Q4 2020 Snap-On Inc Earnings Call
Ladies and gentlemen, you are currently on hold for the snap on incorporated 2024th quarter results Investor Conference call. At this time, we are assembling today's audience and we plan to be underway. Shortly we appreciate your patience and please remain on the line.
[music].
Ladies and gentlemen, good day and welcome to the snap on incorporated 2024th quarter results Investor Conference call.
Today's call is being recorded and at this time I would like to turn the call over to Sara <unk> Vice President of Investor Relations. Please go ahead ma'am.
Thank you Abby and good morning, everyone. Thank.
Thank you for joining us today to review of snap on fourth quarter results, which are detailed in our press release issued earlier this morning.
We have on the call today, Nick Pinchuk snap on Chief Executive Officer, and Aldo Pally, Ari SAP on Chief Financial Officer.
Jack will kick off our call. This morning with his perspective on our performance. Although will then provide a more detailed review of our financial results.
After Nick provides some closing thoughts we'll take your questions.
As usual we've provided slides to supplement our discussion these slides can be accessed under the downloads tab and the webcast viewer as well as on our website snap on dot com under the investors section.
The 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 and such statements additional information and the factors that could cause our results to differ materially.
And 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 and isolation or as a substitute for their GAAP counterparts, and additional information, including a reconciliation of non-GAAP measures is included in our earnings release and the.
On our conference call slides on pages 14 through 16, well it 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 the highlights of our fourth quarter and I'll.
And I'll give you my perspective on how the virus is playing out on the <unk>.
Trends, we see today and going forward and I'll I'll speak about our physical and financial progress and al.
Aldo will give you a more detailed review of the the financials.
The starwood.
I'll just say we are encouraged by the quarter it was strong.
But we believe we can reach even higher.
This year was soft.
A lot of unusual events, but when you look through it all snap on so of headwinds, but we met those challenges and absorb the shock developed accommodations to the environment moving forward on a clear recovery and.
We believe we exited the year stronger than ever.
We did have disparities from group the group and within each group, but our overall sales and profitability improved both sequentially and year over year for the second straight quarter.
Sheathing, New heights, despite the virus.
Through the year of the snap on team continue to make progress of accommodating to the threat pursuing our essential commercial opportunities safely.
And moving along upward trajectory is consistent with our general projections of how the days of the virus.
Geographically.
The impacts of the Covid continues to be very for us The Asia Pacific and remains virus challenge Southeast Asia, and India are still deep turbulence and the well.
And the U S and in Europe.
And actually seem to be further ahead and accommodation and are moving on to what we call psychological recovery for the business section segments.
We saw the <unk>.
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 continuing to gain and.
And activity and critical industries of advanced despite certain sectors like education, and oil and gas U S aviation not returning to growth yet, but you would kind of expect that.
Going forward.
We are convinced.
And that we're well positioned on a strong base, but we know we have much more work to do the environments throughout the world is still impacted by the virus and many of our businesses and not yet fully recovered against the Greek withering.
But having recognized the having a recognize these headwinds. However, we're also convinced that there will be abundant opportunities of the sky is clear and society pivots torque suburban locations at the more individual trends transportation. This is great news for the vehicle repair and industry I got Italia.
And because of that.
We're keeping focus on snap on value creation of safety portion of these times huh.
The quality customer connection innovation and rapid continuous improvement of our RCI and we've been unrelenting and advancing our advantage and products that solve the most critical of tasks and brands that serve as the outward sign them and of our brand that serves the outward sign of the pride and dignity working men and women taken their profession.
And and our people.
We're deeply committed and very capable.
Snap on team is of great asset and we've maintained its true these days of the virus.
We've advanced each of these strengths and the turbulence and it's enabled snap on to achieve new heights, and the number of show it.
Well, that's the overview and now the results.
Fourth quarter.
As reported sales of 1 billion and $74 4 million were up 12, 5% from 2019 and coding of $9 6 million of favorable foreign currency translation and $7 5 million of the acquisition related sales.
Organic sales growth rose, 10.6% volume gains and the van channel and OEM dealerships and diagnostics and repair information and our European hand tools business all of demonstrating the abundant opportunities on our runways and or increase the ability to take advantage of those opportunities.
From an earnings perspective.
Operating and income.
Our goal of why from the quarter of $216 2 million, including $2 8 million of the direct costs associated with the virus 1 million of restructuring charges for actions outside the United States and a million and a half hit from unfavorable currency was up $26 one per set.
And the Opco operating margin.
It was 21 per cent.
Of 220 basis points, overcoming 30 basis points of unfavorable currency 30 basis point 30 points of Covid cost the impact and 10 basis points of 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 tests.
And that result, combined with Opco for a combined with alcohol for consolidated the operating margin of $24 four per cent of 190 basis points.
Yeah the improvement.
The overall quarterly EPS was the $3.82 and according the <unk> charge for restructuring and that was all compared to $3 and eight since last year.
And increase of 24%.
I did say new heights.
Now for the full year sales were 3 billion of $593 million of three eight per cent organic decline principally on the first and second quarter shock of the virus before the sequential gains of accommodations took hold.
I'll call out of six on the $31 9 million of including $12 5 million of restructuring charges of $11 9 million of direct costs associated with Covid, 19, and $13 1 million of unfavorable currency.
Compared to $716 4 million of 2019, which benefited from $11 6 million legal settlement of the patent related litigation matter.
Okay.
Opco Oi margin, including including a 30 basis point the impact associated with restructuring.
30 points of direct pandemic expenses 30 points of unfavorable currency was 17, 6% and compared with 19, 2% of 2019, which incorporated 30 basis points of non REIT of the the nonrecurring benefit from the legal settlement that's.
That's a mouthful right.
But what it says is that despite the great disruption.
Our full year of why March our full year of OE margin was the only 40 basis points apples to apples demonstrating the special snap on and resilience that has enabled us the paid dividends every quarter since 1939.
Without a single reduction.
For the year of financial services registered Oi of $248 6 million versus the $245 9 million of 2019 overall EPS for the period of $11 of 44 cents was down 7.8 per cent from the 12 41 reported last year of 2019, adjusting for the restructuring and the current year and the one time legal benefit and the prior year.
2020, EPS as adjusted reached $11.63 down five 1%.
So now let's go on to the individual operating groups.
And C&I.
Volume and the course of fourth quarter of the $364 4 million, including $7 5 million from acquisitions and $6 5 million of favorable foreign currency was up three 3% as reported.
The activity was essentially flat organically, but represented of continuing sequential C&I rise all the way back to the early shock notably.
And these numbers the C&I year over year sales were marked by a strong double digit rise and our European based hand tool business growing broadly across western Europe against the twin challenges of Covid and the Brexit the disruption.
There were also offsetting decreases in sales to our customers and critical industries and Asia Pacific, but both of these operations joined the overall group growth group and registering substantial quarter to quarter of sequential improvement, they're still down but they are clearly recovering.
From an earnings perspective.
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 $1 million of Covid related costs with sales up 3.3 per cent as reported flat organically Oi grew twice the four 9% and.
And nice operating improvement.
And the Oi margin for the group was 15, 4% up 260 basis points from last year, overcoming 70 basis points of unfavorable currency and 30 basis 30 points of direct COVID-19 costs, the benefits of ours, the eye and margin gains and a critical and are these industries made all of the difference.
Speaking of the critical industries, we just see selective gauge the international aviation and heavy duty registered double digit improvements, but as you might expect and I referenced before education of oil and gas and U S. U S aviation continues to be down.
And in the quarter of military sales were also impacted by the wind down of one of our major kitting programs.
But we do remain confident in and committed to expanding and the critical industries and we see growing opportunities moving forward and the principal pay up to that possibility of customer connection and innovation, creating powerful new products.
You heard about our European hand tool business and showed significant resiliency and the quarter and was aided by a good dose of innovation of products like our recent expansion of our of a bottle of custom kitting systems, extending our direct to use of possibilities.
I don't sit and go product line allows buyers to quickly develop semi bespoke kits and full tool control.
Consists of more than 200 pre configured different tools sets designed around the 26 inch wide Oh twice, the cinch white box of roll cab available and three standard phone configurations, one third of our two third store and a cold war customers can choose the the particular box draw configuration and the tools they needed right from a bottle of dot com website.
Reaching and users without distributor of interaction and of a wider range of specialization of the sometimes it is specialization is required our sales reps and help develop just the white unit using the full breadth of the Bockel systems.
We've had great success with our new fit and go it's an important extension of our handful of presence in Europe and and in the quarter.
It helped boost SNA Europe to achieve the double digit growth and a very challenging environment I think everybody would agree C&I demonstrating further accommodation with continuing continued sequential gains serving the essential each of the business is generating a positive trajectory and exiting the quarter stronger than when they entered and products authored a big piece.
Of that progress.
Now on to the tools group.
As reported sales up 22% to 494 point, $494 9 million, including $2 2 million of favorable foreign currency and in the $81 million or 19.6% organic increase the second straight quarter of strong game with the U S.
And international businesses, both growing at double digits.
And the tools group operating earnings.
$93 6 million and.
And one point to me and of virus related costs that 93 points, including.
That 92.6 included $1 2 million of buyers really the clubs and that $93 6 million compared to last years, $54 3 million and over 70% improvement.
Actually the tools group report recovered the positive territory for the full year sales were up 2% organically with O I rising almost 9% and all of my margins up 110 basis points.
The continues of the continue operating and operating gains are all of the tools group are further affirmation of our view of the COVID-19 of Covid trajectory on.
And the resilience of the vehicle repair business and on the strength of our direct space the pace of band the band model It turns out.
The deep and direct connection with the customers is a differentiator even on a pandemic and and the quarter and throughout the year. The tools group confirmed the market leading position of our via network. We believe the franchisees are growing stronger and that's clear on the franchisee health metrics and metrics. We monitor each period. They continue the trend favorably and that was acknowledged by a number of.
And I respect the public patients all of listening snap on and as a franchise of choice. One was the franchise business review of where we were again recognized and the magazines latest rankings for franchisee satisfaction and as a top 50 franchise, marking the 14th consecutive year that snap on received that award.
And now.
This type of recognition reflects the fundamental strength of our franchisees and our band business and general and it would not have been achieved without a continuous stream of innovative new products developed through our strong customer connections throughout the storm. We've added every day.
Two of our already considerable insight and experience and the changing vehicle environment and because of that we're able to bring a brief word innovation after innovation great products like the like our newly released eight inch Talon group flank joy flank jaw pliers, and we call. The H J forty-seven ACF with the unique design for significant versus the versatility.
The D and both removing and tightening fast and its first our unique flank jaw formula the specially designed smooth and answer rated meeting area allows the use of the group of hex shape only on the flat surface and positioning the load away from the corners and similar to our flank drive systems on the sockets, 30% more torque applied to the fastener.
While still minimizing damages, eliminating rounded edges second when the fasteners of or already been heavily rounded and and our top of the grip our talent and grip Diamond Strait of jaws joined the located is the pliers tip generate on.
Parallel clamping force is up 57% of up up up to a 57 per cent increase and turning power.
With the snap on talent, our technicians can we move even the most damaged and rounded hex messengers and fasteners and for the icing on the versatility of Cape The New players also feature of our patented three position slipped joint design for easy changes to the group position. The H D 47 on ACF manufactured right here and I'm the walking.
And the U S and it's been very well received putting them on a clear path to becoming another one of our hit products millions of dollars selling products just in one quarter. We also worked hard during the COVID-19 to maintain and further strengthen our brands celebrating our 100th year cause any of our presence and racing and serve most importantly, I think servicing on.
Our customers every day reinforcing that what they do really use of essential and that's the display of the snap on brand and confirms that it's sold.
Sometimes on the tools group has also been working to expand franchisee selling capacity.
And that effect continuing with the with focus through the pandemic and the days of the early Scott access to the shops and sort of the technician is very widely and the tools group worked on engaged social media and bridging the gap.
This turns into a powerful tool for pre briefing customers on products and promotions reserving the actual face to face the interaction for closing the deal providing a significant franchise the opportunity for selling more products and reaching new customers why do you think were up.
The tools group also made strides and redeploying the type of the time saved from restricted travel everybody stay at home or today streamlining the van sales process through RCI and developing more concise customer presentation, so important and pitching products.
Of ever rising complexity, social media engagement, RCI and selling and more effective trading it made the difference raising franchisees selling capacity of match the strength and the capacity of our new products 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 the stream of new products building, the brand and raising selling capacity and strengthening for the future.
Now, let's speak of ours and I.
The north of I group, continuing the accommodation and extending its positive trend sales of $361 1 million and the fourth quarter up 7.8%, 7% organically, excluding a $2 4 million of favorable foreign currency of <unk>.
Speak recovery from the depths of the pandemic.
The rise was due to double digit gains and OEM dealerships as the as auto manufacturers begin to release, new models and launched new pro of loss watch more of central programs.
High single digit gain and the sales of our of our powerful diagnostics and repair information products and independent repair shop owners and managers and then offsetting low single digit decline and sales of under car equipment were garage owners haven't developed sufficient confidence to invest the to get it and invest broadly and upgrading or expanding their on their facilities.
Fortunately the operating earnings of 90 million of improved $2 8 million as the mix of lower margin OEM project sales diluted the volume improvement and as the group recorded of millions of dollars and charges for a small European pulp is through a restructuring.
Diagnostics and information based operations have recorded continuous growth for some time.
The sales to independent repair shop owners and managers and 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 our new 20 got the 24 software update for our diagnostics platforms and North America food.
Full coverage for the two 'twenty and 'twenty vehicles additional reprogram reprogramming facility increased functional test capabilities and an expansion of.
Of our unique advanced driver assistance or a D. A S content. So critical these days for engaging vehicle automation.
The software represents another move forward and on and are already powerful already market, leading intelligent diagnostics and repair information product lines, and it's being well received thousands of technicians of all across the U S. Canada will be upgrading to this very capable. New addition, before the next update is released in May and.
And then it will start again.
Arch and is building a powerful position and the vehicle repairs and vehicle repair software that meets the changing mobility environment and the 20th got four is another step in that direction, we're confident and the strength of ours and I and we keep driving to expand its position with repair shop owners and managers, making work easier with great new products, even in the days of the virus.
Yes.
Well, that's our fourth quarter absorbing the shock driving accommodation moving on to psychological and recovery keeping our people safe, while we serve the essential and all of that is working builds.
Building snap ons of advantage and the results show it sequential gains from the third quarter and significant growth from last year sales up 12, 5%, 10.6% organically Oi margin of 21% to one of 20 basis points higher financial services, continuing to deliver navigating the virus with strength and without disruption and <unk>.
The P S of $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 six.
For the fourth quarter of 2020 was strong with respect to snap on its financial performance sales development was robust both year over year and sequentially gross profit and the operating earnings margins expanded and cash flow generation was again the healthy.
Net sales of 1 billion and $74 $4 million on 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 tools segment and high single digit gains with the repair shop owners and managers and the repair of systems and information segment.
And we've again identified direct costs associated with Covid, 19, which totaled $2 $8 million this quarter the.
And these costs include direct labor and under absorption associated with temporary factory closures wages for quarantines associates and the bed cancellation fees as well as other cost of a comedy the current enhanced health and safety environment on.
Also on the quarter, we recorded $1 million of restructuring cost actions for Europe Consol.
Consolidated gross margin of 48 per cent compared to 47, 2% last year. The 80 basis point improvement primarily reflects the higher sales volume and benefits from 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.
The team.
Operating expenses as a percentage of net sales of 27, 9% and 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 billion of restructuring costs and $1 $5 million of unfavorable foreign currency effects compared to 171 $4 million and 2019, reflecting a 20 day.
The six 1% year over year improvement.
As a percentage of net sales operating margin before financial services of 21%, including 30 basis points of direct costs associated to the COVID-19, pandemic and 30 basis points of unfavorable garner currency effects and improve.
The 220 basis points from 17, 9% of last year.
As you May know snap on operates on a fiscal calendar, which resulted in an additional week to our fiscal full year and fourth quarter every six years.
As a result, our 'twenty and 'twenty fiscal year contained 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 its consolidated fourth quarter total revenues or net earnings our financial services segment did earn and additional week of interest income on its financing portfolio.
Of 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.
Services revenue of $93 $4 million on the quarter of 2020 compared to $83 $9 million last year, primarily reflecting the extra week of interest income and the growth and the financial services portfolio.
Services operating earnings of $68 five millions of dollars increased $6 $3 million from 2019 levels, principally due to the higher revenue, but partially offset by increased variable compensation and other costs.
So all of the operating earnings of $284 7 million of including $2.8 million of direct COVID-19 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 four per cent compared to $22 five per cent of 2019.
Our fourth quarter effective income tax rate of $21 eight per cent compared to taught the 2.3% last year.
Finally, net earnings of $208 $9 million of $3.82 per diluted share, including a tusa and charge for restructuring increased $38 $3 million of 74 cents per share from 2019 levels, representing a 24% increase and diluted earnings per share.
Now, let's turn to our segment results starting with the C&I group on slide seven.
Sales of $364 $4 million increased three 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 decline.
While organic sales were essentially flat as compared to last year, they did improve sequentially and a more meaningful manner than what we see and our typical seasonal patterns with organic sales up 14, 6% from the third quarter of 2020.
And as compared to last year, the organic sales decline primarily reflects a mid single digit decrease and our Asia Pacific operations, and a low single digit decline and sales to customers and critical industries offset by double digit gains on the segment's European based hand tools business.
And Asia similar to last quarter sales the customers in India, and southeast Asia continue to be impacted by the effects of the pandemic of.
Across critical industries, while year over year sales decline and natural resources, including oil and gas U S aviation and technical education and see.
Cells into these markets have improved from third quarter comparisons.
This quarter's year over year gains were reflected across the international aviation and heavy duty and non military government related activity.
Sales of the U S military were lower as compared to the prior year as the fourth quarter of 2019 included sales from a major project that is winding down.
Sales increases and our European based hand tool business were evident across the region, particularly in France, and the United Kingdom, as well as and 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 and 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 point of two 4% and 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 billion of direct COVID-19 cost compared to $45 million last year.
The operating margin of $15 four per cent compared to $12 eight per cent of the year ago.
Turning now to slide eight.
Sales and the snap on tools group of $494 $9 million increased 22% from $411 $7 million and 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 and both our U S and international operations.
And this reflects a nine 5% organic sequential gain over a strong third quarter 'twenty and 'twenty sales performance.
Gross margin of 42, 9% and the quarter and improved 270 basis points, primarily due to the higher sales volumes and the benefits from RCI initiatives.
Operating expenses as a percentage of sales of 24 per cent and improved from 27% last year, primarily due to the impact of higher sales volumes and the savings from cost containment actions, which more than offset $1 billion of 30 basis points of COVID-19 related costs.
Operating earnings for the snap on tools group of of $93 $6 million compared to $54 $3 million last year.
The operating margin of $18 90 per cent compared to 13, 2% the year ago and increase of 570 basis points.
Turning to the Ars and I group shown on slide nine.
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 in sales to OEM dealerships, particularly and sales related to the OEM facilitation programs and a high single digit increase 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 and sales of under car equipment.
Sequentially ours, and 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 of higher sales of 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 costs from restructuring and improved 50 basis points from 21 seven per cent last year, largely reflecting the mix of business activity of the quarter.
Operating earnings for the Arts, and I group of $90 million compared to $87 $2 million last year. The operating margin of 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% of a year ago.
Turning to slide two.
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 the 50, <unk> week, and our 'twenty and 'twenty fiscal calendar.
Financial services operating earnings of $68 5 million compared to $62 $2 million and 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 the year over year decrease and provisions for credit losses and.
Compared to the fourth quarter of last year provisions for credit losses were lower by $700000, while net charge offs of bad debts were lower by $1.3 million.
As a percentage of the average portfolio financial services expenses were one, 1% and 1% and the fourth quarters of 'twenty, and 'twenty and 'twenty and 19, respectively.
And the fourth quarter and the average yield on finance receivables of 17, 7% in 'twenty and 'twenty compared to 17, 5% and 2019 respective average yield on contract receivables was eight five per cent and nine 2% the lower yield on contract receivables of 2020 includes the impact of lower interest business operation support loans for Frank.
<unk> the as long as were offered during the second quarter to help of comedy and 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 on the quarter increased $10 million of three eight per cent from 2019 levels, reflecting a four 5% increase and originations of finance receivables, while originations of contract receivables were essentially flat.
Moving to slide 11.
Our yearend balance sheet foods of approximately $2 $2 billion of gross financing receivables, including $1 9 billion from our U S operation and the fourth quarter, our worldwide growth financial services portfolio increased $28 million. The 60 day, plus delinquency rate of one eight per cent.
For the United States extended credit is unchanged from last year and reflects the seasonal increase we typically experience from the fourth quarter.
As it relates to the extended credit or finance receivables and trailing 12 months of net losses of $45 $6 million represented 262% of outstandings at quarter and down eight 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 on the quarter increased $129 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 and working investment primarily driven by inventory.
The reductions in the period.
Net cash used by investing activities of $73 $6 million included $35 $4 million for the acquisition of auto group capital expenditures of $26 $5 million and net additions to finance receivables of $15 $9 million free.
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 include the cash dividends of $66 $8 million and the repurchase of 460000 shares of common stock for $78 $7 million under our existing share repurchase programs.
Full year 2020 share repurchases totaled $1 109 share thousands of shares broad and $74 $3 million.
As of year, and we had remaining availability of the repurchase of up to an additional $275 $7 million of common stock under existing authorizations.
Turning to slide 13 trade.
Trade and the other accounts receivable decreased $53 $9 million from 2019 year and day sales outstanding of 64 days compared to 67 days of 2019 year and inventories decreased $13 9 million from 29, <unk> year, and including a $40 1 million dollar inventory reduction part.
We offset by increases from $23 $2 million of currency translation and $3 million from acquisitions.
The trailing 12 month basis inventory turns of $2 four compared to 2.6 at year end 2019, and 2.4 at the end of the third quarter 2020.
Our year end cash position of $923 $4 million compared to $184 $5 million at year end 2019.
Our net debt to capital ratio of $12, one per cent compared to 22, 1% of at year end 2019 and.
In addition to cash and expected cash flow from operations, we have more than $800 million and available credit facilities as of year end and 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 on the I'll briefly review a few outlook items for 'twenty and 'twenty one.
We anticipate the capital expenditures will be in the range of 90 millions of of $100 million. We currently anticipate absent of any changes of the rest of the actual installation that our full year 2021 effective income tax rate will be and a range of $23 24 per cent.
Now I'll turn the call back the Nick for his closing thoughts Nick Thanks Aldo.
Snap on fourth quarter.
We're encouraged by where we've been and buy where we're going.
You see.
We believe.
We believe that we exit 2000, twenty's stronger more capable and more advantaged.
And when we entered the year.
The virus came and we absorb the shock we accommodated the turbulence and we forged a V shape recovery.
As we anticipated and the depths of the difficulty.
We believe the year is vivek testimony, the snap ons of resilience into our ability and turning change and challenge to our advantage and the fourth quarter performance says it sold.
Sales of 12, 5% as reported 10.6% organically Oi margin of 21% up 220 basis points against 30 basis points of unfavorable currency 10 basis points of restructuring charges 30 day, and 30 basis points of direct COVID-19 costs.
Strong improve C&I sales clear sequential gains Oi margin of $15 four per cent rising 260 points are tight sales up 7% organically Oi of 24, 9% down.
But still and heavy territory financial services revenue and profit so all up portfolio of salad and the storm.
And finally of the tools group sales up 19, 6% organically profit is up 72, 4% Oi margin of 18, 9% rising 570 basis points.
The numbers.
But more importantly, underscoring our belief that the franchisee selling capacity has expanded and is positioned for more games and all of that and it all came together the author of EPS and the quarter of $3 82 up 24% from 2019, New Heights, and the great turbulence of 2020.
And the hikes were achieved while still the nurturing our product our brand and our people per.
Serving and amplifying our natural advantages.
We do believe we leave the year at full and expanded the strength and ready to reach higher and farther amid the abundant opportunities of 2021 and.
And the years beyond.
Before I turn the call over to the operator, I'll speak directly to our franchisees and associates.
We celebrate and your contributions of you perform year of Central task and we're confident your effort and preserving our society will be remembered for years.
Okay.
For years to come on.
And your success and answering the encouraging results of our fourth quarter you have my congratulations and for.
For your steadfast commitment to our present and your for your unwavering belief and our future.
You have my thanks.
Now I'll turn the call over to the operator.
Operator, thank you.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to a lot of your signal to reach our equipment I got into the start one to ask a question.
And we will take our first question from Scott <unk> with C. L King.
Yeah.
Good morning, guys here in the graph.
And so on.
It's a very strong quarter.
Thank you.
Yeah.
And particularly when you look at the tools group and if you look at the year over year number I think you said the organically up 2% it looks like you've essentially offset what you lost share.
During the Covid period, but can you just frame out of the or how much of that was catch up and how much of that is there a new incremental layer on the growth you talked about.
And people are traveling and being around and easier I guess of some pockets of things coming and just kind of just your views on the tools group.
Yeah.
I think the story of the tools group as they took the Covid and if you look at the endpoints there on unaffected you know what.
And if you look at the end points of pretty good and I think part of it is.
Sure. They got 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 and the third quarter, we had some recovery.
Coming out of those those deep days of the virus and the at the end of the first quarter and second quarter fourth quarter, it's harder to judge that we think the expanded capacity and the impact of and the new products coming out of the SFC drove things now you can step back and look at one other thing is that G.
The attempted to think about that realize that sales off the van nine of match dog and.
And sales off the van were up.
You know significantly more.
And then the scale through the van and the year.
So I would say things are kind of chugging, along and we can talk about what's up and down and so on but we think we think the tools group is in good shape. We think we think its product is where it is and 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 broken through.
Some of the time.
Got it and just again you did say you saw.
And then it was up significantly more than the sell in and just to make sure I heard of that correctly, yes. It can have a good morning.
The bulk of the ban of demand was sort of if you look at the full year well off the van with more of the two the ban and and and the better you know it's Jay.
And just from most of them up and generally kept pace, even and the best quarters.
The best periods.
Yeah, and again your view longer term hasnt changed mid single digit growth of the segment.
And just to clarify that day ever change I think we get and well, let's let's take one step at a time and get back to where we want to be we said were 46% growing and growers of corporation and the tools group is on the bottom of that it's of great profitable business. We think of is positioned for growth and we'll just take that one quarter at a time, but we're feeling good.
Yeah.
Got it and then last question within tools did you talk about and how big ticket did versus hand tools and I would just clarify that a little more of it not and I'm.
Sure hand tools were stronger.
And which is one of the great things, where we're innovating and handles isn't it interesting that and a complex environment like the hand tools.
And we've seen it forever hand tools are a great business, but the big ticket items.
The goal, it's particularly diagnostics. This particular quarter were nice and strong, but there's always tools and tool storage was up but and in any kind of environment coming out of the coming out of the the the the difficulty like we saw and the financial recession people take a little of the kinds of fully get the psychological recovery and they're willing to pay for our and.
And best and longer payback items.
And 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.
Yeah, Thanks, and good morning, guys. The first question just wondering if we could follow up on sales off the van versus your sales and the fourth quarter, specifically should we assume that and lines up with remarks that you've just provided relative to the full year and sort of the the general shape of that as we went through the year overall.
And I don't want to get into and I don't want to start and other reporting number from myself, but the but the sales, but the sales of off the van were up strong double digits.
So fair enough.
Yeah, Okay, and then that's followed onetime on so we're not seeing any tail 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 you made on the software side of Nick in terms of the Adas content on that you rolled out I just wanted to understand.
Oh, yeah, well and what that capability is.
Okay I'll tell you. This I'll tell you one of the things I talk about the the.
Sales of that.
Information and diagnostics to repair shop owners and managers and independent shops, and one of the cornerstones of that lately is MIT and Mitchell one is the a D and software, which allows people to deal with difficulties of programming and understanding what's wrong with the when the when you have a glitch in the you know advanced driver assist.
The systems and as cars go to war the more autonomous this is even going to get bigger.
And and and so the Mitchell one has been one of the solid once if you go back and look at it that segment has that portion has been pretty solid throughout the COVID-19 and that's one of the things driving it is the demand for these products you know, we weep, if automakers and we're gonna go to a highly automated cars and that gives them tomorrow because of our business.
Our business gets even better because of precision as needed and that's evidence of it.
Uh huh.
And then last question for 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 was invisible visible inflation and I should say that we have the pricing power to deal with it that said, yes, there's increases in the odds of steel horizon. It takes a few months for them to come into the company, because obviously, you buy and orders of inventories and in the past months and.
Have the in line to arrive so theres a trailing effect that's there, but historically if you look back look we've had these types of gyrations and steal from time to time, and we deal with and we do have pricing power and then again I remind everyone snap on is very vertically integrated so and a way of the good news factor of steel is.
Not as much of a percent of the final and product as some people might imagine so I think that actually does work to our benefit to some degree.
Great. Thank you for all of the color on it.
Okay.
And I'll leave it there thanks.
Right right.
We will take our next question from David Macgregor with Longbow Research.
Yes, good morning, everyone, our net congratulations and congratulations on the good numbers.
And on quarter he helped.
Help me understand why the spread between tools segment organic growth and the origination numbers again this quarter and the mid teens and you called out the diagnostics being strong I think you may have even said double digits.
So I'm really saying and I understand that right and.
And I actually say double digits just to be clear I don't think we could reap sometimes I say things I don't remember, but certainly I don't think I said at that time look like here is the thing you make the ask that question no of course that originations are divorced and time from what we sell to the bands and so what we're talking about of cells in a band and so you have that divorce, but like I said.
And you know our our our hand tools are stronger and this quarter than others, because people haven't been investing and big ticket items as much but the big ticket items are still on diagnostics was strong and diagnostics is kind of of mix. It doesn't all go to EC Dave you know increasingly because as the as the franchisees get more well heeled they turn it on.
They often use them on revolving accounts sort of they'll put them on their 15 week deal or the may stretch it a little bit and they don't go the EC. So you get a mix of those things. So if you're trying to figure out where we're at origination is kind of go you have time displacement and you have the the the split of EC between our a I mean.
But diagnostics between our a and D. C. And then you have tools storage on top of that so it would be fair to say, though that as I said before the the overall big ticket items and it wasn't as robust as of the overall tool sales share.
I mean, you you called out of the sell through off the truck and the fourth quarter up double I think there you did say up double digits and it was the strong and I did yes, yes, and the <unk>.
The cadence through the quarter I mean, the on the surface when you see that create the disparity between organic growth and tools and the originations number it would look like there was an inventory build on the trucks.
And I don't think so I don't we don't think that look here's the thing I think I'm, saying this I think it per it lines up perfectly.
The the sales of off the truck and two the truck kind of lineup alright, and in fact, maybe for the full year of the sales off the truck or higher and so there's an inventory shrink I guess and macro and secondly, what I'm, saying is sales two of the truck.
Are more weighted to smaller ticket items because people invest in the shorter paybacks and these times, but that doesn't mean that the big ticket Malinger diagnostics was strong we liked diagnostics, but I'm not giving you. The total number right and then what's the what was the impact of the extra week on organic growth and the tools segment.
Yeah, it's kind of immaterial really because you know the extra week is between new year's and Christmas.
And you've got holidays, and you've got people of relaxing and of those periods. So it doesn't really make much difference you know it might be you know I think I think actually we think we and opco anyway, we lose money and that week.
So.
At the expenses and we don't have much sales.
So what's the typical week would be about $40 million of revenue would it be half that.
Oh the less.
Listen half that'll cause anybody to relax and this happens whatever you know this happens every year of the same way and we don't want activities of the weekend, but that week of the same every year. Okay last question from me just.
Question on the I guess on the cost savings and the SG&A line, specifically within the tools segment expenses were down about 300 basis points. So you know and nice to see the very good number.
By contrast, and the.
C and ice segment expenses were down about 30 bps and in the nurse and I doubt about 50. So I guess the question is what were you able to cut back on the tools that may not have presented the same opportunity and the other two segments and and how much of that I don't know if let's call. It 250 basis points of the discrepancy comes back with normalized conditions and 'twenty, one and I don't know I don't know look I think the reason is one of the reasons of course.
The the tools group is much more heavily direct and so because of our selling direct through our friend with shell and with our franchisees. We are out there traveling and servicing them in the normal years and so we're out we're kind of forward fourth place and and tools and more than others and what we like to be and the other places. So you would expect that to be of more target rich situation and especially in a situation with travelers.
Restricted and and as far as going backwards, you know I don't know I think you know if you're if you have any operating business you feather back of these.
The operations you want to go out and reach people when the Sky is clear your guess is as good as mine when the Sky is clear and Youre going out there and they're gonna be feathered in I don't know if at all I doubt of it all come back, but some of it will come back I can't give you any guidance on it they'll really because we you know we're going on we're going to play it period by period.
Okay, Thanks, and I'll get out of the way and turn it over the other thanks Nick.
Sure.
Okay.
We will take our next question from Curtis Nagle with Bank of America.
Yeah.
Great. Thanks very much.
And so you know.
And I know you guys don't give.
The guidance in terms of.
Of the the operating numbers, but maybe.
Maybe just a little insight I guess, if you could and in terms of kind of how does the plenty out of a budget of the year off of.
And the tools group I guess via the and things like miles driven.
What I think should be of recovering environment. She thinks of the collision and other auto work and <unk>.
And I wasn't sort of framing of I guess.
And I think it does.
And what do you want.
Yeah, and maybe I'll give you a look miles driven you know everybody makes a big deal about miles driven but you know we never see motion on miles driven short term.
And I don't think of it plays out what we've learned is since we have over the last few years put it a bit bigger and collision it plays out and the collision business. So you're very right I mean collision is down significantly as an industry of year over year, and we see that and youre seeing it at that and our equipment numbers that isn't and the tools group numbers. So much you might see some garages.
The odd group, the garages and revisit but it isn't a big factor and that situation miles driven I think it's not so much of the short term, but we think longer term, it's going to start going up and they're gonna be more cars because people are going to go to smaller to smaller individual vehicles.
And once again on a subway.
How many people want to live and a 40 stab at work and of 40 storey building and the future. Maybe you guys and I don't know, but I think there's gonna be emotion of reversal of that and we see and we saw that in China. So we see car ownership and and miles driven in the long way of getting better and that drives our business what that means for us and 2021 unclear, but we.
Think it's opportunity.
And now we think its opportunity and 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 gone through the year closing out the year with.
Feel good about that we feel good about how our products are being received and we feel good about the efficacy of our software and the complex business. We feel good about the idea that our van drivers have more time to sell.
That's what all day.
Okay Fair enough and then maybe just a quick follow up.
So any notable changes in terms of.
Now the underlying health of all of the.
Jack population technician population in terms of you know Inc.
From which I think is still pretty good.
Actually it's actually income is up the wages and I'll say the I'll say that's on.
The wages are up our trailing 12 months and the year over year in November we all get BLS statistics. So you know you view that from what you will but it's a couple of 3% and sort of wages are up nicely. So the technicians are suffering and they see you know and I talked to several franchisees yesterday.
And they all seem positive about their customer base.
So and that's pretty good and and we had our kickoff and I was in I zoomed in just watch parties in Pennsylvania, and Florida, and Iowa, and and and New York and they were all positive about their customers. So I think I think yeah, you know the technicians aren't being affected in fact, maybe they are doing better.
Okay.
And so this is kind of slow moving and so that's sort.
And the thing, but you know in terms of the AGA and shortages in terms of toxicity and the improvement there with maybe and Wow, that's what I can handle the deployment.
Here's what I'll tell you is that we're involved and that we think that's an opportunity for us and of course, we're kind of an up and angelus for and listing people and career and technical education and what we do is we establish snap on education sector is down, but we think it's got a boon for us because we've been investing and we've been investing and education and our number of certified centers that out of the centers.
The education centers that offer of snap on certification programs increased 33% and 2020 from 133 to 177. So we think we're in good shape and that situation. So I think technicians are gonna Com I think people are working on and I'm I'm, particularly kind of optimistic about the president because his wife Dr.
The Doctor Jill Biden and this is in is in the technical education, and so I think it'll it'll get a good focus.
Alright sounds good good luck on the quarter and congrats very much.
Thank you.
Yeah.
We will take our next question from Bret Jordan with Jefferies.
Hey, good morning, guys good.
Alright.
On the sort of trying to reconcile the tools growth where the originations are you seeing that may be mechanics are using other sources of credit.
Given the lack of spending on vacations or restaurants and other entertainment.
And I don't I don't know maybe you never know I don't think we're seeing that I haven't heard that anyway, you're not pretty good cash flow here.
And even.
And they go of it and you know what does happen, though is actually our franchisees.
Get more flush and they tend to reach up and the franchisees are healthier and the and they tend to reach up into the into the lower end of the what we would call of bigger ticket items, particularly in the diagnostic segment.
So the big the big the Big hitter and one of our baby Boomers is is the Apollo D. Nine and it's kind of per the every man technician in the middle of the range and that's the thing that really did well and the quarter and that one it can be financed by by a technician by of by of franchisees. So maybe we're seeing some of that you know it and that one that one we.
Introduced I think at the SFC It gets rolling out and we gave the we gave it we gave the demonstration units its outselling its predecessor of by about 25% in terms of the you know.
The activation and so so it's looking pretty good so maybe that.
Adding this but I just want of caution that it's hard to reconcile in the period originations with what the sales with sales we have set up and that's another factor there of a bunch of factors that are dislocating and that way over time it should be directionally.
Okay, and then I guess the question on the share gains.
Obviously, some really strong quarters back to back into all of the full year, just I guess the go up a couple of 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 over the overall strong their critical repair of particular via the critical industry are critical and they're essential and particular vehicle repair that underpins, our critical mobility and 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.
And I said it in my speech that we are benefiting from being there through thick and thin.
We were there every day and.
And almost every day and the pandemic anytime anybody would meet US our guys were out there safely.
And that has accrued to us.
So for that turns into the market share I guess, you can interpret and how you will.
Okay, great. Thank you.
Sure. Thanks Mark.
And we will take our final question from Christopher Glynn with Oppenheimer.
Thanks.
Kind of Uh huh.
Narrow question, but maybe of Lustered of of how you operate and thank you mentioned the growth in the international aviation and even.
Double digit digits pretty Inc.
No.
At odds with the context of that margin. So is that kind of a start up the initiative or is it off of a decent base just looking for a little bit more on.
Well look our international business and not.
Fully equal to the U S business and aviation critical industries, but.
It's a reasonable comparison.
And now when you know this isn't like you know $300000 and we doubled at the 600, that's not it. So generally generally that business that business I think brought aviation and is enough to bring aviation and total.
Sort of up.
So I mean, it's a good business yeah I all I can say you go figure you know, what we're getting and I guess, it's a credit to the quality of our of our tools the importance of and I remember one of the things we've done and in industrial that has got US I think got great popularity is we're leaning more and more on this customized hits I talked.
And that's in our Europe, and we were Bang and those customer you know it was gangbusters on the customized kits for the last several quarters and we are expanding capacity and that in fact, that's one of the investments next year, we're looking at to expand our capacity and customized kit and the international aviation is part of it.
Great. Thank you.
Sure.
And I would like to turn the call back to Sara verbs ski for any additional or closing remarks.
Thank you all for joining us today, a replay of this call will be available shortly on snap on dot com as always we appreciate your interest and snap on good day.
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Ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Yeah.
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