SNA Snap-On Inc

Management Discussion

• Net sales of $852.2 million in the first quarter of 2020, reflecting a $62.7 million, or 6.9%, decrease in organic sales and $10.3 million of unfavorable foreign currency translation, partially offset by $3.5 million of acquisition-related sales, compared to $921.7 million in 2019. The decline in sales volume primarily reflects the impact of economic uncertainty associated with the COVID-19 pandemic in the first quarter of 2020.
• Gross profit of $421.6 million in the first quarter of 2020, including $5.1 million of exit and disposal (“restructuring”) costs and $6.1 million of unfavorable foreign currency effects, compared to $471.6 million in 2019. Gross margin (gross profit as a percentage of net sales) of 49.5% in the quarter declined 170 basis points (100 basis points (“bps”) equals 1.0 percent) from last year primarily due to the impact of lower sales volumes, as well as from higher sales in lower gross margin businesses, costs associated with COVID-19-related operating disruptions, 60 bps from costs related to restructuring actions, primarily in Europe, and 10 bps of unfavorable foreign currency effects. These decreases in gross margin were partially offset by benefits from the company’s “Rapid Continuous Improvement” or “RCI” initiatives.
• Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect benefits from a wide variety of ongoing efficiency, productivity and process improvements, including savings generated from product design cost reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing initiatives and facility optimization. Unless individually significant, it is not practicable to disclose each RCI activity that generated savings and/or segregate RCI savings embedded in sales volume increases.