Operator: And our next question will come from Scott Stember with MKM Partners. .
Unidentified Analyst: And Nick, you talked about the big ticket items really driving the show for the Tools Group, but how did the hand tools perform in the quarter?
Nicholas Pinchuk: Hand tools were flat. So hands tools have been booming. They were like going wild in the last year and the first part of this year, and they are the high — actually, believe it or not, they’re the highest margin business in the hand tools. And so they’re great. But when they back down a little bit, that puts a little margin pressure on them in the Tools Group. Flat is okay, though because they’re really still strong. But tool storage is a great margin business, and that was up strong double-digit, fact, best tool storage ever. In fact, I had a guy telling me, I was out talking to the sales guy, he told me he could sell every tool storage unit I could build for him. Our backlog is exploding in tool storage.
So we can sell a lot of them. And then — so — and that doesn’t have much effect on margin. The real margin — the source of the margin comment here was diagnostics. Diagnostics makes a lot of money for the corporation, but the Tools Group shares the margin with RS&I. Remember, RS&I makes it and sells it to the Tools Group. So from a pure Tools Group or when you’re looking at diagnostics, that margin is a lower one for them. And so the flatness of hand tools and the rise in diagnostics created that margin pressure that moved it down somewhat in this period. But we thought this is great. It’s one of the reasons why we have 21.5%, one of the reasons why RS&I was up 50 basis points, you see, because of diagnostics sells well for them. So that’s sort of the way.
The other thing, as I said before, I want to emphasize, boy, I think it’s a good sign for the future that big ticket is strong. Now you might argue, okay, diagnostics had a special case because we launched the Zeus, and it’s the best thing since and everybody loves it. But the fact that tool storage is selling well really indicates an underlying confidence in the customer base, which speaks well for our situation.
Unidentified Analyst: Got it. And then just last question. What’s the relationship of sell-in versus sell-through of the event?
Nicholas Pinchuk: Yes. Look, we look at these things. They’re about in the range where we like to see it, about sort of equal. So when you look back from sell-in to sell-out, we see that being about balance. Now it always goes up and down a little bit every quarter, but this is kind of in the range. I think this quarter, it’s about equal. .
Operator: And our next question will come from David McGregor with Longbow Research.
David MacGregor: Nick, you’re continuing to expand the lexicon of the contemporary CEO. Boom shakalaka, that’s… .
Nicholas Pinchuk: Gee, special.
David MacGregor: Listen, let me ask you about your balance sheet. Your working capital investment continues to grow. I can appreciate you’ve got more inventory in transit and safety stock. But can you talk about your plans to harvest that cash? And is the inventory accumulation concentrated within specific lines of business or specific products? And how much of that’s tool segment versus the other 2 segments?
Nicholas Pinchuk: I’m — I like our inventory because we have a lot of faith in the future, but I’ll let — Aldo has got to answer a question. I’ll let him say something here. Aldo, why don’t you say something?
Aldo Pagliari: Well, David, if you’re looking year-over-year, yes, the Tools Group makes a major portion of it, but it’s not all of it. But actually, the Tools Group has their inventories kind of reflective of the fact that they’ve had very consistent organic growth. And therefore, I think it’s suitable. If you look at some of the other areas where we’re investing, I mentioned in my prepared remarks, it’s not insignificant the amount of money that’s tied up in in-transit inventory and safety stocks. Again, Snap-on has made a strategic decision to err on the side of availability. So that is priority #1. So a long answer to your question, we think the inventory is appropriate given the opportunities we see in front of us and the fact that we don’t want to miss on the opportunities that present themselves as we go forward and not have disruption from the supply chain.
Now again, Snap-on is blessed, for lack of a better word, with we’re not a typical consumer retail-oriented company, and therefore, we’re not subject to the fashion sense, I like to say, many other companies have to be concerned about. So our product doesn’t really obsolesce on the shelf, so to speak. I mean, yes, you have to update the algorithms in a diagnostic unit or an alignment machine, but pretty much we feel pretty confident that making an investment in inventory is going to pay off and being able to capture sales in projects or programs that manifest themselves as we go forward.
David MacGregor: I can appreciate that you need that inventory to support the sales activity, but it continues to grow. And I guess the question is, at some point, do you have enough? And at what point if any, is there an opportunity to harvest that cash? Or is this kind of a structural step-up?
Aldo Pagliari: There’s probably opportunities to harvest that, David, you’re absolutely right, but I wouldn’t model it that way. In other words, I just told you what our strategic decision is. And trust me, you have even more inventory. You will never have exactly the right thing at the right time. So you have to be prepared to have a flexible factory and a flexible distribution center because of 80,000 different SKUs, impossible to forecast what the accuracy you would like. And then you multiply the statistical probability of having them when you have to put arrays of SKUs that could have 100 to 200 pieces together, and you can see what drives the need for a lot of products. And then on top of it, you have spare part requirements sometimes imposed by regulations.
So if you’re going to sell machines that have a life of 10-plus years such as lifts and linear machines, tire changes, wheel balances, there’s obligations behind the scenes to keep ample supplies of spare parts on hand. So you put that all together, and again, we will err in favor of availability. There could be opportunities to harvest. In just saying that we don’t model ourselves cash flow growth from reduction in inventories, even though that certainly is theoretically possible.
David MacGregor: Good. Let me ask you about growth, and you mentioned the improving supply channels. How much of the growth in each segment would you estimate is driven by shipping from backlog orders rather than new orders?
Nicholas Pinchuk: Well, look, certainly isn’t much say in the critical industries. So our backlog just keeps growing there. That’s because they keep being bedeviled by the supply chain disruption. That’s sort of the thing I was saying. Our backlog is really strong there. And I don’t think much is in the Tools Group. Our backlog in tool storage at all-time high, and we’re actually expanding 2 of the plants in the Tools Group this year to try to keep up with this whole situation. You can look at different places like you’d be entitled to the idea that, geez, I think Europe is a little bit under the weather. So you see that kind of thing there, but the U.S. seems to be booming to me. So I don’t know. You can — it seems to me as though I think you can look at it that way.
U.S. is pretty strong. And we’re trying to — look, we have real confidence in the future. That’s why we’re expanding our capabilities here. If I could expand the more tool storage, I would tomorrow. I told you — I think I said before, the guy said he could — one of the guys — one of the top sales guys said he could sell everything I could give him. So I think we’re sitting on some pretty good strength in that situation. So I think you called it book-to-bill last time. I think that’s pretty healthy in the U.S., a little more turbulence in Europe.
David MacGregor: Last question. Okay. Yes. Nick, last question for me. Just the 10-Q is not out yet, so, Aldo, maybe if you could just give us the finance receivable charge-offs. And then just how were overwrites this quarter?
