Nicholas T. Pinchuk
Chairman and Chief Executive Officer at Snap-on
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 on our path ahead. After that, Aldo will give you a detailed review of the financials of second quarter.
Of course, there were challenges. Uncertainty remained prominent among our technician customers, but our Repair Systems & Information or RS&I group with repair shop owners and managers and our Commercial & Industrial or C&I Group enabling critical, 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 principle value-creating mechanism, observing work right in the workplace, using the insights learned to create products that make critical, critical tasks easier and more efficient, that works across many industries and in many environment, 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. International, Internationally, our consolidated results were varied, but reflected overall positives. 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 $1,179.4 million were slightly down from the $1,191.3 million of last year. On an organic basis, excluding $5.7 million on unfavorable foreign currency and $7.3 million from acquisitions, our sales were lower by 1.1%. The OpCo operating income or OI margin for the full quarter was 23.8%, up 50 basis points. Now with that said, that level included the benefit of a final payment from our recent legal wins. Excluding that addition, the OI margin was 22.8%, down from 2023, but still among our very best, surpassed only by the recent, by the recording setting second quarter of last year.
For financial services, the OI grew to $70.2 million from the $66.9 million recorded in 2023, a number that when combined with our OpCo results raised the consolidated OI margin to 27.4%, up 60 basis points over the 26.8% of 2023; and EPS, it was $5.07, which included a benefit from the legal payment of $0.16. Again, excluding that legal item, EPS was $4.91, still above last year and representing a new Snap-on level for any quarter, strength and progress against the wind. So, those are the overall numbers.
Now for a view of the markets. The second quarter once again highlighted that the opportunities in automotive repair, they continue to be favorable, marked by the ever-expanding complexity of design, new and diverse powertrains, more interlocking systems to advance driving, driving autonomy, arrays of drive-by-wire sensors, new body materials and an aging car parc now averaging 12.6 years. The opportunity in vehicle repair exists industry-wide and they appear to be unwavering.
The vehicle OEMs, the dealerships, and the independent shops recognizes the positive trend, and they continue to invest in tools and equipment that will expand their capabilities to support the influx of new models and the ever-rising complexity of repair. And in the quarter, RS&I Group expanded our reach into OEM dealership program, into OEM dealership programs and strengthened our position in independent garages with repair management software packages and with great new hardware products. So the possibility with repair shop owners and managers are strong. The outlook looking forward is quite positive and Snap-on is well-positioned to seize the opportunities.
Now let's shift to the technicians. These are the folks who turn the wrenches, make the diagnosis, and execute the repairs. Again, this quarter, I had multiple occasions to meet with the franchisees, the garage owners, and the tech, and it reconfirmed that the shops and the technicians are prospering. The microdata says it's true. Repair hours are up, tech wages are healthy, the demand for techs is strong, and the number of techs are increasing. The number of tech is increasing. It makes sense. New systems, the rising complexity, the aging car parc makes what the techs do more difficult and more valuable.
So the economic trajectory of vehicle repair is quite positive. It's an attractive place to be. But it's also clear that while the techs are busy and have cash, their confidence in the way forward is still poor. Every day there's bad news. Two wars with no end in sight. The border unsettled. The shipping lanes disrupted. Tit for tat with China. Lingering inflation and the election. The election seems to get more unpredictable with every morning news cycle that hits just keep on coming for bad news for breakfast. It's almost like the grassroots technicians, technicians have a fear of what may happen and paraphrasing the movie Dune, fear is the outlook killer.
The franchisees also confirm to us that with the general uncertainty, the techs are leaning toward purchases that provide quick payback, while making the work easier right away. They're kind of cool on longer-term bigger ticket items. And knowing that, the Tools Group continues to focus on near-term product development, manufacturing changes, and selling efforts that match those preferences.
So now let's talk about the critical industries, where Snap-on rolls out of the garage, solving tasks of significant consequence. This is where the C&I Group operates, and it's our most significant international presence, the area where we're most subject to global headwinds. But the news was still reasonably encouraging. For the sectors, the critical industries kept rising in the period. The Military, Aviation, and Education segments led the way.
For geographies, Europe was mixed. Several countries in recession, and the ongoing impacts of the Ukraine war. Asia-Pacific also remained mixed. China was weak, driven by its delayed financial recovery and Southeast Asia again had its difficulties. But both regions for C&I and for the corporation in total were positive in the quarter, despite the variations.
Now speaking more than, now I'd like to speak more about the critical industries. The demand for customized solutions to drive reliability and productivity keeps rising and C&I continues to show significant and broader advances in that arena. And we believe there's more coming. So, that's the markets, vehicle techs, cash rich but confidence poor, preferring quick payback, payback products. Repair shop owners and managers moving upward to match the car parc, and the critical industries booming outside the garage.
In C&I, so let's, let's cover the groups now. In C&I, sales were $372 million, representing an organic sales gain of 1.2%, excluding $7.3 million of acquisition-related sales and $3.8 million of an unfavorable foreign currency, higher activity with customers based in those critical industries and the gains in Asia, and a gain in Asia that defies the turbulence more than offset declines in our power tool and European-based hand tool operations.
From an earnings perspective, C&I OI of $62.2 million improved $4.1 million, or 7.1% above last year and the OI margin, it was 16.7%, up 70 basis points, representing a new record for that group, gangbusters, gangbusters for those guys. And the big driver was our international division, continuing its upward trajectory with its double-digit rise and very strong profitability. You know, about 18 months ago, we expanded our capability to make work easier outside the garage by adding another building for the industrial, for industrial custom kitting, serving a range of critical segments and it's paid off, it's paid off big.
Since then, that business has been on a tear, baffle [Phonetic] cranking out more and more bespoke product bundles, sophisticated solutions like our automated tool control units that have become the standard for a range of industry. Custom kit offerings aimed at specific applications, and at making the critical work easier and more reliable. It's driven some nice gains all around the world. And we believe, we see many more possibilities in that arena. So we continue to invest in critical industries, expanding capabilities like, like in our custom tool machine shop in Kenosha, producing low-volume, high-reward items for the most essential tasks.
For example, visiting an oil drilling site, we saw that adding a section of pipe on the rigs requires technicians to move around the, the circumference, constantly repositioning the turning tool. It's a slow and clumsy and imprecise effort. Our custom team tackled the problem, designing both a new bespoke, bespoke wrench, both a new bespoke wrench, both designing a new bespoke wrench, specifically for the task and enabled by our new Kenosha machine shop configured a special machining process to produce it and it all worked.
The special oil rig pipe wrench greatly reduced the rework associated with misalignments and substantially decrease the task time, getting the job done more efficiently and more reliably and along the way, expanding the Snap-on reputation in the critical oil and gas sector. Also in the quarter, we introduced a new line of 14.4 volts micro power drills aimed specifically at diverse applications in aviation and general manufacturing. Tests in those sectors vary from inserting wood screws to drilling accurate holes in airframes to high volumes on production lines. To span the variety, each tool in the new line and there's a range of them is set to a different RPM range, enabling the tech to fit the speed to the job, substantially reducing rework or irreversible damages, damage.
The drills, it's also designed for two operating stages. The first, slower. Allowing the tools to bite into the materials, securing a position for the serious drilling. And the second stage performing that serious drilling at the predetermined RPM, making a quick and clear cut. Our new industrial micro drills, two-stage design match to the task, bringing new levels of accuracy, consistency and reliability to the work, it's a superior tool for the very task of those sectors and the customers have noticed. C&I in the quarter, launching customized solutions, maintaining its strong momentum in the critical industries, extending out of the garage, and reaching new heights in profitability.
Now for the Tools Group. Sales in the second quarter of $482 million, including, included an organic decrease of 7.7%. The Group's OI margin in the period was 23.8%, down 250 basis points due to the lower volumes. But gross margin held down 20 basis points, almost flat. The benefits of new product, manufacturing efficiencies, and Rapid Continuous Improvement or RCI is written all over those numbers.
And during the quarter, we continue to focus our product development, redirect our plans, and guide our selling programs toward innovative quick payback solutions that drive productivity. A cornerstone for the pivot is rooted in customer, in our customer connection, standing side-by-side with the technicians, observing the work, witnessing the difficulties of modern and complex repair, and using the insights gained to create a tool that makes especially difficult tasks much easier.
In the second quarter, those insights led the Tool Group to design a new torque adapter for use on, on Ford E-Series commercial vans. The standard procedure for basic brake repair on that model requires the rear caliper bolts to be torqued at over 160-foot pounds, not so easy. And the task made doubly difficult, because the bolt is obstructed, making it impossible to access the area with standard tooling without removing auxiliary parts, a big-time eater.
So we've specifically configured a 21-millimeter, 12.6-inch flat adapter with a half-inch hex drive, hex drive to make the work easier and specification. The device nestles perfectly between the particular obstructions on the model, engaging the fastener, turning a time-consuming task into one of just seconds, and freeing the tech up to, to tackle the next repair order. It's made in our Elizabethton, Tennessee plant, and it brings great value to the techs working on E-Series and you know there's a lot of them.
Another example is the struggle observed when, we observed when removing a canister cap that hoses the fuel filter on Ford Super Duty trucks. Access to the 36-millimeter hex structure on the top of the cap is impeded by other components. Standard pliers or sockets are out. Seeing the problem, our team created a special low-profile socket tapered gradually just to slide into position under the blocking hoses and then using a standard ratchet and extension, easily removing the clock of the cap, complete the repair, a complicated, and complete the repair, a complicated job made much easier. Produced in our Milwaukee plant, it's another quick payback item that makes a substantial difference and the techs love it.
A final example comes from observing technicians walking to and from the workpiece back-and-forth from their buck to achieve standard pliers for basic task. A compact, a compact design seemed to be the solution. So we expanded our triple joint plier line to develop a small 4.5-inch plier set with three models, a combination of long nose and a flank drive slip joint version for versatility and they were all pocket-sized to be always at the ready, pull it out of your pocket and you're ready to go. And all designed to allow immediate access to remove low torque fasteners in places to pull fuses, to adjust hoses or provide some additional gripping levers, leverage for basic repairs or just inspections.
The new units save steps and make work easier in tight spaces and they're offered in two handle models, a cushion grip addition to reduce hand fatigue, and for the first time, our bare-metal, diamond plate texture that provides a superior grip even with sweaty or oily hands. Cold Forge in the US, the new players, a game-changer and the rollout was a huge hit, making our million-dollar hit product status just during the initial launch, launch. Well, that's the Tools Group.
Pivoting to technicians' preferences, producing innovative, quick paybacks, making work easier, new tools matched to the task and guided by customer connection, bringing quick value to the techs, to the techs, and you can see the value play out in the gross margins. Bringing quick value to the tech, and you can see that play-out in the gross margins. Almost flat in the downturn.
You can also see, I think, our unwavering support for the franchisees and the operating expense. It was about flat even in the turbulence, even in the downturn, even with the lower sales. We'll maintain our training, our programs, and our efforts in the field, even in this turbulence. You see, we believe the uncertainty will recede and we want the network to be strong and fully loaded when that occurs.
Now for RS&I. Group sales of $458.8 [Phonetic] million in the quarter, representing a $4.3 million, or 1% organic increase that was partially offset by $1.5 million of unfavorable foreign currency translation. Those gains reflected higher activity with OEM dealerships attenuated by lower sales in the Diagnostics division. The OI margin it was an even 25%, rising 60 basis points and among the Group's best. The numbers reflect the strength of RS&I products and programs for repair shop owners and managers, as we help them match the evolving challenges of the modern car parc.
Speaking of the product evolutions and our progress with OEM programs, the traditional method of lifting vehicles becoming more complex with the, with the onset of new hybrid and EV platforms. The batteries require changes in lift points to adjust for the different center of gravity on EVs. And to complicate the matter, each model design presents a different problem. In response, we designed steel floor plates matched to particular models that service guides and positioning the vehicles in the exact location that puts the lift arms in the proper place for that vehicle, enabling a safe procedure and an easy lift.
The OEMs and the shops, they enthusiastically see the innovation as another, a long line of the modifications needed to match the evolving car parc. They need to facilitate to match that change and we're helping them do it. Another successful RS&I release was the, was the Pro-Cut, X1 HD [Phonetic] on vehicle brake blade, brake blade. Specifically, for heavy-duty platforms like buses, fire engines, and semi-trucks, the late cuts away imperfections and abrasions on a brakes rotor surf, the V imperfections and abrasions on a brakes rotor surface that always arise during regular operations. The result is a fully restored component that supports optimized brake performance without the need of a replacement.
The previous choice for heavy-duty brake repair work was to disassemble the brake assembly or, and either order new parts or smooth the rotor on a standalone bench [Phonetic], in either case, a laborious process. The new Pro-Cut design avoids both the time and the effort to lift the heavy components off the vehicle and it eliminates the cost of new parts. We believe it's another game-changer. Garage owners have seen the value and we project that the Pro-Cut design will become the industry standard.
Also in RS&I, C&I, a car aligner serves the vehicle collision market, serves the vehicle collision market, serves the vehicle collision market with a number of heavy-duty items. A good example during the quarter is the release of our low-profile frame bench, innovatively designed for holding the workpiece at an optimal height, making it easier for technicians to interact with the damaged vehicle. The bench is rugged for heavy collision work and integrates with our, with our existing pulley solutions that, that stretch and contort the chassis back into position. The ability to raise and lower the benches in multiple positions, while still engaging with the vehicle reduces fatigue with the user and makes the process much easier.
The collision space is quite robust, driven by the changing vehicles and, and car aligner has been on a continue, and as such, car aligner has been on a continuing positive trajectory and the new bench makes our advantage of that market even stronger. RS&I expanding its reach with shop owners and managers, confronting the increased complexity, focusing on developing innovations that simplify the difficult and help shops prosper along the way. Well, those are the prosper along the way. Well, those, the RS&I quarter was quite strong. Well, those are the second quarter results.
Tools Group, down, impacted by uncertainty, pivoting to customer preference, launching new products, holding the gross margins, and maintaining the network. C&I and RS&I, providing the multi-sector power of customer connection and new product, recording strong profitability, balancing the headwinds of technician uncertainty and the overall corporation, launching a broad range of products from tapered sockets to industrial power tools to collision benches.
Sales about flat. OI margin 23.8%, 22.8% excluding the illegal, the legal benefits, one of our highest; and EPS $5.07, $4.91, excluding the legal item setting a new high, performance achieved against the wind. It was an encouraging quarter.
Now I'll turn the call over to Aldo. Aldo?
