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Snap-On Inc (SNA) Q2 2019 Earnings Call Transcript

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Snap-On Inc (NYSE: SNA)
Q2 2019 Earnings Call
Jul 18, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Snap-on's Second Quarter 2019 Results Investor Conference Call. Today's conference is being recorded.

At this time, I'll turn the conference over to Snap-on's Vice President of Investor Relations, Sara Verbsky. Please go ahead, ma'am.

Sara M. Verbsky -- Vice President, Investor Relations

Thank you, David and good morning, everyone. Thank you for joining us today to review Snap-on's second quarter results, which are detailed in 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 have provided slides to supplement our discussions. These slides can be accessed under the Downloads tab in the webcast viewer, as well as on our website snap-on.com under the Investors section. These slides will be archived on our website, 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 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, including a reconciliation of non-GAAP measures, is included in our earnings release and in our conference call slides on pages 14 through 17, both can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick ?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Thanks, Sara. Good morning, everybody. As usual, I'll start with the highlights of our quarter. I'll speak about the general environments, the trends we see, some of the headwinds we've encountered, and I'll talk about our progress. Then Aldo will give you a more detailed review of the financials.

We believe that our second quarter, again, demonstrates Snap-on's ability to continue the trajectory of positive results, overcoming both ongoing headwinds and period-to-period variations, the variations of the current environment. We are encouraged by the results. Like every quarter, we had turbulence from geography-to-geography and from operation-to-operation. North American -- North America was positive with clear growth in that region across our operations and our groups. In this quarter, that progress was attenuated by a slowdown in Europe and the UK, but also in other some important markets like Germany.

An example of that variation was evident in the Tools Group where overall organic sales were about flat. We had gains in the US that were offset by organic decreases in international market. There was also a meaningful impact in currency in the quarter, translation in transactions, a significant headwind. So there was variation, but once again, I think you can say our strengths prevail.

Now the results. Second quarter as reported sales were $951.3 million, flat down 0.3%. But it included a $19.5 million or a 200 basis point impact from unfavorable foreign currency and an incremental $1.1 million from acquisition. On an organic basis, sales grew 1.6%. The OpCo OI was $189.9 million, a decline of $3.2 million, but more than accounted for by $5.9 million in negative foreign exchange.

OpCo OI percent for the quarter was 20%, down 20 basis points from the last year, again, due to negative currency, but still representing the second highest level recorded by the corporation in its current configuration.

For Financial Services, operating income grew to $60.6 million from last year's $57.8 million. That result combined with OpCo, to raise a consolidated operating margin was 24.2%, basically flat at 2018. EPS was $3.22, up $0.10. So those are the numbers.

From an overall macro market perspective, we now believe the automotive repair arena remains favorable for the Tools Group, the technicians. We did see headwinds in certain economically impacted geographies like the UK and Australia, but we also saw continued gains in the US. And as we look forward, we do see further opportunities for advancements as the vehicle techs encounter even more complex repairs.

The other side of auto repair, Repair Systems and Information or the RS&I Group, encouraging progress in the quarter. Expanding our -- Snap-on's presence with repair shop owners and managers, capitalizing on a broader product line, return to growth with a rise in the OEM programs. We like RS&I's potential moving forward. The repair shop is changing, upgrading both dealership and independent shops and RS&I is capitalizing on that trend with database solutions, great software products like continually improving and gaining Mitchell 1 car and truck repair information software, powerful databases that are easy to use, helping the shop fix it right the first time and efficiently.

For the Commercial & Industrial Group, the other piece of our -- the other markets we play in or the C&I Group, sales were up across a number of sectors and geography. In the critical industries, significant growth in the military and our specialty torque division, an ongoing upward trend meeting the need which we always set for increased precision authored by more automated systems and growing momentum in new markets in C&I, in markets like India, which has become a real strong strength for us. So overall, the results remain favorable.

Tools Group, continued improvement in the US offset by headwinds in international markets. RS&I, resurgence in OEM dealerships and continued strength in repair informational offerings and gains in multiple sectors and geographies across C&I. That progress outweighed the challenges and the results confirm it. And the strong operating income margin clearly demonstrated, once again, the leverage and the power of Snap-on value creation; safety, quality, customer connection, innovation and Rapid Continuous Improvement.

Snap-on creation, developing new products and solution born out of insights and observations gathered at our customers' workplaces, which together with RCI, helped again drive the progress and overcame the current difficulties.

That's a macro overview. Let's move to the segments. In the C&I Group, organic sales were up $6.2 million or 1.9%. Now including $10.1 million of unfavorable foreign currency and an additional $1.1 million of -- from my acquisitions, second quarter as reported volume declined $2.8 million [Phonetic]. From an earnings perspective, C&I operating income was $48.9 million, about the same as last year. Operating margin was 14.6%, 10 basis points better. We mentioned in April -- the pieces of this is that we mentioned in April, the importance of torque in a world of increasing autonomous operation and precision. Well, that makes the positive performance of our specialty torque division, a high-single digit increase in volume in the quarter, particularly encouraging. Europe overall was challenged, but SNA Europe delivered yet another quarter of sales growth achieved in a difficult environment. In critical industries, variation across the segments, but overall, it was up showing positive progress and a promising outlet -- outlook.

We're confident and committed to extending in critical industries 11 straight quarters of growth, authored by our strengthening lineup of innovative new products matched to the task. Our military segment had a strong quarter, capturing significant long-term contracts and product breadth and strength, because of the difference. And as I said, our torque business has been marching upwards, becoming a clear success story, and our recent innovation played a big part in that. Innovation evident in great new products like the ATECH FR-125 electronic torque wrench launched early -- it was launched early in the quarter, it's got an extended range up to 125-foot pounds, and it's enabled with our new torque angle adjustment capability.

These -- now these days, automotive repair and maintenance procedures require torque above 100 foot pounds. And the new ATECH 125 produced in our City of Industry, California plant covers those extended requirements. But beyond the torque capability, the unit has a stronger pivot point. It utilizes a rugged, Dual 80 ratchet design. Combined both of those, the pivot point and the ratchet design, 82s [Phonetic] ratchet designed combining for more durability.

It also comes with our Patent Pending, it is a cool thing, Multi Axis Gyro Compensation system. So that automatically adjusts torque results when the ratchet head is angled, so it provides and produces significantly greater accuracy when making measurements. Accuracy, versatility, durability, all in one. Technicians all over are looking to replace multiple mechanical wrenches with a single ATECH 125. Snap-on is already the leader in electronic torque, and the ATECH 125 makes us stronger and that will become more important as we go forward. The first shipments were delivered in April and the sales have been robust.

Also in the last quarter, helping to mitigate some of the geographic turbulence, we launched a new window scale torque wrench in Europe, the Bahco-74W. It's aimed specifically at European -- sort of preferences of our European customers. It's produced by our recently acquired Norbar operation, and that's in the UK, with the chemical resistance -- it's got its chemical resistance, soft-touch handle using the well-regarded BAHCO ergonomic design, gives -- makes a really comfortable feel when you use the wrench. Each wrench also features adorable and accurate clicking mechanism that provides tactile and audible signals, and is capable of withstanding a 100,000 cycle. So it's quite durable.

Consistent with the -- also consistent with the preferences of the Europe's techs, settings on a 74W can be quickly adjusted using a built-in window showing a dual-scale for new meters of foot pounds. It's quite different than what we use in the US in terms of the way we see torque, affording greater clarity and ease when reading torque value. Sales of the overall European torque line have increased double digits since the launch. The 74W is shaping up to be quite a success for us. C&I, a promising quarter, moving down the runways for growth and delivering profitability.

Now on to the Tools Group. Organic sales, flat down, I guess 0.2%, reflecting lower -- it pretty much reflects lower sales in the international operations, predominantly in the UK and Australia being partially offset by gains in the US. It's a pattern similar to last quarter, really. Operating earnings were $71.3 million, down $7.7 million, including $3.8 million of unfavourable foreign currency or a margin -- OI margin of 17.6% compared to 19.2% from last year. That margin includes 70 basis points of unfavorable foreign currency and higher investment of field support activities, enabling the demand for our hand tools and underpinning the training for intelligence diagnostics. So the Tools Group, another positive quarter in the US, balancing international turbulence. We do believe our van network remains quite strong.

In late June, I spent some time with dozens of franchisees at the NHRA Nationals near Chicago. They had a quite positive outlook on their position and on their prosperity. But beyond the windshield surveys like that, we see other indications that continually strike like the franchisee heath metrics we monitor -- those are the numbers we monitor and evaluate regularly. In this quarter, they remain favorable. So qualitative and quantitative indicators, both positive and the positivity is just not from our own internal lens. It's reflected in the external view. In fact, this year, we will once again be acknowledged by the hour -- by an outside publication. Snap-on was recognized as a Number 18 in an entrepreneurs magazine, Best of the Best for 2019 The Annual Franchise 500 ranking. That evaluates companies for more than 150 data points in areas of cost and fees, size and growth, franchise support, brand power, financial strength and organizational stability, among others. Our position in this year's ranking represents a substantial rise over last year, and once again, we scored highest in the Tools Distribution category. In fact, we've held that top spot for some time.

Now, this type of recognition, I think reflect the fundamental and contemporary -- fundamental and contemporary strength of our franchisees and our overall van business. And it would not have been achieved -- we wouldn't have the enthusiasm for the franchisees without -- with other franchisees, without the continuous stream of unique new products. Hand tools were up in the quarter. And it was driven by great new products like our F80MP Multi-Position Ratchet. Features ahead that index is in 16 positions across 240 degrees, a number of different -- much variability, giving it much better -- and that gives it much better access to fasteners around blind corners and it's also a two-in-one unit that functions both as an offset fixed head ratchet and as a speeder with a 360 degree crank for quickly tightening or loosening fasteners, it's quite versatile. Sales have been strong and we already have plans for additional drive sizes, different handle grips, and more colors that's going to expand into a full line.

Another product of impact was the Snap-on SRPCR Series. It's a Snap Ring Plier line that's launched this quarter, showcasing a significant design improvement. Snap-on ring pliers are virtual units that can be used on both internal and external rings, switching from compression to expansion mode, accommodating a variety of repair and removal on assembly desk. This new design allows the technicians to execute that compression to expansion and conversion up to 80% faster, utilizes a quick release push button rather than the thumb screw mechanism that's common on competitor products and is on our previous model.

Pliers, they're manufactured in our Milwaukee plant. So we can do this because of advanced forging -- cold-forging techniques and high alloy steel creates the strength and durability required to enable that new design and support that speed. Beyond the push button system, the new unit also features extended jaws, making it easier to access hard-to-reach retaining rings and to top it all off, it's got an ergonomic cushion for considerably more comfort and control. No wonder it's popular. Our new tools are in fact making a difference with the franchisees and in the tools group.

Now on to RS&I. Sales of $348.8 million -- $348.9 million, up $5.8 million reflecting an $11.7 million or a 3.5% organic gain, primarily due to the return of the OEM dealerships -- higher sales in the OEM dealership business, the essential tools business. Unfavorable foreign currency translation of $5.9 million was an offset, but then the as reported rise to 1.7%. Now, RS&I operating earnings are $88.6 million in the quarter, including an offset of one -- including offset of $1.2 million of unfavorable foreign currency effects compared with $88.7 million in 2018.

The operating margin was 25.4%, down 50 basis points from last year's pretty strong 25.9%. The variance primarily affects -- reflects that the higher sales of OEM essential programs, which boosted the sales, but tend to have lower operating margins than the average RS&I activity is still a good mark. Having said that, we continue to clearly see abundant runways for growth in RS&I and we work then to take advantage.

In addition to using diagnostics and repair information offerings we have, we recently introduced the V2000 John Bean Aligner. It replaces the traditional workstation design with a more compact design -- device utilizing an ordinary tablet and a new camera, a beam configuration effect, considerable speed and ease-of-use, and we put it in a small overall footprint. It introduces imaging alignment to the compact segment of the market and the research has been pretty enthusiastic.

Also in the quarter, we introduced our new unique calibration array. We're really excited about this new calibration array for Advanced Driver Assistance Systems or ADAS. One of the prominent trends in late -- ADAS is one of the prominent trends in later model vehicles and developed by our diagnostics team, and a special target apparatus E-shops and recalibrating pollution avoidance systems. As to body repairs there is glass replacement, we will need a wheel aligner for all makes and models of [Indecipherable] facing cameras. The ADAS calibration versus VAR ADAS calibration system was ideal for general repair occasions and for collisions stops, enabling those independent facilities that now finalizes a repair without having to visit the OEM dealerships. That's a great advantage when operating in the more complex world, the more complex sensor-enabled we're operating on, more complex sensor-enabled later model vehicles. It's very popular. It's gonna be even more popular.

So to wrap up, RS&I, improving position with repair shop owners and managers, growth in OEM dealerships, driving organic sales gain, expanding product lines. Margin is down some, but still quite strong. Well, those are the highlights of the quarter. Tools Group, mixed; US up, international down. C&I reporting an overall positive performance, especially in torque, and RS&I expanding strength in critical repair information and raising its OEM project activity. Progress along the runways for career and [Phonetic] growth and advancements down our runways for improvement.

Overall sales increasing organically 1.6%. OpCo operating income margin, a strong 20%, the second highest level ever reported by the corporation. EPS, $3.22, up again despite the headwinds. It was another encouraging quarter.

Now I'll turn the call over to Aldo. Aldo?

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Thanks, Nick. Our consolidated operating results are summarized on slide 6. Net sales of $951.3 million in the quarter were down 0.3%, reflecting a 1.6% organic sales gain, $1.1 million of acquisition-related sales, and $19.5 million of unfavorable foreign currency translation. The organic sales gains this quarter, principally reflected double-digit growth in sales to OEM dealerships in the Repair, Systems and Information segment, and low-single digit growth in the Commercial and Industrial segment. Sales in the Snap-on Tools segment were essentially flat, but included low-single digit gains in the US franchise operations. Overall, sales to customers in United States increased across all segments, while sales in Europe, particularly the United Kingdom continue to exhibit weakness on a year-over-year basis.

Consolidated gross margin of 49.8% compared to 51% last year. A 120 basis point decrease primarily reflects increased sales and lower gross margin businesses, 20 basis points of unfavorable foreign currency effects, partially offset by savings from RCI initiatives. The operating expense margin of 29.8% improved 100 basis points, primarily due to organic sales volume leverage, including higher volumes and lower expensive businesses, lower performance-based compensation costs and RCI savings.

Operating earnings before financial services of $189.9 million, including $5.9 million of unfavorable foreign currency effects compared to $193.1 million last year. As a percentage of net sales, operating margin before financial services of 20%, including 20 basis points of unfavorable foreign currency effects compared to 20.2% last year.

Financial Services revenue of $84.1 million and operating earnings of $60.6 million increased 2.6% and 4.8% respectively from 2018, reflecting a year-over-year growth of our Financial Services portfolio, as well as lower provisions for credit losses.

Consolidated operating earnings of $250.5 million, including $6.3 million of unfavorable foreign currency effects compared to $250.9 million last year. As a percentage of revenues, the operating earnings margin was 24.2% in both periods.

Our second quarter effective income tax rate of 23.6% compared to 23.8% last year. During Q2 2018, our tax rate included a 20 basis point benefit related to the implementation of tax legislation in the United States.

Finally, net earnings on a reported basis of $180.4 million or $3.22 per share included a $0.09 unfavorable impact associated with foreign currency compared to $178.7 million or $3.12 per share a year ago. In Q2 2018, excluding a $0.01 per share benefit related to taxes, adjusted earnings per share was $3.11.

Now, let's turn to our segment results. Starting with C&I Group on slide 7, sales of $335.0 million in the quarter decreased 0.8%, reflecting a 1.9% organic sales gain and $1.1 million of acquisition-related sales, which were more than offset by $10.1 million of unfavorable foreign currency translation. The organic growth included a high-single digit gain in our specialty tools business, as well as low-single digit increases in both the segment's European-based hand tools business and to customers in critical industries.

Gross margin of 38.6% decreased 80 basis points year-over-year, primarily due to increased sales and lower gross margin businesses, including higher sales for the US military and to customers in India. The operating expense margin of 24% improved 90 basis points primarily due to benefits from organic sales volume leverage, including higher sales and lower expense businesses and from RCI savings. Operating earnings for the C&I segment of $48.9 million compared to $49 million last year and the operating margin of 14.6% increased 10 basis points from 14.5% in 2018.

Turning now to slide 8. Sales in the Snap-on Tools Group of $405.8 million decreased 1.5% primarily due to $5.1 million of unfavorable foreign currency translation. Organic sales were essentially flat, reflecting headwinds in the United Kingdom and higher sales in the United States. The organic sales included a mid-single digit decline internationally, nearly offset by a low-single digit increase in United States. Gross margin of 48.1% decreased 80 basis points from last year, primarily due to 60 basis points of unfavorable foreign currency effects. The operating expense margin of 27.5%, increased from 26.7% last year, primarily due to higher field support investments and 10 basis points of unfavorable foreign currency effects.

Operating earnings for the Snap-on Tools Group of $71.3 million, including $3.8 million of unfavorable foreign currency effects, decreased $7.7 million from last year, while the operating margin of 17.6%, including 70 basis points of unfavorable foreign currency effects, compared to 19.2% in 2018.

Turning to the RS&I Group shown on slide 9. Sales of $348.9 million increased 1.7%, reflecting a 3.5% organic sales gain, partially offset by $5.9 million of unfavorable foreign currency translation. The organic sales gain includes a double-digit increase in sales to OEM dealerships, principally through the segment's equipment solutions operation. Weakness in Europe, again, impacted RS&I's overall sales growth in the quarter. Gross margin of 46.3% decreased 100 basis -- 180 basis points from 48.1% last year. This was primarily due to the increased sales to OEM dealerships and higher material and other cost, partially offset by RCI savings.

Sales for the equipment solutions operation tend to have lower gross margins and lower operating expenses associated with such activity. The operating expense margin of 20.9% improved 130 basis points from 22.2% last year, primarily due to the aforementioned effect of higher sales to OEM dealerships and the benefits from RCI initiatives.

Operating earnings for the RS&I Group of $88.6 million compared to $88.7 million last year, while the operating margin of 25.4% compared to 25.9% a year ago.

Now turning to slide 10. Operating earnings from Financial Services of $60.6 million increased 4.8% versus Q2 of 2018. Revenue of $84.1 million dollars was up 2.6% from a year ago. Financial Services expenses of $23.5 million decreased $0.7 million, primarily due to lower provisions for credit losses, partially offset by higher expenses related to the growth in the portfolio. As a percentage of the average portfolio, Financial Services expenses were 1.1% in the second quarter of 2019 and 1.2% in the second quarter of 2018.

The average yield on finance receivables in the second quarter of 2019 was 17.6% as compared to 17.7% last year. The average yield on contract receivables was 9.1% in both periods. Total loan originations of $263.4 million decreased $12.7 million or 4.6% primarily due to decrease in originations of finance receivables resulting from lower year-over-year Snap-on Tools Group sales of big ticket items.

Moving to slide 11, our quarter-end balance sheet includes approximately $2.1 billion of gross financing receivables, including $1.8 billion from our US operations. Our worldwide gross financial services portfolio grew $15.2 million in the second quarter. The 60-day plus delinquency rate of 1.4% for the United States extended credit remains stable and reflects the seasonal improvement we typically experienced in the second quarter. As relates to extending credit for finance receivables, the largest portion of the portfolio, trailing 12-month net losses of $50.4 million represented 3% of outstandings at quarter-end, that's down 9 basis points sequentially, supporting continued stabilization in the portfolio's credit metric performance.

Now turning to slide 12. Cash provided by operating activities of $145.5 million in the quarter decreased $41.4 million from comparable 2018 levels, primarily reflecting net changes in operating assets and liabilities, including payments related to last quarter's legal settlement.

Net cash used by investing activities was $65.2 million, included net additions to finance receivables of $29 million, capital expenditures of $28 million, and $8 million for the acquisition of Power Hawk, which provides rescue tools and related equipment for a variety of military, governmental and fire rescue and emergency operation.

Net cash used by financing activities of $73.1 million included cash dividends of $52.5 million and the repurchase of 365,000 shares of common stock for $60.1 million under our existing share repurchase programs. As of the end of June, we had remaining availability to repurchase up to an additional $445.3 million of common stock under existing authorizations.

Turning to slide 13, trade and other accounts receivable decreased $8.5 million from 2018 year-end. Days sales outstanding of 66 days compared to 67 days of 2018 year-end. Inventories increased $52 million from 2018 year-end, primarily to support higher levels of demand across critical industries, including demand for US manufactured hand tools, new products, as well as to improve service levels to our customers. Our trailing 12-month basis inventory turns of 2.7 compared to 2.9 at year-end 2018 and 2.7 in Q1 of 2019.

Our quarter-end cash position of $164 million increased $43.1 million from 2018 year-end levels. Our net debt-to-capital ratio decreased to 22.5% from 24.2% at year-end 2018. In addition to cash and expected cash flow from operations, we have more than $700 million in available credit facilities and as of quarter-end, we had $154.6 million of commercial paper borrowings outstanding, a reduction of $22.5 million since year-end 2018.

That concludes my remarks on our second quarter performance. I'll now turn the call back to Nick for his closing thoughts. Nick?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Thanks, Aldo. Well, that's our quarter. Encouraging progress. I think you could describe it as -- we would describe it as encouraging and progress achieved against variation and headwinds. Challenges for sure, European operations down. For the particular macro-related difficulty in the US and the strong headwinds of unfavorable currency, we overcame with some encouraging positives. North American volume up, the Tools Group up in the US, new hand tool products driving enthusiasm and gain. At C&I, the investments in torque paying off with robust performance, matching the move to autonomy and precision, and advancements in critical industries is gaining new military business and long-term contracts. And RS&I, a return of the OEM programs for vehicle dealerships, continuing strength in Mitchell 1 shop software. It all came together, overcoming the considerable difficulties of the current environment.

Sales up organically 1.6%, OI margin at 20%, clearly among our best so far and EPS up again to $3.22. And we believe we have the capabilities, the brands, the product and the opportunities to maintain that upwards earnings trajectory throughout the year and on into the quarters that follow.

Before I turn the call over to the operator, I'll speak directly to our associates and our franchisees, Snap-on team. I know many of you are listening in or will hear the call later. Once again, we made progress against the headwinds and that advancement reflects our energy and effort, your extraordinary contribution to our enterprise, for your achievement and accomplishment and prevailing. You have my congratulations. And for your dedication and your commitment to our team, you have my thanks.

Now, I'll turn the call over to the operator. Operator?

Questions and Answers:

Operator

[Operator Instruction] And we'll take our first question from Scott Stember with CL King & Associates.

Scott Stember -- CL King & Associates -- Analyst

Good morning, and thanks for taking my questions.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Hey.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Hi.

Scott Stember -- CL King & Associates -- Analyst

Just going over to the Tools Group, low-single digit increase in the US. I think we were mid-single digits in the first quarter, but it seems like some of the delta there is related to higher ticket items. That said, could you just give us a breakout of what tool storage, hand tools and specifically what some of the other categories that are in the quarter?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. You kind of got it -- said. I mean, the thing is, if you look at the originations, originations are down so that says that the big ticket items were weaker. I think the originations were down like 4.4%, 4.6% a quarter. But generally, it's around diagnostics. If you look at that view, the diagnostics were lower than year-over-year, the Apollo launch was much bigger, it launches into a broader category of customers than the Triton which we launched. The Triton launch was successful versus its -- versus its prior people, but -- its prior iterations of that particular segment. And -- so we're pleased with the launch, but what we've learned with launching intelligent diagnostics is our franchisees tend to focus on it and it tends to be a time intense of sale. So it has uncertain results for the rest of the diagnostics lineup, and that's what happened in this time.

There also is a pretty strong activity around hand tools. Hand tools is up again in the quarter, and I think one of its highest levels ever. So hand tools is pretty good. So that's sort of the story of that quarter, that kind of balance in that situation. Now you can look at the numbers and you can see the margins and so on. So you had gross margins in the Tools Group. I think they were down 80 basis points and it's about 50 basis points, 60 basis points of currency. So fundamentally, gross margin, that gross margins, the profitability was defined by what happened internationally where you wanted your levers around pricing, you can't use anymore. Gross margins in the US were actually up a little bit.

Scott Stember -- CL King & Associates -- Analyst

Okay. And just going over the part over to the UK, because it seems like that's where the lion's share of the tools' weakness is abroad. Seems like it's getting a little bit worse and we all know about Brexit and some of the impact over there, but there is talk longer term about the business over there as a comparison here, the automotive repair market and the expectation for that business.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. I can... all right, sorry, sorry.

Scott Stember -- CL King & Associates -- Analyst

No, I got it.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah, look, I can do that. Yeah. So it depends how you look at the UK. UK was down higher percentages year-over-year in this quarter. You know it's down -- I think it was down high-single digits in the first -- in the last quarter, you know the first quarter, and down double digits, somewhat double digits in the second quarter. But actually sequentially, the number was about the same. So I'm not sure how to really react to that. You understand what I'm -- so maybe it should have been higher because it was the second quarter or not, we don't think there's anything structurally wrong with that business. I've been over the UK just recently myself, talking to people and I've talked to a number of people who are in the government there, and they say that people are quite uncertain. And one of the things we know about uncertainty in our business, we saw this in the big recession in 2009, is the technicians have -- are cash rich, but confidence poor. If they start getting attracted -- discouraged by this bad news for breakfast with the macro issues, they start back backing away from the longer payback items and that's exactly what's happening in the UK.

You're seeing a lot of -- you're seeing a lot of backing away from tool storage and diagnostics. So that's what's ailing the UK really. You can see it in -- you can see it in the originations. Originations are down in US, but they're down bigger in the international. And so that's really the situation. So when the confidence come back -- comes back, we believe we got a robust business there.

Scott Stember -- CL King & Associates -- Analyst

Got it. And then just last...

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

The problem with that is, I don't know when the confidence is going to come back, but I think people feel like the Brexit situation is going to get solved. And I think it doesn't even have to be solved, people have to believe that they see a way forward and I'll bring it back. I don't have any better answer than that for you.

Scott Stember -- CL King & Associates -- Analyst

Got it. Thanks a lot. And just the last question before I jump back in the queue is RS&I. Nice bounce back. OE dealership business up. Could you just flush out how some of the software products did, just try to frame that out and what is [Speech Overlap].

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. I think -- sure. Well, diagnostics is down in the Tools Group and diagnostics in RS&I tends to follow that. It also had some external sales in the UK, and the UK is kind of shut down a little bit. So you see some of that in -- sales around in addition to the Tools Group itself, the diagnostic sells some direct to certain elements of the UK government. That is a weakness from year-over-year. So diagnostics is down in the quarter, but Mitchell 1, bought whole [Phonetic]. So Mitchell 1 is a great business and all we see is excelsior or ever upward in the Repair System -- the repair information products. Car and truck repair, that's what I was trying to say in my message there, is that repair information for the garages seems to be going pretty well.

We believe that our diagnostics business goes well once we get our franchisees and the technicians comfortable with the huge power of Intelligent Diagnostics. Intelligent Diagnostics is a great product, just more complicated to sell because it's got so many nuances and features. So you saw and -- so that all played out, give some -- giving you the features, but that all played out for repair -- diagnostic information in the go -- in the independent shops to be about flat in that.

And the OEM business, of course, was up basically and equipment was sort of flattish. I think it was up a little bit. So that's how diagnostics rolled out in the quarter. I mean, not -- RS&I rolled out in the quarter.

Scott Stember -- CL King & Associates -- Analyst

Got it. Thanks again.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Sure.

Operator

And next we'll go to Christopher Glynn with Oppenheimer.

Christopher Glynn -- Oppenheimer -- Analyst

Thanks. Good morning.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Good morning.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Good morning.

Christopher Glynn -- Oppenheimer -- Analyst

I had a question about the progress of trade. If we go into little more detail, I'm curious about the interplay of channel fill and to sell through, how the staging regional rollouts goes and if that's more a driver in the second half?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

It was as a national launch. But one thing that's happened in the first two quarters of this year is, the -- we call them first-time activations. Basically they -- we can see when a technician activates the software and when -- the technician, not the franchisee. So we sell to the franchisee, he sells it into the industry, into the marketplace and that the technician who buys it gets it activated. Well, activations are actually running ahead of our sales. So in fact, this is kind of a positive. Triton itself were up to the franchisees, met our expectations. It's not the segment that Apollo [Phonetic] -- so met that expectation and in fact, a little bit better than the last launch. The activations -- and the activations always follow and the activation so far are running ahead of our expectation. So we think that's kind of a positive sign although, you know, who knows what'll happen tomorrow but the thing is, that seems to be positive. So Triton itself, I think worked pretty well.

We've seen this phenomenon. When we launch the Intelligent Diagnostics now, it tends to draw the attention of the franchisee who only has 24 hours a day and they tend to spend more time selling it, because they love the product. Everybody loves the software, harder to explain, a little more expensive. And so it tends to diminish what happens in the other brand. That's what happened this time, that's why we had the downturn. So we had a good launch, but yet the other products didn't sell us the way they sold in other periods of the way the way we expected.

Christopher Glynn -- Oppenheimer -- Analyst

Okay. And then...

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

So what we're doing is -- I should add, what we're doing is, is that one of the things you see, the OE and the Tools Group, one big component of that, is the training seminars and the support systems for the franchisees to sell and to train the technicians in how to use this stuff and to realize how truly important it is and how they can't live without it.

Christopher Glynn -- Oppenheimer -- Analyst

Okay. And then, kind of a broad question on the second half. We generally are kind of banking on a kind of a holding pattern with the demand trends and mixed trends in the first half or did some mix now truly kind of revert or unwind?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

You know, look, I don't think anybody -- we wouldn't be happy with continued sales in the US at 1% for an extended period of time. We wouldn't be happy with that, of course. Yet we do get variation from period-to-period. So that's why we think this is not a bad thing in this situation with these -- with these economics. But we would -- we stick to our view that this is a 4% growing business and absent huge turbulence like what's happening in the UK, I would call UK a singularity. I would call Australia being under economic duress, at least in our sector. So I kind of come out for those and say it isn't -- it really isn't our business. We would expect it to get better. Now, the third quarter is always kind of squirrelly, you know, because we have the SFC and so on. And I'm not saying anything I haven't said 10 times before, but we still feel pretty confident.

I think one of the challenges for us is to get that Intelligent Diagnostics down to an easier sale and a more natural sale, and to get it out there so it doesn't weigh down on our business. And of course, to keep coming with a new price, the hand tools are hotter, and heck, if we can keep up that momentum, that's got a [Indecipherable]. If you look at our capital expenditures, we raised capital expenditures, and part of this is making the hand tool deliveries much more smooth, much smoother, because we're investing in new facilities in our distribution system in Crystal Lake and other places and our hand tools factories like Milwaukee and other places. And some of our expenses in the quarter, the field support expenses, was to support that distribution of hand tools which rolls through that distribution.

Christopher Glynn -- Oppenheimer -- Analyst

And...

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yes, go ahead.

Christopher Glynn -- Oppenheimer -- Analyst

Yeah. I just had a last one. Any updates on capital allocation or strategic levers, and in particular, as you look at, valuation has been a little lower for a little while here. You -- any benefits to going private? What kind of board level discussions do you have in some of those respects?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

We have discussions about this kind of thing all the time, you know, and so on. I think our -- we feel that -- well, we talk about capital allocation, we say -- we think this business has a lot of runway. So we think we can keep the best use of our capital is to invest in the business. And you can see it now we're investing in the hand tools. We're investing in the training of the franchisees to be able to sell this new diagnostics -- this transformative diagnostic product better. So we see that and we say -- as we say, we have a dividend. We want to preserve the dividend and make sure it keeps going. We've never reduced it over years and then we look at share buyback, we brought back a significant number of shares in the quarter. I mean, I guess, it supposedly can be -- everybody can have a different view of what's a significant number, what we think was more than before. And we take advantage of when the stock price is an appropriate place and we're not in a blackout period. And then we look at acquisitions and we're looking at acquisitions as we speak. So we have a lot of those discussions at -- all of those things are discussed at the Board level and our level constantly, probably the Board and us talks about it regularly.

Christopher Glynn -- Oppenheimer -- Analyst

Thank you.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Sure.

Operator

And next we'll go to David Leiker with Baird.

David Leiker -- Robert W. Baird & Co. -- Analyst

Good morning, everyone.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Good morning, David.

David Leiker -- Robert W. Baird & Co. -- Analyst

I guess, a couple of things that circle back around on -- Nick, you did a great job of talking about some of the headwinds and some of the things that you're facing, and we've talked about them with you as well. You have -- I just want to pose this question to you, it's one that we talked about in the past and to see if there's any change in your view on it. But you know, we're 10 years into an economic recovery, people have almost everything that they need. You've talked about in the past about other use of money from your customers' pockets. Any update or any thoughts on whether some of that might actually be behind the headwinds that you're facing right now from a demand perspective?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

You know, I don't know. I mean, the thing is, I don't think so. I don't think it's anything different now than before. Maybe our technicians get a little more easy credit, but I continue to feel, David, that this is on us. Whatever has happened here is on us. When I go out and talk to the franchisees, again, I just -- like I said, I thought I was just on a truck the other day, and I talked to a number of franchisees across the country, one in Texas, one in California and one in the Midwest, and they don't seem to see it that way, that there's a shrinking of demand. It's on us to try to allocate their time the best and get products that will attract them. I think that is the solution. We don't see a back off of a technician.

Now 10B, I had an interesting discussion. 10B is a little bit of -- a little bit period-to-period variation and one of the franchisees said, I live in a beer and Budweiser -- a beer -- a Budweiser and fireworks culture. In other words, around the 4th of July, everybody gets -- goes on vacation and they invest in fireworks and Budweiser, that's how we talked about it. So sales get down a little bit slow in the spirit, that's what he said. But I don't think he said it always comes back. So I don't think -- we don't see any indication of saturation or misdirection. Could be wrong but, you know, nothing quantitatively or qualitatively said that. Certainly qualitatively we're not seeing it, quantitatively, we are seeing the salaries the trailing 12 months grew by 4% for technicians. The technicians itself year-over-year grew by 1.7%. So that's BLS data. So we all think this -- and nominal spending on repair moved upwards a couple of percent, no, real spending moved upwards a couple of percent year-over-year. So I think -- I just think it's still robust, it's execution. And one of the things that I tried to mention here is, boy, trying to support that launch of Intelligent Diagnostics, it's a revelation -- it's a revolution. And when I talk to franchisees, they need help doing it. So that's what we're working on, to try to boil things down to just be the quick seven-minute pitch that'll convince people.

David Leiker -- Robert W. Baird & Co. -- Analyst

Okay. And then just two numbers-related questions. One is on the working capital. Aldo, if you could? And I'm looking at Q2 versus Q2 year-over-year, it's the cash flow statement. And if there's a way you could break that down, because I know currency is going to be a play role in there, there is probably some acquisitions? But just, you know, the drivers behind the increase in working capital here year-over-year.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Yeah. The biggest increases -- if you look at our divisions, the biggest increases in inventory are associated with the Snap-on Tools Group, our European based hand tools operation and Industrial. Those are the ones that I haven't been adding. By the way, the most -- I'd say across the range, most new products, say new product additions is certainly one of them. Industrial, more specifically, has been pleasantly engaged in more project-based activity and assembly of kits, and they've been compiling more inventory to service those customers, as an example, the US military being a significant one. And we're trying to improve our service levels. In other words, when you have such a variety of SKUs that we offer across the board and you're somewhat dealing with an environment where people can use discretion to buy maybe a little bit of an impulse element in there as well, the last thing you want to do is not be able to meet demand because you don't have the inventory on the shelf.

So we're willing to err on the side of having adequate levels of inventory across those broad number of SKUs. And with this we've got a couple of product ramp-ups that are occurring. So, for example, we're developing new lifts in some of our factories and that requires some ramp-up investment and our inventories are rod with prob [Phonetic] as well. Again, so we're trying to take advantage of the situation where we can and buy smartly. That, in essence, is what drives the operating variance. David, it's about $52 million if we look year-over-year taking out the effects of currency and acquisitions to give you a number.

David Leiker -- Robert W. Baird & Co. -- Analyst

No. Okay. And then secondly, you had called out in the corporate expense line there, a little bit of a variance there. You referenced there in particular, incentive comp. Was any of that a reversal from what might have been accrued in Q1?

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

There's an element of that, but you have a lot of performance-based compensation that runs through -- the analysis of it, it's related actually to the stock price performance, which accreted more in Q2 of last year actually than it did in Q2 of this year. So you get some variation there, but also is the timing of certain expenses, some of them related to legal matters, some are related to other or just corporate spending [Technical Issues]. Those are account essentially. So if you look at the back half of the year, my expectation, we typically spend in the quarter -- more typical quarter you're spending in the range of $22 million to $24 million. I see no reason that, that would not be a good forecast as we look to the back half of the year in terms of our spend.

David Leiker -- Robert W. Baird & Co. -- Analyst

Okay. Great. Thank you.

Operator

And next, we'll go to Curtis Nagle with Bank of America Merrill Lynch.

Curtis Nagle -- Bank of America Merrill Lynch -- Analyst

Good morning. Thanks for taking my questions. I guess, just starting off...

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Hi, Curtis.

Curtis Nagle -- Bank of America Merrill Lynch -- Analyst

Hey. How're you doing? So I could start now just thinking about the gross margin for Tools, it looks like currency was a fairly decent sized headwind. How do we think about that for the remainder of the year? Is that primarily Canada or in some way is that Europe?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

No, it's -- look, the big components there are -- you said, Canada but the UK and Australia, those are the big players in the transaction there. They pretty much dominate that 80 basis points of currency of gross margin change and so it's pretty much outside the United States. And how this works out is, normally when currency has happened to us in the past, we've had RCI and the lever and we have two methods of offsetting RCI and pricing, local pricing. But when you're down, several quarters in a row and you've got double-digit deterioration in the UK and you've got some downtick in sales in Australia, your appetite to price is a lot lower. So therefore, you're seeing that roll through and that's really what's happening. The fact that the currency is visiting on the places where it's much -- we're much more reluctant to test the waters or to push the pricing, because we want the volume backup. That's really what's dominating a situation.

US as I said, I know a lot of peoples have been talking about discounting and promotions and all such. But actually, it's up again in the US because our people in the Tools Group are masters of making heat and the light out of programs, and really, they don't -- by and large, don't change their margins. The programs come out and they have different faces and the same names and all kinds of things, but their idea is to generate enthusiasm both with the franchisees and the customers in it and I think given sometimes, they often do, but that doesn't mean we're actually net-net discounting.

Curtis Nagle -- Bank of America Merrill Lynch -- Analyst

Got it. And not to extrapolate too much, but just kind of focusing on the comment about spending behavior and maybe shift to things like fireworks and Budweiser, which you know, theoretically might be a reference to 4th July, was without a forward comment in terms of what's going on demand or... ?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Actually, it was 4th of July. It was about -- look, it was kind of like, he said, look, when it gets warm, your technicians are thinking about other things and repairing cars. That is simple. It's kind of a anecdotal comment. It wasn't meant to -- or to be a forecast of any kind, I was just trying to give you a view like David asked me, if there was variation in appetite for buying or people decided to focus elsewhere. And I said I didn't think so, except for this kind of very, very temporal thing that one of my franchisees or several my franchisees say when weather gets good and vacation is coming, people may not buy as much then, but they make it up later, that's all, that's all.

Curtis Nagle -- Bank of America Merrill Lynch -- Analyst

Understood, understood. Great. Thanks very much. Appreciate it.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Sure.

Operator

And next, well go to David MacGregor with Longbow Research.

David MacGregor -- Longbow Research -- Analyst

Yes. Good morning, everyone.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Good morning.

David MacGregor -- Longbow Research -- Analyst

I guess, I wanted to sort of go back to a couple of kind of bigger picture questions. Credit has always been kind of a very important part of your value proposition to the marketplace. So, if you advance from the premise that people are using less credit now, does that leave you a little more exposed to price elasticity on the Tools? And you've always had very high quality to them, no debate about it, but also a premium price tool. And I'm wondering if maybe as credit become -- people become maybe a little less credit dependent this late in the cycle, if people are just becoming more price sensitive and you're feeling that?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

I don't think we're feeling price sensitivity anymore than we always have. I mean, as you say, everybody's always known that if you buy a Snap-on tool, it's going to be more expensive. And I wouldn't characterize -- I think the characterization you're saying is a little bit not the way we would. We would say people aren't using -- aren't buying big ticket items from us. Not that they're not -- when they're buying big ticket items or using credit, and RA is credit itself, remember? Remember that when a guy buys a set of wrenches or a power tool, $600 power tool, he's probably paying $50 a week. And that's stretched out over 12 weeks or maybe even sometimes 10 weeks or 15 weeks, depending on how the franchisee does it.

So everything is about credit and the RA business is up. So I wouldn't I wouldn't say that credit, it doesn't appear to us, David, that credit is -- is a question. People are reluctant to take it. Now, if you're saying -- if you're telling me that UK and I don't know -- I think the UK, they could be saying, "Wow, you know, I don't know what's going to happen next week." So maybe I'm not going to -- that's where my comment is about longer payback items. I think we find when pessimism or uncertainty seizes the psyche of the working men and women, including the technicians, they tend to invest in shorter payback things like power tools and hand tools, and shy away from the longer payback stuff.

David MacGregor -- Longbow Research -- Analyst

Right. Can you just talked about...

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

But not -- certainly not in US, that's not a phenomena here.

David MacGregor -- Longbow Research -- Analyst

No, I appreciate you addressing that, Nick, thanks. Let's talk about -- can you just talk about field inventory levels and inventory on the truck? Clearly, in terms of your reported numbers, your inventory numbers are up, but just talk about what you're seeing out there and [Speech Overlap].

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Inventory is seeing -- look I think -- David, I think inventory if anything, I think our numbers say they are down slightly per truck. But that might be a blip, I'm not sure that's relevant. But it hasn't gone up. I mean, the sales off the van have matched I think the sales to the van. So there's not -- we're not seeing any kind of buildup in that. And recently, the only buildup we've seen over time, has been a buildup associated with the sales of the van network. But in general, recently, we're not seeing that kind of buildup.

So I wouldn't say -- the one thing I would say that -- I will say that -- I did say about diagnostics and I don't know what to make of this yet, because it's not -- we don't have a report, but it seems as though there's more -- there's been more activations than the buy, in other words, sales off the truck, of diagnostic bodies and software activation than we have sold to the truck. So from an inventory point of view, that would tend to be a diminishment of that you would think.

David MacGregor -- Longbow Research -- Analyst

Can you reconcile [Speech Overlap]?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

On the van -- on the van, you would think.

David MacGregor -- Longbow Research -- Analyst

Sure. How do you square that with originations being down again? I guess, it's a couple of quarters in a row now where your selling has exceeded your originations. And I understand there's a timing difference, but that would have happened last quarter, we would have seen that correctly normalized.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. Yes, there is a time difference. [Indecipherable] sales of diagnostics in the quarter weren't that good. That's why it's tough. As I tried to -- I tried to lay that out a little bit, maybe I was unsuccessful, but that's the thing. One of our two major -- the big ticket item of diagnostics wasn't as strong as in prior quarters. And so, yes, there are timing differences and so on, but that accounts, diagnostics accounts for the lion's share of the variation year-over-year in originations. So I think -- yeah, sure.

David MacGregor -- Longbow Research -- Analyst

I'm sorry. Last question for me is, just you referenced in your prepared remarks to franchisee help metrics remain favorable. In other words, I guess, you're still in the green zone, so to speak. Can you just talk to the second derivative on those metrics and just maybe give us example one or two, that you put a higher level of emphasis on in terms of deriving comfort that they're still in good shape?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah, look, a second derivative of let's say, -- let's say, well, let's say terminations, you know. People leaving the system. Really the first derivative, it's been flat. So I think generally the second derivative has been generally stable. It's not moving either way that. In fact, I think that improved a little bit. It got slightly better in this quarter. So you would say the second derivative, I don't know -- I'm trying to think of how that would work in terms of polarity, but anyway it was favorable in this particular quarter.

Now, a really small amount, you know, but generally that's been about the same for several quarters now. It had been going I think -- I don't know, I want to think back about three quarters ago, it had been up to then and had been going upwards, going -- and they go in the other way, it had been rising. And maybe up to the fourth quarter, it had been rising a little bit. And so now, it's kind of gone back the other way in terms of second derivative. So I don't know what to make of that, whether that's positive or negative.

Generally, those things get driven by retirement. The difference between the -- what drove it upwards was retirements by people who had spent more times on a van and they wanted to go to Hawaii or something, you know, for the retirement. And so those are the kinds of things which are making the difference. We saw more of those, I think this quarter we saw rather less. Still up from say, -- slightly from, say, 18 months ago, but down from say, five years ago.

David MacGregor -- Longbow Research -- Analyst

Okay. One last question if I could. Just the diagnostics returns, was that a meaningful headwind to organic growth, the Tool segment this quarter?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Returns, you mean, people giving us back diagnostic units or something?

David MacGregor -- Longbow Research -- Analyst

Correct, correct.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

I don't think -- I don't necessarily check all these things, but I don't think so. I haven't heard of that. No one's mentioned that to me. So I don't think it was actually. I think it actually was -- we sold not Triton, so we didn't sell enough of the other stuff.

David MacGregor -- Longbow Research -- Analyst

Got it. Good luck in the second half.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Sure, thank you.

Operator

And next, we'll go to Gary Prestopino with Barrington Research.

Gary Prestopino -- Barrington Research Associates -- Analyst

Hi, good morning, everyone.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Good morning.

Gary Prestopino -- Barrington Research Associates -- Analyst

Nick, that ADAS product that you talked about, is that targeted specifically to the independent shop versus the franchise dealer?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. Yes, yes. It is typically targeted in a shop, because the idea, Gary, is to make it versatile so it can accommodate the specificities of systems that are authored by different OEMs. It's pretty well -- the whole ADAS thing is becoming very important for us. So one of the things we like is in Mitchell 1, we have a particular ADAS suite where when people are repairing the ADAS systems, they are able to go in a particular section of that repair information and can deal with ADAS systems in the terms and which describes ADAS. And so it's one of things that's driving Mitchell 1 upwards. Mitchell 1 was very strong in the quarter.

Gary Prestopino -- Barrington Research Associates -- Analyst

Excellent. Is that -- would that be considered, you know, a big ticket item must-have for the independent repair shops going forward, I mean relative to the other diagnostic equipment?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Yeah. I don't know. I think it's certainly as expensive as a diagnostic unit. So it's a big ticket item, but the independent repair shop is a slightly different -- they maintain -- sometimes independent repair shops pay cash or credit card for these kinds of things. They don't always borrow from us necessarily. So it wouldn't necessarily impact the originations. It might, but I don't think so in this case. So I wouldn't do that. But they have offices just to make sure it's clear. Everything now, when you hit your bumper now, you need to worry about the ADAS systems. You know, it becomes a -- if you accept the sensors that are in the bumper and you have to recalibrate just to be putting on the bumper. So that's why there's more and more demand of this. The more there is the peripheral sensors, the more they have to deal with it. So that's why we're pretty enthusiastic about the sensors [Phonetic] that help on us I think.

Gary Prestopino -- Barrington Research Associates -- Analyst

Okay. And then, just to be clear, a lot of talk here. The headwind that you saw in the US, if there was a headwind was really revolving around diagnostics. It wasn't around tool storage and you know the bread and butter.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Tool storage was kind of flattish, it was OK. We thought tool storage was OK, it was up versus the last time, quite being -- now sequentially it was up. So we felt pretty good about that. It's not tool storage, it's diagnostics. You know, I'm sure that we'd like to have -- look, power tools is down too, but that had to do with the launch which is coming, and people are waiting for one. There are a lot of things I'd like to -- I would -- there are some things I'd like to have better, of course. But if you asked me to say what do you have to fix to make -- to get back to where you are, I think it has to do with making sure that diagnostics works.

Gary Prestopino -- Barrington Research Associates -- Analyst

Okay. Thanks. And the last question. I don't know if you have this -- Aldo if you have this, what was the negative impact of currency on EPS in Q3 and Q4 of last year for each quarter, do you have that handy?

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

I think it was positive. I mean, it was positive last year.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

I think Gary, it's still going to be a headwind if we get into the back half of the year, not as bad. Currency rates stay right where they're at right now. We're still going to see some negativity in Q3 and a little bit in Q4. So it's gotten worse since what we would have talked about in our April call with you. But the currency is totally a headwind over the balance of the year. It was really flat in Q3 of last year and it was about $0.06 negative in Q4 of last year.

Gary Prestopino -- Barrington Research Associates -- Analyst

Okay, because I look back and the sales impact was about a negative $12.5 million in Q3 and negative $17.10 million in Q4. So that's why I was just wondering. So you are saying it would be flattened, the impact in Q3 was flat overall from currency, even with the negative sales?

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Yes. So that's the sales, and not the indicator. So what gets to the bottom line like this transaction, particularly in the Tools Group in the United Kingdom, Australia, and Canada is embedded within the activity that you see at the gross margin line, not the sales line. All we're saying is last year there was no EPS impact. There is -- actually it was probably $0.2 million [Phonetic] of OI I think in the last year. And this year, I expect it to be negative if we were to stay where they are at today.

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

What happens, Gary, is sales gets driven by the euro and the pound and the Canadian dollar. And then when you talk about profitability, you see a much bigger influence of the pound and the Aussie dollar and the Canadian dollar. So there's different currencies that impact us for sales for...

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

And as example, the pounds went from 1.24 to 1.25 [Phonetic], it's worse than where it was at last year.

Gary Prestopino -- Barrington Research Associates -- Analyst

Right. All right, thank you.

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Thank you, Gary.

Operator

Okay. And that does conclude today's question-and-answer session. I'll now turn the call back over to Sara Verbsky for any additional or closing remarks.

Sara M. Verbsky -- Vice President, Investor Relations

Thank you all for joining us today a replay of this call be available shortly on Snap-on.com. As always, we appreciate your interest in Snap-on. Good day.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

Sara M. Verbsky -- Vice President, Investor Relations

Nicholas T. Pinchuk -- Chairman of the Board and Chief Executive Officer

Aldo J. Pagliari -- Senior Vice President, Finance and Chief Financial Officer

Scott Stember -- CL King & Associates -- Analyst

Christopher Glynn -- Oppenheimer -- Analyst

David Leiker -- Robert W. Baird & Co. -- Analyst

Curtis Nagle -- Bank of America Merrill Lynch -- Analyst

David MacGregor -- Longbow Research -- Analyst

Gary Prestopino -- Barrington Research Associates -- Analyst

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