Good day, and welcome to the Snap-on Incorporated 2017 Second Quarter Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mrs. Leslie Kratcoski. Please go ahead ma’am.

Thanks, Anna and good morning everyone. Thank you for joining us today to review Snap-on’s second quarter results, which are detailed on our press release issued earlier this morning. We have on the call today, 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’ve provided slides to supplement our discussion. These slides can be accessed under the Downloads tab and the webcast viewer, as well as on our website, snapon.com, under Investor Information. 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 state 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 of 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, Leslie. Good morning, everyone. I’ll start the call with some highlights of our second quarter. I’ll speak about the general environment, the trends we see, some of the headwinds we’ve encountered and the progress we’ve made. Then Aldo will move into a more detailed review of the financial. On an overall basis, our second quarter was encouraging, we believe that once again offered evidence of advancement along our runways for both growth and for improvement. Reported sales were up 5.6% to $921.4 million and that included unfavorable foreign currency translation this quarter an impact of $12.5 million. It also reflected an incremental $38.4 million from acquisition last years Car-O-Liner and Sturtevant Richmont operations and this year is BTC and Norbar business. Our organic sales for the quarter rose 2.7% with varying increases recorded by every group. The opco operating margin reached 19.9% up from 19.1% in 2016, and that 80 basis point increase reflects the higher sales but it also represents the power of Snap-on value creation to driver earnings growth. For financial services operating income grew to $54.6 million from last year’s $49.5 million, combining with opco to offer our consolidated operating margin of 23.9%, up 100 basis point. Our earnings per share they reached $2.60, up from the $2.36 of last year a rise of 10.2%. Those are the numbers. Now for the market, from an overall macro perspective, we do believe the automotive repair arena remains favorable. The Tools Group organic activity was up slightly, smaller again then the previous period. That said, we don’t believe the second quarter results indicate a softening marketplace. We’re not hearing or seeing that rather it reflects the specific headwinds like sales decrease around our tool storage product line. On the other side of automotive, our automotive repair operations RS&I…

Thanks, Nick. Our consolidated operating results are summarized on Slide 6. Net sales of $921.4 million in the quarter increased $49.1 million or 5.6% from 2016 levels, reflecting a $23.2 million or 2.7% organic sales gain, $38.4 million of acquisition related sale and $12.5 million of unfavorable foreign currency translation. Foreign currency movements adversely impacted our Q2 sales comparisons by 150 basis points. The organic sales gain reflects ongoing progress in serving the vehicle repair sector as well as more broad based sales growth to industrial market segments in our C&I Group and more than we’ve seen in sometime. Consolidated gross margin of 50.2% improved 80 basis points, primarily due to the benefits from higher sales and savings from RCI initiatives, partially offset by 20 basis points of unfavorable foreign currency effect. Operating expenses of $279.3 million yielded an operating expense margin of 30.3% in the quarter unchanged from year ago and sales volume leverage and other benefits were offset by 70 basis points of operating expenses or acquisition. As a result of these factors, operating earnings before financial services of $183.7 million, increased 10.4% and improved 80 basis points to 19.9%, despite the 70 basis point impact from acquisition and 20 basis point of unfavorable foreign currency effects. Financial services revenue of $77.7 million increased $8.4 million from 2016 levels, and operating earnings of $54.6 million, including $0.5 million of unfavorable foreign currency effects increased $5.1 million. Consolidated operating earnings of $238.3 million, including $4.9 million of unfavorable foreign currency effects increased 10.4%, and the operating margin of 23.9% improved 100 basis points from 22.9% a year ago. Our second quarter effective income tax rate of 30.6% compared to 31.0% last year. Finally, net earnings of $153.2 million, or $2.60 per diluted share increased $13.1 million, or $0.24 per…

Thanks, Aldo. Snap-on second quarter Tools Group, tepid growth, but having the advantages going forward of a strong franchise network and a robust market. C&I accelerating growth, up mid single-digit, broad gains in the critical industries and the continuing upward march of SNA Europe and RS&I, another high single-digit quarter, up 8.3% organically each division contributing to that rise, confirming both the opportunities in automotive repair and our progress with repair shop owners and managers. The positives of C&I and RS&I combining to overcome the challenges in tools, making for overall organic growth of 2.7% and Snap-on Value Creation, driving improvement, customer connection, innovation in RCI, authoring margin progress again. Opco OI margins of 19.9%, a rise of 80 basis points against currency and acquisitions. And acquisition, presenting near-term margin dilution, but offering further landscapes for Snap-on Value Creation and margin improvement going forward, it was a quarter in which we saw a challenges, but overall, we overcame and demonstrated growth and improvement again. EPS of $2.60, up 10.2%. It was an encouraging quarter. And we’re confident. We’re market that our markets have the opportunity, our businesses have the position and our team has the capability to continue our ongoing positive trend and performance going forward. Now before I turn the call over to the operator, I’d speak to our franchisees and associates listening to the call. The encouraging result to the second quarter reflect your capability and your commitment, for your ongoing achievement and your commitment. For your ongoing achievements, you have my congratulation. And for your extraordinary dedication to our team, you have my thanks. Now I’ll turn the call over to the operator. Operator?

Thank you, sir. [Operator Instructions] And we’ll now take a question from Liam Burke with FBR Capital.

Thank you. Good morning, Nick. Good morning, Aldo.

Good morning, Liam.

Good morning.

Nick, can you give us some color on diagnostics sales and what the innovation or new product pipeline would look like in that area of the business?

Well, we don’t like to give away the secrets that we’re going to rollout say at the SFC or so because we like to electrify the people who go there. I just talked to our franchisee in California who said, he likes to get the fever when he goes on the floor. So we want to have that, but look, our thermal imagers are still selling well. That still got legs, that’s the new category that’s going well. Overall in the Tools Group, the diagnostics category was up, I think mid single digits in the U.S. The U.S. numbers, have those. So if that was in part of that statement raise, and even in that we saw a destocking so it would have been up bigger without what we perceived to be destock, so you have that and then you have the ETHOS, which is the next level. We keep refreshing the platform. Remember, there are four levels of platform. ETHOS, for the entry-level tech; SOLIS for the guy who kind of worked on breaks, and there’s a whole bunch of the other little bit, more sophisticated jobs; MODIS for the guy who really works on the more complicated jobs and VERUS for the guy who works on those things that only happen on money. So we rolled out the ETHOS and we’re doing out some new wrinkles in the SFC, but the ETHOS has just come out, very early days. We have it in the script here, but that’s only been selling for a little while, but the first numbers are pretty good. It was up nicely in the second quarter.

Okay. And on the Rock ‘N Roll Van, you said you were going to go back and do some things differently. What would you anticipate doing to improve the space constraints that the van drivers would have on some of the products?

Sure. One of the things that when we saw these results, I decided to talk to a bunch of franchisees. So in the last couple of weeks, I don’t know when we got the results, but I’d say a couple of weeks ago. Right away I met with guys from Illinois, Wisconsin, Indiana, rode some vans in Arkansas and Texas told the guys in New Hampshire, Florida and California and almost everybody said that the Rock ‘N Roll Cab had lost some of its excitement. So it’s a matter of – it’s not really the function, Liam, it’s having people get on the van and saying, oh this is something different, an experience. I want to get on the van and experience because that’s what they did before. So we’ll do stuffs like rapid differently with some of our new facilities. We’ll reorganize the tool boxes. We’ll try to put some more spiffier and stuff on in terms of the box as on the van. So I’d like to say, it’s a matter of this, when the technicians were getting on, they – they get feedback on them and they, think I saw this. Now some of the guys have bought because they look at the boxes, but other guys were kind of saying, I done that, so we’re going to try to make it a different experience, move around some of the floor plan, maybe kind of put on some a little better computer aid, things like that. So I think it’s really to change the – I want to say the cosmetics of it more than anything else, so people feel as though they’re getting a different experience.

Great. Thank you, Nick.

We’ll now move to David Leiker with Baird.

Good morning, gentlemen. How are you doing?

Good morning, David.

Couple things, I’m trying to – I guess I’m trying to slice the business up a little bit to get a deeper understanding on some of the pieces. Can you talk within – first of all, you said on the tools side that the destocking. Is there way to characterize what the selloff the truck volume was during the quarter?

Well, look. I don’t think we want to get pinning down that variable, but what I’ll tell you is sort of like this. You think about it this way. Tool storage was down fairly significantly even off the trucks, but less so than we had, okay. So that’s why we say tool storage, the product line. We believe it needs to refresh. We need the marketing, the Rock ‘N Roll vans need something that helps and so we’re working on that. If you look at everything else, if you take everything else, like this, two type you are very familiar with this, it’s easy that the finance stuff and the RA stuff, the stuff that what we know is the stuff that the franchisee sells on his own credit like hand tools and power tools and shop and pack, and in some portions of diagnostics. That was up fairly significantly, towards the top of the ranges that we expect to see from the Tools Group. So we would have classified that it as a fairly robust quarter, looking at the sales off the van, that didn’t translate into our sales though. Our sales were quite mixed in those categories and a quite tepid. So what we – and you talk to the franchisees and what they said was it makes sense is that always July is the lowest quarter because people are getting ready. But what happened over the years is more and more the ordering is taking place in these burst. That doesn’t mean the second quarter becomes incandescent, but they’re taking place at these bursts and so I think they’ll be more aware of the need to kind of get ready for these orders. Last year, the orders in the SFC were up quite strongly in the before as well. So what’s happening is, is that they’re bleeding out – out of July into June, that’s what happened. We saw a significantly weaker tail end of June than we have seen in the past.

Okay. And then the other item you mentioned it couple of times in your call, obviously the topic going on in the marketplace today. Can you talk about the changes – the terms you did with your franchisees on the credit side, how frequently you make those changes, just some initial color behind that.

We make them pretty much every year, some kind of changes and I think since 2009 or 2010 we’ve made significant changes in most of the years, in a lot of years so that happens. What you do is you look at how people are performing. You say how is the business? How are the franchisees? Who are big active parts? You try to restructure the program so it guides them to get the best out of their opportunity, and that’s what we did. And so that had some initial impact because we identified some customers who are weaker and we said some of the franchisees are having some of the greatest results, and that’s where we strip them. So those franchisees would be focused on those guys and really couldn’t deal with them as much. Whereas other guys, we have lots of faith and we let them deal with that same category, that’s the restriking pretty much.

And then the last item here again on the credit side, if we could talk a little bit about, I mean you can tell by the yield that clearly, if you go back a couple of years, you took in some high-risk customers, some of that was after CIP funding the credit company. Recently, that seems to have backed off a little bit. Can you talk a little bit about what those credit losses are in the pool of high-risk customers when we’ll see those flow through the credit losses in terms of peak loss period.

David it’s Aldo. I think you’re seeing that now when you look at the year-over-year differences in the rate of provision and the rate of charge-offs. And I don’t think that you’re going to see a decline in those rates, so to speak, but I don’t think you’ll see an acceleration either. And I think if you look since the started of the year, there’s been rather good amount of stability, so it’s rather cut them out. So the portfolio constituents are more or less where they’re at right now, I don’t see that changing very much. I think the franchisees are always adjusting as Nick suggested to the fact and circumstances that they face on the Street each and every day, but the portfolio losses right now are more or less stable throughout the year, at least year-to-date.

Is that fair to say, I’m going to jump to the conclusion, but is it fair to say with that commentary that credit profile, credit risk profile, the people who are coming into the credit side on the origination side are similar to what the overall pool is today?

It’s a hard question to answer because you have a – you have the portfolio whose customer FICO scores are improving and the other half of the portfolio that actually might be a little bit less than improving. So if you look at the mix overall, the average FICO score of the portfolio has been rather consistent, but anything goes out, it changes overtime but not dramatically.

Okay, great. Thank you very much.

Sure.

We’ll now take a question from Scott Stember with C.L. King.

Good morning, guys.

Good morning.

Could you maybe talk about the timing of when comparisons in the Tools Group get a little bit easier and most considerably with regards to tool storage? And then maybe secondarily, just talk about some of these changes in the vans, make them a little bit more exciting, increasing traffic into the vans for tool storage, when that will actually start to take place? Thanks.

Sure. Look, I don’t know. Look, I don’t think we ever think we have easy comparisons. I think we kind of look – I mean, okay. The comparisons are easier, but they’re up 0.5%. This is the best second quarter ever in terms of sales. I mean, the increase wasn’t the best, and the profitability is the best ever. So I don’t think we think in those terms. I think the question is how you are going to restart, it’s clear to us that the primary factor in the sale slim situation in tools was tool storage. So first is product. Tool storage is among the most discretionary things. You’ve got excite people they got to want it, they got to aspire to have it. We’re working the SFC will come up in early August will be launching a whole bunch of new product that the SFC to try to roll people and excite them. We tried some of that in the second quarter, some of it worked and it wasn’t enough and then the tool storage and the van, the Rock ‘N Roll Cab, there are I think 67 of them. So what we will do over the next, say, quarter, we’ll be developing – in this quarter, let’s say, we’ll be developing possibilities for the new van. We’ll probably test some of them and then we’ll roll them out whatever works best. So it will be a test period, development period, a test period and then a rollout period. And you tend to roll them out, so you should start seeing some of that as, well, I don’t know, toward the later end of the year, things like that. But first is product. The first factor is product. First factor is product.

Got it. And just last question. Yes, sure, you talked about the sell-through on the vans, I guess outside of the tool storage of being relatively strong or actually to the high-end of the year, which you look for. Can you maybe just give us a flavor of how high that was? Just give a comfort level to how strong the rest of the business is doing?

Okay. I’d say that Snap-on should grow at 4% to 6%. I’ve said this for a dog’s age. That’s my range. So I’m talking to the end of that range. That’s the kind of thing we talk about, right? Okay.

Perfect. Thank you.

We will now take a question from Gary Prestopino with Barrington Research.

Hey, good morning all.

Good morning, Gary.

A couple of questions. On the C&I Group, I think you said that you had some pretty good sell-through there in hand tools and then across various markets. But I’m wondering, were all of the markets within the C&I Group, is this one of the first times where you’ve really seen upsales year-over-year? And I’m particularly interested if some of those laggard groups like military and energy are starting to energize.

Look, natural resources was up. Natural resources, in general, that sort of natural resource segment was up. International aerospace, which had been a laggard, was up. We’re very pleased to see that. Military, actually, was flat. I kind of viewed that – kind of flat, it was up a little bit. I kind of view that as a positive, Gary, because the thing is military, as you know, it’s kind of lumpy and it had been dominating our quarters. So actually, last quarter was sort of the same kind of thing, we had broad growth. This time with military, not as much a factor in the growth situation. And this time, the same thing was the case. So this was a very healthy quarter and you’re seeing acceleration in industrial. C&I’s numbers, if you go back and look at them, you’ll see that we threw, four quarters ago, 1.5%, 2.4%, 3% and 4.7%. So people, if you look at this, other people have looked at the segment and say, well, there’s some deceleration. Well, this is acceleration. And so that’s pretty positive, and the nature of that’s been pretty good. And industrial has been up higher than that.

Okay. And then some of the strength you’re seeing in the RS&I Group with diagnostic equipment and other equipment, I’m really more pertaining to diagnostic, do you feel that, that’s a function of really rolling out some of these newer products? And in conjunction with that, you’re starting to get some cars that are four or five years old that had maybe a higher technological content than cars that were 10 years old, flowing through in the – to the independent repair shop market?

Sure. There’s a – I don’t want to short change some other factors in there. But if you look at the diagnostics, it’s a great tailwind. The increasing need for diagnostics to create repair, you know it as well as I do, is that 40%, 50% of repairs on cars today require diagnostic. But new cars, that’s all the cars 11.5-year-old average car fleet, but if you look at new cars it’s 80% of the repairs. So there’s an increasing demand. You hear it in the shops when you go around. We have the best goal alternatives. So you see our new products rolling out, exciting customers, solving their problems against the backdrop of their needs, that’s partially what you’re seeing, and diagnostics was up nicely in that quarter. But I wouldn’t want to short change Mitchell, which is a purely short, purely software business, which provides repair shop management and provide repair shop – repair information, our Sure Track database with the 1 billion record that only we have of repair, shortcutting repairs. That was up big in the – nicely in the quarter. So you take those two things, I think diagnostics is in – I mean, RS&I, in general, is in a situation where the tailwinds are only intensifying and where the best game in town.

Right, thanks. And then the last question really pertains to tool storage and you say you refreshed the product, refreshed the vans. When was the last time that you actually did something like this? And then how long after you refreshed did the sales start reinvigorating themselves?

I don’t know. We didn’t refresh. We launched the tool storage vans and this is – you got the first – when you launch, you probably – I think it’s fair to say we had some periods where we’re adjusting. But really, they’ve been pretty much the same since we launched like five years ago.

Okay.

So we haven’t had that information in this kind of fleet. We haven’t had this kind of fleet. This was a brand new idea. You remember I said it’s the kind of idea that came to the Tools Group guys. We thought it was brilliant. It accelerated tool storage sales. But now, it’s kind run out of mojo. Now we’re still generating some sales, but franchisees are telling me that what they used to generate is now half of what they generated when they get these guys in a route, so we need to pump them up. But this is why we have managers to figure this out, that’s what we do.

Yes. I guess, what I was getting at, Nick, is there something on the product side that you – do you refresh every five years understanding like…

No. No, I think we try to – what happens is, Gary, we try to roll out new product at the SFC or the kickoffs every year. This year, we’re particularly energized to do it. So you can see sales, you can see ordering pretty quickly from the franchisees. I didn’t get a feeling for that pretty quickly at how good that worked. The question is, is it going to play out into the marketplace? So there are two levels, getting the franchisees interested and then having the technicians look at it and say, "Hey, I got to have that box. I already got a box, but I got to replace mine."

So I guess the question I would have is relative to new products or product refreshes that you bring into this annual meeting that you have. On the tool storage side, have you done more in terms of maybe intro or refreshing product than you would usually do?

We’re doing more and we’re certainly going to do more in tool storage at the SFC this year than we have been in the past. So think about the SFC though, no matter how much the SFC orders are, remember, they’re ordering for like six months, so it doesn’t happen immediately, right? Okay. But we’re doing more. Sure, this is the whole thing. We think the product line is weak. If it’s not doing, we got to pump it up.

Okay, thank you.

Thanks, Gary.

We’ll take our next question from David MacGregor from Longbow Research.

Yes. Good morning, everyone. Just a few questions here for you. Nick, could you just talk about the destocking in the extent to which that may be related to some of the changes you made in the credit business?

We don’t think it’s that. We think the credit is – while the destocking is something completely different. The destocking is, we think – I think I try to – this is my view, David, is that, look, and I think it’s our view here. There are two factors we’re talking about on the Tools Group, destocking and the weakness in tool storage. Destocking is a completely different thing. The destocking is there driven by the size of the orders that are occurring in the SFC and the feeling that our people want to clear the decks. This is happening in every product line, not just tool storage. So from our perspective, that’s not really a factor there. If you come back to the tool storage sales, you could argue – and I think I did say that it’s a tertiary effect, so we don’t believe it’s the primary driver. But re-striping had some initial effect on this, for sure, but we don’t think it’s the primary driver when we look at the numbers.

Okay. Second question is on margins in the tools segment, which were pretty darn good. I guess, could you just talk about the strength at 19.5%, I guess given the flat top line, then how we should think about your ability to maintain this level of margin progression heading into the second half of the year?

I think a couple of things are in there. The first is that if you go back and you look at our numbers, it’s not – if you look at our numbers by division, it’s not unusual to see that kind of growth. It isn’t necessarily directly proportional to the volume. I mean, we have RCI products and new products that rollout that are a lot more, a lot more capable and a lot more value, and therefore, higher margins as they rollout to the industry. So it really plays out how long those new products and how many new ones we rollout, and how effective they are. And then in this particular – so in this quarter, in that area, we have things like the PT850. I think I talked about it last time, our new half inch impact wrench, very, very popular product. In the atmosphere of tepid sales, that one sold very well, nice margins. I talked about the long handle ratchet’s that have the flex heads and were – gave great leverage and also gave great access, that sold better than – great margins. And these margins transformed our categories in terms of margins. What happened in the destocking in a lot of situation is some of the more standard and core product didn’t sell as much because they were products that we’re already on the van. And so that was, perhaps, lower margin so it’s skews the thing towards there. And then we had good leverage in the way our businesses were stronger internationally than they were in the U.S. and the compensation in the international is a little bit different. So we tend to get a little bit more leverage and drop through volume leverage out of the volume, so that’s what made for that. I think it’s hard to say what the sustainability is of this, but we believe, I’ve said this over and over and over and over again, that we believe we can drive margins up, absent volume increases. And if you look at our numbers, 19.9% ain’t chopped liver. It’s our highest ever. And so you go back and you look at this quarter, for example, this quarter is very similar to last 20 quarters, 9 quarters were similar to this and we grew 100 basis points or more. So I really believe maybe the 19.5% isn’t sustainable every quarter, but it’s an indication we can reach that level and we keep going off those levels, that’s our history.

Just a couple of quick follow-ups here. The storage growth, I don’t want to beat this thing to death, but Aldo, in his discussion, the originations mentioned that there have been $12.5 million decline in the originations related to storage, 5.1%. Is that a good proxy for how we should think about the extent to which storage was down year-over-year?

No. Storage is down more than that.

Can you quantify that for us?

Well, storage is down double digits. I don’t want to get confused here because I spoke probably for the first time on this call about sales off the van. Don’t get confused about sales off – I’m talking about our sales. Storage was down double digits. And so that played out into a different lower originations. But remember, in originations, originations are the franchisee sales. Their storage was down but not as much. And then you also have in that, you have other products like diagnostic units and other things like that so it’s hard to make that characterization. But I just thought tool storage was painful.

Yes. Last questions just on the originations. With originations maybe set to go through kind of a negative growth pattern here for at least the foreseeable future. This would presume that you got a little bit more cash, sort of discretionary use of free cash flow. You were jacking up your share repurchase activity this quarter, which was good to see. Do we expect to see that pattern maintain going forward? Do you sort of lean a little harder into the repurchase as use of cash?

No. I think we’re always discussing the use of cash and we’ve always said, I think, that you have investment in your business and you have acquisitions and you have dividend, and of course share repurchase is part of that. So we always consider that in the context of the cash availability, the authorizations we have from the board and the attractiveness of the pricing.

Thanks Nick.

And we’ll take our next question from Bret Jordan with Jefferies.

Hi, good morning guys. A question on the destocking discussion. I guess the franchisees have a minimum balance requirement anyhow. How close does the average franchisee runs to minimum balance? I mean how much more potential for destocking is there? Or are we really sort of out of – are we going to find some base relatively soon?

Look, I think this, I think we’re going to see destocking through July then they’re going to come up to the SFC. This destocking, I don’t think – it wasn’t – I don’t think it was driven so much by people saying, I got too much inventory. It was driven more by the idea, that the ordering patterns are migrating toward big orders – more toward big orders at the buy, twice a year events. And they order these things because they, like I said, the franchisers get on the floor and they get the fever and are able to – for the first time, touch the product and they order the packages, they see the new product and they tend to order more and these things get delivered for like six, eight months after that. So the lower they are – the better – the more stabilized they are going into that, they’re starting to realize, the better off they’re to manage that six, eight month delivery pattern that they’ve signed up for when they go into these places. That’s was happening so there’s a little bit more ordering happening at the big events and less maybe on whatever the monthly events are. We have monthly events and so, I think, that’s what you’re saying. And because the SFC has been sold, I think that’s what I’m hearing because the SFC has been sold successful, people are bringing it down. I don’t think they’re thinking that, oh, I’m joking on inventory.

Okay. I guess in your inventory, you talked about growth around new programs and future customer demand. Can you talk about the categories that you’re growing? Is this RS&I inventory that you’re building up because you’re seeing so much strength there? Or just some increase in your inventory, as you seen a little bit of destock but you’re building inventory with expectation as they’ve tick it up in the current quarter?

Yes. The answer is for both of those. Look, I think we saw it some destock, but we’re kind of confident that – as the SFC rolls out, that inventory is going to be quite useful that’s we’re building toward. The RS&I business, hey, it’s smoking. It went well. I mean, the thing is in RS&I, in some cases, we can sell – we want to have inventory because we have quite good demand and even in the Tools Group, really. I mean, we sold – I believe, we sold every PT850 we could build this quarter. So I mean, the thing is you do have this kind of things, so we’re happy to have some inventory going to the SFC for that kind of thing.

Okay. And then on the last call, we talked about – I’m running a special sort of tool color program that was going to drive incremental demand. Have we’ve rolled that out yet? Or is that something that coming in the current quarter around this big event?

No, no. We’ve rolled it out and it worked, but didn’t have enough effect. We rolled out a special call and we had a couple of split with top boxes, with the couple of minor changes. We did it as quick as we could because we – second quarter, we weren’t quite ready for it. So we rolled that out and it worked pretty well. It was a purple box. Now, we have a number of different things like different mechanisms for the box, different power configurations for different product lines, different in array of more colors that come out in like an SFC. So it’s a much more comprehensive thing.

Okay. And a housekeeping question for Aldo. On corporate expense, I think a couple of years ago, I think you guys have given some a range of guidance like 90 to 100 and we keep coming in below that. Should I think about future corporate expense being closer to what we’re seeing this quarter? Or does that whole guide still hold?

I think the guide holds, Bret, for this year we’re trending towards the low end of that range, so 90 is about a good target. The reason we have made a little bit the progress this quarter is every second quarter, we true up our pension calculations working with our actuaries. We got a little bit of good news and it’s accounts for most of the year-over-year improvement this quarter, when it comes to that. And then as you go forward, you don’t have the quite benefit of that one-time adjustment. So anyway, corporate expenses trend and may be more towards 90-ish.

Okay, great. I thanks a lot guys. I appreciate it.

We will now take our next question from Christopher Glynn with Oppenheimer.

Thanks, good morning. On the – taking credit a little during the quarter, saw that in originations in tool storage, I think there is probably a relationship there. Would we expect a bigger impact in the third quarter with the full period of the tighter credit practices?

Well, you’ll have – I think we have two months worth in this quarter. You’ll have three months then. On the other hand, you’re offsetting that. Anytime you make a change in credit, people tend to be take a little time to try to understand the new rules more with more clarity. This is just a fact. So I don’t know. You could because you got one more month. On the other hand, you’ll have people operating with more clarity. So I’m not so sure. In any case, we don’t expect the huge impact.

Okay. And on the inventory, it sounds like your sort of we anticipating a tail-off of that. Do you think that the tools growth rate has probably put in a bottom here?

Well, I can never comment. I hate to do that because many times, I’ve been humiliated by saying I thought that things were over, but look, we’re not – this is a very slim quarter for the Tools Group, but I know they’re going to work pretty hard to try to energize this tool storage business and we think the market is strong. So we’ll see how that plays out. I guess, I can’t make any predictions, but I think this is what we do. We revitalize products. We change marketing. This is the kind of thing that Tools Group does and over the years, we’ve been pretty good at it. So I’m confident in them. But I can’t make any predictions on a quarter-to-quarter basis. That’s difficult to say. I’m pretty confident. So that the Tools Group is over time is at – in that range of 4% to 6%, I’m very confident of that.

Okay, thanks. And last one, I was going to ask about to Aldo, how long things that might cycle through this sort of increasing trend of charge-offs? But it sounded, Aldo, like you thought that trend is kind of matured at this juncture.

Yes. I think the kind of level of charge-offs and provisioning we’re seeing right now will be reflective of what we’ll likely see in the second half. You never know what certainty, of course, but like I said, the movement among the credit companies portfolios have been rather stable at this point in time. So we will go back through the level of provisions and what we had a year or so ago, probably not. At the same time, I don’t see it accelerating.

Great. Thanks for the color.

And that concludes our question-and-answer session. I’d like to turn the conference back to Ms. Kratcoski for any additional or closing remarks.

Thanks, Anna and thanks, everyone for joining us today. A replay of the call will be available later on snapon.com, and as always, we appreciate your interest in the company. Good day.

And once again, that does concludes today’s conference. And we thank you all for your participation. You may now disconnect.