Snap-on Inc. has announced 2020 operating results for the fourth quarter and full year.
Net sales of $1,074.4 million in the fourth quarter of 2020 increased $119.2 million, or 12.5% from 2019 levels, reflecting a $102.1 million, or 10.6%, organic sales gain, $9.6 million of favorable foreign currency translation, and $7.5 million of acquisition-related sales.
Operating earnings before financial services for the quarter of $216.2 million, or 20.1% of sales, including the impacts from $2.8 million of direct costs associated with COVID-19, $1.5 million of unfavorable currency effects and $1 million of exit and disposal costs for actions outside of the United States (“restructuring charges”), compared to $171.4 million, or 17.9% of sales in 2019. Excluding the restructuring charges, operating earnings before financial services in 2020, as adjusted, of $217.2 million, or 20.2% of sales, increased $45.8 million, or 26.7%, from 2019 levels.
Financial services revenue in the quarter of $93.4 million increased $9.5 million from 2019 levels; financial services operating earnings of $68.5 million compared to $62.2 million last year.
Consolidated operating earnings for the quarter of $284.7 million, including $2.8 million of direct costs associated with COVID-19, $1.3 million of unfavorable currency effects and $1.0 million of restructuring charges, compared to $233.6 million last year. As a percentage of revenues (net sales plus financial services revenue), consolidated operating earnings were 24.4% and 22.5% in the fourth quarters of 2020 and 2019, respectively. Excluding the restructuring charges, consolidated operating earnings in 2020, as adjusted, of $285.7 million, or 24.5% of revenues, increased $52.1 million, or 22.3%, from 2019 levels.
The fourth quarter effective income tax rate was 21.8% in 2020 and 22.3% in 2019.
Net earnings in the quarter of $208.9 million, or $3.82 per diluted share, compared to $170.6 million, or $3.08 per diluted share, a year ago. Excluding the restructuring charges, net earnings, as adjusted, were $209.9 million in 2020, or $3.84 per diluted share.
Full year net sales of $3,592.5 million decreased $137.5 million, or 3.7%, from 2019 levels, reflecting a $140.9 million, or 3.8%, organic sales decline and $10.9 million of unfavorable foreign currency translation, partially offset by $14.3 million of acquisition-related sales. The lower sales volume is primarily due to decreased activity in the first half of the year as a result of the initial shock associated with the COVID-19 pandemic. Full year net earnings of $627.0 million, or $11.44 per diluted share, compared to net earnings of $693.5 million, or $12.41 per diluted share, last year. In 2020, excluding restructuring charges, net earnings, as adjusted, were $637.3 million. In 2019, excluding a legal settlement related to a litigation matter that was being appealed (the “legal settlement”), net earnings, as adjusted, were $684.8 million. Earnings per diluted share, as adjusted, of $11.63 in 2020, decreased 5.1% as compared to earnings per diluted share, as adjusted, of $12.26 last year.
“Our fourth quarter was another encouraging period in which Snap-on continued its upward trajectory, extending to new heights in both sales and earnings . . . achieved directly against a disruption of historic proportion . . . all while prioritizing the health and safety of our constituents,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “We believe our performance clearly confirms the continuing and abundant opportunities along our runways for growth and improvement, demonstrates the strength inherent in our operations, and testifies to the resilience of our enterprise, supported by our franchise network, by our capacity for critical innovation, and by our deep connection with makers and fixers. We’re further heartened that the gains were achieved in the challenging COVID environment, while still expanding our special advantage in our products, in our brands, and in our people. Those elevated capabilities enabled us to reach higher in the quarter and will serve as an effective base for attaining increased progress as we move forward through 2021. Finally, I want to celebrate our franchisees, our associates, and our customers who have labored at their essential tasks, especially in repair shops, in warehouses, and in factories. Their dedication and hard work have helped preserve our society during the time of the virus . . . an effort that will be remembered for years to come.”
Outlook
COVID-19 spread across the globe during 2020 and continues to impact economic activity worldwide into 2021. Snap-on is accommodating to the related risks while safely pursuing opportunities in the COVID-19 environment. In 2021, the company believes there will be ongoing advancement against the virus-related turbulence, and that the trajectory of progress may be uncertain due to the evolving nature and duration of the pandemic.
Snap-on does expect to make progress in 2021 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, it is projected that capital expenditures in 2021 will be in a range of $90 million to $100 million. Snap-on continues to respond to the global macroeconomic challenges through its Rapid Continuous Improvement (RCI) process and other cost reduction initiatives.
Snap-on currently anticipates that its full year 2021 effective income tax rate will be in the range of 23% to 24%.
