Good day, and welcome to the Snap on Incorporated Second Quarter 2021 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sarah Burbsky, excuse me, Vice President, Investor Relations. Please go ahead.
Thank you, Stephanie, and good morning, everyone. Thank you for joining us today to review Snap on's 2nd quarter results, which are detailed in our press release issued earlier this morning. We have on the call today Nick Pinchuk, Snap on's Chief Executive Officer and Aldo Pagliari, Snap on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results.
After Nick provides some closing thoughts, we'll take your questions. As usual, we have provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. These slides will be archived on our website along with a transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs or otherwise state management's or the company's outlook, plans or projections are forward looking statements and actual results may differ materially from those made in such statements.
Additional information and the factors that could cause our results to differ materially from those in the forward looking statements are contained in our SEC filings. Finally, this presentation includes non GAAP measures of financial performance, which are not meant to be 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 1415. Both can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk.
Nick?
Thanks, Sarah. Good morning, everyone. As usual, I'm going to start the call by covering the highlights of our Q2. And along the way, I'll give you my perspective on our results. Once again, they were encouraging.
And our markets robust and promising. And our continued progress and strength amidst pandemic. The pandemic isn't over, but we believe we're stronger right now than when it all started. And of course, we'll also speak about what it all means. Then Aldo will move into a more detailed review of the financials.
We believe that our second quarter again demonstrates Snap on's ability to continue its trajectory of positive results, overcoming a variety of ongoing headwinds, accommodating to the lingering virus environment, meeting the challenges of the day across the business world and advancing along our runways for growth and for improvement. Our reported sales in the quarter were $1,801,400,000 and they were up versus last year's $357,100,000 or 49.3 percent, including $20,600,000 of favorable foreign currency exchange and $19,600,000 in acquisition related sales. The organic sales were up 42.5 percent with significant gains in every group, our 4th straight quarter being above pre pandemic levels, a V shaped trajectory that defines resilience and flexible capability. The OpCo operating income of $217,100,000 was up $126,000,000 from last year, which included $4,000,000 of restructuring charges. OpCo operating margin was 20.1%, up from the 2020 level of 12.6% or 13.1% as adjusted for restructuring, representing a 700 basis point as adjusted improvement.
For Financial Services, operating income of $68,900,000 increased 19 point 6%, higher originations, lower losses, delinquencies below pre pandemic levels, our finance company passing the greatest stress test of our time with flying colors. And that result combined with Opgolf were consolidated operating margin of 24.5%, up 560 basis points as adjusted. Quarterly EPS was $3.76 up 103.2% from last year. And excluding the 2020 restructuring charges, EPS grew 96.9%. Versus the pre pandemic levels of 2019, the EPS grew 16.8%, clearly tracing an ongoing positive trend.
I've said it before, but it bears repeating. We believe Snap on is stronger now than when we entered this great withering, and we believe our 2nd quarter is emphatic evidence of that fact. Compared with 2019, Our sales in the past quarter grew $130,100,000 or 13.7 percent. That reflects $23,000,000 of acquisition related sales, $17,200,000 of favorable foreign currency and $89,900,000 or and $89,900,000 or 9.3 percent organic gain. The 2021 OpCo operating margin of 20.1 percent was up 10 basis points from 2019, but that gain was achieved against 70 basis points of unfavorable currency and acquisition impacts, all while absorbing the lingering effects of the virus.
It's not gone. So those are the numbers. From a macro market perspective, it's clear that our automotive repair sector remains favorable. The technicians across the map are still at their post repairing cars and trucks, keeping the world running and they are busy. And as expected after the COVID, it appears that people are leaning more toward personal transportation and are holding on to their vehicles longer every year.
Auto repairs is a strong and resilient market. You can hear it from our franchisees and you can see it in our numbers. As we look forward, we see greater opportunities as vehicle techs encountered even more complex repairs, new technologies, alternative powertrains, greater proliferation of driver assistance electronics, it's all music to our ears. And then there's the repair shop owners and managers, RS and I territory. A little more mixed, particularly in Europe, but a return to growth in repair garages and dealerships, They're starting to invest.
Undercar equipment and OEM programs are coming back, and RSI is taking advantage of that trend with new equipment offerings and advanced database solutions, continually improving our software products and our diagnostic releases, products like Mitchell 1 repair information software and shop management software and electronic parts catalogs and our DealerFX shop management technology and our heavy duty and our intelligent diagnostic units, big databases and getting more powerful and easier to use, helping the shop fix it right the first time efficiently. Per Shop is changing, rising in complexity and RS and I as the products to match. Finally, let's talk about critical industries, where the step on rolls out of the garage, solving the task of consequence. This is where the C and I Group operates, our most international operations, where the customers have endured the longest impact of the virus and have been slower to accommodate it, recovering it, what I call very great, segments like oil and gas and aviation to geographies like Southeast Asia and India still down. But despite the variation, we did see growth in critical industries, improvements in education, the students are coming back and in power generation and heavy duty fleet, all combining to offset that continuing turbulence.
So overall, I'd describe our C and I markets as healthy and representing clear opportunity. And coupled with auto repair, we believe our markets are robust now and there's considerable opportunity ahead and we have opportunity ahead for us as we move along our runways for growth and improvement. And I can't read the section about robust progress and abundant possibilities, while speaking on the engine of our advance, Snap on value creation, customer connection innovation, developing new product solution born out of insights and observations gathered right in the workplaces and RCI, guiding the expansion of franchisee selling capacity with better processes, more effective training and a new focus on social media. It will all help drive our progress overcoming the accommodating the virus and enabling us to take full advantage of the opportunities and chart a continuing and positive trend forward. That's the overview.
Now let's move to the segments. In the C and I group, sales in the quarter were up 33.8 percent or $88,600,000 versus 20 including a $71,300,000 or 26.3 percent organic uplift with double digit progress across all of the divisions. From an earnings perspective, C and I operating income of $55,500,000 including $1,100,000 of unfavorable foreign currency represents a rise of $32,600,000 compared to 2020, which included a $2,000,000 of restructuring. That all means an as adjusted increase of over 122.9 percent and the operating margin was 15.8%, an as reported increase of 7 10 basis points, a rise of 6 30 basis points as adjusted and an uplift of 120 basis points from the pre pandemic level in 2019 despite 90 basis points of unfavorable currency. When compared with pre pandemic 2019, sales were up 4.6%, including a 0.4% organic gain, about flat.
Now continuing bright spot for our Ford C and I. S and A Europe did deliver yet another quarter of growth, expanding beyond pre pandemic levels against the wind with Spakor Ergo tool management system leading the way, tailoring products specific to customer needs. Europe is a very market environment, but Essentane Europe is defying economic gravity again. And that positive was joined by contributions from recovering areas in critical industry like duty power generation. And as I said before, education was come to the party just now.
And from Asia Pacific geographies like China and Japan, And those gains were balanced by declines in attenuated sectors like the military, aerospace and natural resources, all still weak. We do remain confident in and committed to extending in critical industries and we're committed with great new products. Speaking of product, in the last quarter to help solve challenging tasks across aviation and other critical industries, we launched the new Snap on 14.4 volt micro lithium cordless right angle mini drill with a 6,000 RPM making it ideal for drilling a variety of materials, plastics to aluminum and to fiberglass. The unit has a compact 90 degree head, which provides easier access to combined spaces and reduces working fatigue. A big factor.
In addition, it also offers a higher quality chuck that achieves precise drilling with minimum run out ensuring tight tolerances are met with a couple of reliability. The top blow off our drill, the muscle utilizes a double ball bearing supported spindle shaft and spiral bevel gears, not helpful, but it all means that the new Power Tool has a clear superior in durability. The cordless triangle midi, great innovation with array of advantages and are noting that C and I, promising quarter. Moving down its revenue growth with strong profitability. C and I OI margin, 15.8%.
Now on to the ToolsCoop. Sales of $484,100,000 up $160,800,000 including $154,000,000 or 46.7 percent organic gain, double digit growth both in the U. S. And the international operations and the operating margin was 21.4%, up 9 30 basis points. Compared with pre virus 2019, sales grew $78,300,000 including 70,700,000 or 17.1 percent organic gain.
In this quarter's 21.4 percent operating margin was up 380 basis points compared with the free virus numbers coming out of the pandemic stronger indeed. Another power another I was going to say powerful, I guess I could say that, but another positive quarter with double digit expansions across all geographies in all products. We do believe our van network remains quite strong. Just a few weeks ago, I spent time with a dozen franchisees on our the dozen franchisees on our U. S.
National Franchisee Advisory Council at our Algona, Iowa tool storage plant and they were pumped and prosperous, excited by their current positions, positive about other vans in the regions they represent and very optimistic about the prospects for even more. Beyond the windshield surveys, we see other indicators of continuing strength like the business health metrics. They remain quite favorable. Qualitative and quantitative indicators, both very positive. And that positivity was not just internal, it was reinforced by the external view.
Was recognized again this year among the top 50 in the franchise industry by Entrepreneur Magazine. And once again, we scored highest in the tools distribution category, place we've held for quite some time. And now this type of recognition, this kind of positivity reflects the fundamental and contemporary strength of our franchisees and of our overall van business and would have not have been achieved without a continuous stream of unique new products. Hand tools were up in the quarter and part of that torque is rising in importance as more mechanical provisions precision becomes necessary to support vehicle automation. And we're riding that wave with great new products like our new ATEC Micro Torque Wrench with a quick release head.
Quarter inch drive quick release has a positive locking mechanism to retain the socket solidly and securely in place and at the same time, It offers a push button for easy tool disengagement. It holds and it ejects, both important under the hood and it's a time saver. It's quite a time saver in close clearance applications like valve cover removals and spark plug replacements that happen every day in the garage. The tool also offers visual and visual, audible and migration alerts to confirm that the proper torque has been applied and it has a wide torque range, 12 to 2 40 pound inches And the new Micro also includes a 15 degree flex head ratchet for better access to fasteners, a 72 tooth quarter inch drive socket ratchet enabling efficient operation in tight areas and a +or-2% accuracy. Microtech takes precision dampening to the next level.
Tool storage was also strong in the quarter, and part of that success was our KTL1023 A3 Roll Cap, a wide 72 inches triple banks tool storage box. It offers 3 extra wide drawers for longer and larger tools, giving the technician more organizational options. Our patented lock and roll latch mechanism, which prevents drawers from drifting open and our IsoRide Castor is providing a smooth ride, smooth rolling and excellent weight capacity, plus. It adds our LED lighted power top, which spans the full width of the cabinet for better illumination and great eye appeal and includes 10 offset AC outlets and 4 USB ports for charging a large array of the TEX electronics. The KTL1023A3, storage efficiency in a box that captures sharp attention in any shop.
Sales of the unit, well, it's a sellout. Our new products are in fact making a difference in the Tools Group. You can't miss it in the numbers. They also and the group also registered its 4th straight quarter above pre pandemic levels. The Tools Group, unmistakably, is moving onward and upward.
Now on to the RS and I Group. Sales were up 62.7 percent or $153,600,000 versus last year, including $135,700,000 or a 54.1 percent organic uplift with double digit growth weighted toward our undercar equipment and our OEM project businesses. But with our Diagnostics and Information product businesses but with our Diagnostics and Information product business still delivering strong double digit increases in addition to the weighting toward undercar equipment and OEM projects. From an earnings perspective, RS and I Operating income of $86,700,000 represents a rise of $36,100,000 or 71.3 percent compared to 2020, which included $1,400,000 of restructuring and the operating margin was 21.8%, an increase of 110 basis points from last year, 60 basis points as adjusted, but it gives it 180 basis point impact of unfavorable currency and acquisition effects. When compared with 2019, sales were up 14.2% as reported and organic growth was 29,700,000 or 8.4% with double digit advances in undercar equipment, OEM projects, diagnostics and information in North America, all of that being attenuated by a general weakness in Europe.
For profitability, the OI margin was 21.8 percent The OAM margin of 21.8 percent was down 360 basis points with 150 point impact from unfavorable currency and acquisition effects and with a further drag from the higher sales of undercar equipment and OEM projects, both at the lower end of RS and I margins. Having said that, RS and I has great opportunities and we're fortifying its way forward with more new products. We just introduced our new ZEUS mobile work centers, giving the technicians the ability to use the full capabilities of our top of the line diagnostics information systems, including our exclusive fast track intelligent diagnostics from anywhere in the service bay. It has a compact footprint for great mobility reaching all over the shop. It also incorporates a lockable 2 drawer storage cabinet and a large 27 inches touchscreen display.
The new Zeus workstation offers significant improvements in convenience and security and invisibility combined with the power of our most sophisticated databases. It's just a ticket for those shops that want to solve the most difficult repair challenges and want to visibly display their advanced capability for all the customers to see as they come in the shop. And the new workstation is making a difference, attracting attention and it's setting new volume levels for this category. So to wrap up our RS and I, improving position with repair shop owners and managers, strong growth across all the divisions, recovering areas of undercar equipment and OEM projects and expanding product lines to lead the way forward. Well, those are the highlights of the quarter.
Tools Group, strong progress everywhere, unmistakable strength. C and I recording a positive performance with significant profitability against variations across the industry and geographies and RS and I expanding volume independent repair shops and OEM dealerships, gains in the U. S. Overcoming weakness in Europe. Overall, sales increasing for the corporation up nicely, both versus last year at 42.5% up and compared with pre pandemic levels at 9.3% up, continuing our V shaped recovery.
OpCo operating margin, a strong 21%, up again in the face of 70 basis points of unfavorable currency and acquisition effect. EPS, dollars 3.76 in the quarter for the up for the 4th quarter in a row, up versus last year, up versus last quarter, up versus pre pandemic levels. It was another encouraging quarter. Now I'll turn the call over
to Aldo. Aldo? Thanks, Nick. Our consolidated operating results are summarized on Slide 6. The Q2 of 2021 exhibited solid financial performance, particularly as compared to last year's heavily pandemic impacted Q2.
Results also compared favorably with the Q2 of 2019, which being a pre COVID-nineteen time period, may serve to be the more meaningful baseline. Net sales of $1,081,400,000 in the quarter increased 49.3% from 2020 levels, reflecting a 42.5 percent organic sales gain, dollars 19,600,000 of acquisition related sales and $20,600,000 of favorable foreign currency translation. Sequentially, organic sales improved by 4.5% as compared to the Q1 of 2021. Additionally, net sales in the period increased 13.7 percent from $951,300,000 in the Q2 of 2019, including a 9.3 percent organic gain, dollars 23,000,000 of acquisition related sales and $17,200,000 of favorable foreign currency translations. Consolidated gross margin of 50.2 percent improved 310 basis points from 47.1 percent last year, included 30 basis points from restructuring costs.
The gross margin contributions from the higher sales volumes and benefits from the company's RCI initiatives were partially offset by 20 basis points of unfavorable foreign currency effects. Operating expenses as a percentage of net sales of 30.1% improved 4 40 basis points from 34.5% last year, which included 20 basis points from restructuring costs. The improvement primarily reflects the benefits of higher sales volumes, partially offset by higher stock based cost and 70 basis points of unfavorable acquisition effects. Operating earnings before financial services of $217,100,000 compared to $91,100,000 in 20.20, reflecting 138.3 percent year over year improvement. As a percentage of net sales, operating margin before financial services of 20.1% proved 7.50 basis points from 12.6% last year, which included 50 basis points for restructuring costs.
Financial Services revenue of $86,900,000 in the Q2 of 2021 compared to $84,600,000 last year, While operating earnings of $68,900,000 increased $11,300,000 from 20.20 levels, primarily as a result of higher revenue and lower provisions for credit losses. Consolidated operating earnings of $286,000,000 increased 90 2.3% from $148,700,000 last year. As a percentage of revenues, the operating earnings margin of 24.5% compared to 18.4% in 2020, which included 50 basis points from restructuring costs. Excluding the restructuring costs, operating earnings margin in 2021 increased 5.60 basis points from last year. Our 2nd quarter effective income tax rate of 23.3 percent compared to 24.1% last year, which included a 20 basis point increase related to the prior year quarter's restructuring charges.
Net earnings of $208,000,000 or $3.76 per diluted share increased $106,800,000 or $1.91 per share from last year's levels, representing 103.2% increase and diluted earnings per share. As compared to 2020, excluding the restructuring charges of $3,300,000 after tax or $0.06 per diluted share. Diluted earnings per share increased 96.9%. Relative to the Q2 of 2019, Net earnings increased $27,600,000 or $0.54 per share representing a 16.8% increase in diluted earnings per share. Now let's turn to our segment results.
Starting with the C and I Group on Slide 7. Sales of $350,500,000 increased 33.8 percent from $261,900,000 last year, reflecting a 26.3 percent organic sales gain, $7,700,000 of acquisition related sales and $9,600,000 of favorable foreign currency translation. The organic gain reflects higher activity in all of the segments operations and includes mid teen increases in sales to customers in critical industries. Within Critical Industries, robust sales gains were achieved in general industry, heavy duty and technical education, but were partially offset by year over year declines in sales to the military, which had remained strong in the pandemic impacted period last year. As a further comparison, Net sales in the period increased 4.6 percent from 2019 levels, reflecting $1,400,000 of organic sales gain, $7,700,000 of acquisition related sales and $6,400,000 of favorable foreign currency translation.
As compared to 2019, sales in our European based hand tools business were up high single digits.
With respect to
critical industry sales activity in that period, Our Military, International Aerospace and Natural Resources segments were below 2019 levels. All other critical industry segments are at or above the Q2 of 2019. Gross margin of 39.5 percent improved 5 10 basis points from 34.4 percent in the Q2 of 2020, included 80 basis points from restructuring charges. Contributions from the higher sales volumes and the improvements resulting from the lower restructuring costs or partially offset by 60 basis points of unfavorable foreign currency effects. Operating expenses as a percentage of sales of 23.7 percent improved 200 basis points compared to last year, primarily as a result of the improved volumes.
Operating earnings for the C and I segment $55,500,000 including $1,100,000 of unfavorable foreign currency effects compared to $22,900,000 last year. The operating margin of 15.8% compared to 8.7% a year ago. Turning now to Slide 8. Sales in the Snap on Tools Group of $484,100,000 increased 49.7 percent from $323,300,000 in 20, reflecting a 46.7 percent organic sales gain and $6,700,000 of favorable foreign currency translation. The organic sales increase reflects a gain of approximately 40% in our U.
S. Business and a gain of approximately 80% in our international operations with strong growth across all product lines. Net sales in the period increased 19.3 percent from $405,800,000 in the Q2 of 2019, reflecting a 17.1 percent organic sales gain and $7,600,000 of favorable foreign currency translation. Additionally, sales in the U. S.
Operation were up 18.8% in that period, while franchisee sales off the van versus 2019 were up 21%. Gross margin of 46.8 percent in the quarter improved 510 basis points from last year, primarily due to the higher sales volumes, benefits from RCI initiatives and 50 basis points from favorable foreign currency effects. Operating expenses as a percentage of sales, 25.4 percent improved from 29.8% last year, primarily due to the higher sales volumes. Operating earnings for the Snap on Tools Group of $103,500,000 compared to $38,400,000 last year. The operating margin of 21.4% compared to 11.9 percent a year ago, an improvement of 9.50 basis points.
Turning to the RS and I group, shown on Slide 9. Sales of $398,600,000 compared to $245,000,000 a year ago, reflecting a 54.1 percent organic sales gain, dollars 11,900,000 of acquisition related sales and $6,000,000 of favorable foreign currency translation. The organic increase reflects a rise of approximately 80% in sales of under car equipment as well as a gain of approximately 50% in sales to OEM dealerships and an increase of approximately 30% in sales of diagnostics and repair information products to independent repair shop owners and managers. As compared to 2019 levels, Net sales increased $49,700,000 from $348,900,000 reflecting an 8.4% organic sales gain, $15,300,000 of acquisition related sales and $4,700,000 of favorable foreign currency translation. Gross margin of 44.7 percent declined from 47.4% last year, primarily due to the impact of higher sales in lower gross margin businesses and 40 basis points of unfavorable foreign currency effects, partially offset by 70 basis points of benefits from acquisitions.
As a reminder, undercar equipment as well as the facilitation program related activity, both of which had healthy sales increases in the quarter, typically have a gross margin rate that is below the RS and I segment's average. Operating expenses as a percentage of sales of 22.9% improved 380 basis points book 26.7% last year, which included 50 basis points of restructuring costs. Contributions from the higher sales volumes and benefits from lower costs related to restructuring were partially offset by 190 basis points of unfavorable acquisition effects. Operating earnings for the RS I Group of $86,700,000 compared to $50,600,000 last year. The operating margin of 21.8% compared to 20.7% a year ago.
Now turning to Slide 10. Revenue from Financial Services of $86,900,000 compared to $84,600,000 last year. Financial Services operating earnings of $68,900,000 compared to $57,600,000 in 2020. Financial Services expenses of $18,000,000 decreased $9,000,000 from 2020 levels, primarily due to lower provisions for credit losses, resulting from $2,800,000 of lower year over year net loan charge offs as well as favorable loan portfolio trends, which support lower expected reserve requirements. As a percentage of the average portfolio, financial services expenses were 0.8% and 1.3% in the 2nd quarters of 2021 2020 respectively.
In the 2nd quarter, the average yield on finance receivables of was 8.5% 8.2%. 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 Q2 of 2020 to help accommodate franchisee operations in dealing with the COVID-nineteen environment. As of the end of the current quarter, approximately $8,000,000 of these business operations support loans remain outstanding. Total loan originations of $285,800,000 in the 2nd quarter $30,000,000 or 11.7 percent from 2020 levels, reflecting a 17.9% increase in originations of finance receivables, while originations of contract receivables were down 11.5%.
Last year's contract receivable originations included the aforementioned offering of business operations support loans to qualifying franchisees during the Q2 of 20. Moving to Slide 11. Our quarter end balance sheet includes approximately $2,200,000,000 of gross financing receivables, including $1,900,000,000 from our U. S. Operation.
Our worldwide gross financial services portfolio increased $13,200,000 in the 2nd quarter, primarily due to the higher originations. The 60 day plus delinquency rate of 1.2% for the United States extended credit is up 20 basis points from the rate of 1% in the Q2 of 2020. As we commented during our Q2 2020 earnings call, We estimated in the quarter, the 60 day plus delinquency rate was favorably affected by 20 to 30 basis points as a result of forbearance and deferred payment programs in place during that period last year. As it relates to extended credit or finance receivables, Trailing 12 month net losses of $41,600,000 representing 2.4 percent of outstandings at quarter end. Is down 15 basis points sequentially and down 53 basis points compared to the same period last year.
Now turning to Slide 12. Cash provided by operating activities of $238,200,000 in the quarter decreased $15,400,000 from comparable 2020 levels, primarily reflecting the higher net earnings more than offset by net changes in operating assets and liabilities, including $98,400,000 of higher income tax payments. The increase in cash paid for income taxes reflects both higher levels of taxable profitability as well as the IRS no longer allowing companies to defer estimated tax payments as compared to the IRS accommodation offered during the Q2 of 2020. Net cash used by investing activities in the $29,700,000 included net additions of finance receivables of 18,700,000 Net cash used by financing activities of $147,900,000 included cash dividends of $66,700,000 and the repurchase of 566,900 shares of common stock for $137,400,000 under our existing share repurchase programs, partially offset by proceeds from stock purchase and option plans of $61,800,000 As of quarter end, we had remaining availability to repurchase up to an additional $251,600,000 of common stock under existing authorizations. Turning to Slide 13.
Trade and other accounts receivable increased $4,700,000 from 2020 year end. Days sales outstanding of 56 days compared to 64 days at 2020 year end. Inventories increased $14,400,000 from 2020 year end, on a trailing 12 month basis, inventory turns of 2.7 compared to 2.4 at year end 2020. Our quarter end cash position of $965,900,000 compared to $923,400,000 at year end 2020. Our net debt to capital ratio of 10.8% compared to 12.1% at year end 2020.
In addition to cash and expected cash flow from operations, We have more than $800,000,000 in available credit facilities. As of quarter end, there were no amounts outstanding under the credit facility and there are no commercial paper borrowings That concludes my remarks on our Q2 performance. I'll now briefly review a few outlook items for 2021. We anticipate that capital expenditures will be in a range of $90,000,000 to $100,000,000 We currently anticipate, absent 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 now turn the call back to Nick for his closing thoughts. Nick?
Thanks, Alo. Well, at the beginning, I said I would speak on what this all means. I'm going to try. 1st, It means that Snap on and its markets are resilient. The virus, probably the greatest threat to our society and into business.
And in many decades, it was a great shock. Miles driven down big dealerships many furloughed no travelers aviation no travelers oil and gas and free fall and education virtually little need for equipment customers and franchisees and our direct selling vans kept rolling, quickly accommodating to the environment. Snap on kept investing in our product, our brands and our people, we accommodated and recovered to post 4 straight quarters of above pre pandemic results, tracing a B shaped recovery and emerging from the height of the storm stronger than we entered, resilience against the greatest business threat in memory. It's more than resilience, more than bounce back. It also demonstrates great flexibility.
As the world passed through the shock, through accommodation to psychological recovery, Change was the order of the day and SAP on adjusted, fueled by our fortified advantages and product, brand and people we accommodated. The pandemic limited face to face interaction, we expanded virtual contact and came away with some long term social media tools that will enable our franchisees for some time. When technicians focused on shorter payback items, we gave them hand tools and power tools and torque. When repair leaned away from maintenance to complex repairs in a shock, We provided ADAS calibration tools and intelligent diagnostics and helped our franchisees expand their selling capacity to manage those more complicated offerings efficiently. When some critical industries weakened, we developed offerings for those that maintained.
When the virus attenuated the distributors in Europe, we focused on customization and more direct interactions. All of that achievement in the time of change demonstrates Snap on's flexibility and confirms we can prosper amid future change going forward as we've always done by observing work and solving whatever the new problems are. Snap on 2nd quarter. Tools Group up in all geographies and in all product lines. Sales up 17.1% compared with 2019 and OI margins of 21.4 percent.
C and I gains offsetting the challenges of the lingering COVID, rising profitability to 15.8%, up 120 basis points from the pre pandemic level, even with a 90 basis point impact from unfavorable currency. RS and I sales up 8.5% versus 2019. Undercar equipment and OEM projects recovering in an OI of 21.8%, down from the pre pandemic, but still strong in Snap on overall. Sales up 9.3% organically versus 2019. An OI margin of 20.1% and an EPS of $3.76 up meaningfully versus every comparison.
It was an encouraging period again, demonstrating resilience and flexibility, encouraging for the now and we're confident, encouraging for the prospects of growth and improvement for the future on through 2021 and well beyond. Before I turn the call over to the operator, I'll speak directly to our franchisees and associates. Your support is the fundamental element in driving our continuing positive trend for your role in helping our society and our company to navigate the pandemic, you have my admiration. For your contributions and authoring this quarter's strong results, you have my congratulations. And for your continued commitment to the Snap on team, you have my thanks.
Now I'll turn the call over to the operator. Operator? Thank
you. Our first question comes from Bret Jordan with Jefferies.
Hey, good morning guys.
Good morning.
When you think about the mechanic in the tools segment, I guess demand has
been very strong. We're hearing
a lot about labor rate inflation. Are you seeing a real change in their buying patterns that they are more liquid than they have historically been and more biased to pay cash for higher ticket items, I guess?
I think there's a combination of that. I think they are. I think they are and our franchisees are more flushed and therefore they are able to underwrite the shorter payback. Even for bigger even for medium ticket items, which might have gone on EC before the franchisees are willing to underwrite it and let them pay RA. I do think the technicians are kind of have good cash because the business has been going well for quite a long period of time and they are interested in continually investing in tools.
So you see that as a factor. Mean, that's certainly a factor in the business. And one of the things we see is that you'll notice that RA is very strong versus EC in this quarter. And we see that as the technicians are buying and still have capacity to buy more in the future because they have borrowing capacity under our EC.
When you think about the technicians as they relate to this next route of stimulus on the child tax credits, do you give any demographic color as to whether they are more or less likely to have kids that are going to give them a stimulus check?
I don't know. The technician population is pretty spread. I wouldn't say they're more or less. In fact, I think they're kind of the average, the every man. There are old technicians and young technicians.
So I don't think there's any particular concentration. You don't go into the garage and see all young people. You don't go see all old people either. So I don't think there's any particular position in that. They have some kids, but not different than the regular population.
By the way, Brett, you know Aldo, I have to apologize for his voice. He was at the Deer District overnight at the Bucks game. So he's a little under the weather.
All right. Thanks guys. Sure.
Thank you. Our next question comes from Curtis Nagle with Bank of America.
Thanks very much. Just a quick one. You just I got to ask this because you brought it up a couple of times in the prepared remarks about new social media tools. Could you expand what on what you're talking about what these tools are targeting new customers, No, not so much. Sure.
They're not so much sure, they target new customers. But what I'm really referring to here without I I didn't want to get into it in my remarks because there's a lot to say and I didn't want it really what this is, is we use social media before, but in the pandemic we realized a more effective way to use them was pre brief customers. In other words, to contact them. At first, we started out by saying, okay, we want to stay in touch with our customers via social media or any electronic means that could that do it at a distance, but then we realized, boy, it's a powerful tool for making for sales efficiency when you're actually in front of them. Because what you can do is contact them on the social media, you have a relationship with them, you can pre brief them about how a great new product what the elements of a particular new product is like the 14 4 volt power tool I talked about or the tech wrench I talked about.
And you can also pre brief them on any promotions we might have. And so then when you're actually spending the time in front of the technician, you can spend your time closing the deal. This is this kind of shrinks the time. And so it takes some of the pre sell out of the face time makes it more efficient. That's what we're talking about here.
We learned how to do that very well in the pandemic. And that's going to serve us well. And it's part of the idea. Remember, I always said that The pacing element for sales to the Tools Group has been the franchisees' time. Well, they're hitting new limits, up 17% versus pre pandemic levels and it's because we've expanded their capacity.
Got it. Okay. And just a follow-up, just any general comments in the U. S. Tools group in terms of Competition with your, well, your close competitors, MatCo, anything, any notable changes relative to say last quarter?
I don't know. I can tell you, I just spent Aldo and I were just in California talking to a franchisee. We're out there visiting plants and we visit franchisees. And I was at the NFAC at our Alcona plant and Ozai, those guys think they're crushing it. So I don't know what that means in terms of market share, but it sounds good to me.
Got it. Okay. Fair enough. Thanks very much.
Thank you. Our next question comes from Scott Stember with CL King.
Good morning, guys, and congrats on the Bucks.
The Bucks? Yes, this is NBA championship headquarters right here.
Just talking about in tools, you guys said that everything was up pretty much. Sounds like tools led the way, hand tools.
Can you talk about that? Excuse me, Scott, I didn't actually say that. Hand tools did not lead the way this quarter. It was up big. But actually, the best year over year number was tool storage.
Okay.
Yes. But they were all big. I mean, when you compare it, Scott, when it's compared to 2020, everything looks great. I mean, it's all great. That was the nadir of the downturn.
But there's no doubt, What I tried to say with that, all products, all geographies, just our way of saying that Tools Group had a gangbusters quarter.
Got it. And any comments on tools, I mean on sales off of the van versus sell in? Last couple
of quarters, it sounded like it was pretty much in line?
Yes. I think Aldo said, yes, they're generally holding in line. I think Aldo said it was what? We were up 17% versus pre pandemic levels and sales of the van were up 21%, I think, or something like that. So I think it's Going pretty well, just rolling through the van.
Got it. And lastly, on Europe, European within Snap on tools, tremendous growth there. Maybe just speak to What's driving the recovery there? And did you give for Europe at least, are we back to pre pandemic levels?
Yes. Europe is above pre pandemic levels. Now, okay, to be fair, Europe wasn't all that hot in 2019. But it was it's still clearly above the pre pandemic levels. In other words, it's offset whatever the impact of the pre pandemic was.
Tools Group is pretty much across all geographies, which is kind of interesting because ain't no stimulus in the UK and Australia and Canada.
Got it.
Thanks again for taking my questions. Sure.
Thank you. Our next question comes from Luke Junk with Baird.
Good morning, Nick, Aldo, good to see you. Good morning. So first question I had a near term question. As we get further into the psychological recovery post the onset of COVID, we saw an increase in originations both year over year and sequentially this quarter. Nick, as you put your finger on the pulse of bigger ticket purchases, tool storage especially, do you feel like we're getting closer to or maybe already at an inflection point in terms of mechanic attitudes around discretionary spend right now?
Yes, I think we are. I mean, I don't know. It could be famous last words, Luke. You got a lot of people talking about the delta variance and all this stuff. I don't think so.
I think the people of work, the people in the factories and the people in the garages, like I said on other calls, are kind of thinking they've weathered the storm and they're not going to get shocked again no matter what. And so I think they've kind of changed their level. They're starting to recover. And so you're starting to see people we saw it in our tool storage numbers. One of the reasons why of the reasons why we took the franchisees, the franchise counsel to Algona, our tool storage plant, is everybody screaming for more tool storage.
Now one of the effects was that when we entered the COVID, they sold down their used boxes that they had taken in trade, so they had a lot of that rolling out. But still they're looking for boxes now. So I think things have turned. The question is, franchisees so flush with cash that they want to finance some of those boxes or some of them sometimes they sell them a locker, which is not quite as expensive as a box and they can afford to finance those kinds of things. But I do think when I talk to franchisees, they're telling me that we've kind of turned the corner.
Turn the corner is probably too maybe too binary a word for it. We were coming back though. Things are pretty optimistic in the shops.
That's helpful. And second, I'm wondering looking forward here, how we should think about the impact of the franchisee conference this year. What I'm wondering is both in absolute terms, I. E, what does that event going to look like this year? And also in relative terms, given the unique nature of last year's virtual conference?
Yes. Look, it's going to be bigger than any of the conference. We think, Who knows? We still got a few weeks to go, but registrations are higher than they've ever been. When I talk to the franchisees, they are really excited about going no matter who I talk to.
I haven't heard they're always kind of optimistic about it, but this one is really big because it's we're celebrating our 100 really and they've been away for they didn't have it last year, so they're really, really talking about. So it's going to be bigger, I think. And so what will the effect be? I've said for dog's age on these calls that the Q3 can be a little bit variable because there's a lot of windage. How many people go to the franchise conference?
Do they take more weeks, what happens in Europe and so on. But I'm telling you, I'm not forecasting any weakness or anything like that. I'm just you never know how those things are going to turn out. But I like how we're entering the quarter. I like our momentum.
So I think whatever happens, we'll make the best of it. We're in a great position to navigate the quarter. Hello. Okay. He had to go to the Buck's celebration.
He was like, okay, go next.
Thank you. Our next question comes from Christopher Glynn with Oppenheimer.
Thank you. Okay, Chris.
I'll do. I'll do feel better.
Yes,
I got it, Chris. I got it covered.
All right. So,
great commentary on the momentum and the overall buzz around the operations. The comps are kind of binary into the back half and your Language around tools is that the momentum is so robust, storage sold out. So I think you were a little more hedged the last couple of quarters about what current run rates mean for continued growth. But What I'm hearing is you're very confident you can continue to compound not just overall, but at SOT. So I just Wanted to bounce that off if I'm kind of hearing you right.
You're not going to get me to forecast the quarter. You know what I mean? I'm not going to say we're going to build on a 17% ever upward over a 17% increase over pre pandemic levels. But all I'm saying is the Tools Group the reason why we say all products, all geographies is we can't find anything wrong with it. And we always can find warts in some places.
This is good. So we like our momentum. How that plays out in the Q3, I'm not sure, you've been on the call, we've been on these calls a long time and I've always said that the Q3 is not I'm saying I like our momentum. I think we're going into the quarter really strong. We feel stronger than last quarter.
But I will add that I've always said that the Q3 is not necessarily a trend indicator. Whether it's way up or way down, it has to do with all that windage, how many vacations do people take in Europe is one big thing. And the franchisees allow them to take the same vacations as next last year or more, I don't know. But I do think I haven't seen the Tools Group this strong.
Okay, great. And just a more pointed question, are you seeing increased uptake in interest in franchisees adopting 2nd associates over the past couple of months?
Yes. Well, I don't know. I think, look, it's starting to come out of the thaw because I think you can imagine why people are a little more reluctant in the COVID. There's a lot of interaction questions, a lot of viscosity and that kind of I think they grew by 2% to 2.5% sequentially. So that's not bad, I think.
So whether that has to do with the people getting more excited, I don't know. I do think when I talk to franchisees, they do more quickly go to the conversation, Gee, maybe I ought to get a I'm doing so many so much business, maybe I better get a franchisee. The guy in California was just talking about that. This guy just started like a few years ago. He signed up for a competitor and then he was talking to the guy and he said, I don't want to I you ought to go the guy who sold him the thing, you ought to go to the best.
So he came to Snap on. And the thing is this guy is so pumped, he's gone up so far. He's talking about, Gee, maybe I could do more with an assistant. I need an assistant and a lot more and more people are doing that. So we would expect some expansion in this area.
Great. Thanks.
Sure.
Thank you. Our next question comes from David MacGregor with Longbow Research.
Good morning, everyone. And Nick, congratulations on a really strong quarter. Just outstanding results across the enterprise. So I guess I wanted to understand just a couple of housekeeping questions. What was the change in provisions?
If you mentioned that, I missed it.
Change sorry, Dave, what is change of provisions?
Yes, question for Aldo. Didn't you reduce
Specifically, David, they said that the charge offs were lower by 2 $800,000 But the charge offs are just one of the indicators. When you look at your overall provision for losses, it's down about $9,000,000 to cut to the chase, but that's based on an assessment of what is the reserve size that we think we need for expected losses over the duration of the portfolio, which runs a little over 4 years on average. So that's the change we're but again, as you'll see you'll get more information obviously when the queue comes out. But if you look at charge offs are lower, the 60 plus day delinquency rate is lower. The net trailing 12 month losses are lower.
The recoveries are better. The non performing loans number are lower. The amount of past due accounts are lower. So you'll put that all together and that's what it will let's us arrive at the that the reserves were able to be reduced somewhat.
Sure. That makes sense. But $9,000,000 is the number that's what I was looking for. The second question is just, I guess, going back to the whole discussion around originations. And Nick, you talked about the fact that the technician is just in better shape today than they've been in a while.
I guess a lot of stimulus and low wage growth will do that. But I'm just wondering right now to what extent you think the slower origination growth may be attributed to technicians, again, because they're in better shape, just qualifying for lower cost credit from alternative sources, and You're just going all
the way. Well, I have a tougher time figuring that out. I don't think so though, because It might be in the U. S. I don't think I actually don't think David, I don't think stimulus was much of a factor, Maybe some because we have pretty good growth in international operations.
We don't see as clear pumping of the money into the economy. So when we look at it across the world, it doesn't seem as though that specific characteristic of America is a factor. I don't know, maybe, but I tend to think it's more a combination of the franchisees feeling more flush. You kind of got an interesting interaction. You have people who at first were leaning towards shorter payback items and maybe that expands to away from hand past hand tools up into lockers or spiffier tops for the tool storage boxes, which are more fundable by the franchisees over time.
Franchisees like to build their shorter term credit, so they like that. And It is true that the technicians do have more cash. I mean, they've been working all through the pandemic. And so that's kind of built up on a relative cash. It could be eligible for other credit.
We have no way of knowing that. I don't hear anybody mention it though. Now I talked to a lot of franchisees and they may not necessarily mention, but We haven't heard that particular thing come up in any environment. So I don't know.
Yes. It's interesting dynamic. I guess we'll watch and see where it goes. Yes. You talked about the strength in storage, which I guess was surprising to hear and certainly strikes me intuitive given it's hard to think another product you sell that would be more carbon steel intensive.
And given cold rolled steel now hitting $2,000 a ton this week, there's been an awful lot of inflation, which I'm assuming you passed through. So is there just no elasticity there in storage or Legacy storage sales kind of flat and what we're seeing the growth on is a lot of new product introductions.
Yes, no, it was a strong quarter in storage. I think somewhat I'd like to think Our offerings are kind of spiffier than they have been. I talked about this extra wide, the 72 inches Master Series in the call with the light at top, those things are statement makers in garages. And I think that having refrained from some of this for a period of time, technicians are getting more anxious to buy them and they have the money and they're getting a little more confident so they go out and look at them. That's really I think that's the situation.
I wouldn't say there's no elasticity, but I think when you I mean is there elasticity with new cars? I mean the thing is people are buying cars and reuse cars and so on. I mean, so I think when people want something in this category, which is I've often said, I think you and I have had conversations at a tool storage box like a car. So people tend to want them. They'll pay a little bit more.
It's not no elasticity, but people We'll go up and pay for them. That's my analysis. It's really the psychology and the need, a combination of need and psychology. And our biggest cycle The product we have, which is the biggest psychological factor in people buying it is tool storage. Now all I can tell you is our tool storage plant is sold out.
Yes. Sold out.
I mean, that's great.
That's fantastic. That's great. I guess, as you talk about the strong growth in storage, how much of that growth was from some of these new products, I guess, what was the legacy product growth looking like?
Well, look, I don't I think when I say I don't know. I don't have that number at my fingertips, but there's a lot of wrinkles you can put into a storage. Like we wouldn't necessarily call a new color a new product. On the other hand, if you roll out a new color, remember when we rolled out purple, there was an explosion. So some of that happens.
It just has to do with a wrinkle that makes it, oh, this is the best box in the shop or it's the newest thing. That's really what happens. So we're constantly doing that stuff.
I just wanted to wrap up one last question. And I guess you kind of touched on this earlier in our conversation. So maybe I'll ask the question in
a slightly different way, but
I'm just thinking about tool segment growth sort of going forward. And prior to the pandemic, tools we're struggling with growth for a rather extended period of time. And certainly, we're coming short of that 4% goal that you'd set for the segment. Now, whether through the last four quarters, the sort of easy compares are behind you, but you've delivered remarkable growth through that period of time, including on a 2 year basis, just to be fair. I guess as we think about the growth potential for the business now that 4 easy compares are behind you, I guess what has changed to support sort of growth going forward and what gives you confidence that the segment can can track forward at greater than 4% when you were having some
Okay. I'll tell you, it's this way. It's a simple statement. Figured out new ways to expand the selling efficiency of the franchisees. This has happened before.
There's a precedent for this. If you go back and you look before that term, which you told, you know, said that they struggled for growth and it's a fair characterization in some ways. Between 2011 2016, the compounded annual growth rate was 7.2%. And that was fueled by the expansion of the capabilities. We found artifice as we do that, the vans, the rock and roll cast and so on.
And in this case, we believe we've broken through another ceiling to a new level, and it's provable by the absolute amounts that are flowing through the vans at this point. So that's certainly true for us. And so we keep we've always said, keep pounding that and we can sell more. We're not bound by the market, we're bound by our ability to sell. And so that's part of it.
That's part of it, getting franchisees to be able to deal with these more complex products. And we think we've made a step change over the last now we've been investing in it for like 3 years or something, trying to get that, but we think we've done it and we think this is provable by the absolute amounts. Whatever the source of that volume is, it proves that the franchisees can accommodate it. They couldn't before.
Thank you. Our final question comes from Gary Prestopino with Barrington Research.
Hey, good morning, everyone.
Hi, Gary.
Most of
the questions have been answered, but I guess just want to pick up on some of the things the last question here was asking as it relates to margins. It looks like your tool and C and I margins from Q2 2019 have expanded fairly significantly, particularly the Tools Group. I mean is there anything that's inherently changed in the business or is that just a function of that's just the leverage of the business with sales growth? Look, I think there is leverage in that situation, so that's good. I think it would be a mistake to overlook the idea that embedded in there is some pricing to offset.
We've got a whole bunch of we've got material costs in there. I don't want to get into the document, but we've got a great dollar for material costs. Anybody who's reading the press sees that the varying levels of steel we use from steel rod to plate steel to sheet steel and so on have gone up tremendously. The costs of freight are up tremendously. Yet through pricing and RCI, we shoved them aside and got the 20%.
So yes, there's leverage, but there's also great RCI in there that's dealing with the material costs. That's one thing to think about. So you got a combination of those. And you have some other costs in there. I think we will talk about it.
I think you'll see some when you see in the Q. But I do think it's a combination of those working very well. 21.4 I think might be the highest we've ever seen in the Tools I don't know. But we kind of hope to get the highest every quarter actually. So I don't like to say that, but we're pretty pleased with that.
Okay. Thank you.
Sure.
Thank you. This concludes today's question and answer session. I'd like to now turn it back to our presenters for any 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.
Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect.