實耐寶 (SNA) 2007 Q1 法說會逐字稿

Good day everyone and welcome to the Snap-on Incorporated 2007 first quarter results conference call. As a reminder, this call is being recorded.

For opening remarks and introductions, I'd like to turn the conference over to Mr. Marty Ellen, Chief Financial Officer. Please go ahead, sir.

[Darrell], thank you and good morning everyone. Thank you for joining us today to review Snap-on's first quarter results. With me this morning are Jack Michaels, Snap-on's Chairman and CEO and Nick Pinchuck who was appointed President and Chief Operating Officer by our Board yesterday. Many of you already know Nick, as he has run our Commercial and Industrial Group for the last five years. I will begin our review this morning with first quarter financial results. Afterwards Jack will provide an update on our strategic initiatives and then Nick would like to make a few comments. Afterwards, we'll take your questions Consistent with past practice, we will use slides to help illustrate our discussion. You can find a copy of the slides on our web site next to the audio icon for this call. These slides will be archived on our web site along with a transcript of today's call.

Any statements made during this call relative to management's expectations, estimates, or beliefs, or otherwise state managements 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 in the factors that could cause our results to differ materially from those in the forward-looking statements are contained in the Company's SEC filings. This call is copyrighted material by Snap-on Incorporated. It is intended solely for the purpose of this audience, therefore, please note that it cannot be recorded, transcribed or rebroadcast by any means without Snap-on's expressed permission.

With that said, I will now begin our discussion with slide four. We believe our first quarter results demonstrate that we're making progress on our core initiatives to improve customer service, strengthen our brands, improve our global supply chain and reduce overall complexity and cost. This progress is the result of hard work by all of our associates. I know Jack, Nick, and the rest of our team sincerely thank them and encourage them to keep up these efforts.

Net sales of almost $710 million in the quarter were up $116 million, nearly 20% over last year. Sales increases were achieved across all segments. Organic sales growth was 8.4% while currency translation added 2.9%. The November 2006 acquisition of ProQuest Business Solutions, now rebranded Snap-on Business Solutions, contributed 8.3% of the total sales increase. Productivity also improved in the quarter with sales per associate up 8% from comparable 2006 levels.

In our Financial Services segment, revenue increased $2.2 million while operating income improved $1.7 million. Consolidated gross profit was $312 million or 43.9% of sales. The $51 million increase in gross profit reflects higher sales, including the gross margin contribution from Snap-on Business Solutions. Pricing, together with productivity and cost reduction savings from our rapid continuous improvement initiatives, or RCI as we refer to it, were able to more than offset material and other production cost increases during the quarter. The 2007 gross margin rate was reduced by about 80 basis points, mostly from manufacturing restructuring initiatives in Europe. In 2006, restructuring charges reduced the gross margin rate by about 30 basis points.

Operating expenses of $246 million were up $23 million from last year. RCI is enabling us to reduce operating costs and better leverage our costs, thus reducing the operating expense ratio by 300 basis points to 34.6% from 37.6% last year.

Operating earnings of $69.7 million for the quarter were up nearly 77% from 2006 levels, reflecting both the earnings contribution from higher sales and savings from RCI initiatives. As a percentage of revenues, operating earnings were just under 10%, actually 9.6%, up significantly from the 6.5% earned a year ago. The increase in interest expense in the quarter is largely due to higher debt levels associated with the Business Solutions acquisition. Our tax rate in the quarter was 33.4%, slightly below our full year expectation of 34.5%. And finally, diluted earnings per share in the quarter were $0.66, up over 78% from the $0.37 reported last year.

I will now turn to our segment results. Please turn to slide 5. Sales in the first quarter for the Snap-on Tools Group of $288 million were up 16% over last year. In the U.S., sales increased over 17% from prior year levels. On a per franchisee basis, sales increased 6% year-over-year during the quarter. This included higher sales from our new mid-tier product offering, and the relaunch of our in-house, warehouse distribution program. The total year-over-year sales comparison in the U.S. also benefited from lower levels of franchisee turnover and product returns. We're encouraged by a number of these data points. The average number of U.S. franchisees in the quarter was essentially unchanged from fourth quarter levels, which was consistent with our expectations for the quarter. As we previously communicated, sequential growth in franchisees is expected to occur mid-2007.

International sales in the Tools Group were up 18.5% due to continued strong sales growth in the U.K. and Australia and were also aided by currency. Operating earnings for the Snap-on Tools Group increased $11 million year-over-year to $29 million. As a percentage of sales, operating earnings improved to 10.2% as compared to 7.3% a year ago. The increase in operating earnings reflect the higher level of sales, together with the benefits of operating cost leverage and savings from our ongoing RCI initiatives.

Turning to the Commercial and Industrial Group on slide 6. Segment operating earnings of $28 million were up 21.6% year-over-year on a 7.7% organic sales improvement. All businesses in the group had sales gains. Currency translation added 4.3% of sales growth. Gross profit of $113 million increased $7.8 million. The gross margin rate declined 150 basis points to 35.3% in the quarter. Most of the decline in the gross margin rate was due to higher restructuring costs for our manufacturing footprint changes. Continued RCI initiatives lowered operating expenses to 26.6% of sales from 28.8% of sales a year ago, even though we continued our operating investments to further our expansion in Asia and other emerging markets.

Turning to the Diagnostics and Information Group on slide 7, net sales of $168 million in the quarter were up over 40% compared with a year ago. Business Solutions added $49 million. Sales of Mitchell Information Products continued to experience growth. Sales of hand held diagnostics and related software also grew in the quarter. In 2006, we eliminated our manufacturing of certain non-strategic, low margin equipment products, which caused a decrease in this year's sales comparison.

Operating earnings of $21.6 million in the quarter were up $11.3 million from prior year. In addition to the contribution from Business Solutions, an improved sales mix of higher margin products and benefits from improved productivity and cost reduction initiatives also contributed to the improved profitability, as particularly seen in the gross margin improvement. As a percentage of sales, operating earnings were 12.9% in the quarter as compared with 8.6% in 2006. As I said earlier, Financial Services, shown on slide 8, had a $1.7 million increase in operating earnings in the quarter. This was primarily due to improved yields, partially offset by a slight decline in credit contract originations.

Now let me turn to a brief discussion of our balance sheet and cash flow. As seen on slide 9, accounts receivable at the end of the first quarter of $568 million were essentially flat with year end levels. Days sales outstanding of 75 days was down slightly from 76 days at year end, but improved from 79 days at the end of the first quarter of 2006. Inventories at quarter end of $327 million and inventory turns of 4.6 times were also essentially flat with year end levels. A year ago, inventory turns were only 4 times. Our net debt position at first quarter end is $503 million. Our net debt to total capital was 31.5% at the end of the quarter. As you'll recall, the Business Solutions acquisition added about $517 million to our net debt position at year end 2006. In January we issued $300 million of floating and fixed rate debt. The proceeds from these issuances were used to retire commercial paper.

Turning to slide 10, cash flow from operating activities in the quarter was $27 million, down slightly from prior year. The change in operating assets and liabilities shown here, includes numerous items, including the first quarter 2007 franchisee litigation settlement payments. Net shareholder distributions, consisting of dividends and net share repurchases, were $33.3 million this quarter as compared to $16.4 million in the year ago quarter.

That concludes my remarks on our first quarter. Now I'd like to briefly review with you some financial considerations for the balance of 2007.

Turning to slide 11, we expect operating and earnings improvements for the remainder of 2007 as we continue to execute our strategic initiatives. Jack will talk about these initiatives in a moment. In the first quarter we spent $8 million on restructuring initiatives, and we expect full year restructuring costs to be about $28 million. We anticipate that capital spending for 2007 will be in a range of $50 to $60 million and depreciation and amortization is anticipated to be about $70 million. Because of higher debt levels, we expect to incur approximately $24 million of increased year-over-year interest expense. And finally, we continue to anticipate that our full year 2007 effective tax rate will approximate 34.5%.

Now I'd like to turn the call over to Jack. Jack?

Thank you, Marty, and good morning. I'm pleased with the start we have made in 2007. But not simply because of the financial results we reported today. It's because of the improvements we're making in our business fundamentals - quality, delivery, safety, and cost, and our strategies align with these fundamentals that I've been sharing with you over the last couple years. We believe our improving financial results demonstrate that we're working on the right things and we're on the right track, but we still have much, much more to do. That said, I want to thank all of our associates worldwide for their support and contributions.

I know I've commented to you before on safety, but I want to do so again. We've reduced our global safety incident rate from 13.6 to 3.4 since 2004, a decline of 75%. Our incident rate is now 1/2 the U.S. national average as compared to double the U.S. national average in 2004. I recognize that most of you on this call are more concerned about EPS trends than safety trends. There are, however, a couple of important points you should take away from these trends.

First, business fundamentals generally hang together. Safety, quality, delivery, and cost. Second, our improved results demonstrate the importance and powerful nature of well documented and sustained business processes. That is fundamental to everything we do in RCI and safety is a good example of it. I call your attention to the fact that our RCI, or rapid continuous improvement, is our lean program.

In the Snap-on Tools Group, we continue to work on our strategies aimed at improving the franchise proposition. Our internal measures including growth in franchisee sales, gross margins per franchisee and franchisee turnover are all showing positive trends. While franchisee in van count in the U.S. was flat with the fourth quarter of 2006, we expect the trend will turn positive in the middle of this year. We believe we are capturing additional customers and winning back some of the business that our franchise did with outside suppliers as a result of our mid-tier and our RWD strategies, RWD is our wholesale program. This is benefiting both us and our franchisees.

In the supply chain, complete and on time, or COT, has been between 90 and 93% during the quarter as compared to the mid-80s a year ago with COT of 93% on our high volume SKUs. In fact, we reached a record high level of 94.3% last week. We set a goal of 99% COT by the end of this year, which is going to be a real challenge, given the root cause issues in our plants and with our outside suppliers. What we're not going to do is improve COT by carrying excess inventory. So we've got to fix the underlying issues. We're working on these.

We are continuing to make the needed changes to our main product distribution center and to our out lying velocity centers. Our shop floor RCI events are increasingly focused on reducing machine set-ups so we can lower lead times, reduce inventories, and fill orders to demand and not to forecast. Our U.S. team-based field structure is in place. And we've completed business reviews with all of our franchisees. We're getting favorable feedback on the improvements to our franchisee training programs. The results of our ongoing pilots through the end of February continue to produce strong gains in sales and cash flows.

In our Commercial and Industrial Group, our focus continues to be on improving our costs and competitive position by migrating away from higher cost manufacturing regions and increasing our low cost sourcing activities. In fact, operating results this quarter included $5 million of restructuring costs related to these activities.

The emerging markets continue to offer tremendous growth opportunities. In Asia where we continue to invest in expanding our physical presence, we now have over 300 resellers, more than double a year ago. And in China we're expanding our manufacturing facilitates to produce saws using our technologies from our SNA Europe business in Sweden. We expect sales in the Asia Pacific could reach $100 million for the full year.

We continue to grow sales in our Industrial Sales division with sales increasing about 5% in the U.S. This business is experiencing better sales performance as our COT improves, since they depend on the same supply chain that services are franchisees. Our undercar Equipment business continues to make progress, which we believe reflects our investments in product innovation and improvements in customer service. We're beginning to capture some business with new customers, sales are growing, and profit margins are expanding. And our Power and Torque Tools businesses continue to make steady gains through continued product innovation.

In our Diagnostics and Information segment, we've completed our first full quarter since the Business Solution acquisition. And the integration has gone very well. Performance today has met our expectations. We are in the process of combining Business Solution offerings with other OEM offerings to better serve this customer segment. At the same time, we're working on solutions that better integrate instrumentation with information from the Worldwide Diagnostics and Mitchell Businesses. We're in the early stages of developing our integrated shop strategy and I can tell you the opportunity is exciting.

So, as I said, we're off to a good start, but we have much more to do. What's encouraging is we have many more opportunities. Some of our underlying business processes, particularly rapid continuous improvement, are beginning to take hold and we're getting results, but we are also still in the very early stages, and RCI is just a part of the much broader culture we're creating throughout Snap-on globally. By now you should have seen our recent announcement concerning Ben Brenton, who joined us as Vice President of Innovation, to help all of our businesses improve innovation and innovation processes. If we're going to succeed at fearless innovation, we need the right people and processes. Ben brings extraordinary capability in this area.

Before we take your questions, I want to cover the other news we released this morning concerning our succession planning. Our Board of Directors yesterday appointed Nick Pinchuk, President and Chief Operating Officer of Snap-on Incorporated. Many of you know, and have met Nick on your visits. He has been with Snap-on for the last five years and has held -- and has led a very successful turn around of the Commercial and Industrial Group. When I became CEO in late 2004, I shared my doubts with you about whether this group could add shareholder value. At that time, it clearly wasn't. I'm pleased that Nick and his team have removed those doubts.

On slide 14, we've included the group sales and earnings performance since 2003. Please note, they achieved a 22% growth in operating earnings this first quarter, as Marty has presented. This was realized as we continued to invest in emerging markets. They clearly have done well. Nick's background is included in the press release issued this morning. So I won't repeat them, but I will ask Nick to make a few comments. Nick?

Thanks, Jack. I want to start by echoing something you said earlier. And that is that the results we're viewing today reflect the individual and team contributions by a number of dedicated associates across the Corporation. My thanks to each and every one of you.

As to my new responsibilities, I have to say, I feel, I really feel quite honored by the confidence that Jack and the Board have placed in me. It's pretty exciting. Snap-on is an extraordinary company. With a -- almost -- with an almost legendary legacy. A team of committed associates, engaged franchisee partners and a legion of loyal customers around the world. And under Jack's leadership, we've made some encouraging progress. Costs have been reduced, the franchisee proposition has been improved, and we've continued to invest in growth and innovation.

But the best part, the best part is that everyone, every associate in the Corporation recognizes that there's much more opportunity, that there's significant runway for even greater performance. So I'm looking forward to working with Jack, the Board, our franchisee partners, and the entire management team in the months and years ahead to make that great potential a reality. And as we move along, I hope to meet with many of you on this call to give you an update on some of the exciting things that are happening here at Snap-on.

Now operator, we'll open the call for questions.

Thank you. (OPERATOR INSTRUCTIONS) And we'll take our first question is from Jim Lucas from Janney Montgomery. Please go ahead.

Thanks, good morning everyone. Couple of housekeeping questions and then two bigger picture questions. First, corporate expense showed a year-over-year decline, could you offer any commentary around that, Marty?

Yes, we're spending less. Jim, good morning to you. I mean, we continue to work on our corporate spending through RCI just like we do everything else. We try to do more with less, we try to stay focused on where we create value and where are things we do that don't necessarily create value for our shareholders. We try to eliminate those latter ones, so we stay focused on it.

Okay, I mean, is there any one particular area, or is it just really broad-based?

It's pretty broad-based.

This is Jack, let me just make a couple comments. Obviously we've been using some outside consultants, assistants, Shingijutsu and Lean Horizons, and a lot of the events that we're talking about in the offices had been led by Lean Horizons, and their people with ours, and we're getting our people up to speed on the tools that they employ. But it has been very broad-based. In fact, in all three of our operating groups. As well, obviously, at Corporate.

Right, fair enough. And first quarter tax rates of 33.5%, would have been a little below what your full year guidance is, which would imply higher tax rate as the year progresses, any additional color there?

No, there was an adjustment made in the first quarter to recognize some previously unrecognized tax benefits. Other than that, our best forecast at you right now is given the mix of our earnings across the world and global tax rates, our guidance is to model around 34.5% for the full year.

Okay, fair enough. Just wanted to make sure there wasn't anything in particular there. And then switching to the big picture questions, first, Jack, on the RWD program, could you provide just a little bit more color there? Just as a reminder again, of what exactly that program is?

Yes, as you may recall, we had a program that was called the RWD4U , and it really was not focused on here internally and in fact, I'll be honest with you, at one time we even thought about discontinuing it because there was just a lack of focus, it wasn't getting us any -- wasn't creating any real value, but as we looked at it, and we realized that our franchisees will always need to sell product that we will not manufacturer. Clearly will not, we talk about rags to hand cleaner and go on from there, but clearly we realized there was an opportunity, so we revitalized the program, we called it RWD Tools and Equipment Program, and in the quarter we had incremental sales of about $13 million. We were pleased, but we're just starting to roll this program out. We have a focus group on it. We believe that it's another opportunity to split and focus, it's giving us good

Okay, and then, Nick, I can't let you off the hook on your first conference call here. With the -- and congratulations by the way --

Thank you.

-- clearly you've had a lot of success. I would echo Jack, on the outside, as an outsider that was somewhat skeptical about C&I's position, clearly the results there have been nothing short of very good, if not remarkable, when you think about the lessons learned of the success you had in C&I, as you think about the transition into the COO role for the entire Company, what, in terms of a transition of lessons learned would apply here?

Well, I, I think the only thing I can say is, first of all I think we have an encouraging trend established in all three groups of the organization. In my new responsibilities, I wouldn't see an abrupt change of that, but I would say that from a C&I point of view, what we found is the application of rapid continuous improvement at the grass roots levels throughout the business, created organizations which made it easier to make money.

At the beginning with C&I, we had good people who were trying 24 hours -- 8 hours a day, but it wasn't paying back 8 hours a day return. Through RCI and a number of other things we did to improve our position, that helped profitability. And we've got a number of those initiatives going on in the Tools Group and in D&I. I think it's just a matter of continuing them. And then once that process gets underway -- once that process gets established, C&I, also, in this last quarter and I think in the prior quarter you can start to see that the investments in growth and innovation start to create leverage. So I think those are the lessons. Invest in C&I, put yourself in an easy place where your people can make money, and invest in the right growth opportunities and things work pretty well. That's what happened for C&I.

Jim, let me add just add one comment. You've been around us a long time, and I think we've been pretty open about the fact that we probably didn't execute well the acquisition strategies through the 90s. When Nick came in and assembled his team, one of the things that was clearly facing us was a need to really get after and do the things that we hadn't done years before. I think they've done a good job in getting that done, getting the economic value out of that on top of all the other accomplishments that they've made.

This is Jack. I'd like to add one comment around RCI. Everybody tends to think that's just a way to reduce costs, yes, obviously it does that, but it really builds the platform for growth. That's really the opportunity that we have going forward. We're in the early stages, as you know, with our RCI or Kaizen and we just have a lot more to do. But it will provide the opportunity for growth.

I think, I'd add one other thing, Jim, that is that in C&I we did a lot to put together the right teams in place. We brought some people from the outside. We married them up with some capable people in place, and they executed this change in the platform and the installation of the processes. I don't see all that happening in these other groups because they have great teams now. Moving forward I expect continued progress.

Congrats to a good start to the year.

Hey Jim, thanks for your notes this morning. I'll get back to you regarding the visit.

Okay, Great. Thanks.

And we'll take our next question from Alexander Paris from Barrington Research Associates. Please go ahead, sir.

Good morning, great quarter.

Thanks.

In fact, it was so great on the earnings per share basis, everybody I'm sure gets suspicious of what, well, anything special in there at all, I'm sure you were a bit surprised on the bottom line gain?

Alex, I think the quarter was operationally consistent with our expectations. Were there a few things, sure, the tax rate was a little lower, we didn't anticipate that probably added $0.01. As we said on the call, I think, operationally we sort of did what we set out to do for the 90 days. There was higher growth in the Snap-on Tools Group, the sales growth in the U.S., and as we commented in the press release and in our prepared remarks, we had about a 6% sales increase per franchisee, as Jack said, and as we said on the call and in the release, we did get the benefit from the reinvigorated RWD program, the benefits are starting to pay off.

It would appear from all the work we did on our Tools Group strategies the last couple years, our mid-tier product line. Now the sales growth was higher than 6%. Were there some things that may not continue? Sure, like the effect of having lower turnover, but we obviously expect that we would like to continue to have lower turnover. And if we're going to grow the franchisee base, like we said we're going to do starting mid year, we need to have lower turnover. That helps the sales line, because when they turnover those sales really come back in as negative sales to us.

This is Jack. I think the other thing that we realized and we obviously hope it continues was, as we said earlier, on the first question from Jim, was the RWD, program, but also our mid-tier program with Blue Point. We had improvement there, and we hope it will continue, but it's still early on in that whole process. I think the broader answer to your question is, our strategies are working, we're putting processes in place to sustain and it's all about blocking and tackling. It's just that simple. There's nothing exotic here. It's about execution.

So that would imply that your 9.8 operating margin, if you're going to continue to perform and that's the bottom for the year, you should be trending up from that then, is that true?

Alex, you've been around us for a while. We've said previously, I know before we acquired ProQuest, we'd like to get to a 10% operating margin in 2008. It looks like we're clearly tracking it that, if not a little bit ahead of that. I'd say, if you look out a quarter, year ago, second quarter was a little sloppy in terms of numbers, we had a litigation settlement, so let's talk without that. I think the margin was about 9.3% a year ago. I think we would be, for next quarter we'd be satisfied if we saw an operating profitability in the low to mid 10% range for the quarter. I think that would be consistent with our expectations.

So this big jump, quarter-over-quarter is you're not necessarily changing your 10% target.

I'm not going to change it here on this call, let's be fair, we were laughing at 6.5% operating margin a quarter a year ago. Nothing to really write home about. But I think as we plot along here, execute on what we're executing on, obviously, we don't put out direct financial guidance, you all know the second quarter tends to be seasonally stronger, you can look at the trends there. I'm just telling you that if we look at a year ago baseline without the special charge, think about what we're doing, what we expect the benefits to be of what we're doing, if we came into the low to mid 10s, in terms of operating profitability, I think that would be successful execution of what we're doing.

That's great. In the D&I area it looks like, after you take out the Business Solutions, those sales are about unchanged, I think you said that shortfall would be sales that you dropped out from products that you discontinued.

That's correct.

What does that amount to roughly in sales?

Well Alex, the product that we -- just give you a low margin in the equipment, not really diagnostic products, but (Inaudible) recovery and other products we no longer produce that, that was probably a 4 to $5 million number in terms of year ago sales. The key to the diagnostics group, is in my judgment, you guys can provide your own, look at the profit increase because of the mix shift, we're increasingly getting the benefits of our software sales and our higher margin product sales. The story isn't being told as much on the top line, and we put that comment in on elimination, just so you could close the loop on that one issue, in fact, we didn't have some sales we had a year ago, but the real story is the margin expansion, and if you look at what they are selling, it's not only good news in terms of the handhelds, and software that are going through our franchisees, but really this, the implementation of essentially, we'll call it the razor blade strategy, which is the higher margin software.

And the, maybe you mentioned this at the time of the acquisition, but the operating margin on the Business Solution, is that comparable to the overall software margin in your Company?

The operating margin on Business Solutions is when you look at software in our company, we look at companies like Mitchell, and the profitability is comparable. We don't quote profitability of any of our business separately. That's our closest direct model and yes, the profitability is consistent.

And speaking about margins, your RWD, is that a lower margin because you're kind of passing along products that you don't manufacture yourself?

This is Jack, yes, it is somewhat lower, but it's still attractive, still creating value for us.

Okay. And in the $100 million sales from Asia, that you were talking about possible for the full year, how would that compare to 2006 for Asia Pacific? Sizeable?

I think that's a sizeable -- this is Nick, that's a sizeable increase. The number in 2006 would have been just north of maybe $60 million.

Alex, we did, we think we can get to $100 million for the year. We did $17 million in the first quarter. About $50 million last year. So we've got lots of, lots of improvements, lots of expansion, lots of reasons why we think we can ramp the business up over the next 9 months.

And you see that as early results of some of the heavier spending you've been doing in that region?

That's right. Some of these investments and distribution and manufacturing facilities there.

Thank you very much.

Thanks, Alex

We'll take our next question from Jonathan Steinmetz from Morgan Stanley. Please, go ahead.

Thanks, good morning everyone. Few questions mostly on the revenue side of the Tools Group. Can you quantify on a year-over-year basis what the impact of the lower product returns in the franchisee turnover meant? I guess you're booking that as contra revenue I take it?

Yes, Jonathan, what we're communicating this morning is, if you look at the overall rate of improvement in the U.S., up [17%], sort of eliminate roughly 6% per franchisee improvement in sales. Everything else, 11 points of growth fall into a number of categories. Which, while they may continue a little bit, probably won't continue at nearly that level. That's the lower turnover rates and the like. So it's, it added substantial impact in the quarter. I think what we're trying to communicate this morning, as you think about the business going forward, think about that sort of 6% or so sales gain per franchisee as a way to think about the business at least short-term in terms of its ongoing ability to grow revenues.

And we dig a layer deeper on the 6% per franchisee improvement, that includes the impact of Blue Point and that kind of thing?

Yes it does.

Is that a significant driver or that 6% or was there sort of organic growth or market share gains, so to speak, in the underlying market that's also a big component of that 6%?

As we look at the improvement in the mid-tier and the RWD, that probably accounted for maybe a little less than half of the 6%. The balance was, I hate to say core, because some of these we should be considered core to us like Blue Point, but I will call everything else then is the remainder.

Okay. Just to peel the onion back one more layer, on the rest of the remainder, is there a major pricing component? I know you have 10, 15,000 skus in that business, but is there a big pricing component to it or is it sort of a unit or mixed story?

No actually, pricing in the quarter was, was, for the Snap-on Tools Group was actually very small, and I'm talking about probably less than 1/2 a point in terms of pricing. So, the rest was volume growth.

This is Jack, let me just make a comment. One of the things that we will start talking more to you about is this whole question of innovation. We had some innovative products that we introduced. Some, even towards the end of last year, like our tech angle wrench, and now we're coming out with a new ratchet, that is clearly meeting our expectations of productivity improvement, and we've got new power tools that we introduced. So, and we'll continue to introduce. Those are all innovative. These aren't just putting a new skin on an old product. This is about changing the guts of the product and making it a more productive tool for the technician.

Jack, what would be, without naming an individual product, but from a dollar value perspective, what would you consider a successful new product intro on an annual basis?

Oh boy. Good question, if we looked at our MG31, which was a power tool, 3/8 inch drive power tool, I suspect it was around $10 million. We'd look probably in the range of 5 to $10 million.

Okay, hey thank you very much.

That's kind of like a year, if you had a full first 12 months, okay?

Okay, appreciate it

We'll take our next question from Seaver Wang from Utendahl Capital Partners. Please go ahead.

Hi, good morning. I was just wondering if you could kind of give me an idea of has there been any significant changes since the acquisition of the Business Solutions business since November? Are there any plans to kind of reposition it in any way as part of the Snap-on portfolio than when it was stand alone?

Well, Seaver, I think as we said on the call, we're really pleased with the results, but we have begun an integration process, and we're looking forward to integrating that business more deeply with our other businesses, namely Mitchell and Diagnostics. That's still underway of being developed at this point. We certainly have some thoughts, but, and some plans, but we're just in the early throws of it. But, it will be integrated more into that business as we move forward.

Seaver, remember when we talked about the acquisition, talked about the strategy that essentially embodied the four walls of the service bay, as well as the deeper penetration into the OEM segment. We're very early into this. Jack made a brief comment and it maybe got past most of you that we've now seen some early designs and some early thinking around our end-to-end shop strategies, service strategy and it's very encouraging, as Jack said. But we've got a lot of work to do. But that was a big part of our strategy going into the acquisition, and so we are encouraged by sort of the early concepts.

What we're looking for, is that, we have the repair service to parts, and through integration with the OEMs that have already begun to some degree with the independents that we can improve the productivity for the shop management.

And I had a -- you had mentioned, I think in the last call about the, I'm speaking about the Financial Services segment now, of the -- you had some new programs, which ended up having greater yields, can you kind of give more detail as to what type of programs, what causes the more effective yields?

Yes, Seaver, really it was the fact that a year ago, we put out some lower priced programs, some directed at shop owners at lower rates of interest, and more competitive rates of interest, so we had a little compression in the portfolio yield a year ago. We've lapped that. It's really that the yields in the portfolio now are more normalized than they were a year ago. So, as I said on the call, we've got a little bit of improvement from the better yields.

Okay, thank you.

Thanks, Seaver.

And we'll take our next question from David Leiker from Robert W. Baird. Please go ahead.

Good morning, all. If you're looking at the Business Solutions business, is there a way you can give some perspective on the comparison of how that business did versus a year ago when it was owned by ProQuest?

Yes, a year ago the business is tracking where it was a year ago. It's performing to the expectations we've set forth, there's been no real, there's been no real change of the business. It's, it's still plotting along. And obviously, you've got to remove it -- when you talk about business financially, you've got to remove the acquisition effect, right, higher amortization, [multiple speakers].

No, I'm looking at just the operations [multiple speakers] margins, things like that.

On an operating basis, the business is performing consistent.

Okay. If you look at the -- you got a couple quarters here where you put up double digit revenue growth. Are you at the point now that the product introductions and inventory run down and all of these other items, do you think that's a sustainable type revenue number going forward here or are we still in the period that could be a little choppy?

I think it could -- David, this is Jack, I think it could still be a little choppy. We certainly have the opportunities to have the growth, but for us to speculate and say that the growth we had in this quarter will be the growth that we project going forward, I think could be misleading, but we know that there will be growth, but we're still working, we still have our franchisees that we're working with to enhance the franchise proposition. It was one of our key strategies. We're still trying to improve the supply chain for the franchisees. We still, as Nick talked about, the areas that's been his previous responsibility in commercial and industrial, I think we already touched on those in diagnostics and information. I can't tell you it's going to stay at those levels. There'll be growth, but we still just have a lot more to do, David.

Right.

Somebody asked me at the last call where I thought we were, and I said on a scale of 1 to 10, I thought maybe we were between 2 and 3. I might change that to say maybe we're about 3 today.

Okay.

Still have a lot of opportunity ahead.

If you look at the Blue Point product, where are you timing-wise on rolling that out? Is that across your system today?

No, we're still in the early stages of it. I mean, we, we probably have, I don't know the exact number, but maybe 40% of it, of the product that we want for the longer term, and this rolled out, but we still, we have another split and focus group working solely on that, and it's headed by a senior executive whose been with the Company for a considerable time. We're really pleased with the results that he and his group are achieving, not only in the Blue Point but the RWD program as well.

Do you have any way of gauging the Blue Point sales, how much of those are incremental versus cannibalizing the Snap-on brand.

That echos back to the commentary we were talking with Jonathan about. The encouraging part, we've looked at some of these key product categories, we haven't seen changes or decrease in the sales of the comparable Snap-on branded products and those important skus. I think that does speak to, early on at least, to the success of the strategy, which was all built around new customers, the guy that wants a second set of tools for his home, the occasional tool use or the technician that just, new to the trade, can't necessarily afford to buy Snap-on today, but wants to get into Snap-on and be part of Snap-on. Early indications are that the segmentation strategy is working.

If you recall, David, we piloted this in Australia before we launched it here in North America, so we already had several months of results down there. We didn't really cannibalize the Snap-on, actually what we were doing is getting new customers. That's what's happening here in the U.S.

Great, thank you. Nice job everyone.

Thank you, David.

This concludes our question-and-answer session. I'd like to turn it back to management for any additional or closing remarks.

Again, we'd just like to thank you for joining us here this morning. And again, I would just like to thank our associates worldwide for all of their hard work and contributions during this time. Obviously we're counting on that to continue for the foreseeable future. Trust everybody will have a good day. Thank you.

Thank you very much.

Thanks.

Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.