Snap-On Inc
NYSE:SNA
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Snap-On Inc
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Ladies and gentlemen good day, and welcome to the Snap-on Incorporated 2020 Fourth Quarter Results Investor Conference Call. Today’s call is being recorded. And at this time, I would like to turn the conference over to Sara Verbsky, Vice President of Investor Relations. Please go ahead, ma’am.
Thank you, Abby and good morning, everyone. Thank you for joining us today to review Snap-on’s fourth 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’ve provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investor section. 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 including a reconciliation of non-GAAP measures is included in our earnings release and in our conference call slides on Pages 14 through 16. Both can be found on our website.
With that said, I’d now like to turn the call over to Nick Pinchuk. Nick.
Thanks, Sara. Good morning, everybody. Today, I'll start with the highlights of our fourth quarter. I'll give you a perspective on how the virus is playing out and on the trends that we see today and going forward. And I'll speak about our physical and financial progress. Then Aldo will give you a more detailed review of the financials.
To start with, I'll just say we are encouraged by the quarter it was strong. But we believe we can reach even higher. This year was -- a lot of unusual events, but when you look through it all Snap-On saw a headwinds but we met those challenges absorb the shock, develop the combinations to the environment, move forward on a clear recovery. And we believe we exited the year stronger than ever. We did have disparities from group-to-group and within each group, but our overall sales and profitability improved both sequentially, and year-over-year for the second straight quarter, achieving new heights despite the virus.
Through the year, the Snap-On team continue to make progress accommodating to the threat pursuing our essential commercial opportunities safely. And moving along upward trajectory is consistent with our general projections on how the days of the virus would unfold.
Geographically, the impact of the COVID continues to be varied for us. Asia Pacific remains virus challenge; Southeast Asia and India are still in deep turbulence. And while the U.S. and Europe actually seem to be further ahead and accommodation, and are moving on to what we call psychological recovery. For the business segments, we saw the essential nature of our markets rising through the turbulence along our runways for growth. Demand for vehicle repair technicians, to our franchisee network directly selling-off the vans, it was robust. Again this quarter, it was robust. Volume of repair shop owners and managers continued to gain and activity and critical industries advanced despite certain sectors like education, oil and gas, U.S. Aviation not returning to growth yet, but you would kind of affect that.
Going forward, we are convinced that we're well positioned on a strong base. But we know we have much more work to do. The environment throughout the world is still impacted by the virus and many of our businesses have not yet fully recovered against the great weathering. But having recognized these headwinds however, we're also convinced that there will be abundant opportunities as the skies clear and society pivots toward suburban locations and to more individual trends transportation. This is great news for the vehicle repair industry, I got to tell you.
And because of that, we're keeping focus on Snap-On value creation, safety, quality, customer connection, innovation and rapid continuous improvement, our RCI. We've been unrelenting and advancing our advantage in products that solve the most critical tasks and brands that serve as the outward sign and our brands that serve as the outward sign of the pride and dignity working men and women take in their profession and in our people are deeply committed and very capable.
Snap-On team is a great asset. And we've maintained it through these days of the virus. We've advanced each of these strengths in the turbulence, and it's enabled Snap-On to achieve new heights, and the numbers show it.
That's the overview now the results. Fourth quarter, as reported sales of $1,074.4 million were up 12.5% from 2019, including $9.6 million of favorable foreign currency translations, and $7.5 million of acquisition related sales. Organic sales will rose 10.6% volume gains in the van channel and OEM dealerships and diagnostics and repair information in our European handles business all demonstrating the abundant opportunities on our runways and our increased ability to take advantage of those opportunities.
From an earnings perspective, operating net income from the quarter of $216.2 million including $2.8 million direct costs associated with the virus, $1 million of restructuring charges for actions outside the United States. And a $1.5 million hit from unfavorable currency was up 26.1%. And the OpCo operating margin it was 20.1%, 220 basis points overcoming 30 basis points of unfavorable currency 30 basis points of COVID cost impact and 10 basis points restructuring.
For financial services operating income of $68.5 million increased 10.1% from 2019, all while keeping 60-day delinquencies flat the last year in the midst of the pandemic stress test. And that results combined with OpCo for consolidated operating margin of 24.4% 190 basis points point improvement. The overall quarterly EPS was $3.82, including a $0.02 charge for restructuring and that result compared to $3.08 last year, an increase of 24% I did say new height.
Now for full year, sales were $3,593 million a 3.8% organic decline principally on the first and second quarter shock of the virus before the sequential gains of a combination to hold. OpCo OI is $631.9 million including $12.5 million of restructuring charges $11.9 million of direct costs associated with COVID-19 and $13.1 million of unfavorable currency compared to $716.4 million in 2019, which benefited from $11.6 million legal settlement and a patent related litigation matter.
OpCo OI margin including a 30 basis point impact associated with restructuring, 30 points of direct pandemic expenses, 30 points of unfavorable currency with 17.6% and compare with 19.2% in 2019, which incorporated 30 basis points of non-recurring benefits of the legal service. That's a mouthful, right.
But what it says is that despite the great disruption our full year OI margin was down only 40 basis points apples-to-apples, demonstrating the special Snap-On resilience that has enabled us to pay dividends every quarter since 1939 without a single reduction.
For the year financial services registered OI of $248.6 million versus the $245.9 million in 2019. Overall EPS for the period of $11.44 was down 7.8% from the $12.41 reported last year 2019 adjusting for the restructuring and the current year and the one-time legal benefit in the prior year 2020 EPS as adjusted reached $11.52, down 5.1%.
So now let's go on to the individual operating groups. In C&I volume in the quarter fourth quarter of $364.4 million including $7.5 million from acquisitions, and $6.5 million a favorable foreign currency was up 3.3% as reported. The activity was essentially flat organically, but represented a continuing sequential C&I rise all the way back to the early shot. Notably, in these numbers, the C&I year-over-year sales were marked by a strong double-digit rise in our European base hand tool business going broadly across Western Europe against the twin challenges of COVID and the Brexit disruption.
They're also offsetting decreases in sales to our customers in critical industries in Asia Pacific. But both these operations join the overall growth group and registering substantial quarter-to-quarter sequential improvement. They're still down, but they're clearly recovering. From an earnings perspective, C&I, operating income of $56.2 million increased $11.2 million, including $1.3 million of unfavorable foreign currency effects, and a $1 million of COVID related costs, with sales up 3.3% as reported flat organically, OI grew 24.9% a nice operating improvement. And the OI margin for the group was 50.4% up 260 basis points in the last year overcoming 70 basis points of unfavorable currency and 30 points of direct COVID cost, the benefits of RCI and margin gains in the critical energy industries made all the difference.
Speaking to the critical industries, we did see selective gains international aviation and heavy duty registered double-digit improvements. But as you might expect, and I referenced before education, oil and gas and U.S. Aviation continue to be down. And then in the quarter our military sales will also impacted by the wind-down at one of our major fitting programs. But we do remain confident in and committed to expanding in the critical industries and we see growing opportunities moving forward and a principal path to that possibility is customer connection in innovation, creating powerful new products.
You heard about our European hand tool business. It shows significant resiliency in the quarter. And it was aided by a good dose of innovation products like our recent expansion of our FIFO custom fitting system, extending our direct-to-user possibilities.
Our new fitting goal product line allows buyers to quickly develop semi-bespoke kits in foam tool control consists of more than 200 pre-configured different tool sets designed around a 26 inch wide block a roll cast available in three standard foam configurations one-thirds store two-thirds store and a full door. Customers can choose the particular box drop configuration and the tool array needed right from our block a roll website reaching end users without distributor interaction, and for a wider range of specialization and sometimes it is specialization is required, our sales reps can help develop just the right unit using the full breadth of the block hole system. We've had great success with our new fitting goal. It's an important extension of our hand tool presence in Europe.
And in the quarter it helped boost SNA Europe to achieve the double-digit growth in a very challenging environment. I think everybody would agree. C&I demonstrating further accommodation with continued sequential gains serving the essential each of the businesses generating a positive trajectory and exiting the quarter stronger than when they entered and product offered a big piece of that progress.
Now onto the Tools Group. As reported sales up 20.2% to $494.9 million, including $2.2 million a favorable foreign currency and an $81 million or 19.6% organic increase the second straight quarter of strong game with the U.S. and international business is both growing at double-digits.
And the Tools Group operating earnings $93.6 million, including $1.2 million of virus related costs, that 93.6 included $1.2 million virus related costs, and that $93.6 million compared to last year's $54.3 million and over 70% improvement.
Actually, the Tools Group was recovered to positive territory for the full year. Sales were up 2% organically with OI rising almost 9% and OI margins up 110 basis points. The continue operating gains of the Tools Group are further affirmation of our view of the COVID-19 trajectory and the resilience of the vehicle repair business. And on the strength of our direct face-to-face van model, it turns out that deepened direct connection with the customers is a differentiator even in a pandemic.
And in the quarter and throughout the year the Tools Group confirmed the market leading position of our van network. We believe the franchisees are growing stronger. That's clear in the franchisee health metrics we monitor each period, they continue to trend favorably and that was acknowledged by a number of respected publications, Snap-On as a franchise of choice. One was the franchise business review where we were again recognized and the magazine's latest rankings for franchisee satisfaction as a top 50 franchise marking the 14th consecutive year that Snap-On received that award.
Now this type of recognition reflects the fundamental strength of our franchisees and our VAN business in general and would not have been achieved without a continuous stream of innovative new product developed through our strong customer connections. Throughout the storm, we've added every day to our already considerable insight and experience in the changing vehicle environment and because of that we're able to bring forward innovation great products like our newly released eight inch talent grip plank jaw pliers. We call it the HJ 47 ACF with a unique design for significant versatility in both removing and tightening fasteners.
First, our unique plank jaw, specially designed, smooth and unsaturated meeting area allows the user to grip a hex shape only on the flat surface, positioning the load away from the corners. That's similar to our flank drive systems on sockets, 30% more torch applied to the fastener while still minimizing damages, eliminating rounded edges.
Second, when the fasteners have already been heavily rounded and are tough to grip. Our talent grip diamond serrated jaws jointed located as the pliers tip generate unparalleled clamping force it's up to a 57% increase in turning power.
With the Snap-On talent, technicians can remove even the most damaged and rounded hex fasteners and for the icing on the versatility cake, the new pliers also feature a patented three position slip joint designed for easy changes to the grip position, the HD 47 ACF, manufacturing right here and I'm going to walk you to the plant in the U.S. and it's been very well received putting it on a clear path to becoming another one of our hit products $1 million selling products just in one quarter. We also worked hard during the COVID to maintain and further strengthen our brand, celebrating our 100 year continuing our presence in racing and serve, most importantly I think servicing our customers every-day reinforcing that what they do really is essential and that the display the Snap-On brand confirms that it's sold.
Sometimes the Tools Groups also been working to Span franchisee selling capacity. And that effect continued with focus to the pandemic and the days of the early shot access to the shops and to the technicians vary widely and the Tools Group more to engage social media in bridging the gap. This turned into a powerful tool for pre-briefing customers on products and promotions, reserving the actual face-to-face interaction for closing the deal, providing significant franchisee opportunity for selling more products and reaching new customers.
The tools we've also made strides and redeploying the time saved from restricted travel, everybody stay-at-home work today streamlining the VAN sales process to RCI and developing more concise customer presentation. So important in pitching products of ever rising complexity, social media engagement, RCI, selling and more effective trading. It made the difference, raising franchisee selling capacity to match the strength and capacity of our new product and the results back it up.
Well, that's the Tools Group. Moving through a V shaped recovery, recording two straight quarters of double-digit expansion, continuing a stream of new products building the brand raising selling capacity and strengthening for the future.
Now let's speak of RS&I. The RS&I Group continuing the combination and extending its positive trend sales at $361.1 million in the fourth quarter up 7.8%, 7% organically excluding $2.4 million of favorable foreign currency a steep recovery from the depths of the pandemic.
The rise was due to double-digit gains and OEM dealerships as auto manufacturers began to release new models and launched more essential programs. A high single-digit gain in the sales of our of our powerful diagnostics and repair information products independent repair shop owners and managers and then offsetting low single-digit decline in sales of undercar equipment or garage owners haven't developed sufficient confidence to invest to get it invest broadly and upgrading or expanding their facilities.
RS&I operating earnings of $90 million improved $2.8 million as the mix of lower margin OEM project sales diluted the volume improvement and as the group recorded a $1 million in charges for small European focused restriction. On a diagnostics and information based operations have recorded continuous growth for some time, the sales to independent repair shop owners and managers they've had continuous growth for some time, and innovative new products are the key to that success. And the fourth quarter was no exception. We just began shipping our new 20.4 software update for our diagnostics platforms in North America full coverage for the 2020 vehicles.
Additional reprogramming facility, increased functional test capabilities, and an expansion of our unique advanced driver assistance or ADAS content, so critical these days for engaging vehicle automation. This software represents another move forward in our already powerful already market leading intelligent diagnostics and repair information product lines. And that's been well received. 1,000s of technicians all across the U.S. and Canada will be upgrading to this very capable new edition before the next update is released in May. And then we'll start again.
RS&I is building a powerful position in the vehicle repairs and vehicle repair software that meets the changing mobility environment. And the 20.4 is another step in that direction. We're confident in the strength of RS&I, and we keep driving to Spanish physician repair shop owners and managers making work easier with great new products even in the days of the virus.
And that's our fourth quarter, absorbing the shock, driving accommodation, moving on to psychological recovery, keeping our people safe while we serve the essential all of that is working. Building Snap-On's advantage and the results show us sequential gains from the third quarter and significant growth from last year. Sales up 12.5%, 10.6% organically OI margin 20.1%, 220 basis points higher financial services continuing to deliver navigating the virus with strength and without disruptions and EPS up $3.82 up 24% all achieved, while maintaining and expanding our advantages and product brands and people ending the year stronger ready for more opportunities to come. It was an encouraging quarter.
Now I'll turn the call over to Aldo. Aldo?
Thanks, Nick. Our consolidated operating results are summarized on Slide 6. The fourth quarter of 2020 was strong with respect to Snap-On’s financial performance. Sales development was robust both year-over-year and sequentially. Gross profit and operating earnings margins expanded, and cash flow generation was again healthy net sales of $1,074.4 million in the quarter compared to $955.2 million last year, reflecting a 10.6% organic sales gain $9.6 million of favorable foreign currency translation and $7.5 billion of acquisition related sales.
The organic increase principally reflected double-digit growth across the Snap-On tool segment, and high single-digit gains with repair shop owners and managers in the repair systems and information segment. We've began identified direct costs associated with COVID-19, which totaled $2.8 million this quarter. These costs include direct labor and under absorption associated with temporary factory closures, wages for quarantines associates event cancellation fees, as well as other costs to accommodate the current enhanced health and safety environment.
Also in the quarter, we recorded $1 million of restructuring cost actions for Europe. Consolidated gross margin of 48% compared to 47.2% last year, the 80 basis point improvement primarily reflects the higher sales volume and benefits and the company's RCI initiatives partially offset by 30 basis points of unfavorable foreign currency effects and 10 basis points of direct costs associated with COVID-19.
Operating expenses as a percentage of net sales of 27.9% improved 140 basis points from 29.3% last year, primarily reflecting the impact of the higher sales, which more than offset the 30 basis points related to restructuring and direct costs associated with COVID-19.
Operating earnings before financial services of $216.2 million, including $2.8 million of direct costs associated with COVID-19, $1 million of restructuring costs and $1.5 million of unfavorable foreign currency effects, compared to $171.4 million in 2019, reflecting a 26.1% year-over-year improvement.
As a percentage of net sales operating margin before financial services of 20.1%, including 30 basis points of direct cost associated to the COVID-19 pandemic, and 30 basis points of unfavorable foreign currency effects improve 220 basis points from 17.9% last year.
As you may know, Snap-On operates on a fiscal calendar, which results in an additional week to our fiscal full year and fourth quarter every six years. As a result, our 2020 fiscal year contains 53 weeks of operating results with the extra week relative to the prior year occurring in the fourth quarter. While the impact of this additional week was not material to Snap-On’s consolidated fourth quarter total revenues or net earnings, our financial services segment did earn an additional week of interest income on its financing portfolio.
At the consolidated level, the net earnings benefit from the additional week of financial services interest income was largely offset by a corresponding additional week of fixed expenses, primarily personnel related costs and interest expense. With that said, financial services revenue of $93.4 million in the quarter of 2020 compared to $83.9 million last year, primarily reflecting the extra week of interest income and the growth in the financial services portfolio. Financial services operating earnings of $68.5 million increase $6.3 million for 2019 levels, principally due to the higher revenue but partially offset by increased variable compensation and other costs.
Consolidated operating earnings of $284.7 million including $2.8 million of direct COVID related costs $1 million of restructuring costs and $1.3 million of unfavorable foreign currency effects compared to $233.6 million last year. As a percentage of revenues, the operating earnings margin of 24.4% compared to 22.5% in 2019. Our fourth quarter effective income tax rate of 21.8% compared to 22.3% last year.
Finally, net earnings of $208.9 million or $3.82 per diluted share, including a $0.02 charge for restructuring increased $38.3 million or $0.74 per share from 2019 levels representing a 24% increase in diluted earnings per share.
Now let's turn to our segment results, starting with the C&I Group on Slide 7. Sales of $364.4 million increased 3.3% from $352.9 million last year reflecting $7.5 million of acquisition related sales and $6.5 million of favorable foreign currency translation partially offset by a seven-tenths of 1% organic sales declining.
While organic sales were essentially flat as compared to last year, they did improve sequentially in a more meaningful manner than what we see in our typical seasonal patterns, with organic sales of 14.6% from the third quarter of 2020. As compared to last year, the organic sales declined primarily reflects a mid single-digit decrease in our Asia Pacific operations, and a low single-digit decline in sales to customers in critical industries, offset by double-digit gains in the segments European based hand tools business.
Within Asia similar to last quarter, sales to customers in India and Southeast Asia continue to be impacted by the effects of the pandemic. Across critical industries, while year-over-year sales declined in natural resources including oil and gas, U.S. Aviation and Technical Education. Sales into these markets have improved from third quarter comparisons. This quarter’s year-over-year gains were reflected across international aviation heavy duty and non-military government related activity.
Sales to the U.S. military were lower as compared to the prior year as the fourth quarter of 2019 included sales for a major project that is winding down. Sales increases in our European based hand tool business were heaven across the region, particularly in France and the United Kingdom, as well as in our Scandinavian and export markets.
Gross Margin of 37.8% improved 230 basis points year-over-year, primarily due to increased sales and higher gross margin businesses and declines in lower gross margin sales to the military, as well as from benefits of RCI initiatives. These increases were partially offset by 60 basis points of unfavorable foreign currency effects and 20 basis points of direct COVID-19 costs.
Operating expenses as a percentage of sales 22.4% from 30 basis points as compared to last year. Operating earnings for the C&I segment of $56.2 million, including $1.3 million of unfavorable foreign currency effects and $1 million of direct COVID-19 costs compared to $45 million last year. The operating margin of 15.4% compared to 12.8% a year ago.
Turning down to Slide 8, sales in the Snap-On Tools Group of $494.9 million increased 20.2% from $411.7 million in 2019 reflecting a 19.6% organic sales gain and $2.2 million of favorable foreign currency translation. The organic sales increase reflects double-digit gains in both our U.S. and international operations. This reflects a 9.5% organic sequential gain over a strong third quarter 2020 sales performance.
Gross margin of 42.9% in the quarter improved 270 basis points, primarily due to the higher sales volumes and benefits from RCI initiatives. Operating expenses as a percentage of sales of 24% improved from 27% last year, primarily due to the impact of higher sales volumes and savings from cost containment actions, which more than offset $1 million or 30 basis points of COVID-19 related costs. Operating earnings for the Snap-On Tools Group of $93.6 million compared to $54.3 million last year. The operating margin of 18.9% compared to 13.2% a year ago, an increase of 570 basis points.
Turning to the RS&I Group shown on Slide 9, sales of $361.1 million compared to $335 million a year ago reflecting a 7% organic sales gain and $2.4 million of favorable foreign currency translation. The organic increase includes a double-digit gain sales to OEM dealerships, particularly in sales related to OEM facilitation programs and a high single-digit increase in the sales of diagnostics and repair information products to independent repair shop owners and managers. These increases were partially offset by a low single-digit decline in sales of undercar equipment. Sequentially RS&I organic sales improved by 13.2%. Gross Margin of 46.1%, including 10 basis points of unfavorable foreign currency effects, declined 160 basis points from last year primarily due to the impact have higher sales and lower gross margin businesses including facilitation program related sales to OEM dealerships.
Operating expenses as a percentage of sales of 21.2%, including 30 basis points of cost from restructuring improved 50 basis points from 21.7% last year, largely reflecting the mix of business activity in the quarter. Operating earnings for the RS&I Group of $90 million, compared to $87.2 million last year, the operating margins at 24.9%, including the effects of 20 basis points of unfavorable foreign currency effects and 10 basis points of direct costs associated with COVID-19 compared to 26% a year ago.
Now turning to Slide 10, revenue from financial services of $93.4 million compared to $83.9 million last year. This includes the additional days of accrued interest associated with a 53rd week in our 2020 fiscal calendar. Financial services operating earnings of $68.5 million, compared to $62.2 million in 2019. Financial services expenses of $24.9 million increased $3.2 million from last year's levels, primarily due to higher variable compensation and other costs partially offset by a year-over-year decrease in provisions for credit losses.
Compared to the fourth quarter last year, provisions for credit losses were lower by $700,000, while net charge-offs and bad debts were lower by $1.3 million. As a percentage of the average portfolio, financial services expenses were 1.1% and 1% in the fourth quarter of 2020 and 2019, respectively.
In the fourth quarter, the average yield and finance receivables is 17.7% in 2020 compared to 17.5% in 2019. The respective average yield on contract receivables was 8.5% and 9.2%. The lower yield on contract receivables in 2020 includes the impact of lower interest business operations support loans for our franchisees. These loans were offered during the second quarter to help accommodate franchisee operations and dealing with the COVID-19 environment.
As of the end of the quarter, approximately $13 million of these business operating support loans remain outstanding. Total loan originations of $272.4 million in the quarter increased $10 million or 3.8% from 2019 levels, reflecting a 4.5% increase in originations of finance receivables, while originations of contract receivables were essentially flat.
Moving to Slide 11. Our year-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our U.S. operation. In the fourth quarter, our worldwide gross financial services portfolio increased $20.8 million, the 60-day plus delinquency rate of 1.8% for the United States, extended credit is unchanged from last year and reflects the seasonal increase we typically experienced in the fourth quarter. As relates to extended credit or finance receivables, trailing 12 months net losses of $45.6 million represented 2.62% of outstandings at quarter end, down 8 basis points sequentially and down 29 basis points as compared to the same period last year.
Now turning to Slide 12. Cash provided by operating activities of $317.6 million in the quarter increased $120.9 million from comparable 2019 levels, primarily reflecting the higher net earnings and net changes in operating assets and liabilities including a $53.5 million decrease in working investment, primarily driven by inventory reductions in the period.
Net cash used by investing activities of $73.6 million included $35.4 million for the acquisition of auto grid, capital expenditures of $26.5 million and net additions to finance receivables of $15.9 million. Free cash flow during the quarter of $275.2 million was 129% in relation to net earnings.
Net cash used by financing activities of $111.6 million, including cash dividends of $66.8 million and the repurchase of 460,000 shares of common stock for $78.7 million under our existing share repurchase program. Full year 2020 share repurchases totaled 1.109 shares for $174.3 million. As of year-end, we had remaining availability to repurchase up to an additional $275.7 million of common stock under existing authorizations.
Turning to Slide 13, trade and other accounts receivable decreased $53.9 million from 2019 year-end. Days sales outstanding of 64 days compared to 67 days of 2019 year-end. Inventories decreased $13.9 million from 29 year-end including a $40.1 million inventory reduction, partially offset by increases from $23.2 million of currency translation and $3 million from acquisitions. On a trailing 12 month basis inventory turns of 2.4 compared to 2.6 in year-end 2019, and 2.4 at the end of the third quarter 2020.
Year-end cash position of $923.4 million compared to $184.5 million a year in 2019. Our net debt to capital ratio of 12.1% compared to 22.1% at year-end 2019. In addition to cash and expected cash flow from operations, we have more than $800 million in available credit facilities. As of year-end, there were no amounts outstanding under the credit facility, and there were no commercial paper borrowings outstanding.
That concludes my remarks on our fourth quarter performance. I'll now briefly review a few outlook items for 2021. We anticipate that capital expenditures will be in the range of $90 million to $100 million. We currently anticipate the absence of any changes to U.S. Tax Legislation that our full year 2021 effective income tax rate will be in a range of 23% to 24%.
I'll turn the call back to Nick for his closing thoughts. Nick.
Thanks, Aldo. Snap-On fourth quarter, we're encouraged by where we've been and by where we're going. You see, we believe that we exit 2020 stronger more capable and more advantaged than when we entered the year. The virus came, we absorb the shock. We accommodated the turbulence and we forged a V shaped recovery as we anticipated in the depths of the difficulty. We believe the year is vivid testimony to Snap-On resilience into our ability in turning change and challenge to our advantage. And the fourth quarter performance says it's so.
Sales up 12.5% as reported 10.6% organically OI margin 20.1% or 220 basis points against 30 basis points of unfavorable currency 10 basis points of restructuring charges and 30 basis points of direct COVID costs, strong improve.
C&I sale, clear sequential gains OI margin of 15.4% rising 260 points, RSI sales up 7% organically, OI of 24.9% down, but still in heavy territory. Financial services revenue and profits all up portfolio solid in the storm.
And finally, the Tools Group, sales are up 19.6% organically profits up 72.4% OI margin of 18.9% rising 570 basis points good numbers. But more importantly, underscoring our belief that the franchisee selling capacity has expanded and is positioned for more gains. And all of that it all came together to offer an EPS in the quarter of $3.82 up 24% from 2019 new heights in the great turbulence of 2020. And these heights were achieved while still nurturing our product, our brand, our people preserving and amplifying our natural advantages. We do believe we will leave the year at full and expanded strength and ready to reach higher and farther amid the abundant opportunities a 2021 and the years beyond.
Before I turn the call over the operator. I'll speak directly to our franchisees and associates. We celebrate your contributions as you perform your central task, and we're confident your effort in preserving our society will be remembered for years to come. For your success in altering the encouraging results of our fourth quarter, you have my congratulations. And for your steadfast commitment to our present and for your unwavering belief in our future. You have my thanks.
Now turn the call over to the operator. Operator?
Thank you. [Operator Instructions] And we will take our first question from Scott Stember with C.L. King.
Good morning guys and congratulations on a very strong quarter.
Thank you.
Thank you.
Particularly when you look at the Tools Group and if you look at the year-over- year number, I think you said, organically up 2% looks like you've essentially offset what you lost during the COVID period. But can you just frame out, how much of that was catch-up, and how much of that, is there a new incremental layer of growth? You talked about, people not traveling and being around and easy, I guess, some positive things coming, just your views on the Tools Group?
I think the story of the Tools Group is they took the COVID. And if you look at the endpoints, they're unaffected, what I mean, if you look at the endpoints are pretty good. And I think part of it is, sure they got shocked, and they had to accommodate, but they came back. And that's really the story of the corporation. But if you want to talk about recovery, I think, certainly in the third quarter, we had some recovery, we're coming out of those deep days of the virus in the end of the first quarter and second quarter.
Fourth quarter, it's harder to judge that. We think the expanding capacity and the impact of the new products coming out of the SFC drove things. Now, you can step back and look at one other thing is that, if you attempted to think about that, realize that sales of the VAN kind of matched of, and sales of the van were up, significantly more than the sales to the VAN in the year. So I would say things are kind of chugging along, we can talk about what's up and down and so on. We think the Tools Group is in good shape. We think its product is where it is. And that's why I spent time on the discussion talking about expanding the capabilities of our franchisees because we said that there are two boundaries to the Tools Group, it's time and space. And we think we broke them through some of the time.
Got it. So just again, you said that it was up significantly more than the selling, just to make sure I heard that correctly.
Yes, significant more than Tools Group. If you look at the full year, of the VAN was more than to the VAN, and in the better, it changes from month-to-month, but generally kept pace even in the best course, best periods.
Yes, and again, your view longer term hasn't changed mid single-digit growth for this segment. Just to clarify that?
That haven't changed, I think we get, let's take one step at a time and get back to where we want to be. We said we're 46% growth and will grow as a corporation, the Tools Group at the bottom of that. It’s a great profitable business. We think it's positioned for growth. We'll just take that one quarter at a time, but we're feeling good.
Got it. And then last question, within tools. Did you talk about how big ticket did versus hand tools? Let me just clarify that a little more.
Hand tools was stronger, which is one of the great things we're innovating in hand tools. This is an interesting that in a complex environment like this hand tools and we've seen it forever hand tools are a great business. But the big ticket items continue to go it's particularly diagnostics, this particular quarter were nice and strong. But it's also a tool -- and Tools Group is up. But in any kind of environment coming out of the difficulty, like we saw in the financial recession, people take a little time to fully get into psychological recovery, and they're willing to pay for, or invest in longer payback is. So you're seeing that coming along.
Got it. That's all I have. Thank you.
Thank you.
We will take our next question from Luke Junk with Baird.
Thanks, and good morning, guys. First question, Nick. Just wondering if you could follow up on sales of the VAN versus your sales in the fourth quarter specifically, should we assume that outlines, that you just provided relative to the full year and sort of the general shape of that as we went through the year overall?
No. So, I don't want to get into that. I don't want to start another reporting number for myself. But the sales of the van were up strong double-digits.
Fair enough.
Yes, okay. And that that followed month-by-month. So we're not seeing any sale off necessarily. We like the momentum.
Okay, I'll leave that one there. Second question that I wanted to ask is if you could expand on the comments that he made on the software side, Nick, in terms of the ADAS content that you rolled out I just want to understand -- what that capability is.
Okay I will you that, I tell you. One of the things, I talked about the sales of that information and diagnostic store repair shop owners or managers and independent shops, and one of the cornerstones of that lately is in Mitchell 1 is the ADAS software, which allows people to deal with difficulties of programming and understanding what's wrong with when you have a bridge in the advanced driver systems and as cars go to more autonomous this is even going to bigger. And so that Mitchell 1 has been one of the solid ones. If you go back and look at it, that segment has that portion has been pretty solid throughout the COVID. And that's one of the things driving it is the demand for these products. If automakers were going to go to highly automated cars, I kiss them tomorrow, because our business gets even better because precision is needed. And that's evidence of it.
And then last question for Aldo, if I could. Just wondering if you could comment on higher steel pricing that we're seeing right now and your ability to offset that both operationally and through pricing actions, given the strength that you're seeing the Tools Group, especially right now?
Well, certainly we always do believe when there's invisible and -- visible inflation, I should say that we have the pricing power to deal with it. That said, yes, there's increases in the steel horizon, it takes a few months for them to come into the company, because obviously you buy in order some inventories in the past months, and you have them in line to arrive. So there's a trailing effect that's there. But historically, if you look back, Luke, we've had these types of gyrations in steel from time-to-time, and we deal with it, we do have pricing power, then again, I remind everyone Snap-On is very vertically integrated. So in a way, the good news factor is steel is not as much a percent of the final end product, as some people might imagine. So I think that actually does work to our benefit to some degree.
Great, thank you for the color. I'll leave it there.
Right, good.
We will take our next question from David MacGregor with Longbow Research.
Yes. Good morning, everyone. Nick, congratulations on the good numbers, strong quarter.
Thank you.
Help me understand, why the spread between tools segment organic growth and the origination numbers is again this quarter in the mid-teens. And you called that diagnostics, being strong, I think you may have even said double-digits. So I'm really struggling to understand that, but…
I didn't actually say double-digit just to be clear. I don't think we could read. Sometimes I say things I don't remember. But certainly I don't think I said at that time. Look what here is the thing, you like to ask that question. Of course, that originations are divorced in time from what we sell to the VANS. And so what we're talking about is selling to the VANS. And so you have that divorce. But like I said, our hand tools are stronger in this quarter than others because people haven't been investing in big ticket items as much.
But the big ticket items are still up diagnostics was strong. And diagnostic is kind of a mix, it doesn't all go to EC, they increasingly because as the franchisees get more well heeled, they often use them on revolving accounts, sort of put them on their 15 week deal or they may stretch it a little bit. They don't go to EC. So we get a mix of those things. So if you're trying to figure out where origination is going to go, you have time displacement. And you have the split of EC between RA I mean, but diagnostics between RA and EC, and then you have tool storage on top of that. So it would be fair to say though, that, as I said before the overall big ticket items wasn't as robust as the overall tool sales.
Sure. I mean, you call that sell through off the truck in the fourth quarter up double, I think there you did say up double-digits, and it was a strong and…
I did. Yes, I did. Yes, I did.
And the strong cadence through the quarter. I mean, on the surface, when you see that greater disparity between organic growth and tools in the originations number, it would look like there was an inventory build on the trucks.
No, I don't think so. We don't think that look, here's the thing. I think I'm saying this, I think if it lines up perfectly, the sales off the truck and to the truck kind of line up, all right. In fact, maybe for the full year, the sales off the truck are higher. So there's an inventory shrink, I guess, in macro. And secondly, what I'm saying is sales to the truck are more weighted to smaller ticket items, because people invest in the shorter paybacks in these times. But that doesn't mean that the big ticket Mullingar diagnostics was strong. We like diagnostics, but I'm not giving a total number.
Right. And then what was the impact of the extra week on organic growth in the tool segment?
Yes, it's kind of immaterial, really, because, the extra week is between New Year's and Christmas. And you got holidays and you got people relaxing and those periods so it doesn't really make much difference. It might be I think, actually, we in OpCo anyway, we lose money in that week. So at the expenses, and we don't have much sales.
So a typical week would be about $40 million in revenues. Would it be half of that?
No less.
Less than half of that, okay.
This happens, whatever, this happens every year the same way. We don't have that week, but that week is the same every year.
Okay, last question for me. I guess on the cost savings at the SG&A line specifically, within the tool segment expenses were down about 300 basis points. So nice to see that pretty good number. By contrast in the C&I segment, your expenses were down about 30 bips and then RS&I down about 50. So I guess the question is, what are we able to cut back on and tools that may not have presented the same opportunity in the other two segments? And how much of that I don't know, could cost 250 basis points of discrepancy comes back with normalized conditions in ‘21?
I don't know. Look, I think one of the reasons is, of course, the Tools Group is much more heavily direct. And so because we're selling direct through our franchise, we're selling with our franchisees, we're out there travel and services, I mean, the normal years, and so we're out, we're kind of forward placed in tools more than others, so we like to be in the other places. So you would expect that to be a more target rich situation, especially in a situation with travels restricted in. And as far as going backward, I don't know, I think if your any operating business, you're feathered back these operations, you want to go out reach people when the sky is clear. Your guess is as good as mine. When the sky is clear, and you're going to work, they're going to be feathered in. I don't know if it will I doubt if it will all come back. But some of it will come back. I can't give you any guidance on it, though, really? Because we -- we're going to play it period-by-period.
Okay, thanks. I'll get out of the way and turn it over to others. Thanks, Nick.
Okay, thanks.
We will take our next question from Curtis Nagle with Bank of America.
Thanks very much. So, I know you guys don't give guidance in terms of any of the operating numbers, but maybe just a little insight, I guess, if you could, in terms of kind of how you're planning out or budgeting the year for the Tools Group, I guess vis-à-vis things like miles driven what I think should be a recovering environment for things like collision and other auto work? I wasn't sort of framing I guess if you see 2021?
Yes, look miles driven. Everybody makes a big deal about miles driven. But we never see motion, miles driven short-term. I don't think it plays out what we've learned is, since we've had over the last few years put a bigger in collision, it plays out in the collision business. So you're very right. I mean, collision is down significantly as an industry year-over-year. And we see that and you're seeing it that in our equipment, numbers that isn't in the Tools Group numbers so much.
You might see some garages, the odd, the garages we visit, but isn't a big factor in that situation. Miles driven, I think it's not so much the short-term, but we think longer term, it's going to start going up and that going to be more cars, because people are going to go to individual vehicles, who wants to get on a subway, how many people want to live in a 47 -- work in a 40 storey building in the future? Maybe you guys I don't know. But I think there's going to be a motion a reversal of that we saw that in China.
So we see car ownership and miles driven in a long way of getting better. And that drives our business what that means for us in 2021, unclear, but we think its opportunity. Now we think it's opportunity in the longer term, we're going to play out quarter-by-quarter, what I will tell you is we feel good about the momentum we've had going through the year, closing out the year. We feel good about that. We feel good about how our products are being received. We feel good about the efficacy of our software in the complex business. We feel good about the idea that our VAN drivers have more time so that's what I would say.
Okay, fair enough. And then maybe just a quick follow up. I guess any notable changes in terms of the underlying health on the tech population, technician population in terms of income, which I think is still pretty good?
Actually income is up. But wages, I'll say that, I'll say the wages are up trailing 12 months and year-over-year in November, we will be less logistic. So, you view that from which you will but it’s up a couple 3%. So the wages are up nicely, so the technicians aren't suffering and they think, I've talked to several franchisees yesterday, and they all think positive about their customer base. So that's pretty good. And we had our kickoffs and I zoomed in to the watch parties in Pennsylvania, in Florida and Iowa and in New York, and they were all positive about their customers. So I think the technicians are being affected. In fact, maybe they're doing better.
And you said, this is kind of, slow moving, maybe slow turning things. But in terms of the ongoing shortages in terms of tax any improvement there with employment?
Here is what I'll tell you, is that we're involved in that. We think that's an opportunity for us. And of course, we're working on that and for in listing people in career and technical education. And what we do is we establish Snap-On education sector is down, but we think it's been a boon for us, because we've been investing in education, and our number of certified centers, the education centers that offer Snap-On certification programs increased 33% in 2020 from 133 to 177. So we think we're in good shape in that situation. So I think technicians are going to come I think people are working on it. I'm particularly kind of optimistic about the President because his wife, Dr. Joe Biden is in technical education. So I think it'll get a good focus.
All right, sounds good. Good luck on the quarter and thank you very much.
Thank you.
We will take our next question from Bret Jordan with Jefferies.
Good morning, guys.
Good morning.
I am going to sort of trying to reconcile the tools growth with originations, are you seeing that maybe mechanics are using other sources of credit? Given their lack of spending on vacations or restaurants other entertainment?
I don't know, maybe you'll never know, I don't think we're seeing that. I haven't heard that anyway.
You're not seeing a cash buyer pick up, I guess.
What does happen though, is as our franchisees get more flush they tend to reach up. Franchisees are healthier. And they tend to reach up into the lower end of the what we would call bigger ticket items, particularly in a diagnostic segment. So the big hitter, one of our baby boomers is the Apollo D9 and it's kind of for the everyman technician in the middle of the range. And that's the thing that really did well in the quarter. And that one can be financed by a technician, by a franchisee. So maybe we're seeing some of that, and that one we introduced, I think at the SFC, it gets rolling out we gave demonstration units. It's outselling its predecessor by about 25% in terms of activations and so it's looking pretty good. So maybe that heading this, but I just want to caution that it's hard to reconcile in the end period, originations with what sales we have to the van that's another factor. There are a bunch of factors that are dislocating in that way. Over time, it should be directionally.
Okay. And then I guess a question on share gains obviously, some really strong quarters back-to-back in tool the full year just got to go up a couple percent. But do you feel that there's any shift in market share in your favor right now or is the market overall particularly strong?
Well, I think, look, I think vehicle I think our markets are overall strong, they're critical repair in particular being they're critical. They're critical. And they're essential and particular vehicle repair that underpins our critical mobility in the nation. But, and I don't really like to talk about market share, but what I'll tell you is, my franchisees are telling us that I said in my speech, that we are benefiting from being there through thick and thin. We were there every day in almost every day in the pandemic, anytime anybody would meet us, our guys were out there safely. And that has accrued to us. So for that turns into market share, I guess you can interpret it how you will.
Okay, great. Thank you.
Sure, thanks Bret.
And we will take our final question from Christopher Glynn with Oppenheimer.
Thanks. Kind of a narrow question, but maybe illustrative of how you operate. Nick you mentioned, growth in international aviation, even double-digit pretty adds-on with the context of that margin. So is that kind of a startup initiative or is it up a decent base just looking for a little bit more?
Well, look our international business is not fully equal to the U.S. business in aviation critical industries, but it's a reasonable comparison. This isn't like $300,000 and we doubled it to 600. That's not it. So generally that business I think, broad aviation is enough to bring aviation in total sort of up. So I mean, it's a good business. All I can say is go figure. Where we're getting. I guess it's a credit to the quality of our tools, the importance. Now remember, one of the things we've done in industrial that has got us, I think, got great popularity is we're leaning more and more on this customized kits. I talked about it, that’s in Europe, and we were banging those customers. It was gangbusters on a customized kits for the last several quarters and we are expanding capacity in that. In fact, that's one of the investments next year we're looking at to expand our capacity and customize kits and international aviation is part of it.
Great. Thank you.
Now I would like to turn the call back to Sara Verbsky for any additional or closing remarks.
Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap-On. Good day.
Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.