarter you can have different comparisons with that in this quarter like this with the launch quarter. But generally, tool storage, if you're talking about the efficacy of tool storage, One of the things this is doing is allowing us to sell and pivot to provide people the accessories, the benches, the cards that technicians are more receptive to in this situation. So that will accrue to us. It's a question of how quickly we can get that burned in to the Algona production process. It's working a little bit now. But in the quarter, technician uncertainty, I think, was a little higher this quarter. So you probably like you might see the conditions are a little more uncertain. And so I think the ticket was down again.

And then lastly, just given the uncertainty in terms of tax right now, do you meter or change your approach to the SFC all this year just in terms of promotions and positioning and could it be maybe a venue to refine your approach in this more unsettled environment kind of exiting this year into '25 [ph]?

Yes, yes. I mean, the thing -- the -- look, not the overall thing. The overall thing is the SFC is 3 purposes. Before. One is we have a training seminar, -- we're going to train the heck out of things, things we think need train -- some of those are smaller ticket diagnostic units, some of them are handles and so on. So we're working on those things in the SFC. We're going to continue that because we're going to continue to support. Like I said, we want to be a full sprint on fully loaded when we come out of this difficulty with the Tools Group and our network. And then we have kind of a tool show which is several football fields and you want to let the people touch the tools and that's where we'll have some change because we'll be trying to emphasize the quicker payback items which we think that technicians want. For example, one of the warm-up promotions for the SFC was the Super 7 which is filled with the hand tools, wrenches and ratchets and hammers and torque units. And it did go pretty well. It did get subscribed almost as a sellout. So we're going to try to push in that situation. So we'll be trying to emphasize by physical presentation and by verbal urging the idea of quicker payback items, not completely neglecting tools further diagnostics in that situation. And then -- the other thing about the SFC, you need the SFC, I think, because you don't touch your franchisees that often and we all want to give them a message and reinforce that they have listed their economic future with a strong and robust business called [indiscernible].

And our next question will come from Bret Jordan with Jefferies.

This is Patrick Buckley on for Brett. On the RS&I, could you talk a bit more on the dispersion between the OEM dealer customers and the independents. Is that independent shop softness similar to what you're seeing in the Tools Group? Just more cautious given the backdrop? Or is there something else there?

Well, remember that that's characterization. We are strong in the dealerships because the OEM programs have been strong, the change the idea -- that was the purpose of the Lyft discussion with is that really the OEMs are coloring up or are raising their game to match the different drivetrains and the more autonomy and the OEMs are launching programs to do that. and either associated with new models and new capabilities like demonstrated in Lyft. So you see that and that is marking. That business grew again high single digits in the quarter. So that is Boeing is underpinning that. And also, it's around the -- some of the software in that business with our electronic parts catalog. Now if you pivot, it's a little more complicated situation with the independent because flowing through RS&I is the diagnostics. They have the Diagnostics division because of its dependence on the information basis which are integral to other RS&I products. So diagnostics like big ticket was down in the Tools Group. So that dragged down some of the RS&I volume. If you look at our RS&I C&I, both sell to power tools and C&I diagnostics and ours. And if you look at them, they were up, I think the number was 1% organically at RS&I 1.2% organically in C&I. But if you looked at it externally, excluding sales to the Tools Group, internal sales, C&I was up 3.9% organically. And RS&I was up over 4%. And so it's a little more complicated description of that. We described it that way based on the efficacy of the actual reported numbers. So we do see some progress in independent shops, particularly with our direct sales businesses. You see one of the things that is happening in RS&I and coming out in RS&I is that when we can get up and sell directly to the customer with our, I think, really strong product line and broad, we do pretty well. We're still doing pretty well. But a part of that business goes through distributors. And when they go through distributors, we're seeing a pull off of that business. We saw it particularly in some of the RS&I businesses. So I don't think it's the independent shops. I think it's the distributors themselves or maybe getting a little white knuckle at this time and maybe taking down some of their inventories, some of those distributors. So you're seeing that over here. It's kind of a complicated complicate around late summarized. We're doing pretty well with the dealerships. We're doing well selling to direct independent shops which means they're doing pretty well and they're doing -- they're still robust. But the intermediaries are a little bit more reluctant.

Got it. That's helpful. And then within the Tools Group, could you talk about how pricing compared to units during the quarter? Or maybe just additional color around how successful these lower payback items are and improving volumes and how that mix is affecting things?

Well, the price per unit is a lot lower. So you've got to sell a lot more wrenches to make up for a tool storage box, that's pretty important. And that can weigh on your volume. But I would offer to you, you need to look no further than gross margin. Margin down 20 basis points with a -- what was it, 7.7% organic sales down, gross margin down 20 basis points -- how does you think that happened? Well, it happens because the new tools you bring out. The new ranches, the new tools we're bringing out, they are selling at good margins -- that doesn't mean we're pricing the existing businesses but a lot of these new tools and a lot of them are rolling out we got rent ships and ratchets and extensions and things that are especially made after the E-Series and the Super Duty trucks we talked about. People are willing to pay big premiums or that kind of stuff and it's playing out in the gross margins. part of the story about the Tools Group is, we held the margins pretty well and we kept spending at lower volumes. We didn't back off of the SG&A supporting the franchisees. So in effect, we could have blunted the volume even more if we didn't want to we didn't believe that the sun is coming out again and we want to be at full strength. So those are the balances. Gross margin is a big -- if you look at the gross margin overall the corporation, C&I is up 220 basis points RS&I up 50 basis points. The overall corporation is 5.6%, only down 10 basis points. So what you're seeing in our financials are, boy, we're still pretty robust. That's why I love the idea of C&I and RS&I Boeing up the turbulence of the Tools Group because if you look at the overall business, you say, hey, this business at the gross margin level looks pretty healthy.

And our next question will come from Gary Prestopino with Barrington Research.

Just wanted to address the corporate expenses look like they were down and I would assume that's the impact of the legal settlement, right?

Yes. Except -- down, I don't know, like, what, $18 million or something like that? Maybe equal change. Okay. This hands me to tell you this, there, pains me nearly you got $11.2 million, I think, for the legal settlement and [indiscernible] change for reduced management stock-based compensation and bonuses estimated for the. So it hurts me to tell you that on this call. But in fact, that's a difference in this quarter.

Right. And I could also see the stock comp was down. And I guess what I'm getting at is that looking forward in the back half of the year, should it be some -- without the impact of any legal settlement? Should it be somewhere between $20 million and $25 million a quarter?

I more at the top end of that. I would think more of the top end of that, actually. That's it I think.

The other question I want to ask you is quite obvious that there's a slowdown here in the buying of diagnostic equipment. Some of it deals with the fact that you just had a great year last year. But when does it get to the point where the technician or the shop starts falling behind, if ever, if that occurs really with not upgrading their diagnostic product. And my understanding is that with these products, it really speeds up your production being able to repair cars. So does that start coming into play here as we work deeper into this?

Sure. It does. I think -- this is the thing. I think you've got 2 things going on. One, I hate to say the comparison but it is true that we launched a new product last second quarter and you're comparing against that. But you also have the technicians clear aversion for bigger ticket items at this point. They don't want to -- they're less like, you can see it broadly in the originations. They're gravitating towards other things. I was with franchisees and garage owners and Syracuse and in Atlanta and I had all the regional guys in here and I was watering them for probably longer than they wanted to be questions -- and they all said the same thing. People are starting -- they're just worried there's a fear in the situation of where they're going. So they don't want to get embroiled and pay them back over years as much. They're a little more conservative about that. They're not probably in the spending. So you see but your overarching point is quite true. Eventually, people have to say, people do say, boy and it's like it you could -- the car nowadays usually be able to take the car by sound. Now you have to look at the -- most we'll have to look at the trouble codes and try to the troubled points mean and then try to fix it. That's what scanners they tell you the trouble codes are. Those are the simpler and competitive diagnostic unit. But ours, what we confirmed in the legal settlement, we have a proprietary database that will take those data points, those data points, those trouble codes and decaled them tell you what's actually wrong with the car. Right now, the previous that, you can only scan, you have to figure that out for yourself. Our database will put you right on target. So eventually, as the cars go up in complexity, people aren't going to be able to -- just like they haven't been able to read now, they're not able to read the even get an idea about the car, even start without knowing what the trouble costs. In the future, they're going to have to be able to decode the trouble code because it's going to get even more complex and you see that weighing on the situation. And so we expect that to all figure out. That will all come out in the next -- over the next period. We'll be launching new diagnostics which will have new hardware and our software keeps getting better. Now one of the things we do see, Gary, is supporting your point is people who have diagnostics really fall in love with them and so they want to update their software. Our subscriptions are going up. Part of the reason why the tools was able to hold its margins is because it's software content is moving upwards. So people value it but eventually, they're going to want hardware.

Our next question will come from David MacGregor with Longbow Research.

Nick, let me just ask you about sort of the second half and expectations here. I mean given second quarter negative organic growth in Snap-on tools. Does that suggest second half growth should be negative as well. And I mean, 2Q was not a challenging compare. And so I guess I'm just wondering how much forward visibility you have given the truck inventory levels and pre-SFC order growth?

Well. I don't know. I think I wouldn't have said that Q2 last year, you're right. On a year-over-year basis, if you just look at year-over-year, Q2 last year was down. It wasn't down, it was tepid, let's say. So it wasn't -- in that space, it wasn't as strong. But if you look back, if you look sequentially the movement between the first quarter and the second quarter isn't that much different in the last year versus this year. So it's not so inconsistent. It isn't like it isn't like that's a big difference. If you're talking about the second half, boy, there's a lot of things going on. One is that for some time, so it's hard to judge what the second half would be like. You're not going to get me to say that it will be negative in the second half because we have plants, we think provide some overcoming to that. And for some time now, for several quarters, the sales off the van have been bigger than the sales to the man on a year-over-year basis. Now we saw some of that change towards the end of the quarter. So I don't know where it's going to go. If you want to look at it -- so from a -- I would say when you look at it from an operational point of view, do you think sooner or later, this is going to have to play out more positively. But then when you look at uncertainty, your guess is as good as mine about how the uncertainty is going to play out. It seems to me as though, like I said in my remarks, the hits just keep on common. And so does anybody think -- if you look at the uncertainty in the world that it's less uncertainty -- or is the same today as it was, say, 3 months ago? I don't think so. I don't think so. And so you hear that out of the technicians. I don't know where it's going the third quarter or the fourth quarter, it's hard to say. But I think there's some positives that would mitigate towards positivity, the things we're doing the product we're bringing out the pivots we're making. But on the other hand, if you look at the macros, it's a black hole. You don't know it's very opaque. So your guess is good as mine in that situation. All I know is the only thing I can control is to try to do the pivot to try to match what the technicians and take advantage of every opportunity we have and the message of this quarter is, is that RS&I and C&I, show that the model works in those places and I can make a lot of money and they provide good offsets.

Right. Nick, you -- the operating expenses in the second quarter in the Snap-on Tools segment deleveraged. You characterized that mostly as volume-related I guess it sounds now like you're about to lean more heavily into training and maybe advertising and promotions. And I'm just wondering how you expect that OpEx to continue deleveraging, in the second half?

I don't know. What happened -- my view on the second quarter, you may have a different view of it might view the second quarter was, we didn't back off. We kept spending the same. We spent a little bit more [indiscernible].

So we continue doing that in the second half?

More volumes. So I'm not talking that I'm going to sally forth with a lot more expenses but I'm holding the support I'm holding a support. We're doing what we do only we're adjusting it to match the current situation. I didn't mean my comments before that we're going to open the plug dates and spend a lot more. I didn't mean that. What I meant is I'm holding because I thought we were doing a pretty good job of supporting before. Now I think we held that in the second quarter. We'll probably do that again but it will be a different array versus the match to the current environment.

Got it. And then can you just talk about cadence within the quarter? You mentioned a moment ago in responding to the question that your trucks were destocking right up until late in the quarter.

Yes, right.

I was just going to get you to talk about cadence. Please go ahead.

Cadence was pretty, I think, consistent throughout the quarter. I think towards the end of the quarter, we had less destocking events in the last month or so. that's a positive. However, sometimes, I'll tell you, David, sometimes that happens because it's the last month. So it's hard for me to interpret whether that's a last month phenomenon that happens once in a while, not uncommonly but not all the time. It hasn't happened recently but it did happen. So maybe that's a positive. It's not for us to predict that out of the 1 month. But I think if you go back through the quarter, it was about the same levels. The relationship was the [indiscernible] except for the land.

And your early July experience wouldn't give you a framework for interpreter?

No. It's too early. And then you got too much stuff floating through July. Somebody asked me, not on the call but asked me well, are people pulling back in early July, waiting for the SFC, the responding -- we did have, like I said just a minute ago, we had the Super 7 program that rolled out and seemed to be pre well received with this full array of hand tools. We gave him a great jackpot blast the hand tools for this promotion. And that seems to get enthusiasm up and it's pretty close to expectation. I think it was the kind of sellout type of things or close to sell it. So that seemed to go okay. But that is an evidence to proclaim where the world is going. It's better than a pulp in the Iowa to sustain but you're not going to be able to -- can't extrapolate to -- it's dangerous to extrapolate out of that too much. Now I hope it is. The flood gates go up and everything is going to go well. Happy days are here again.

Last question for me. Last question for me, if I could. Just on credit. I mean what are you seeing increase in RA transfers? And what would originations look like without the RA transfers and Credit penetration [ph].

The mix of activities is pretty much similar to last quarter. So no, they have not pivoted to RA transfers as a method of funding activity on demand or anything like that.

Our next question will come from Scott Stember with Roth MKM.

Nick, is there a way of trying to see how much of the tool sales decline is really just based on the fact that you still don't have the available capacity to make product? Just trying to frame that out -- and If you can't do that, maybe just give us an idea of when would you expect to have all of the capacity and all the bottlenecks could up to make sure that you're at least making what they need?

You're thinking towards the -- if everything is in place, it gets better every Dick's got. You know what I mean, we get for every day in that situation. Because some of the capacity is in there and so the machines are there. Well, for example, we're half -- we're 50% of the expand we wanted in Flex stock in Milwaukee. So that's helping us but it's not enough. And so you've got adjustable wrenches, not enough. You've got some of the smaller ticket tool stores, not enough. So we're getting out of those. On the other hand, it's hard for me to say how much really would play out. I mean that would give you a legal boost. So, I do think you saw -- as you know, in the quarter, when you're selling small -- when you pivot to smaller kit items, you got to sell a lot of wrenches to make up a tool storage box. So it tends to put a, what I would call, a weight on your overall revenue. But I think you saw some of that in this quarter. We're trying to fill up the bucket on that but -- it's going to take us a while to do. Now, third quarter will be better than the second and the fourth quarter will be better in the first quarter after that will be better. So when the -- translating that in the revenue and profit numbers, it's hard for me to say, really hard for me to say. So I can't really put a number on it.

And then, just last question. When you're talking with the shops and just with your franchisees, what are you hearing about how your competitors are faring at least at the shop level -- just trying to sense if there's a share loss or...

I don't -- tell you the truth, competitors shop guys or tech never really mentioned the competitors to me. So -- but I don't know. I'm a CEO. So I'm not so sure they would I don't know. But they never really -- you go into the shop, you'll see -- you can see, I don't see any increased presence of the competitors. I will tell you that when I talk to franchisees, or I talked to our regional sales developers, we're all in here for 12 hours in a room with me. They didn't mention the competition really. I think we would say that the enemies we have are mostly uncertainty and us. So we're trying to -- the speed at which we can pivot helps some of the problem but the uncertainty will still lay over even when we fully pivoted. So you kind of got that going on. We don't see any incursion in -- that doesn't mean we don't look that headed product with a fine tooth comb and try to figure out, well, do they have something we don't have? Can people say it's better? What is their pricing, how do they deliver? How do they support what kinds of things can it do for the customer? We do that all the time. But I don't think that's part of our problem. It does appear to be. Usually, the competitors are selling to a different customer base actually.

And our next question will come from Christopher Glynn with Oppenheimer.

Was just first curious about net cash position now, the remaining repurchase authorization is a small proportion of your liquidity. So your kind of balance sheet positions in a different spot than I've seen in past years. I'm wondering how you think about that?

I'm bit about it. But look, I think you have to reassess how we're going -- I mean the thing is we -- I think you know our view of cash usage going forward, capital usage. And the first idea is to make sure our business is fully funded. Secondly is we look at the dividend which -- the dividend is coming up and we have paid a dividend every quarter since 1939 and we have never reduced it. So we assessed that in perpetuity -- sorry, guiding principle. But we have increased the dividend. I think now every quarter for almost 13 years, if we lease it again, it will be the 14. I'm not giving you any insight information about whether we're going to increase or go flat or anything but we'll be looking at that pretty carefully. Then we have acquisitions which we're constantly looking at -- and you've heard the story before that we have this landscape. In fact, we have guided as we speak, looking at other acquisitions. And I don't know if they'll play out or not because we're careful with our money. And then we have stock buyback which you already pointed out, as an authorization now that's a little bit less than it was before. And so we'll have to assess that as we go forward. That's how I'm thinking of it really.

Okay. And my follow-up, just back to SOT curious if there's any interesting geographic dispersion. We've got an entry here, lots of regions, different economies to a degree on the incremental weakening, you seen any kind of dispersion in regions?

Well, I can tell you this. In the last 6 months, I've met with franchisees and customers in almost like in the Midwest, in the East just recently in Syracuse in Atlanta and the Southwest. And there hasn't been that much difference. That's one stretchers. I think there's uncertainty, we saw this before. I do think the grassroots economy is impacted by the uncertainty broadly and the text may be among -- maybe the techs are special because car repairs continues robust. So there are -- a lot of people are confident poor but the techs are also cash rich in that situation. So that may be that may be part of the issue. I don't see much. And I talked to our regional guys, all 9 meters were in here. Any there's some differences and we try to look at those differences and try to figure out maybe should we facilitize more. Are they -- are those operations? We haven't been able to come up with much actually. So I don't see much difference even though you would say there would be you don't really -- you get the same story from text everywhere.

Do you think tax did get hit with more regulatory and compliance costs?

The tax, I don't know. I don't think the tax, the garages may be. The garages might get more regulatory compliance costs. I don't think the tax is so much. They don't mention it so much, I think. I don't hear that but I just -- small businesses, I mean the national soul change [ph] in manufacturing goes while over regulations, you know. They talk about how much it cost, they say it for every small manufacturer. So every small manufacturer has to pay $35,000 per employee per year in regulation costs. So I think by extension, you would say small businesses like garages would have that problem. But I don't think the tax [ph] would be burdened with it.

And our next question will come from Tom Hayes with CL King.

Thanks guys. Appreciate you fitting in. Just quickly, Nick, maybe any color you could provide on what you're seeing on the positive side on the critical industries. I think you guys called it out as a bit of a bright spot. Is there anything maybe on avionics or military or natural resources that stands out?

You mean booming as it is, is that the. Yes, no -- [indiscernible] up double digits again. And the military has been consistently strong a cool thing is we include education in the critical industries because we believe it's critical to influence. And one of the things about it is the education business has been up nicely. And what that says is the young people are Hungary for Snap-on products. And so that's a cool thing for us. We really like that. So you see that. I don't have anything in terms of, boy, it seemed like aviation was strong this quarter and I would expect to continue -- and you have to believe, given the Boeing situation that customers in aviation would be pretty anxious to be able to have accuracy and documentation which we offer in spades in our product for that particular industry and I think that's driving some of it. I think the military is obvious. I think the military -- every nation is on edge. For example, you have countries in Europe who are looking to double their military and they're coming to us to help them upgrade to manage their fleet of claims. And so you see some of that. So I think those 2 types of general trusts are working. But you also see in general industry were strong. The overall industry is strong because I think the industry in this time is looking for efficiency and repair is efficiently, the quicker you can do it. Now the overarching thing that we're noting is that in all these industries, they're looking for customized products that will match their particular problems because the critical industries is replete with those opportunities and tasks where you have to have a particular array of products to match them. That's why the custom kitting is doing so well. We almost have not many competitors in this situation as a manufacturer. So that is really working for us. And it seems like whatever whenever we give the industrial group one way, they run the daylight and take it. So I think we're pretty good about that position, that business.

This will conclude our question-and-answer session. I'd like to turn the conference back over to Sara Verbsky for any closing remarks.

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.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.