Nicholas T. Pinchuk
Chairman & Chief Executive Officer at Snap-on
Thanks, Sara. Good morning, everyone.
As usual, I'll start with the highlights of our third quarter. I'll provide my perspectives on the results, on our markets and on our path ahead. After that, Aldo will give you a detailed review of the financials. My perspective, I am encouraged. And we believe our third quarter was encouraging, another period of broad profitability growth and significant forward progress, product and process success and clear traction in our Tools Group pivot to quick paybacks. Of course, the quarter again had its challenges. Ongoing macro pressures, creating obstacles of uncertainty, just like we've encountered before, but in the end, we adjusted. We stood the turbulence, took advantage of the opportunities and drove another strong earnings performance, and all of that is written clearly across the results, here they are.
Third quarter sales of $1.147 billion were slightly down from the $1,159.3 million recorded last year. On an organic basis, excluding $200,000 in unfavorable foreign currency translation and $7.2 million from acquisitions. Our organic sales were lowered by 1.7%, but the opco operating income was up, and the OI margin was 22%, up 80 basis points, setting a new benchmark for our third quarters. For Financial Services, the OI grew to $71.7 million. That's up 60 -- from the $69.4 million of 2023, a number that, when combined with our opco result raised our consolidated OI margin to 26%, up 90 basis points from last year's 25.1% and EPS, it was $4.70, a nice gain from last year's $4.51. Those are the overall results, marked by operating capability, structural balance and consistent resilience prevailing against significant headwinds.
Now let's take a view of the market. During the third quarter, automotive repair remained robust. It continues to expand in complexity. New models enter the market, unveiling a rollout of new drivetrains, motor configuration and high-tech electrical systems that control a neural network of centers, woven together that enable driver-assistant vehicle autonomy, all of it housed in modern chassis, fashioned out of state age materials. And as cavitated sophisticated advancement combined with an aging car part. Now we ever just 12.6 years to make fixing vehicles even more challenging if you're from Snap-on. This is music to your ears, and the hits just keep on coming, creating opportunities for years to come.
Let's talk about organizations. The OEM, the dealerships, the independent garages. The segment that primarily focuses on infrastructure-type investments, recover -- things like renovating bays and upgrading repair equipment, meeting the challenges of new vehicle models and expanding shop capacities to match the rise in repair work driven by the ongoing increase in vehicle complexity. New list to support the extra weight of battery systems, sophisticated undercar equipment to calibrate the driver assist systems that enable vehicle automation and more powerful software suite for managing parts room, service bay and customer interfaces, enhanced vehicle communication devices to interact with the more complex design and more powerful repair information database to read, to diagnose and to fix the vehicles of the now and of the future.
Our repair information group, or RS&I thrives in this world of complexity, serving repair shop owners and managers delivering solutions that make the full repair path much easier, paving a way forward with innovative dealership management systems, proprietary one-of-a-kind intelligent diagnostics platforms and the full array of -- a full array of capable shop equipment. Now the opportunities for the garage is strong, but uncertain interest rates, rumors of tax changes and worries over the elections are all weighing on investment decisions, creating a mixed landscape across the market, but the overall outlook still remains quite positive and we believe that Snap-on and RS&I are poised to participate fully in the abundant opportunities.
Now let's shift to the technician market. These are the folks who decipher the data, touch the screen, diagnose the problems, twirl the wrenches and wheel their extraordinary skills to execute the repair. It's where our van network flies its straight. In that regard, the third quarter is always a great time for me because it's when we hold our annual Snap-on Franchisee Competency or SFC, it's a gathering of men and women who drive the vans and call on hundreds of thousands of techs every week. It's an unmatched connection to the world of vehicle repair. Again, this year, I had extended conversations with dozens and dozens of our franchisees and each encounter. Each encounter resonated with enthusiasm. We say Snap-on prevails and turbulence and proceeds with confidence and the franchisees know it's true.
Now with that said, the microenvironment is still weighing on our technician customers with considerable uncertainty driven by the election and its perceived impact. The fears of ongoing inflation by border pressure and by the specter of prolonged wars. The shops are full. Tech wages are up. The hours are expanding and the demand for tech continues, and they have cash, but there's still confidence poor. The bad news they get every day for breakfast is weighing on them. Right now, they're hesitant on the future. And as such, the reluctant on big ticket items with longer paybacks. So to accommodate -- the Tools Group continues to pivot, focusing on shorter payback items to match the technician's current preferences. And the third quarter results confirm that it's working. So we believe the automotive repair market is robust. Current uncertainty notwithstanding. It's a great place to operate.
Now let's turn to the critical industries. Where the penalty for failure is high. This is where our Commercial & Industrial Group or our C&I makes us living. It's challenging, rugged environments like oil and gas platforms, mining sites and battlefields, but it also includes sensitive and sophisticated atmospheres needed to manufacture computer chips to build airplanes and to launch rockets. The customers in this segment are organizations big and small. And they're more influenced by the data than the text, interest rates, GDP and industry demands. And as such, these segments are pretty positive.
And we see it in the results, growth in aviation, in defense and general industries and sectors that need our torque device to execute and document accuracy and the areas enabled by our custom kits packages that meet the specific needs of the task that improve quality, productivity and safety in other words, solutions that are right up our ally. This is also the segment where our largest international presence is. And consequently, it's the segment with the headwinds of geopolitical turbulence. In that regard Europe continues to vary region-by-region.
The South remains positive. But several countries, particularly in the North are dealing with difficulty in some cases, technical recessions. And in Asia, it's also mixed. China is still recovering from the pandemic and the effects of the extended lockdown. At the same time, Korea and Japan are resilient -- are resilient. So there are geographical -- geographic challenges in the critical industries. But overall, this market is positive. The potential is considerable, and we believe we are well positioned to capitalize on these possibilities. So those are the markets.
Now let's -- those are the markets -- some of the automotive repair is mixed in the now, but broad potential for the future. And the critical industries are still robust and rich with opportunities.
Now let's talk about the operating groups. In C&I, sales of $365.7 million compared to $366.4 million registered last year. Sales, excluding $7.3 million of acquisition-related volume -- excluding the $7.2 million of acquisition-related volume, the organic sales were down by 2.1%. From an earnings perspective, however, C&I, OI $61 million approved by $2.9 million or 5% over last year. And the OI margin was 16.7%, up 80 basis points, expanding to -- equaling the record high established in the last quarter. The major contributors were -- major contributor was our industrial division, continuing its upward trajectory and strong profitability, yielding the capacity provided by its new kitting center in Kenosha and meeting the rising demand for customized solutions along the way.
In addition to our investments in the kitting center. Our acquisition of Mountz last year is rolling into its 12-month, and it's been a valuable contributor meeting the needs of our customers for small precision torque. Torque continues to be -- to rise in significance with critical industries -- with critical industry customers. And to meet this need, we packaged our existing medium and heavy-duty torque products with Mountz lighter offerings, giving us a wide spectrum of clamping forces, the wide spectrum of clamping forces that are essential for the critical industry from oil and gas, the aviation to defense. We're capitalizing on that opportunity, and the quarter showed it.
Our specialty torque business rose significantly, both in volume and in profitability. We also continued adding to our portfolio of professional cordless tools. Engineered products aligned with the work performed and the expectations that techs doing repairs. For the serious people of work, new products can add great value and our quarter was marked by that effect. For working on large equipment and over-the-road trucks, we unveiled a CT9175, 0.75-inch 18-volt impact, not for the faint of heart. This unit delivers 1,550 foot pounds of bolt breakaway torque. It's ideal for the most challenging jobs. The rugged lightweight housing shakes off harsh environment.
The ergonomic design reduces stress and fatigue pretty important when you reeled in 1,550 foot pounds, and the -- this 91.75 monster has a great feature set to boot like LED spotlights, multiple power settings and a variable speed trigger to just apply the right torque to the job. It's a great tool, just what you'd expect from Snap-on, powerful application, easy to use and very efficient. It's a tool that tech increasingly want in their arsenal when they're fighting the toughest jobs, the 9175. It's a great productivity enhancer and the technicians have noticed.
One last thought about the results. C&I kept investing in the quarter, maintaining and expanding our advantage of product, brand and in people. Operating expenses were 140 basis points of sales higher than last year. But with the benefits of rapid continuous improvement, or RCI, the value of new product -- and the value of new products, gross margins rose by 220 basis points, and the OI margin despite the spending was up 80 basis points, higher spending and higher profits without additional scale, Boom Shaka Laka. That's C&I. Innovative products, custom solutions, precision instruments, all combined to reach customers in critical industries and extend the Snap-on brand out of the garage with momentum and profitability.
Now for the Tools Group. Sales in the third quarter of $500.5 million included an organic decrease of 3.1% with a US decrease that was not much different. The OI margin in the period was 21.6%, down 40 basis points from the last year due to the lower volume. With that said, gross margins remained strong, improving 100 basis points driven by new product, RCI and manufacturing efficiencies. That was quite a feat actually. And during the period, our team maintained its focus on product development, designing solutions that make work easier and provide customers with a quick payback. And that pivot is taking hold. Closing the deficit, both overall in the US to less than half it was in the second quarter. And that trend was reinforcing the peers by sales being $18.5 million higher than the second quarter.
With summer vacation and SFC breaks, we haven't seen the Tools Group up sequentially in the third quarter for some time. We believe it's a sign of considerable momentum. The Tools Group's coming back. Beyond the numbers, we held our annual SFC in August this year in Orlando with attendance reaching 9,000 franchisees, guests and Snap-on associates. This tool show spanned over 3 football fields, showcasing the latest in product innovation, more than 4,500 SKUs strong. The weekend also was packed with training sessions purposely designed to grow each fan's business and expand the franchisees already substantial product knowledge, among those seminars was an in-depth review of our intelligent diagnostics portfolio with instructors connected directly to the vehicles, communicating with the cars in real time and clearly demonstrating our industry-leading advantage it attracted a lot of attention.
And we celebrated Saturday night by transporting the entire crew and what could be described as an armada of buses, the sea world for a night of roller coasters, aquatic shows and a lot of fun. It was another memorable event, but principally, it serves as a testament to the unique bond that our franchisees hold with a Snap-on team. I believe anyone attending would affirm that the franchisees left reassured on the power of our operation, enthusiastic, about the way forward with our enterprise and convinced that Snap-on really does prevail in difficulty and proceed with confidence. The product boost at this year's event, we're pretty busy. We're busy, especially near the cartway to heaven. It was an eye-catching and colorful wall of mobile tool carts.
The model that stole the show was our brand-new KRSC2460 flip-top roll cart, a unit that offers Snap-on Tool storage in a quick payback form, just what techs want in today's world. That's why we're so popular. The 2460 can hold a significant breadth of sockets, wrenches and power tools and a variety of drawers that range from 2-inch to 3-inch to 5-inch configurations and the ultra-deep top compartment is designed with 5 AC outlets and 2 USB ports to ensure that electrical devices are charged and at the ready for any use at any time. The launch was a significant success, and it provides even more testimony that the Tools Group traction is to pivoting -- and pivoting to shorter payback items is working.
Also on the shop floor were products highlighting Snap-on's customer connection. We stand next to mechanics, observing work, experiencing the complexity of vehicle repair. And we use those insights gained and design innovations that make work easier. One such custom solution available at the SFC was our new F8400 half-inch drive axle spindle nut cycle. That's a mouthful. It's manufactured right here in the USA at our Elkmont, Alabama plant. Since 2022, GM 3500 heavy-duty pickups have used a unique fastener that's very deep into the axle, inside the axle hub. It's a very difficult and time-consuming operation to extract it with standard tooling.
So our new specialty design socket reaches in, links precisely with the embedded fastener and it makes the removal or installation safe, quick and effortless. Each vehicle is unique, and a range of different repairs are needed as they age. This is the mother lode for a toolmaker, and Snap-on customer connection positions our teams have just the device to match the task. It's a great advantage that was on display at the SFC and it was on display in our third quarter results. The Tools Group, pivoting to quick paybacks, launching, differentiating new products and summoning the -- summoning resilience against the headwinds.
Now for RS&I. Sales of $422.7 million in the third quarter represented an organic decline of 1.9%. Lower sales in undercar equipment and reduced activity with OEM dealerships were partially offset by higher sales and diagnostics and information products to independent shops -- for independent shops. In effect, declines in hardware, balanced by gains in software. OI and RS&I was $107.3 million, up 2.3% compared to last year despite the lower sales. And the OI margin of 25.4%, one of the group's highest for some time, was up 110 basis points from 2023, baffle. All of it was authored by big product and RCI-driven gains in gross -- RCI driven gains in gross margins, partially offset by spending in operating expenses, gross margins up, operating expense is balancing some of it, but it was all an investment was there to maintain and extend our advantages. And so we did.
During the quarter, RS&I had launched its latest addition to our intelligent diagnostics lineup, the APOLLO+. This is a new ergonomically designed handheld that offers a 2-second boot up, the fastest in the industry and a large 10-inch screen -- a touchscreen for improved visibility and navigation. Most importantly, the platform is powered by our proprietary intelligent diagnostics software, with almost 3 billion data records and over 400 billion unique diagnostic events, all organized to help the technicians diagnose and fix vehicles much faster. It was introduced in mid-August, toward the end of the quarter, and it represents a tech's most economical way to wheel the power of intelligent diagnostics. And it already has the customers' attention. Our on-the-street feedback says the new sophisticated platform with a quick payback is a real hit, and we believe it has a great future.
We're encouraged by the strength of our handheld diagnostics and the other unique solutions we provide. And that confidence is reinforced by outside experts. Our SOLUS handheld was eligible for our 2024 -- for the 2024 award, and it was cited by Motor Magazine as 1 of the top of the 2024 top 20 tools. And it was also recognized by Power Tools & Equipment News or PTEN for one of its -- as one of the 2024 People's Choice Award. That's a distinction based on the endorsements from real technicians, actual users from all across the nation, RS&I received PTEN recognitions for its collision repair package. It's on break -- it's on truck break blade. It's heavy-duty diagnostic software, and it's M1, Mitchell 1 shock management system, collectively this year across all our operations. Snap-on won 20 such awards. Product is a Snap-on advantage, and everybody knows it.
We're confident in the strength of RS&I, and we'll keep driving to expand its position with repair shop owners and managers making work easier, the bay is more productive and providing the garages with a means to match the ever-growing challenge of modern vehicle repair. Well, those are the third quarter results. Tools Group, demonstrating improvement sequentially, pivoting effectively to meet customer preferences. C&I and RS&I, innovative new products and operating efficiencies, managing the headwinds, producing benchmark OI margins. And for the overall corporation. Sales organically down 1.7%, but opco OI up 2.9%, opco OI margin of 22%, up 80 basis points. And EPS, $4.70, up 4.2%, rising over every comparison, all achieved against the winds. It was another encouraging quarter.
Now I'll turn the call over to Aldo. Aldo?
