Our net sales improved 11.6% over 2019 to $1.28 billion, the highest in the company's history, driven by strong sales volume.
As a result, we generated record earnings of $4.27 per diluted share, up 43.3% over 2019.
The health, safety and well-being of all our employees remains our Number 1 priority and we will strive for continuous improvement to ensure Simpson remains a safe and rewarding place to work.
Our goal was to achieve a compounded annual growth rate in net sales of approximately 8% from 2016 to 2020.
As of the year end of 2020, we had well exceeded this target, achieving a compounded annual growth rate over 10% relative to our 2016 baseline.
Milestones that helped support this goal included price increase for the majority of our US wood connector products in the third quarter of 2018, the signing of one of our largest US homebuilding companies onto our builder program resulting in 23 of the Top 25 US builders now engaged on our program, strong repair and remodel trends associated with the COVID-19 pandemic and the return of Lowe's as the home center customer in mid-2020.
We aimed to reduce our total operating expense as a percent of net sales from 31.3% in 2016 to a range of 26% to 27% by the end of 2020.
For the full year of 2020, we recorded operating expenses as a percent of net sales of 25.6%, representing 570 [Phonetic] basis points of improvement compared to 2016.
Our next plan was to improve our operating income margin to a range of 16% to 17% by the end of 2020.
We reported an operating income margin of 19.9% for 2020, a 350 basis point improvement compared to 16.4% in 2016.
By focusing on these higher margin products to increase profitability, we exceeded our goal of improving our global concrete gross margin from 34.7% in 2016 42% in 2020.
As a result, we achieved an operating income margin of 7% excluding our SAP costs of approximately $2.5 million in 2020.
While this is lower than our original target range of 8% to 9%, we are pleased with the results, which reflect approximately 350 basis points of improvement versus the 2016 numbers.
We've completed a three-phase SKU reduction program, eliminating upwards of 12,000 non-moving or slow-moving items and converted our customers over to replacement products.
The final element of our 2020 plan was focused on maximizing shareholder value with the goal of improving our return on invested capital from 10.5% in 2016 to a range of 15% to 16% by the end of 2020.
Through our solid operational execution, combined with the enactment of the US Tax Cuts and Jobs Act of 2017, which lowered our effective income tax rate beginning in 2018, we surpassed this target, ending 2020 with the return on invested capital of 20%.
In 2020, we returned $116.2 million to our stockholders through the payments of $40 million in dividends and $76.2 million in share repurchases.
Since the onset of the 2020 plan, we have returned over 83% of our cash generated by operations to our shareholders, far exceeding our target of 50% I'm extremely proud of all that we've accomplished in these past three years and by executing on the 2020 plan, we achieved solid organic growth, we've rationalized our cost structure to improve companywide profitability and we've improved our working capital management and balance sheet position, in turn creating value for all key Simpson stakeholders.
Our fourth quarter consolidated net sales grew 12% year-over-year to $293.9 million on significantly higher volume.
Gross margin increased to 42.1% from 41.9% in the prior year quarter, primarily related to strength in Europe, where we experienced lower material and warehouse costs.
Our solid gross margin combined with effective expense management and reduced costs from travel and other restrictions as a result of the COVID-19 drove a 7.8% year-over-year increase in our income from operations to $39.5 million and earnings of $0.68 per diluted share.
Growth was supported by our product rollout of our connectors, mechanical anchors and fastener product solutions into all 1737 Lowe stores, which we completed during the fourth quarter.
Our sales were further supported by solid US housing starts, as we generally experience a multiple month lag in the demand from the time of the start, in the fourth quarter, we benefited from strong third quarter 2020 housing starts which grew over 11% year-over-year.
We are also very pleased to be in a position to pay off our line of credit borrowing in pool, as well as declare our quarterly dividend as we have done consistently since 2004.
With another quarter of strong year-over-year growth in housing starts, which were up over 11% in the fourth quarter of 2020, we believe housing will continue to be a key element of the economic recovery in the coming years ahead and we are well positioned to capitalize on this environment.
As Karen highlighted, our consolidated net sales were strong, increasing 12% to $293.9 million.
Within North America segment, net sales increased 9.8% to $249.1 million primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers.
In Europe, net sales increased 24.9% to $41.8 million primarily due to higher sales volumes in local currencies.
Wood construction products represented 85% of total sales compared to 83% and concrete construction products represented 15% of total sales compared to 17% last year.
Consolidated gross profit increased by 12.4% to $123.7 million, which resulted in a stronger Q4 gross margin of 42.1% compared to last year.
Gross margin increased by 20 basis points, primarily due to lower material and warehouse costs, which were partially offset by higher labor costs.
On a segment basis, our gross margin in North America declined to 43.2% compared to 43.9%, while in Europe, gross margin increased to 25.3% compared to 29.9%.
From a product perspective, our fourth quarter gross margin on wood products was 41.8% compared to 40.8% in the prior year quarter and was 39.6% for concrete products compared to 43.7% in the prior year quarter.
Research and development and engineering expenses increased 10% to $12.9 million primarily due to personnel costs, stock-based compensation, product testing and cash profit sharing expenses.
Selling expenses decreased 1.2% to $27.8 million due to lower travel and entertainment and advertising and trade show expenses, partly offset by higher personnel costs, cash profit sharing, sales commissions and stock-based compensation expense.
On a segment basis, selling expenses in North America were down 2.1% and in Europe, they were mostly flat.
General and administrative expenses increased 10.9% to $43.6 million primarily due to increases in cash profit sharing, stock-based compensation and software subscriptions and licenses.
Total operating expenses were $84.3 million dollars, an increase of $5.1 million or approximately 6.5%.
As a percentage of net sales, total operating expenses were 28.7%, an improvement of 150 basis points compared to 30.2%.
Our solid topline performance combined with our stronger Q4 gross margin and diligent management of costs and operating expenses helped drive a 7.8% increase in consolidated income from operations to $39.5 million compared to $36.6 million.
In North America, income from operations decreased 1.8% to $36.1 million.
In the fourth quarter of 2019 North America income from operations included a $5.6 million gain on the sale of a selling and distribution facility.
In Europe, income from operations increased 145.8% to $1.3 million primarily due to increased gross profit.
On a consolidated basis, our operating income margin of 13.4% decreased by approximately 50 basis points.
Our effective tax rate increased to 25.6% from 22.3% due to the release of foreign valuation allowances in 2019.
Accordingly, net income totaled $29.6 million or $0.68 per fully diluted share compared to $28.1 million or $0.63 per fully diluted share.
At December 31, cash and cash equivalents totaled $274.6 million, an increase of $44.4 million compared to December 31, 2019 after paying down the remaining $75 million on our revolving credit facility during the quarter.
As of December 31, 2020, the full $300 million on our primary line of credit was available for borrowing.
Our inventory position of $283.7 million at December 31 increased by $23.6 million from our balance at September 30 as we continue to see higher levels of construction activity along with the unprecedented demand we've experienced through the pandemic.
We continue to be highly selective in regard to inventory purchases through careful management and purchasing practices along with maintaining our high level -- high levels of customer service and on-time delivery standards As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $77.5 million for the fourth quarter of 2020, an increase of $21.1 million or 37.4%.
For the full year of 2020, we generated $207.1 million of cash flow from operations, which increased nearly $1.5 million.
During the fourth quarter, we used approximately $17 million for capital expenditures.
For the full year of 2020, capital expenditures were approximately $37.9 million, in line with our reduced expectations as a result of our focus on cash preservation in mid-2020 due to COVID-19.
We were also pleased to have paid $40.4 million in dividends in fiscal 2020 including $10.2 million in the fourth quarter.
In addition, we repurchased approximately 1.05 million shares of our common stock in 2020 at an average price of $72.33 per share for a total of $76.2 million.
This includes approximately 151,000 shares of our common stock that we repurchased during the fourth quarter at an average price of $89.49 per share for a total of $13.5 million.
As our authorization for repurchases of common stock expired at year-end, on December 16, our Board of Directors authorized the repurchase of up to $100 million of our common stock, which went into effect on January 1, 2021 and runs through December 31, 2021.
In addition, on January 22, our Board of Directors declared a quarterly cash dividend of $0.23 per share, which will be payable on April 22, 2021 to stockholders of record as of April 1, 2021.
Operating margin is estimated to be in the range of 16.5% to 18.5%.
The effective tax rate is estimated to be in the range of 25% to 26% including both federal and state income taxes and capital expenditures are estimated to be in the range of $50 million to $55 million including approximately $10 million to $13 million, which will be used for maintenance capex.

Summary:
Our fourth quarter consolidated net sales grew 12% year-over-year to $293.9 million on significantly higher volume.
Our solid gross margin combined with effective expense management and reduced costs from travel and other restrictions as a result of the COVID-19 drove a 7.8% year-over-year increase in our income from operations to $39.5 million and earnings of $0.68 per diluted share.
Accordingly, net income totaled $29.6 million or $0.68 per fully diluted share compared to $28.1 million or $0.63 per fully diluted share.
Operating margin is estimated to be in the range of 16.5% to 18.5%.
The effective tax rate is estimated to be in the range of 25% to 26% including both federal and state income taxes and capital expenditures are estimated to be in the range of $50 million to $55 million including approximately $10 million to $13 million, which will be used for maintenance capex.