UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April~~July 2, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-7724

Snap-on Incorporated

(Exact name of registrant as specified in its charter)

Delaware

39-0622040

(State of incorporation)

(I.R.S. Employer Identification No.)

2801 80th Street,

Kenosha,

Wisconsin

53143

(Address of principal executive offices)

(Zip code)

(262) 656-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	SNA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:


Class						Outstanding at ~~April~~July 15, 2022
Common Stock, $1.00 par value						~~53,374,248~~53,267,889 shares

Table of Contents

TABLE OF CONTENTS



		Page
Part I: Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Statements of Earnings (unaudited) – Three and Six Months Ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021	3

	Condensed Consolidated Statements of Comprehensive Income (unaudited) – Three and Six Months Ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021	4

	Condensed Consolidated Balance Sheets (unaudited) – ~~April~~July 2, 2022, and January 1, 2022	5

	Condensed Consolidated Statements of Equity (unaudited) – Three and Six Months Ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021	7

	Condensed Consolidated Statements of Cash Flows (unaudited) – ~~Three~~Six Months Ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021	89

	Notes to Condensed Consolidated Financial Statements (unaudited)	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3337

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4754

Item 4.	Controls and Procedures	4855

Part II: Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4956

Item 6.	Exhibits	5158

	Signatures	5259

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in millions, except per share data)

(Unaudited)


		Three Months Ended				Three Months Ended				Six Months Ended
		April 2, 2022		April 3, 2021				July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	Net sales	$	1,097.8	$	1,024.6		Net sales	$	1,136.6	$	1,081.4	$	2,234.4	$	2,106.0
Cost of goods sold	Cost of goods sold	(563.5)		(511.0)			Cost of goods sold	(583.1)		(538.3)		(1,146.6)		(1,049.3)
Gross profit	Gross profit	534.3		513.6			Gross profit	553.5		543.1		1,087.8		1,056.7
Operating expenses	Operating expenses	(311.2)		(312.7)			Operating expenses	(306.9)		(326.0)		(618.1)		(638.7)
Operating earnings before financial services	Operating earnings before financial services	223.1		200.9			Operating earnings before financial services	246.6		217.1		469.7		418.0

Financial services revenue	Financial services revenue	87.7		88.6			Financial services revenue	86.4		86.9		174.1		175.5
Financial services expenses	Financial services expenses	(17.3)		(23.3)			Financial services expenses	(21.1)		(18.0)		(38.4)		(41.3)
Operating earnings from financial services	Operating earnings from financial services	70.4		65.3			Operating earnings from financial services	65.3		68.9		135.7		134.2

Operating earnings	Operating earnings	293.5		266.2			Operating earnings	311.9		286.0		605.4		552.2
Interest expense	Interest expense	(11.6)		(14.3)			Interest expense	(11.7)		(14.3)		(23.3)		(28.6)
Other income (expense) – net	Other income (expense) – net	8.3		4.3			Other income (expense) – net	9.3		3.4		17.6		7.7
Earnings before income taxes and equity earnings	Earnings before income taxes and equity earnings	290.2		256.2			Earnings before income taxes and equity earnings	309.5		275.1		599.7		531.3
Income tax expense	Income tax expense	(67.5)		(59.1)			Income tax expense	(72.3)		(62.9)		(139.8)		(122.0)
Earnings before equity earnings	Earnings before equity earnings	222.7		197.1			Earnings before equity earnings	237.2		212.2		459.9		409.3
Equity earnings, net of tax	Equity earnings, net of tax	—		0.5			Equity earnings, net of tax	—		1.0		—		1.5
Net earnings	Net earnings	222.7		197.6			Net earnings	237.2		213.2		459.9		410.8
Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests	(5.3)		(5.0)			Net earnings attributable to noncontrolling interests	(5.7)		(5.2)		(11.0)		(10.2)
Net earnings attributable to Snap-on Incorporated	Net earnings attributable to Snap-on Incorporated	$	217.4	$	192.6		Net earnings attributable to Snap-on Incorporated	$	231.5	$	208.0	$	448.9	$	400.6

Net earnings per share attributable to Snap-on Incorporated:	Net earnings per share attributable to Snap-on Incorporated:						Net earnings per share attributable to Snap-on Incorporated:
Basic	Basic	$	4.07	$	3.55		Basic	$	4.34	$	3.85	$	8.41	$	7.40
Diluted	Diluted	4.00		3.50			Diluted	4.27		3.76		8.27		7.26

Weighted-average shares outstanding:	Weighted-average shares outstanding:						Weighted-average shares outstanding:
Basic	Basic	53.4		54.2			Basic	53.3		54.0		53.4		54.1
Effect of dilutive securities	Effect of dilutive securities	0.9		0.9			Effect of dilutive securities	0.9		1.3		0.9		1.1
Diluted	Diluted	54.3		55.1			Diluted	54.2		55.3		54.3		55.2

Dividends declared per common share	Dividends declared per common share	$	1.42	$	1.23		Dividends declared per common share	$	1.42	$	1.23	$	2.84	$	2.46

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)

(Unaudited)


		Three Months Ended				Three Months Ended				Six Months Ended
		April 2, 2022		April 3, 2021				July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Comprehensive income (loss):	Comprehensive income (loss):						Comprehensive income (loss):
Net earnings	Net earnings	$	222.7	$	197.6		Net earnings	$	237.2	$	213.2	$	459.9	$	410.8
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Foreign currency translation	Foreign currency translation	(9.7)		(29.0)			Foreign currency translation	(110.3)		20.2		(120.0)		(8.8)

Reclassification of foreign currency translation loss from sale of equity interest to net earnings							Reclassification of foreign currency translation loss from sale of equity interest to net earnings	—		(1.0)		—		(1.0)
Unrealized cash flow hedges, net of tax:	Unrealized cash flow hedges, net of tax:						Unrealized cash flow hedges, net of tax:

Reclassification of cash flow hedges to net earnings	Reclassification of cash flow hedges to net earnings	(0.4)		(0.4)			Reclassification of cash flow hedges to net earnings	(0.4)		(0.4)		(0.8)		(0.8)
Defined benefit pension and postretirement plans:	Defined benefit pension and postretirement plans:						Defined benefit pension and postretirement plans:
Amortization of net unrecognized losses	Amortization of net unrecognized losses	4.5		9.1			Amortization of net unrecognized losses	4.7		9.1		9.2		18.2
Income tax benefit	Income tax benefit	(1.1)		(2.2)			Income tax benefit	(1.1)		(2.3)		(2.2)		(4.5)
Net of tax	Net of tax	3.4		6.9			Net of tax	3.6		6.8		7.0		13.7
Total comprehensive income	Total comprehensive income	216.0		175.1			Total comprehensive income	$	130.1	$	238.8	$	346.1	$	413.9

Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(5.3)		(5.0)			Comprehensive income attributable to noncontrolling interests	(5.7)		(5.2)		(11.0)		(10.2)
Comprehensive income attributable to Snap-on Incorporated	Comprehensive income attributable to Snap-on Incorporated	$	210.7	$	170.1		Comprehensive income attributable to Snap-on Incorporated	$	124.4	$	233.6	$	335.1	$	403.7

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share data)

(Unaudited)


		April 2, 2022		January 1, 2022			July 2, 2022		January 1, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	861.1	$	780.0	Cash and cash equivalents	$	812.9	$	780.0
Trade and other accounts receivable – net	Trade and other accounts receivable – net	731.3		682.3		Trade and other accounts receivable – net	729.1		682.3
Finance receivables – net	Finance receivables – net	542.7		542.3		Finance receivables – net	547.0		542.3
Contract receivables – net	Contract receivables – net	102.1		110.4		Contract receivables – net	98.3		110.4
Inventories – net	Inventories – net	864.1		803.8		Inventories – net	893.3		803.8
Prepaid expenses and other assets	Prepaid expenses and other assets	134.7		134.6		Prepaid expenses and other assets	150.1		134.6
Total current assets	Total current assets	3,236.0		3,053.4		Total current assets	3,230.7		3,053.4

Property and equipment:	Property and equipment:					Property and equipment:
Land	Land	33.3		33.8		Land	32.5		33.8
Buildings and improvements	Buildings and improvements	427.9		434.4		Buildings and improvements	419.1		434.4
Machinery, equipment and computer software	Machinery, equipment and computer software	1,067.6		1,059.2		Machinery, equipment and computer software	1,058.5		1,059.2
Property and equipment – gross	Property and equipment – gross	1,528.8		1,527.4		Property and equipment – gross	1,510.1		1,527.4
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(1,015.7)		(1,009.2)		Accumulated depreciation and amortization	(1,006.6)		(1,009.2)
Property and equipment – net	Property and equipment – net	513.1		518.2		Property and equipment – net	503.5		518.2

Operating lease right-of-use assets	Operating lease right-of-use assets	50.1		51.9		Operating lease right-of-use assets	56.6		51.9
Deferred income tax assets	Deferred income tax assets	69.3		49.5		Deferred income tax assets	67.5		49.5
Long-term finance receivables – net	Long-term finance receivables – net	1,099.2		1,114.0		Long-term finance receivables – net	1,127.0		1,114.0
Long-term contract receivables – net	Long-term contract receivables – net	377.6		378.2		Long-term contract receivables – net	375.4		378.2
Goodwill	Goodwill	1,077.8		1,116.5		Goodwill	1,046.0		1,116.5
Other intangibles – net	Other intangibles – net	295.5		301.7		Other intangibles – net	283.5		301.7
Other assets	Other assets	176.6		176.3		Other assets	174.1		176.3
Total assets	Total assets	$	6,895.2	$	6,759.7	Total assets	$	6,864.3	$	6,759.7

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share data)

(Unaudited)


		April 2, 2022		January 1, 2022			July 2, 2022		January 1, 2022
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Notes payable	Notes payable	$	19.6	$	17.4	Notes payable	$	18.8	$	17.4
Accounts payable	Accounts payable	297.3		277.6		Accounts payable	308.5		277.6
Accrued benefits	Accrued benefits	73.1		67.4		Accrued benefits	59.2		67.4
Accrued compensation	Accrued compensation	74.8		114.8		Accrued compensation	81.6		114.8
Franchisee deposits	Franchisee deposits	74.8		80.7		Franchisee deposits	77.5		80.7
Other accrued liabilities	Other accrued liabilities	484.5		424.3		Other accrued liabilities	440.5		424.3
Total current liabilities	Total current liabilities	1,024.1		982.2		Total current liabilities	986.1		982.2

Long-term debt	Long-term debt	1,183.2		1,182.9		Long-term debt	1,183.4		1,182.9
Deferred income tax liabilities	Deferred income tax liabilities	112.9		122.7		Deferred income tax liabilities	102.2		122.7
Retiree health care benefits	Retiree health care benefits	30.4		31.1		Retiree health care benefits	29.7		31.1
Pension liabilities	Pension liabilities	96.4		104.9		Pension liabilities	83.1		104.9
Operating lease liabilities	Operating lease liabilities	32.5		34.2		Operating lease liabilities	39.7		34.2
Other long-term liabilities	Other long-term liabilities	95.1		97.9		Other long-term liabilities	93.3		97.9
Total liabilities	Total liabilities	2,574.6		2,555.9		Total liabilities	2,517.5		2,555.9

Commitments and contingencies (Note 15)	Commitments and contingencies (Note 15)	0		0		Commitments and contingencies (Note 15)	0		0

Equity	Equity					Equity
Shareholders’ equity attributable to Snap-on Incorporated:	Shareholders’ equity attributable to Snap-on Incorporated:					Shareholders’ equity attributable to Snap-on Incorporated:
Preferred stock (authorized 15,000,000 shares of $1 par value; none outstanding)	Preferred stock (authorized 15,000,000 shares of $1 par value; none outstanding)	—		—		Preferred stock (authorized 15,000,000 shares of $1 par value; none outstanding)	—		—
Common stock (authorized 250,000,000 shares of $1 par value; issued 67,444,714 and 67,438,129 shares, respectively)		67.4		67.4
Common stock (authorized 250,000,000 shares of $1 par value; issued 67,444,855 and 67,438,129 shares, respectively)						Common stock (authorized 250,000,000 shares of $1 par value; issued 67,444,855 and 67,438,129 shares, respectively)	67.4		67.4
Additional paid-in capital	Additional paid-in capital	474.7		472.7		Additional paid-in capital	488.1		472.7
Retained earnings	Retained earnings	5,841.0		5,699.9		Retained earnings	5,996.2		5,699.9
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(350.6)		(343.9)		Accumulated other comprehensive loss	(457.7)		(343.9)
Treasury stock at cost (14,073,448 and 14,008,479 shares, respectively)		(1,734.2)		(1,714.2)
Treasury stock at cost (14,177,040 and 14,008,479 shares, respectively)						Treasury stock at cost (14,177,040 and 14,008,479 shares, respectively)	(1,769.6)		(1,714.2)
Total shareholders’ equity attributable to Snap-on Incorporated	Total shareholders’ equity attributable to Snap-on Incorporated	4,298.3		4,181.9		Total shareholders’ equity attributable to Snap-on Incorporated	4,324.4		4,181.9
Noncontrolling interests	Noncontrolling interests	22.3		21.9		Noncontrolling interests	22.4		21.9
Total equity	Total equity	4,320.6		4,203.8		Total equity	4,346.8		4,203.8
Total liabilities and equity	Total liabilities and equity	$	6,895.2	$	6,759.7	Total liabilities and equity	$	6,864.3	$	6,759.7

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in millions, except share data)

(Unaudited)

The following summarizes the changes in total equity for the three month period ended ~~April~~July 2, 2022:


		Shareholders’ Equity Attributable to Snap-on Incorporated															Shareholders’ Equity Attributable to Snap-on Incorporated
		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interests		Total Equity			Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interests		Total Equity
Balance at January 1, 2022		$	67.4	$	472.7	$	5,699.9	$	(343.9)	$	(1,714.2)	$	21.9	$	4,203.8
Net Earnings for the three months ended April 2, 2022		—		—		217.4		—		—		5.3		222.7
Balance at April 2, 2022																Balance at April 2, 2022	$	67.4	$	474.7	$	5,841.0	$	(350.6)	$	(1,734.2)	$	22.3	$	4,320.6
Net Earnings for the three months ended July 2, 2022																Net Earnings for the three months ended July 2, 2022	—		—		231.5		—		—		5.7		237.2
Other comprehensive loss	Other comprehensive loss	—		—		—		(6.7)		—		—		(6.7)		Other comprehensive loss	—		—		—		(107.1)		—		—		(107.1)
Cash dividends – $1.42 per share	Cash dividends – $1.42 per share	—		—		(75.7)		—		—		—		(75.7)		Cash dividends – $1.42 per share	—		—		(75.7)		—		—		—		(75.7)
Stock compensation plans	Stock compensation plans	—		2.0		—		—		8.8		—		10.8		Stock compensation plans	—		13.4		—		—		18.4		—		31.8
Share repurchases – 136,000 shares		—		—		—		—		(28.8)		—		(28.8)
Share repurchases – 251,000 shares																Share repurchases – 251,000 shares	—		—		—		—		(53.8)		—		(53.8)
Other	Other	—		—		(0.6)		—		—		(4.9)		(5.5)		Other	—		—		(0.6)		—		—		(5.6)		(6.2)
Balance at April 2, 2022		$	67.4	$	474.7	$	5,841.0	$	(350.6)	$	(1,734.2)	$	22.3	$	4,320.6
Balance at July 2, 2022																Balance at July 2, 2022	$	67.4	$	488.1	$	5,996.2	$	(457.7)	$	(1,769.6)	$	22.4	$	4,346.8

The following summarizes the changes in total equity for the ~~three~~six month period ended ~~April 3, 2021:~~July 2, 2022:

Shareholders’ Equity Attributable to Snap-on Incorporated
Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Noncontrolling
Interests Total
Equity
Balance at January 2, 2021 $ 67.4 $ 391.7 $ 5,156.9 $ (365.8) $ (1,425.3) $ 21.7 $ 3,846.6
Net Earnings for the three months ended April 3, 2021 — — 192.6 — — 5.0 197.6
Other comprehensive loss — — — (22.5) — — (22.5)
Cash dividends – $1.23 per share — — (66.7) — — — (66.7)
Stock compensation plans — 28.0 — — 71.9 — 99.9
Share repurchases – 722,000 shares — — — — (151.9) — (151.9)
Other — — (0.3) — — (4.8) (5.1)
Balance at Balance at April 3, 2021 $ 67.4 $ 419.7 $ 5,282.5 $ (388.3) $ (1,505.3) $ 21.9 $ 3,897.9


	Shareholders’ Equity Attributable to Snap-on Incorporated
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interests		Total Equity
Balance at January 1, 2022	$	67.4	$	472.7	$	5,699.9	$	(343.9)	$	(1,714.2)	$	21.9	$	4,203.8
Net Earnings for the six months ended July 2, 2022	—		—		448.9		—		—		11.0		459.9
Other comprehensive loss	—		—		—		(113.8)		—		—		(113.8)
Cash dividends – $2.84 per share	—		—		(151.4)		—		—		—		(151.4)
Stock compensation plans	—		15.4		—		—		27.2		—		42.6
Share repurchases – 387,000 shares	—		—		—		—		(82.6)		—		(82.6)
Other	—		—		(1.2)		—		—		(10.5)		(11.7)
Balance at July 2, 2022	$	67.4	$	488.1	$	5,996.2	$	(457.7)	$	(1,769.6)	$	22.4	$	4,346.8

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in millions, except share data)

(Unaudited)

The following summarizes the changes in total equity for the three month period ended July 3, 2021:


	Shareholders’ Equity Attributable to Snap-on Incorporated
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Noncontrolling Interests		Total Equity
Balance at April 3, 2021	$	67.4	$	419.7	$	5,282.5	$	(388.3)	$	(1,505.3)	$	21.9	$	3,897.9
Net Earnings for the three months ended July 3, 2021	—		—		208.0		—		—		5.2		213.2
Other comprehensive income	—		—		—		25.6		—		—		25.6
Cash dividends – $1.23 per share	—		—		(66.7)		—		—		—		(66.7)
Stock compensation plans	—		41.4		—		—		56.8		—		98.2
Share repurchases – 566,900 shares	—		—		—		—		(137.4)		—		(137.4)
Other	—		—		(0.3)		—		—		(5.0)		(5.3)
Balance at Balance at July 3, 2021	$	67.4	$	461.1	$	5,423.5	$	(362.7)	$	(1,585.9)	$	22.1	$	4,025.5

The following summarizes the changes in total equity for the six month period ended July 3, 2021:


	Shareholders’ Equity Attributable to Snap-on Incorporated
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Noncontrolling Interests		Total Equity
Balance at January 2, 2021	$	67.4	$	391.7	$	5,156.9	$	(365.8)	$	(1,425.3)	$	21.7	$	3,846.6
Net Earnings for the six months ended July 3, 2021	—		—		400.6		—		—		10.2		410.8
Other comprehensive income	—		—		—		3.1		—		—		3.1
Cash dividends – $2.46 per share	—		—		(133.4)		—		—		—		(133.4)
Stock compensation plans	—		69.4		—		—		128.7		—		198.1
Share repurchases – 1,288,900 shares	—		—		—		—		(289.3)		—		(289.3)
Other	—		—		(0.6)		—		—		(9.8)		(10.4)
Balance at Balance at July 3, 2021	$	67.4	$	461.1	$	5,423.5	$	(362.7)	$	(1,585.9)	$	22.1	$	4,025.5

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)


		Three Months Ended					Six Months Ended
		April 2, 2022		April 3, 2021			July 2, 2022		July 3, 2021
Operating activities:	Operating activities:					Operating activities:
Net earnings	Net earnings	$	222.7	$	197.6	Net earnings	$	459.9	$	410.8
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:	Adjustments to reconcile net earnings to net cash provided (used) by operating activities:					Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation	Depreciation	18.5		18.7		Depreciation	36.7		37.9
Amortization of other intangibles	Amortization of other intangibles	7.2		6.0		Amortization of other intangibles	14.4		12.3
Provision for losses on finance receivables	Provision for losses on finance receivables	6.3		11.3		Provision for losses on finance receivables	15.4		17.9
Provision for losses on non-finance receivables	Provision for losses on non-finance receivables	3.8		2.6		Provision for losses on non-finance receivables	6.7		8.1
Stock-based compensation expense	Stock-based compensation expense	9.0		12.3		Stock-based compensation expense	17.5		23.8
Deferred income tax provision		2.3		2.3
Gain on sales of assets		(2.7)		—
Deferred income tax provision (benefit)						Deferred income tax provision (benefit)	(7.1)		4.0
Loss (gain) on sales of assets						Loss (gain) on sales of assets	(2.9)		1.4

Changes in operating assets and liabilities, net of effects of acquisitions:	Changes in operating assets and liabilities, net of effects of acquisitions:					Changes in operating assets and liabilities, net of effects of acquisitions:
Trade and other accounts receivable	Trade and other accounts receivable	(53.1)		(9.8)		Trade and other accounts receivable	(73.7)		(4.0)
Contract receivables	Contract receivables	9.7		5.6		Contract receivables	10.4		4.5
Inventories	Inventories	(61.7)		8.3		Inventories	(123.4)		(16.1)
Prepaid and other assets		1.9		(1.8)
Prepaid expenses and other assets						Prepaid expenses and other assets	(23.4)		(14.3)
Accounts payable	Accounts payable	24.1		17.5		Accounts payable	42.1		59.5
Accruals and other liabilities	Accruals and other liabilities	5.9		48.7		Accruals and other liabilities	(37.9)		11.7
Net cash provided by operating activities	Net cash provided by operating activities	193.9		319.3		Net cash provided by operating activities	334.7		557.5
Investing activities:	Investing activities:					Investing activities:
Additions to finance receivables	Additions to finance receivables	(205.5)		(216.5)		Additions to finance receivables	(469.6)		(454.5)
Collections of finance receivables	Collections of finance receivables	215.6		228.6		Collections of finance receivables	426.2		447.9
Capital expenditures	Capital expenditures	(20.2)		(19.3)		Capital expenditures	(41.5)		(37.6)
Acquisitions of businesses, net of cash acquired	Acquisitions of businesses, net of cash acquired	—		(200.0)		Acquisitions of businesses, net of cash acquired	0.5		(195.8)
Disposals of property and equipment	Disposals of property and equipment	3.8		—		Disposals of property and equipment	4.2		1.4
Other	Other	(0.3)		—		Other	(0.2)		1.7
Net cash used by investing activities	Net cash used by investing activities	(6.6)		(207.2)		Net cash used by investing activities	(80.4)		(236.9)
Financing activities:	Financing activities:					Financing activities:

Net increase in other short-term borrowings	Net increase in other short-term borrowings	2.3		2.4		Net increase in other short-term borrowings	2.8		2.9
Cash dividends paid	Cash dividends paid	(75.7)		(66.7)		Cash dividends paid	(151.4)		(133.4)
Purchases of treasury stock	Purchases of treasury stock	(28.8)		(151.9)		Purchases of treasury stock	(82.6)		(289.3)
Proceeds from stock purchase and option plans	Proceeds from stock purchase and option plans	5.8		93.0		Proceeds from stock purchase and option plans	29.2		154.8
Other	Other	(9.9)		(7.8)		Other	(16.5)		(13.9)
Net cash used by financing activities	Net cash used by financing activities	(106.3)		(131.0)		Net cash used by financing activities	(218.5)		(278.9)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	0.1		0.1		Effect of exchange rate changes on cash and cash equivalents	(2.9)		0.8
Increase (decrease) in cash and cash equivalents		81.1		(18.8)
Increase in cash and cash equivalents						Increase in cash and cash equivalents	32.9		42.5
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	780.0		923.4		Cash and cash equivalents at beginning of year	780.0		923.4
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	861.1	$	904.6	Cash and cash equivalents at end of period	$	812.9	$	965.9
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Cash paid for interest	Cash paid for interest	$	(13.8)	$	(19.4)	Cash paid for interest	$	(22.4)	$	(27.9)
Net cash paid for income taxes	Net cash paid for income taxes	(18.0)		(15.9)		Net cash paid for income taxes	(129.2)		(126.6)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Accounting Policies

Principles of consolidation and presentation

The Condensed Consolidated Financial Statements include the accounts of Snap-on Incorporated and its wholly owned and majority-owned subsidiaries (collectively, “Snap-on” or the “company”). These financial statements should be read in conjunction with, and have been prepared in conformity with, the accounting principles reflected in the consolidated financial statements and related notes included in Snap-on’s 2021 Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (“2021 year end”). The company’s 2022 fiscal ~~first~~second quarter ended on ~~April~~July 2, 2022; the 2021 fiscal ~~first~~second quarter ended on ~~April~~July 3, 2021. The company’s 2022 and 2021 fiscal ~~first~~second quarters each contained 13 weeks of operating results. Snap-on’s Condensed Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”).

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the Condensed Consolidated Financial Statements for the three and six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, have been made. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial Instruments

The fair value of the company’s derivative financial instruments is generally determined using quoted prices in active markets for similar assets and liabilities. The carrying value of the company’s non-derivative financial instruments either approximates fair value, due to their short-term nature, or the amount disclosed for fair value is based upon a discounted cash flow analysis or quoted market values. See Note 10 for further information on financial instruments.

New Accounting Standards

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures, which requires enhanced disclosure of certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty while eliminating certain current recognition and measurement accounting guidance. This ASU also requires the disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases. ASU No. 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years; this ASU allows for early adoption in any interim period after issuance of the update. The ~~company is currently assessing the impact~~adoption of this ASU ~~will~~is not expected to have a material impact on ~~its consolidated financial statements.~~Snap-on’s Consolidated Financial Statements.

Note 2: Revenue Recognition

Snap-on recognizes revenue from the sale of tools, diagnostics, equipment, and related services based on when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.

910

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Revenue Disaggregation: The following table shows the consolidated revenues by revenue source:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021

Revenue from contracts with customers	Revenue from contracts with customers	$	1,091.9	$	1,018.8		Revenue from contracts with customers	$	1,130.5	$	1,075.3	$	2,222.4	$	2,094.1
Other revenues	Other revenues	5.9		5.8			Other revenues	6.1		6.1		12.0		11.9
Total net sales	Total net sales	1,097.8		1,024.6			Total net sales	1,136.6		1,081.4		2,234.4		2,106.0
Financial services revenue	Financial services revenue	87.7		88.6			Financial services revenue	86.4		86.9		174.1		175.5
Total revenues	Total revenues	$	1,185.5	$	1,113.2		Total revenues	$	1,223.0	$	1,168.3	$	2,408.5	$	2,281.5

The following tables represent external net sales disaggregated by geography, based on the customers’ billing addresses:

For the Three Months Ended April 2, 2022
Commercial Snap-on Repair Systems
& Industrial Tools & Information Financial Snap-on
(Amounts in millions) Group Group Group Services Eliminations Incorporated
Net sales:
North America* $ 113.7 $ 447.8 $ 242.8 $ — $ — $ 804.3
Europe 81.8 40.1 61.9 — — 183.8
All other 65.7 24.2 19.8 — — 109.7
External net sales 261.2 512.1 324.5 — — 1,097.8
Intersegment net sales 78.9 — 73.7 — (152.6) —
Total net sales 340.1 512.1 398.2 — (152.6) 1,097.8
Financial services revenue — — — 87.7 — 87.7
Total revenue $ 340.1 $ 512.1 $ 398.2 $ 87.7 $ (152.6) $ 1,185.5


		For the Three Months Ended April 3, 2021													For the Three Months Ended July 2, 2022
		Commercial		Snap-on		Repair Systems									Commercial		Snap-on		Repair Systems
		& Industrial		Tools		& Information		Financial				Snap-on			& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated		(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:	Net sales:													Net sales:
North America*	North America*	$	118.0	$	408.1	$	200.9	$	—	$	—	$	727.0	North America*	$	128.7	$	460.3	$	254.7	$	—	$	—	$	843.7
Europe	Europe	84.3		44.2		60.6		—		—		189.1		Europe	73.1		36.4		60.4		—		—		169.9
All other	All other	68.8		26.0		13.7		—		—		108.5		All other	74.3		23.9		24.8		—		—		123.0
External net sales	External net sales	271.1		478.3		275.2		—		—		1,024.6		External net sales	276.1		520.6		339.9		—		—		1,136.6
Intersegment net sales	Intersegment net sales	74.6		—		72.4		—		(147.0)		—		Intersegment net sales	83.0		—		76.9		—		(159.9)		—
Total net sales	Total net sales	345.7		478.3		347.6		—		(147.0)		1,024.6		Total net sales	359.1		520.6		416.8		—		(159.9)		1,136.6
Financial services revenue	Financial services revenue	—		—		—		88.6		—		88.6		Financial services revenue	—		—		—		86.4		—		86.4
Total revenue	Total revenue	$	345.7	$	478.3	$	347.6	$	88.6	$	(147.0)	$	1,113.2	Total revenue	$	359.1	$	520.6	$	416.8	$	86.4	$	(159.9)	$	1,223.0

* North America is comprised of the United States, Canada and Mexico.


	For the Six Months Ended July 2, 2022
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
North America*	$	242.4	$	908.1	$	497.5	$	—	$	—	$	1,648.0
Europe	154.9		76.5		122.3		—		—		353.7
All other	140.0		48.1		44.6		—		—		232.7
External net sales	537.3		1,032.7		664.4		—		—		2,234.4
Intersegment net sales	161.9		—		150.6		—		(312.5)		—
Total net sales	699.2		1,032.7		815.0		—		(312.5)		2,234.4
Financial services revenue	—		—		—		174.1		—		174.1
Total revenue	$	699.2	$	1,032.7	$	815.0	$	174.1	$	(312.5)	$	2,408.5


* North America is comprised of the United States, Canada and Mexico.

1011

Table of Contents

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)


	For the Three Months Ended July 3, 2021
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
North America*	$	126.6	$	416.3	$	236.8	$	—	$	—	$	779.7
Europe	79.2		43.8		66.5		—		—		189.5
All other	68.9		24.0		19.3		—		—		112.2
External net sales	274.7		484.1		322.6		—		—		1,081.4
Intersegment net sales	75.8		—		76.0		—		(151.8)		—
Total net sales	350.5		484.1		398.6		—		(151.8)		1,081.4
Financial services revenue	—		—		—		86.9		—		86.9
Total revenue	$	350.5	$	484.1	$	398.6	$	86.9	$	(151.8)	$	1,168.3


	For the Six Months Ended July 3, 2021
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
North America*	$	244.6	$	824.4	$	437.7	$	—	$	—	$	1,506.7
Europe	163.5		88.0		127.1		—		—		378.6
All other	137.7		50.0		33.0		—		—		220.7
External net sales	545.8		962.4		597.8		—		—		2,106.0
Intersegment net sales	150.4		—		148.4		—		(298.8)		—
Total net sales	696.2		962.4		746.2		—		(298.8)		2,106.0
Financial services revenue	—		—		—		175.5		—		175.5
Total revenue	$	696.2	$	962.4	$	746.2	$	175.5	$	(298.8)	$	2,281.5

* North America is comprised of the United States, Canada and Mexico.

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following tables represent external net sales disaggregated by customer type:


		For the Three Months Ended April 2, 2022													For the Three Months Ended July 2, 2022
		Commercial		Snap-on		Repair Systems									Commercial		Snap-on		Repair Systems
		& Industrial		Tools		& Information		Financial				Snap-on			& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated		(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:	Net sales:													Net sales:
Vehicle service professionals	Vehicle service professionals	$	23.9	$	512.1	$	324.5	$	—	$	—	$	860.5	Vehicle service professionals	$	25.2	$	520.6	$	339.9	$	—	$	—	$	885.7
All other professionals	All other professionals	237.3		—		—		—		—		237.3		All other professionals	250.9		—		—		—		—		250.9
External net sales	External net sales	261.2		512.1		324.5		—		—		1,097.8		External net sales	276.1		520.6		339.9		—		—		1,136.6
Intersegment net sales	Intersegment net sales	78.9		—		73.7		—		(152.6)		—		Intersegment net sales	83.0		—		76.9		—		(159.9)		—
Total net sales	Total net sales	340.1		512.1		398.2		—		(152.6)		1,097.8		Total net sales	359.1		520.6		416.8		—		(159.9)		1,136.6
Financial services revenue	Financial services revenue	—		—		—		87.7		—		87.7		Financial services revenue	—		—		—		86.4		—		86.4
Total revenue	Total revenue	$	340.1	$	512.1	$	398.2	$	87.7	$	(152.6)	$	1,185.5	Total revenue	$	359.1	$	520.6	$	416.8	$	86.4	$	(159.9)	$	1,223.0


	For the Six Months Ended July 2, 2022
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
Vehicle service professionals	$	49.1	$	1,032.7	$	664.4	$	—	$	—	$	1,746.2
All other professionals	488.2		—		—		—		—		488.2
External net sales	537.3		1,032.7		664.4		—		—		2,234.4
Intersegment net sales	161.9		—		150.6		—		(312.5)		—
Total net sales	699.2		1,032.7		815.0		—		(312.5)		2,234.4
Financial services revenue	—		—		—		174.1		—		174.1
Total revenue	$	699.2	$	1,032.7	$	815.0	$	174.1	$	(312.5)	$	2,408.5

For the Three Months Ended April 3, 2021
Commercial Snap-on Repair Systems
& Industrial Tools & Information Financial Snap-on
(Amounts in millions) Group Group Group Services Eliminations Incorporated
Net sales:
Vehicle service professionals $ 24.1 $ 478.3 $ 275.2 $ — $ — $ 777.6
All other professionals 247.0 — — — — 247.0
External net sales 271.1 478.3 275.2 — — 1,024.6
Intersegment net sales 74.6 — 72.4 — (147.0) —
Total net sales 345.7 478.3 347.6 — (147.0) 1,024.6
Financial services revenue — — — 88.6 — 88.6
Total revenue $ 345.7 $ 478.3 $ 347.6 $ 88.6 $ (147.0) $ 1,113.2


	For the Three Months Ended July 3, 2021
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
Vehicle service professionals	$	25.7	$	484.1	$	322.6	$	—	$	—	$	832.4
All other professionals	249.0		—		—		—		—		249.0
External net sales	274.7		484.1		322.6		—		—		1,081.4
Intersegment net sales	75.8		—		76.0		—		(151.8)		—
Total net sales	350.5		484.1		398.6		—		(151.8)		1,081.4
Financial services revenue	—		—		—		86.9		—		86.9
Total revenue	$	350.5	$	484.1	$	398.6	$	86.9	$	(151.8)	$	1,168.3

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)


	For the Six Months Ended July 3, 2021
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial				Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations		Incorporated
Net sales:
Vehicle service professionals	$	49.8	$	962.4	$	597.8	$	—	$	—	$	1,610.0
All other professionals	496.0		—		—		—		—		496.0
External net sales	545.8		962.4		597.8		—		—		2,106.0
Intersegment net sales	150.4		—		148.4		—		(298.8)		—
Total net sales	696.2		962.4		746.2		—		(298.8)		2,106.0
Financial services revenue	—		—		—		175.5		—		175.5
Total revenue	$	696.2	$	962.4	$	746.2	$	175.5	$	(298.8)	$	2,281.5

Nature of Goods and Services: Snap-on derives net sales from a broad line of products and complementary services that are grouped into three categories: (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment. The tools product category includes hand tools, power tools, tool storage products and other similar products. The diagnostics, information and management systems product category includes handheld and computer-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer (“OEM”) purchasing facilitation services, and warranty management systems and analytics to help OEM dealership service and repair shops (“OEM dealerships”) manage and track performance. The equipment product category includes solutions for the service of vehicles and industrial equipment. Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as after-sales support to its customers. Through its financial services businesses, Snap‑on derives revenue from various financing programs designed to facilitate the sales of its products and support its franchise business.

Approximately 90% of Snap-on’s net sales are products sold at a point in time through ship-and-bill performance obligations that also include repair services. The remaining sales revenue is earned over time primarily ~~on a subscription basis including~~for software ~~extended warranty and~~subscriptions, other subscription service ~~agreements.~~

~~Table of Contents~~

~~SNAP-ON INCORPORATED~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

agreements and extended warranty programs.

Snap-on enters into contracts related to the selling of tools, diagnostics, repair information, equipment and related services. At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, Snap-on considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Contracts with customers are comprised of customer purchase orders, invoices and written contracts.

For certain performance obligations related to software subscriptions, extended warranty and other subscription agreements that are settled over time Snap-on has elected not to disclose the value of unsatisfied performance obligations for: (i) contracts that have an original expected length of one year or less; (ii) contracts where revenue is recognized as invoiced; and (iii) contracts with variable consideration related to unsatisfied performance obligations. The remaining duration of these unsatisfied performance obligations range from one month up to 60 months. Snap-on had approximately ~~$195.0~~$188.0 million of long-term contracts that have fixed consideration that extends beyond one year as of ~~April~~July 2, 2022. Snap-on expects to recognize approximately ~~65%~~60% of these contracts as revenue by the end of fiscal 2023, an additional ~~30%~~35% by the end of fiscal 2025, and the balance thereafter.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Contract Liabilities: Contract liabilities are recorded when cash payments are received in advance of Snap-on’s performance. The timing of payment is typically on a monthly, quarterly or annual basis. The balance of total contract liabilities was ~~$65.8~~$65.9 million and $63.8 million at ~~April~~July 2, 2022, and January 1, 2022, respectively. The current portion of contract liabilities is included in “Other accrued liabilities” and the non-current portion of such liabilities is included in “Other long-term liabilities” on the accompanying Condensed Consolidated Balance Sheets. During the three and six months ended ~~April~~July 2, 2022, Snap-on recognized revenue of ~~$34.6~~$10.3 million and $44.9 million, respectively, that was included in the $63.8 million contract liability balance at January 1, 2022, which was primarily from the amortization of software subscriptions, extended warranties and other subscription agreements.

Note 3: Acquisitions

On August 1, 2021, Snap-on acquired AutoCrib EMEA GmbH (“AutoCrib Germany”), a former independent distributor, for a cash purchase price of $4.4 million (or $4.2 million, net of cash acquired). AutoCrib Germany, based in Hamburg, Germany, distributes asset and tool control solutions for a variety of aerospace, automotive, military, natural resources and general industry operations. In the first quarter of 2022, the company completed the purchase accounting valuations for the acquired net assets of AutoCrib Germany. The $3.3 million excess of the purchase price over the fair value of the net assets acquired is recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets.

On July 1, 2021, Snap-on exchanged its 35% equity interest in Deville S.A., valued at $21.8 million, for 100% ownership of Secateurs Pradines (“Pradines”), a wholly owned subsidiary of Deville S.A. with a fair value of ~~$20.7~~$20.2 million (or ~~$16.2~~$15.7 million, net of cash acquired), which reflects a $0.5 million purchase accounting adjustment finalized in the second quarter of 2022, and cash of ~~$1.1~~$1.6 million. Pradines, located in Bauge-en-Anjou, France, designs and manufactures horticultural hand tools for professionals and individuals. ~~As of April 2, 2022, the company recorded, on a preliminary basis, the $10.7~~The $10.2 million excess of the purchase price over the fair value of net assets acquired is recorded in “Goodwill” inon the accompanying Condensed Consolidated Balance Sheets. ~~The company will complete the purchase accounting for the acquired net assets of Pradines in the second quarter of 2022.~~

On February 26, 2021, Snap-on acquired Dealer-FX Group, Inc. (“Dealer-FX”) for a cash purchase price of $200.1 million (or $200.0 million, net of cash acquired). Dealer-FX, based in Markham, Ontario, is a leading developer, marketer and provider of service operations software solutions for automotive OEM customers and their dealers. Dealer-FX specializes in software as a service (SaaS) management systems, communications platforms, extensive data integrations, and offers a digitalized solution that increases productivity and enhances the vehicle owners’ experience. In the first quarter of 2022, the company completed the purchase accounting valuations for the acquired net assets of Dealer-FX, and recorded $32.6 million of net deferred tax changes. The $118.2 million excess of the purchase price over the fair value of the net assets acquired is recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets.

For segment reporting purposes, the results of operations and assets of Dealer-FX have been included in the Repair Systems & Information Group since the acquisition date, and the results of operations and assets of AutoCrib Germany and Pradines have been included in the Commercial & Industrial Group since the respective acquisition dates.

Pro forma financial information has not been presented for these acquisitions as the net effects were neither significant nor material to Snap-on’s results of operations or financial position. See Note 6 for further information on goodwill and other intangible assets.

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~~SNAP-ON INCORPORATED~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

Note 4: Receivables

Trade and Other Accounts Receivable: Snap-on’s trade and other accounts receivable primarily arise from the sale of tools, diagnostics, and equipment products to a broad range of industrial and commercial customers and to Snap-on’s independent franchise van channel with payment terms generally ranging from 30 to 120 days.

The components of Snap-on’s trade and other accounts receivable as of ~~April~~July 2, 2022, and January 1, 2022, are as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Trade and other accounts receivable	Trade and other accounts receivable	$	759.7	$	709.6	Trade and other accounts receivable	$	757.2	$	709.6
Allowances for credit losses	Allowances for credit losses	(28.4)		(27.3)		Allowances for credit losses	(28.1)		(27.3)
Total trade and other accounts receivable – net	Total trade and other accounts receivable – net	$	731.3	$	682.3	Total trade and other accounts receivable – net	$	729.1	$	682.3

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following is a rollforward of the allowances for credit losses related to trade and other accounts receivable for the three and six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021:


		Three months ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Allowances for credit losses:	Allowances for credit losses:						Allowances for credit losses:
Beginning of period	Beginning of period	$	27.3	$	26.3		Beginning of period	$	28.4	$	25.8	$	27.3	$	26.3
Provision for credit losses	Provision for credit losses	3.7		1.9			Provision for credit losses	2.9		5.4		6.6		7.3
Charge-offs	Charge-offs	(3.0)		(2.1)			Charge-offs	(2.2)		(2.1)		(5.2)		(4.2)
Recoveries	Recoveries	0.1		—			Recoveries	—		—		0.1		—
Currency translation	Currency translation	0.3		(0.3)			Currency translation	(1.0)		0.4		(0.7)		0.1
End of period	End of period	$	28.4	$	25.8		End of period	$	28.1	$	29.5	$	28.1	$	29.5

Finance and Contract Receivables: Snap-on Credit LLC (“SOC”), the company’s financial services operation in the United States, originates extended-term finance and contract receivables on sales of Snap-on’s products sold through the U.S. franchisee network and to certain other customers of Snap-on; Snap-on’s foreign finance subsidiaries provide similar financing internationally. Interest income on finance and contract receivables is included in “Financial services revenue” on the accompanying Condensed Consolidated Statements of Earnings.

Finance receivables are comprised of extended-term payment contracts to both technicians and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools, diagnostics, and equipment products on an extended-term payment plan, with average payment terms of approximately four years.

Contract receivables, with payment terms of up to ten years, are comprised of extended-term payment contracts to a broad base of customers worldwide, including shop owners, both independents and national chains, for their purchase of tools, diagnostics, and equipment products, as well as extended-term contracts to franchisees to meet a number of financing needs, including working capital loans, loans to enable new franchisees to fund the purchase of the franchise and van leases, or the expansion of an existing franchise. Finance and contract receivables are generally secured by the underlying tools, diagnostics and/or equipment products financed and, for contracts to franchisees, other franchisee assets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The components of Snap-on’s current finance and contract receivables as of ~~April~~July 2, 2022, and January 1, 2022, are as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Finance installment receivables	Finance installment receivables	$	557.7	$	557.0	Finance installment receivables	$	562.6	$	557.0
Finance lease receivables, net of unearned finance charges of $0.9 million and $1.3 million, respectively		5.5		7.1
Finance lease receivables, net of unearned finance charges of $0.7 million and $1.3 million, respectively						Finance lease receivables, net of unearned finance charges of $0.7 million and $1.3 million, respectively	4.2		7.1
Total finance receivables	Total finance receivables	563.2		564.1		Total finance receivables	566.8		564.1

Contract installment receivables	Contract installment receivables	47.3		55.2		Contract installment receivables	42.8		55.2
Contract lease receivables, net of unearned finance charges of $18.6 million and $18.7 million, respectively		56.7		57.3
Contract lease receivables, net of unearned finance charges of $18.4 million and $18.7 million, respectively						Contract lease receivables, net of unearned finance charges of $18.4 million and $18.7 million, respectively	57.3		57.3
Total contract receivables	Total contract receivables	104.0		112.5		Total contract receivables	100.1		112.5
Total	Total	667.2		676.6		Total	666.9		676.6

Allowances for credit losses:	Allowances for credit losses:					Allowances for credit losses:
Finance installment receivables	Finance installment receivables	(20.4)		(21.7)		Finance installment receivables	(19.8)		(21.7)
Finance lease receivables	Finance lease receivables	(0.1)		(0.1)		Finance lease receivables	—		(0.1)
Total finance allowance for credit losses	Total finance allowance for credit losses	(20.5)		(21.8)		Total finance allowance for credit losses	(19.8)		(21.8)

Contract installment receivables	Contract installment receivables	(0.8)		(0.9)		Contract installment receivables	(0.7)		(0.9)
Contract lease receivables	Contract lease receivables	(1.1)		(1.2)		Contract lease receivables	(1.1)		(1.2)
Total contract allowance for credit losses	Total contract allowance for credit losses	(1.9)		(2.1)		Total contract allowance for credit losses	(1.8)		(2.1)
Total allowance for credit losses	Total allowance for credit losses	(22.4)		(23.9)		Total allowance for credit losses	(21.6)		(23.9)
Total current finance and contract receivables – net	Total current finance and contract receivables – net	$	644.8	$	652.7	Total current finance and contract receivables – net	$	645.3	$	652.7

Finance receivables – net	Finance receivables – net	$	542.7	$	542.3	Finance receivables – net	$	547.0	$	542.3
Contract receivables – net	Contract receivables – net	102.1		110.4		Contract receivables – net	98.3		110.4
Total current finance and contract receivables – net	Total current finance and contract receivables – net	$	644.8	$	652.7	Total current finance and contract receivables – net	$	645.3	$	652.7

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The components of Snap-on’s finance and contract receivables with payment terms beyond one year as of ~~April~~July 2, 2022, and January 1, 2022, are as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Finance installment receivables	Finance installment receivables	$	1,138.1	$	1,155.3	Finance installment receivables	$	1,166.1	$	1,155.3
Finance lease receivables, net of unearned finance charges of $0.4 million and $0.5 million, respectively		3.1		4.2
Finance lease receivables, net of unearned finance charges of $0.3 million and $0.5 million, respectively						Finance lease receivables, net of unearned finance charges of $0.3 million and $0.5 million, respectively	2.4		4.2
Total finance receivables	Total finance receivables	1,141.2		1,159.5		Total finance receivables	1,168.5		1,159.5

Contract installment receivables	Contract installment receivables	198.4		197.1		Contract installment receivables	196.7		197.1
Contract lease receivables, net of unearned finance charges of $29.5 million and $30.3 million, respectively		185.0		187.4
Contract lease receivables, net of unearned finance charges of $29.6 million and $30.3 million, respectively						Contract lease receivables, net of unearned finance charges of $29.6 million and $30.3 million, respectively	184.1		187.4
Total contract receivables	Total contract receivables	383.4		384.5		Total contract receivables	380.8		384.5
Total	Total	1,524.6		1,544.0		Total	1,549.3		1,544.0

Allowances for credit losses:	Allowances for credit losses:					Allowances for credit losses:
Finance installment receivables	Finance installment receivables	(42.0)		(45.4)		Finance installment receivables	(41.5)		(45.4)
Finance lease receivables	Finance lease receivables	—		(0.1)		Finance lease receivables	—		(0.1)
Total finance allowance for credit losses	Total finance allowance for credit losses	(42.0)		(45.5)		Total finance allowance for credit losses	(41.5)		(45.5)

Contract installment receivables	Contract installment receivables	(3.2)		(3.2)		Contract installment receivables	(3.2)		(3.2)
Contract lease receivables	Contract lease receivables	(2.6)		(3.1)		Contract lease receivables	(2.2)		(3.1)
Total contract allowance for credit losses	Total contract allowance for credit losses	(5.8)		(6.3)		Total contract allowance for credit losses	(5.4)		(6.3)
Total allowance for credit losses	Total allowance for credit losses	(47.8)		(51.8)		Total allowance for credit losses	(46.9)		(51.8)
Total long-term finance and contract receivables – net	Total long-term finance and contract receivables – net	$	1,476.8	$	1,492.2	Total long-term finance and contract receivables – net	$	1,502.4	$	1,492.2

Finance receivables – net	Finance receivables – net	$	1,099.2	$	1,114.0	Finance receivables – net	$	1,127.0	$	1,114.0
Contract receivables – net	Contract receivables – net	377.6		378.2		Contract receivables – net	375.4		378.2
Total long-term finance and contract receivables – net	Total long-term finance and contract receivables – net	$	1,476.8	$	1,492.2	Total long-term finance and contract receivables – net	$	1,502.4	$	1,492.2

Credit quality: The company’s receivable portfolio is comprised of 2 portfolio segments, finance and contract receivables, which are the same segments used to estimate expected credit losses reported in the allowance for credit losses. The amortized cost basis for finance and contract receivables is the amount originated adjusted for applicable accrued interest and net of deferred fees or costs, collection of cash, and write-offs. The company monitors and assesses credit risk based on the characteristics of each portfolio segment.

When extending credit, Snap-on evaluates the collectability of the receivables based on a combination of various financial and qualitative factors that may affect a customer’s ability to pay. These factors may include the customer’s financial condition, past payment experience, and credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

For finance and contract receivables, Snap-on assesses quantitative and qualitative factors through the use of credit quality indicators consisting primarily of collection experience and related internal metrics. Delinquency is the primary indicator of credit quality for finance and contract receivables. Snap-on conducts monthly reviews of credit and collection performance for both the finance and contract receivable portfolios focusing on data such as delinquency trends, nonaccrual receivables, and write-off and recovery activity. These reviews allow for the formulation of collection strategies and potential collection policy modifications in response to changing risk profiles in the finance and contract receivable portfolios. The other internal metrics include credit exposure by customer and delinquency classification to further monitor changing risk profiles. The company maintains a system that aggregates credit exposure and provides delinquency data by days past due aging categories. A receivable 30 days or more past due is considered delinquent. However, customers are monitored prior to becoming 30 days past due.

The amortized cost basis of finance and contract receivables by origination year as of ~~April~~July 2, 2022, are as follows:


(Amounts in millions)	(Amounts in millions)	2022		2021		2020		2019		2018		Prior		Total		(Amounts in millions)	2022		2021		2020		2019		2018		Prior		Total
Finance Receivables:	Finance Receivables:															Finance Receivables:
Delinquent	Delinquent	$	0.2	$	15.1	$	13.8	$	6.8	$	3.3	$	2.0	$	41.2	Delinquent	$	2.9	$	16.5	$	11.3	$	5.4	$	2.8	$	1.4	$	40.3
Non-delinquent	Non-delinquent	391.0		788.9		315.0		114.9		41.8		11.6		1,663.2		Non-delinquent	747.6		572.2		247.7		89.3		30.7		7.5		1,695.0
Total Finance receivables	Total Finance receivables	$	391.2	$	804.0	$	328.8	$	121.7	$	45.1	$	13.6	$	1,704.4	Total Finance receivables	$	750.5	$	588.7	$	259.0	$	94.7	$	33.5	$	8.9	$	1,735.3

Contract receivables:	Contract receivables:															Contract receivables:
Delinquent	Delinquent	$	0.1	$	1.0	$	0.8	$	0.6	$	0.4	$	0.3	$	3.2	Delinquent	$	0.2	$	0.7	$	0.7	$	0.9	$	0.3	$	0.2	$	3.0
Non-delinquent	Non-delinquent	40.9		153.9		110.6		80.3		52.1		46.4		484.2		Non-delinquent	83.8		138.5		101.0		71.3		44.5		38.8		477.9
Total Contract receivables	Total Contract receivables	$	41.0	$	154.9	$	111.4	$	80.9	$	52.5	$	46.7	$	487.4	Total Contract receivables	$	84.0	$	139.2	$	101.7	$	72.2	$	44.8	$	39.0	$	480.9

Allowance for credit losses: The allowance for credit losses utilizes an expected credit loss objective for the recognition of credit losses on receivables over the contractual life using historical experience, asset specific risk characteristics, current conditions, reasonable and supportable forecasts, and the appropriate reversion period, when applicable.

The allowance for credit losses is maintained at a level that is considered adequate to cover credit-related losses on the receivables. Management performs detailed reviews of its receivables on a monthly and/or quarterly basis to assess the adequacy of the allowance and determine if any impairment has occurred. A receivable may have credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the agreement. Amounts determined to be uncollectable are charged directly against the allowance, while amounts recovered on previously written-off accounts increase the allowance. For both finance and contract receivables, net write-offs include the principal amount of losses written off as well as written-off accrued interest and fees, and recourse from franchisees on finance receivables. Recovered interest and fees previously written off are recorded through the allowance for credit losses and increase the allowance. Finance receivables are assessed for write-off when an account becomes 120 days past due and are written off typically within 60 days of asset repossession. Contract receivables related to equipment leases are generally written off when an account becomes 150 days past due, while contract receivables related to franchise finance and van leases are generally written off up to 180 days past the asset return date. For finance and contract receivables, customer bankruptcies are generally written off upon notification that the associated debt is not being reaffirmed or, in any event, no later than 180 days past due. Changes to the allowances for credit losses are maintained through adjustments to the provision for credit losses.

For finance receivables, the company uses a vintage loss rate methodology to determine expected losses. Vintage analysis aims to calculate losses based on the timing of the losses relative to the origination of the receivables. The finance receivable portfolio contains a substantial amount of homogeneous contracts, which fits well with the vintage analysis.

For contract receivables the company primarily uses a Weighted-Average Remaining Maturity methodology (“WARM”). The WARM methodology calculates the average annual write-off rate and applies it to the remaining term of the receivables. The WARM method is used since the contract receivables have limited loss experience over generally longer terms and, therefore, the predictive loss patterns are more difficult to estimate.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The company performed a correlation analysis to compare historical losses to many economic factors. The primary economic factors considered were real gross domestic product, civilian unemployment, industrial production index, and repair and maintenance employment rate; the company determined that there is limited correlation between the historical losses and economic factors. As a result, consideration was given to qualitative factors to adjust the reserve balance for asset specific risk characteristics, current conditions and future expectations. Similar qualitative factors are considered for both finance and contract receivables. The qualitative factors used in determining the estimate of expected credit losses are influenced by the changes in the composition of the portfolio, underwriting practices, and other relevant conditions that were different from the historical periods.

The allowance for credit losses is adjusted each period for changes in the credit risk and expected lifetime credit losses.

The following is a rollforward of the allowances for credit losses for finance and contract receivables for the three and six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021:


		Three Months Ended April 2, 2022				Three Months Ended April 3, 2021					Three Months Ended July 2, 2022				Six Months Ended July 2, 2022
(Amounts in millions)	(Amounts in millions)	Finance Receivables		Contract Receivables		Finance Receivables		Contract Receivables		(Amounts in millions)	Finance Receivables		Contract Receivables		Finance Receivables		Contract Receivables
Allowances for credit losses:	Allowances for credit losses:									Allowances for credit losses:
Beginning of period	Beginning of period	$	67.3	$	8.4	$	76.3	$	9.0	Beginning of period	$	62.5	$	7.7	$	67.3	$	8.4

Provision for credit losses	Provision for credit losses	6.3		0.1		11.3		0.7		Provision for credit losses	9.1		—		15.4		0.1
Charge-offs	Charge-offs	(13.4)		(0.8)		(14.9)		(0.6)		Charge-offs	(12.8)		(0.6)		(26.2)		(1.4)
Recoveries	Recoveries	2.3		—		2.6		0.1		Recoveries	2.7		0.1		5.0		0.1

Currency translation										Currency translation	(0.2)		—		(0.2)		—
End of period	End of period	$	62.5	$	7.7	$	75.3	$	9.2	End of period	$	61.3	$	7.2	$	61.3	$	7.2


	Three Months Ended July 3, 2021				Six Months Ended July 3, 2021
(Amounts in millions)	Finance Receivables		Contract Receivables		Finance Receivables		Contract Receivables
Allowances for credit losses:
Beginning of period	$	75.3	$	9.2	$	76.3	$	9.0
Provision for credit losses	6.6		0.1		17.9		0.8
Charge-offs	(12.4)		(0.5)		(27.3)		(1.1)
Recoveries	2.8		0.2		5.4		0.3
Currency translation	—		—		—		—
End of period	$	72.3	$	9.0	$	72.3	$	9.0

Past due: Depending on the contract, payments for finance and contract receivables are due on a monthly or weekly basis. Weekly payments are converted into a monthly equivalent for purposes of calculating delinquency. Delinquencies are assessed at the end of each month following the monthly equivalent contractual payment due date. The entire receivable balance of a contract is considered delinquent when contractual payments become 30 days past due. Removal from delinquent status occurs when the cumulative amount of monthly contractual payments then due have been received by the company.

It is the general practice of Snap-on’s financial services business not to engage in contract or loan modifications. In limited instances, Snap-on’s financial services business may modify certain receivables in troubled debt restructurings. The amount and number of restructured finance and contract receivables as of ~~April~~July 2, 2022, and January 1, 2022, were immaterial to both the financial services portfolio and the company’s results of operations and financial position.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The aging of finance and contract receivables as of ~~April~~July 2, 2022, and January 1, 2022, is as follows:


(Amounts in millions)	(Amounts in millions)	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Total Not Past Due		Total		Greater Than 90 Days Past Due and Accruing		(Amounts in millions)	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Total Not Past Due		Total		Greater Than 90 Days Past Due and Accruing
April 2, 2022:
July 2, 2022:																July 2, 2022:
Finance receivables	Finance receivables	$	13.1	$	9.8	$	18.3	$	41.2	$	1,663.2	$	1,704.4	$	15.8	Finance receivables	$	15.1	$	9.6	$	15.6	$	40.3	$	1,695.0	$	1,735.3	$	13.3
Contract receivables	Contract receivables	1.3		0.6		1.3		3.2		484.2		487.4		0.2		Contract receivables	1.4		0.3		1.3		3.0		477.9		480.9		0.2

January 1, 2022:	January 1, 2022:															January 1, 2022:
Finance receivables	Finance receivables	$	16.0	$	10.5	$	18.0	$	44.5	$	1,679.1	$	1,723.6	$	16.0	Finance receivables	$	16.0	$	10.5	$	18.0	$	44.5	$	1,679.1	$	1,723.6	$	16.0
Contract receivables	Contract receivables	1.7		0.9		0.9		3.5		493.5		497.0		0.1		Contract receivables	1.7		0.9		0.9		3.5		493.5		497.0		0.1

Nonaccrual: SOC maintains the accrual of interest income during the progression through the various stages of delinquency prior to processing for write-off. At the time of write-off, the entire balance including the accrued but unpaid interest income amount is recorded as a loss.

Finance receivables are generally placed on nonaccrual status (nonaccrual of interest and other fees): (i) when a customer is placed on repossession status; (ii) upon receipt of notification of bankruptcy; (iii) upon notification of the death of a customer; or (iv) in other instances in which management concludes collectability is not reasonably assured.

Contract receivables are generally placed on nonaccrual status: (i) when a receivable is more than 90 days past due or at the point a customer’s account is placed on terminated status regardless of its delinquency status; (ii) upon notification of the death of a customer; or (iii) in other instances in which management concludes collectability is not reasonably assured.

The accrual of interest and other fees is resumed when the finance or contract receivable becomes contractually current and collection of all remaining contractual amounts due is reasonably assured. A receivable may have credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the applicable agreement. Such finance and contract receivables are covered by the company’s respective allowances for credit losses and are written-off against the allowances when appropriate.

The amount of finance and contract receivables on nonaccrual status as of ~~April~~July 2, 2022, and January 1, 2022, is as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Finance receivables	Finance receivables	$	8.4	$	7.7	Finance receivables	$	8.7	$	7.7
Contract receivables	Contract receivables	2.7		2.7		Contract receivables	4.1		2.7

Note 5: Inventories

Inventories by major classification are as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Finished goods	Finished goods	$	730.7	$	686.5	Finished goods	$	756.7	$	686.5
Work in progress	Work in progress	68.7		64.3		Work in progress	69.7		64.3
Raw materials	Raw materials	153.4		140.2		Raw materials	157.6		140.2
Total FIFO value	Total FIFO value	952.8		891.0		Total FIFO value	984.0		891.0
Excess of current cost over LIFO cost	Excess of current cost over LIFO cost	(88.7)		(87.2)		Excess of current cost over LIFO cost	(90.7)		(87.2)
Total inventories – net	Total inventories – net	$	864.1	$	803.8	Total inventories – net	$	893.3	$	803.8

1821

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Inventories accounted for using the first-in, first-out (“FIFO”) method approximated 61% and 60% of total inventories as of ~~April~~July 2, 2022, and January 1, 2022, respectively. The company accounts for its non-U.S. inventory on the FIFO method. As of ~~April~~July 2, 2022, approximately ~~35%~~36% of the company’s U.S. inventory was accounted for using the FIFO method and ~~65%~~64% was accounted for using the last-in, first-out (“LIFO”) method. There were no LIFO inventory liquidations in the three and six months ended ~~April~~July 2, 2022, or ~~April~~July 3, 2021.

Note 6: Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by segment for the ~~three~~six months ended ~~April~~July 2, 2022, are as follows:


(Amounts in millions)	(Amounts in millions)	Commercial & Industrial Group		Snap-on Tools Group		Repair Systems & Information Group		Total		(Amounts in millions)	Commercial & Industrial Group		Snap-on Tools Group		Repair Systems & Information Group		Total
Balance as of January 1, 2022	Balance as of January 1, 2022	$	325.8	$	12.4	$	778.3	$	1,116.5	Balance as of January 1, 2022	$	325.8	$	12.4	$	778.3	$	1,116.5
Currency translation	Currency translation	(3.6)		—		(2.5)		(6.1)		Currency translation	(22.7)		—		(14.7)		(37.4)
Acquisition-related adjustments	Acquisition-related adjustments	—		—		(32.6)		(32.6)		Acquisition-related adjustments	(0.5)		—		(32.6)		(33.1)

Balance as of April 2, 2022		$	322.2	$	12.4	$	743.2	$	1,077.8
Balance as of July 2, 2022										Balance as of July 2, 2022	$	302.6	$	12.4	$	731.0	$	1,046.0

Goodwill of ~~$1,077.8~~$1,046.0 million as of ~~April~~July 2, 2022, included $118.2 million from the acquisition of Dealer-FX, ~~$10.7~~$10.2 million ~~on a preliminary basis,~~ from the acquisition of Pradines and $3.3 million from the acquisition of AutoCrib Germany. AsIn the first quarter of ~~the three months ended April 2,~~ 2022, the purchase accounting valuations for the acquired net assets, including deferred tax assets, of Dealer-FX were completed, resulting in a reduction of goodwill of $32.6 million from 2021 year end. In the second quarter of 2022, the purchase accounting valuations for the acquired net assets of Pradines were completed, resulting in a reduction of goodwill of $0.5 million from 2021 year end. The goodwill from Dealer-FX is included in the Repair Systems & Information Group and the goodwill from Pradines and AutoCrib Germany is included in the Commercial & Industrial Group. See Note 3 for additional information on acquisitions.

Additional disclosures related to other intangible assets are as follows:


		April 2, 2022				January 1, 2022					July 2, 2022				January 1, 2022
(Amounts in millions)	(Amounts in millions)	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization		(Amounts in millions)	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Amortized other intangible assets:	Amortized other intangible assets:									Amortized other intangible assets:
Customer relationships	Customer relationships	$	216.8	$	(144.5)	$	217.8	$	(142.1)	Customer relationships	$	212.6	$	(145.1)	$	217.8	$	(142.1)
Developed technology	Developed technology	36.5		(24.0)		36.6		(23.2)		Developed technology	35.9		(24.3)		36.6		(23.2)
Internally developed software	Internally developed software	179.2		(136.0)		182.7		(139.1)		Internally developed software	180.6		(138.0)		182.7		(139.1)
Patents	Patents	45.9		(25.3)		45.7		(25.1)		Patents	46.4		(25.0)		45.7		(25.1)
Trademarks	Trademarks	3.9		(2.4)		3.9		(2.3)		Trademarks	3.8		(2.3)		3.9		(2.3)
Other	Other	8.3		(4.1)		8.3		(4.1)		Other	7.9		(4.0)		8.3		(4.1)
Total	Total	490.6		(336.3)		495.0		(335.9)		Total	487.2		(338.7)		495.0		(335.9)
Non-amortized trademarks	Non-amortized trademarks	141.2		—		142.6		—		Non-amortized trademarks	135.0		—		142.6		—
Total other intangible assets	Total other intangible assets	$	631.8	$	(336.3)	$	637.6	$	(335.9)	Total other intangible assets	$	622.2	$	(338.7)	$	637.6	$	(335.9)

As of ~~April~~July 2, 2022, the gross carrying value of intangible assets includes $28.4 million of customer relationships, $14.8 million of developed technology and a $17.7 million non-amortized trademark related to the Dealer-FX acquisition.

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Snap-on completed its annual impairment testing of goodwill and other indefinite-lived intangible assets in the second quarter of 2022, and the testing did not result in any impairment. Provision for impairment of goodwill and/or other intangible assets could arise in a future period due to significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to significant and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price and/or other events, including effects from the sale or disposal of a reporting unit. As of ~~April~~July 2, 2022, the company had 0 accumulated impairment losses.

~~Table of Contents~~

~~SNAP-ON INCORPORATED~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

The weighted-average amortization periods related to other intangible assets are as follows:


			In Years
Customer relationships			14
Developed technology			5
Internally developed software			6
Patents			14
Trademarks			9
Other			39

Snap-on is amortizing its customer relationships on both an accelerated and straight-line basis over a 14 year weighted-average life; the remaining intangibles are amortized on a straight-line basis. The weighted-average amortization period for all amortizable intangibles on a combined basis is 12 years.

The company’s customer relationships generally have contractual terms of three to five years and are typically renewed without significant cost to the company. The weighted-average 14 year life for customer relationships is based on the company’s historical renewal experience. Intangible asset renewal costs are expensed as incurred.

The aggregate amortization expense was $7.2 million and ~~$6.0~~$14.4 million for the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$6.3 million and $12.3 million for the respective three and six month periods ended July 3, 2021. Based on current levels of amortizable intangible assets and estimated weighted-average useful lives, estimated annual amortization expense is expected to be ~~$28.3~~$28.4 million in 2022, ~~$24.9~~$25.8 million in 2023, $19.6 million in 2024, $14.1 million in 2025, ~~$10.5~~$10.9 million in 2026, and $9.7 million in 2027.

Note 7: Exit and Disposal Activities

Snap-on did not record any costs for exit and disposal activities for ~~both~~each of the three and six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021.

Snap-on’s exit and disposal accrual activity for the first ~~three~~six months of 2022 is as follows:


		Balance at		First Three Months				Balance at		Balance at		First Quarter				Balance at		Second Quarter				Balance at
(Amounts in millions)	(Amounts in millions)	January 1, 2022		Provision		Usage		April 2, 2022			(Amounts in millions)	January 1, 2022		Provision		Usage		April 2, 2022		Provision		Usage		July 2, 2022
Severance costs:	Severance costs:										Severance costs:
Commercial & Industrial Group	Commercial & Industrial Group	$	4.3	$	—	$	(0.5)	$	3.8		Commercial & Industrial Group	$	4.3	$	—	$	(0.5)	$	3.8	$	—	$	(0.4)	$	3.4
Snap-on Tools Group	Snap-on Tools Group	0.3		—		—		0.3			Snap-on Tools Group	0.3		—		—		0.3		—		—		0.3
Repair System & Information Group	Repair System & Information Group	2.4		—		(0.4)		2.0			Repair System & Information Group	2.4		—		(0.4)		2.0		—		(0.3)		1.7
Total	Total	$	7.0	$	—	$	(0.9)	$	6.1		Total	$	7.0	$	—	$	(0.9)	$	6.1	$	—	$	(0.7)	$	5.4

As of ~~April~~July 2, 2022, the company expects that approximately ~~$4.3~~$3.2 million of the ~~$6.1~~$5.4 million exit and disposal accrual will be utilized in 2022, and the remainder thereafter, primarily for longer-term severance payments.

Snap-on expects to fund the remaining cash requirements of its exit and disposal activities with available cash on hand, cash flows from operating activities and borrowings under the company’s existing credit facilities. The estimated costs for the exit and disposal activities were based on management’s best business judgement under prevailing circumstances.

2023

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 8: Income Taxes

Snap-on’s effective income tax rate on earnings attributable to Snap-on was 23.7% and ~~23.5%~~23.4% in the respective first ~~three~~six month periods of 2022 and 2021.

Snap-on and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions. It is reasonably possible that certain unrecognized tax benefits may either be settled with taxing authorities or the statutes of limitations for such items may lapse within the next 12 months, causing Snap-on’s gross unrecognized tax benefits to decrease by a range of zero to $4.2 million. Over the next 12 months, Snap-on anticipates taking certain tax positions on various tax returns for which the related tax benefit does not meet the recognition threshold. Accordingly, Snap-on’s gross unrecognized tax benefits may increase by a range of zero to $0.8 million over the next 12 months for uncertain tax positions expected to be taken in future tax filings.

Note 9: Short-term and Long-term Debt

Short-term and long-term debt as of ~~April~~July 2, 2022, and January 1, 2022, consisted of the following:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
3.25% unsecured notes due 2027	3.25% unsecured notes due 2027	300.0		300.0		3.25% unsecured notes due 2027	$	300.0	$	300.0
4.10% unsecured notes due 2048	4.10% unsecured notes due 2048	400.0		400.0		4.10% unsecured notes due 2048	400.0		400.0
3.10% unsecured notes due 2050	3.10% unsecured notes due 2050	500.0		500.0		3.10% unsecured notes due 2050	500.0		500.0
Other*	Other*	2.8		0.3		Other*	2.2		0.3
		1,202.8		1,200.3			1,202.2		1,200.3

Less: notes payable	Less: notes payable					Less: notes payable	(18.8)		(17.4)

Other notes		(19.6)		(17.4)
		(19.6)		(17.4)
Total long-term debt	Total long-term debt	$	1,183.2	$	1,182.9	Total long-term debt	$	1,183.4	$	1,182.9



*			Includes unamortized debt issuance costs.

Notes payable of ~~$19.6~~$18.8 million as of ~~April~~July 2, 2022, compared to $17.4 million as of 2021 year end.

Snap-on has an $800 million multi-currency revolving credit facility that terminates on September 16, 2024 (the “Credit Facility”); no amounts were outstanding under the Credit Facility as of ~~April~~July 2, 2022. Borrowings under the Credit Facility bear interest at varying rates based on either: (i) Snap-on’s then-current, long-term debt ratings; or (ii) Snap-on’s then-current ratio of consolidated debt net of certain cash adjustments (“Consolidated Net Debt”) to earnings before interest, taxes, depreciation, amortization and certain other adjustments for the preceding four fiscal quarters then ended (the “Consolidated Net Debt to EBITDA Ratio”). The Credit Facility’s financial covenant requires that Snap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to 1.00 of Consolidated Net Debt to the sum of Consolidated Net Debt plus total equity and less accumulated other comprehensive income or loss (the “Leverage Ratio”); or (ii) a Consolidated Net Debt to EBITDA Ratio not greater than 3.50 to 1.00. Snap-on may, up to 2 times during any five-year period during the term of the Credit Facility (including any extensions thereof), elect to increase the maximum Leverage Ratio to 0.65 to 1.00 and/or increase the maximum Consolidated Net Debt to EBITDA Ratio to 4.00 to 1.00 for four consecutive fiscal quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of ~~April~~July 2, 2022, the company’s actual ratios of ~~0.08~~0.09 and ~~0.30,~~0.34, respectively, were both within the permitted ranges set forth in this financial covenant. Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit Facility as back-up liquidity to support such commercial paper issuances. As of ~~April~~July 2, 2022, there were no commercial paper issuances outstanding.

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10: Financial Instruments

Derivatives: All derivative instruments are reported in the Condensed Consolidated Financial Statements at fair value. Changes in the fair value of derivatives are recorded each period in earnings or on the accompanying Condensed Consolidated Balance Sheets, depending on whether the derivative is designated and effective as part of a hedged transaction. Gains or losses on derivative instruments recorded in earnings are presented in the same Condensed Consolidated Statement of Earnings line that is used to present the earnings effect of the hedged item. Gains or losses on derivative instruments in accumulated other comprehensive income (loss) (“Accumulated OCI”) are reclassified to earnings in the period in which earnings are affected by the underlying hedged item.

The criteria used to determine if hedge accounting treatment is appropriate are: (i) the designation of the hedge to an underlying exposure; (ii) whether or not overall risk is being reduced; and (iii) if there is a correlation between the value of the derivative instrument and the underlying hedged item. Once a derivative contract is entered into, Snap-on designates the derivative as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a natural hedging instrument whose change in fair value is recognized as an economic hedge against changes in the value of the hedged item. Snap-on does not use derivative instruments for speculative or trading purposes.

~~The company~~Snap-on is exposed to global market risks, including the effects of changes in foreign currency exchange rates, interest rates, and the company’s stock ~~price, and therefore~~price. The company uses derivatives to manage financial exposures that occur in the normal course of business. The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and stock-based deferred compensation risk.

Foreign Currency Risk Management: Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including currency fluctuations. Foreign currency exchange risk exists to the extent that Snap-on has payment obligations or receipts denominated in currencies other than the functional currency, including intercompany loans denominated in foreign currencies. To manage these exposures, Snap-on identifies naturally offsetting positions and then purchases hedging instruments to protect the residual net exposures. Snap-on manages most of these exposures on a consolidated basis, which allows for netting of certain exposures to take advantage of natural offsets. Foreign currency forward contracts (“foreign currency forwards”) are used to hedge the net exposures. Gains or losses on net foreign currency hedges are intended to offset losses or gains on the underlying net exposures in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates. Snap-on’s foreign currency forwards are typically not designated as hedges. The fair value changes of these contracts are reported in earnings as foreign exchange gain or loss, which is included in “Other income (expense) - net” on the accompanying Condensed Consolidated Statements of Earnings. See Note 17 for additional information on Other income (expense) - net.

Interest Rate Risk Management: Snap-on aims to control funding costs by managing the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements (“interest rate swaps”) and treasury lock agreements (“treasury locks”).

Interest rate swaps: Snap-on may enter into interest rate swaps to manage risks associated with changing interest rates related to the company’s fixed rate borrowings. Interest rate swaps are accounted for as fair value hedges. The differentials paid or received on interest rate swaps are recognized as adjustments to “Interest expense” on the accompanying Condensed Consolidated Statements of Earnings. The change in the fair value of the derivative is recorded in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets. There were no outstanding interest rate swaps as of both ~~April~~July 2, 2022, and January 1, 2022.

Treasury locks: Snap-on may use treasury locks to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt. Treasury locks are accounted for as cash flow hedges. The differentials to be paid or received on treasury locks related to the anticipated issuance of fixed rate debt are initially recorded in Accumulated OCI for derivative instruments that are designated and qualify as cash flow hedges. Upon the issuance of debt, the related amount in Accumulated OCI is released over the term of the debt and recognized as an adjustment to interest expense on the Condensed Consolidated Statements of Earnings. There were no treasury locks outstanding as of both ~~April~~July 2, 2022, and January 1, 2022.

2225

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Stock-based Deferred Compensation Risk Management: Snap-on aims to manage market risk associated with the stock-based portion of its deferred compensation plans through the use of prepaid equity forward agreements (“equity forwards”). Equity forwards are used to aid in offsetting the potential mark-to-market effect on stock-based deferred compensation from changes in Snap-on’s stock price. Since stock-based deferred compensation liabilities increase as the company’s stock price rises and decrease as the company’s stock price declines, the equity forwards are intended to mitigate the potential impact on deferred compensation expense that may result from such mark-to-market changes. As of ~~April~~July 2, 2022, Snap-on had equity forwards in place intended to manage market risk with respect to ~~74,000~~71,200 shares of Snap-on common stock associated with its deferred compensation plans.

Counterparty Risk: Snap-on is exposed to credit losses in the event of non-performance by the counterparties to its various financial agreements, including its foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements. Snap-on does not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of the counterparties and generally enters into agreements with financial institution counterparties with a credit rating of A- or better. Snap-on does not anticipate non-performance by its counterparties, but cannot provide assurances.

Fair Value of Financial Instruments: The fair values of financial instruments that do not approximate the carrying values in the financial statements are as follows:


		April 2, 2022				January 1, 2022					July 2, 2022				January 1, 2022
(Amounts in millions)	(Amounts in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		(Amounts in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Finance receivables – net	Finance receivables – net	$	1,641.9	$	1,931.2	$	1,656.3	$	1,988.6	Finance receivables – net	$	1,674.0	$	1,954.1	$	1,656.3	$	1,988.6
Contract receivables – net	Contract receivables – net	479.7		517.9		488.6		542.5		Contract receivables – net	473.7		508.1		488.6		542.5
Long-term debt and notes payable	Long-term debt and notes payable	1,202.8		1,196.5		1,200.3		1,339.7		Long-term debt and notes payable	1,202.2		1,066.3		1,200.3		1,339.7

The following methods and assumptions were used in estimating the fair value of financial instruments:

•Finance and contract receivables include both short-term and long-term receivables. The fair value estimates of finance and contract receivables are derived utilizing discounted cash flow analyses performed on groupings of receivables that are similar in terms of loan type and characteristics. The cash flow analyses consider recent prepayment trends where applicable. The cash flows are discounted over the average life of the receivables using a current market discount rate of a similar term adjusted for credit quality. Significant inputs to the fair value measurements of the receivables are unobservable and, as such, are classified as Level 3.

•Fair value of long-term debt was estimated, using Level 2 fair value measurements, based on quoted market values of Snap-on’s publicly traded senior debt. The carrying value of long-term debt includes unamortized debt issuance costs. The fair value of notes payable approximates such instruments’ carrying value due to their short-term nature.

•The fair value of all other financial instruments, including trade and other accounts receivable, accounts payable and other financial instruments, approximates such instruments’ carrying value due to their short-term nature.

2326

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 11: Pension Plans

Snap-on’s net periodic pension (benefit) cost included the following components:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Service cost	Service cost	$	7.1	$	7.5		Service cost	$	6.3	$	6.9	$	13.4	$	14.4
Interest cost	Interest cost	11.1		10.6			Interest cost	11.2		10.5		22.3		21.1
Expected return on plan assets	Expected return on plan assets	(24.5)		(23.6)			Expected return on plan assets	(25.4)		(23.5)		(49.9)		(47.1)
Amortization of unrecognized loss	Amortization of unrecognized loss	4.5		9.1			Amortization of unrecognized loss	4.7		9.1		9.2		18.2

Net periodic pension (benefit) cost	Net periodic pension (benefit) cost	$	(1.8)	$	3.6		Net periodic pension (benefit) cost	$	(3.2)	$	3.0	$	(5.0)	$	6.6

The components of net periodic pension (benefit) cost, other than the service cost component, are included in “Other income (expense) - net” on the accompanying Condensed Consolidated Statements of Earnings. See Note 17 for additional information on other income (expense) - net.

Snap-on intends to make contributions of $9.4 million to its foreign pension plans and $9.5 million to its domestic pension plans in 2022, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2022.

Note 12: Postretirement Health Care Plans

Snap-on’s net periodic postretirement health care cost included the following components:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Interest cost	Interest cost	$	0.3	$	0.3		Interest cost	$	0.3	$	0.3	$	0.6	$	0.6
Expected return on plan assets	Expected return on plan assets	(0.2)		(0.2)			Expected return on plan assets	(0.1)		(0.2)		(0.3)		(0.4)

Net periodic postretirement health care cost	Net periodic postretirement health care cost	$	0.1	$	0.1		Net periodic postretirement health care cost	$	0.2	$	0.1	$	0.3	$	0.2

The components of net periodic postretirement health care cost are included in “Other income (expense) - net” on the accompanying Condensed Consolidated Statements of Earnings. See Note 17 for additional information on other income (expense) - net.

Note 13: Stock-based Compensation and Other Stock Plans

The 2011 Incentive Stock and Awards Plan (the “2011 Plan”) provides for the grant of stock options, performance share units (“PSUs”), stock appreciation rights (“SARs”) and restricted stock awards (which may be designated as “restricted stock units” or “RSUs”). As of ~~April~~July 2, 2022, the 2011 Plan had ~~3,096,154~~3,116,594 shares available for future grants. The company uses treasury stock to deliver shares under the 2011 Plan.

Net stock-based compensation expense was ~~$9.0~~$8.5 million and ~~$12.3~~$17.5 million for the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$11.5 million and $23.8 million for the respective three and six month periods ended July 3, 2021. Cash received from stock purchase and option plan exercises during the respective three and six month periods ended ~~April~~July 2, 2022, totaled $23.4 million and ~~April~~$29.2 million. Cash received from stock purchase and option plan exercises during the respective three and six month periods ended July 3, 2021, totaled ~~$5.8~~$61.8 million and ~~$93.0~~$154.8 million. The tax benefit realized from both the exercise and vesting of share-based payment arrangements was ~~$2.1~~$1.8 million and ~~$7.7~~$3.9 million for the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$6.2 million and $13.9 million for the respective three and six month periods ended July 3, 2021.

Stock Options: Stock options are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant and have a contractual term of ten years. Stock option grants vest ratably on the first, second and third anniversaries of the date of grant.

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(Unaudited)

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model. The company uses historical data regarding stock option exercise and forfeiture behaviors for different participating groups to estimate the period of time that options granted are expected to be outstanding. Expected volatility is based on the historical volatility of the company’s stock for the length of time corresponding to the expected term of the option. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the date of grant. The risk-free interest rate is based on the U.S. treasury yield curve on the grant date for the expected term of the option.

The following weighted-average assumptions were used in calculating the fair value of stock options granted during the three ~~months~~month period ended ~~April~~July 2, 2022, and ~~April~~the six month periods ended July 2, 2022 and July 3, 2021, using the Black-Scholes valuation ~~model:~~model; no stock options were granted during the three month period ended July 3, 2021:

Three Months Ended
April 2, 2022 April 3, 2021
Expected term of option (in years)
5.14 5.33
Expected volatility factor 22.61% 21.80%
Expected dividend yield 2.68% 2.59%
Risk-free interest rate 2.00% 0.67%


	Three Months Ended		Six Months Ended
	July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Expected term of option (in years)	3.74	N/A	5.14	5.33
Expected volatility factor	23.12%	N/A	22.61%	21.80%
Expected dividend yield	2.73%	N/A	2.68%	2.59%
Risk-free interest rate	2.73%	N/A	2.00%	0.67%

A summary of stock option activity as of and for the ~~three~~six months ended ~~April~~July 2, 2022, is presented below:


		Shares (in thousands)	Exercise Price Per Share*		Remaining Contractual Term* (in years)	Aggregate Intrinsic Value (in millions)			Shares (in thousands)	Exercise Price Per Share*		Remaining Contractual Term* (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022	Outstanding at January 1, 2022	2,432	$	151.32				Outstanding at January 1, 2022	2,432	$	151.32
Granted	Granted	288	211.41					Granted	289	211.41
Exercised	Exercised	(40)	145.13					Exercised	(118)	131.85
Forfeited or expired	Forfeited or expired	(11)	183.55					Forfeited or expired	(16)	183.40
Outstanding at April 2, 2022		2,669	157.77		5.9	$	124.8
Exercisable at April 2, 2022		2,031	147.09		4.9	115.0
Outstanding at July 2, 2022								Outstanding at July 2, 2022	2,587	158.72		5.7	$	106.0
Exercisable at July 2, 2022								Exercisable at July 2, 2022	1,954	147.97		4.7	98.2



*			Weighted-average

The weighted-average grant date fair value of options granted during the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, was $34.35 and $26.19, respectively. The intrinsic value of options exercised was ~~$2.8~~$7.4 million and ~~$30.8~~$10.2 million during the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$28.1 million and $58.9 million during the respective three and six month periods ended July 3, 2021. The fair value of stock options vested was $10.5 million and $12.5 million during the respective ~~three~~six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021.

As of ~~April~~July 2, 2022, there was ~~$17.5~~$14.9 million of unrecognized compensation cost related to non-vested stock options that is expected to be recognized as a charge to earnings over a weighted-average period of ~~2.1~~1.8 years.

Performance Share Units and Restricted Stock Units: PSUs are earned and expensed using the fair value of the award over a contractual term of three years based on the company’s performance. Vesting of the PSUs is dependent upon performance relative to pre-defined goals for revenue growth and return on net assets for the applicable performance period. For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 100% of the number of performance awards initially granted. The PSUs have a three-year performance period based on the results of the consolidated financial metrics of the company.

Time-based RSUs are earned and expensed using the fair value of the award over the contractual term of three years. Vesting of the time-based RSUs is dependent upon continued employment over the 3-year cliff vesting period.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The fair value of PSUs and RSUs is calculated using the market value of a share of Snap-on’s common stock on the date of grant and assumed forfeitures based on recent historical experience; in recent years, forfeitures have not been significant. The weighted-average grant date fair value of awards granted during the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, was ~~$207.67~~$206.58 and ~~$188.72,~~$187.12, respectively. PSUs related to 46,217 shares were paid out during the ~~three~~six months ended ~~April~~July 2, 2022. There were no PSUs paid out during the ~~three~~six months ended ~~April~~July 3, 2021. Earned PSUs vest and are generally paid out following the conclusion of the applicable performance period upon approval by the Organization and Executive Compensation Committee of the company’s Board of Directors (the “Board”).

Changes to the company’s non-vested PSUs and RSUs during the ~~three~~six months ended ~~April~~July 2, 2022, are as follows:


		Shares (in thousands)	Fair Value Price per Share*			Shares (in thousands)	Fair Value Price per Share*
Non-vested PSUs and RSUs at January 1, 2022	Non-vested PSUs and RSUs at January 1, 2022	215	$	180.29	Non-vested PSUs and RSUs at January 1, 2022	215	$	180.29
Granted	Granted	104	207.67		Granted	111	206.58
Vested	Vested	—	—		Vested	—	—
Cancellations and other	Cancellations and other	(2)	193.02		Cancellations and other	(6)	192.40
Non-vested PSUs and RSUs at April 2, 2022		317	189.22
Non-vested PSUs and RSUs at July 2, 2022					Non-vested PSUs and RSUs at July 2, 2022	320	189.21



*			Weighted-average

As of ~~April~~July 2, 2022, there was ~~$38.3~~$33.6 million of unrecognized compensation cost related to non-vested PSUs and RSUs that are expected to be recognized as a charge to earnings over a weighted-average period of ~~1.8~~1.6 years.

Stock Appreciation Rights: The company also issues stock-settled and cash-settled SARs to certain key non-U.S. employees. SARs have a contractual term of ten years and vest ratably on the first, second and third anniversaries of the date of grant. SARs are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant.

Stock-settled SARs are accounted for as equity instruments and provide for the issuance of Snap-on common stock equal to the amount by which the company’s stock has appreciated over the exercise price. Stock-settled SARs have an effect on dilutive shares and shares outstanding as any appreciation of Snap-on’s common stock value over the exercise price will be settled in shares of common stock. Cash-settled SARs provide for the cash payment of the excess of the fair market value of Snap-on’s common stock price on the date of exercise over the grant price. Cash-settled SARs have no effect on dilutive shares or shares outstanding as any appreciation of Snap-on’s common stock over the grant price is paid in cash and not in common stock.

The fair value of stock-settled SARs is estimated on the date of grant using the Black-Scholes valuation model. The fair value of cash-settled SARs is revalued (mark-to-market) each reporting period using the Black-Scholes valuation model based on Snap-on’s period-end stock price. The company uses historical data regarding SARs exercise and forfeiture behaviors for different participating groups to estimate the expected term of the SARs granted based on the period of time that similar instruments granted are expected to be outstanding. Expected volatility is based on the historical volatility of the company’s stock for the length of time corresponding to the expected term of the SARs. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the date of grant (for stock-settled SARs) or reporting date (for cash-settled SARs). The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date (for stock-settled SARs) or reporting date (for cash-settled SARs) for the length of time corresponding to the expected term of the SARs.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following weighted-average assumptions were used in calculating the fair value of stock-settled SARs granted during the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, using the Black-Scholes valuation model:


		Three Months Ended			Six Months Ended
		April 2, 2022	April 3, 2021		July 2, 2022	July 3, 2021
Expected term of stock-settled SARs (in years)	Expected term of stock-settled SARs (in years)	4.02	3.94	Expected term of stock-settled SARs (in years)	4.02	3.94
Expected volatility factor	Expected volatility factor	23.09%	22.50%	Expected volatility factor	23.09%	22.50%
Expected dividend yield	Expected dividend yield	2.68%	2.59%	Expected dividend yield	2.68%	2.59%
Risk-free interest rate	Risk-free interest rate	1.96%	0.19%	Risk-free interest rate	1.96%	0.19%

A summary of stock-settled SARs as of and for the ~~three~~six months ended ~~April~~July 2, 2022, are as follows:


		Stock-settled SARs (in thousands)	Exercise Price Per Share*		Remaining Contractual Term* (in years)	Aggregate Intrinsic Value (in millions)			Stock-settled SARs (in thousands)	Exercise Price Per Share*		Remaining Contractual Term* (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022	Outstanding at January 1, 2022	397	$	160.09				Outstanding at January 1, 2022	397	$	160.09
Granted	Granted	75	211.67					Granted	75	211.67
Exercised	Exercised	(4)	155.55					Exercised	(11)	153.13
Forfeited or expired	Forfeited or expired	(14)	162.84					Forfeited or expired	(41)	168.44
Outstanding at April 2, 2022		454	168.56		7.0	$	16.6
Exercisable at April 2, 2022		296	155.09		5.8	14.4
Outstanding at July 2, 2022								Outstanding at July 2, 2022	420	168.65		6.7	$	13.4
Exercisable at July 2, 2022								Exercisable at July 2, 2022	273	154.97		5.5	11.8



*			Weighted-average

The weighted-average grant date fair value of stock-settled SARs granted during the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, was $32.63 and $24.05, respectively. The intrinsic value of stock-settled SARs exercised was ~~$0.2~~$0.5 million and ~~$2.2~~$0.7 million during the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$0.8 million and $3.0 million during the respective three and six month periods ended July 3, 2021. The fair value of stock-settled SARs vested was $2.0 million and $2.1 million during the respective ~~three~~six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021.

As of ~~April~~July 2, 2022, there was ~~$4.1~~$3.4 million of unrecognized compensation cost related to non-vested stock-settled SARs that is expected to be recognized as a charge to earnings over a weighted-average period of ~~2.2~~1.9 years.

The following weighted-average assumptions were used in calculating the fair value of cash-settled SARs granted during the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, using the Black-Scholes valuation model:


		Three Months Ended			Six Months Ended
		April 2, 2022	April 3, 2021		July 2, 2022	July 3, 2021
Expected term of cash-settled SARs (in years)	Expected term of cash-settled SARs (in years)	3.88	3.83	Expected term of cash-settled SARs (in years)	3.58	3.59
Expected volatility factor	Expected volatility factor	23.09%	22.49%	Expected volatility factor	23.68%	22.49%
Expected dividend yield	Expected dividend yield	2.79%	2.12%	Expected dividend yield	2.87%	2.20%
Risk-free interest rate	Risk-free interest rate	2.58%	0.39%	Risk-free interest rate	2.85%	0.45%

The intrinsic value of cash-settled SARs exercised was ~~$0.4~~$0.2 million and ~~$0.5~~$0.6 million during the respective three and six month periods ended ~~April~~July 2, 2022, and ~~April~~$0.1 million and $0.6 million during the respective three and six month periods ended July 3, 2021. The fair value of cash-settled SARs vested was $0.1 million for both of the ~~three~~six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Changes to the company’s non-vested cash-settled SARs during the ~~three~~six months ended ~~April~~July 2, 2022, are as follows:


		Cash-settled SARs (in thousands)	Fair Value Price per Share*			Cash-settled SARs (in thousands)	Fair Value Price per Share*
Non-vested cash-settled SARs at January 1, 2022	Non-vested cash-settled SARs at January 1, 2022	2	$	47.13	Non-vested cash-settled SARs at January 1, 2022	2	$	47.13
Granted	Granted	1	32.31		Granted	1	31.67
Vested	Vested	(1)	44.86		Vested	(1)	41.69
Non-vested cash-settled SARs at April 2, 2022		2	36.59
Non-vested cash-settled SARs at July 2, 2022					Non-vested cash-settled SARs at July 2, 2022	2	34.56



*			Weighted-average

As of ~~April~~July 2, 2022, there was $0.1 million of unrecognized compensation cost related to non-vested cash-settled SARs that is expected to be recognized as a charge to earnings over a weighted-average period of ~~2.2~~1.9 years.

Restricted Stock Awards – Non-employee Directors: The company awarded 6,525 shares and 6,858 shares of restricted stock to non-employee directors for the respective ~~three~~six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021. The fair value of the restricted stock awards is expensed over a one-year vesting period based on the fair value on the date of grant. All restrictions generally lapse upon the earlier of the first anniversary of the grant date, the recipient’s death or disability or in the event of a change in control, as defined in the 2011 Plan. If termination of the recipient’s service occurs prior to the first anniversary of the grant date for any reason other than death or disability, the shares of restricted stock would be forfeited, unless otherwise determined by the Board.

Employee stock purchase plan: Substantially all Snap-on employees in the United States and Canada are eligible to participate in an employee stock purchase plan. The purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. ~~There were no share~~For the six month periods ended July 2, 2022, and July 3, 2021, issuances under this plan ~~for the three month periods ended April 2, 2022,~~totaled 18,464 shares and ~~April 3, 2021.~~82,286 shares, respectively. As of ~~April~~July 2, 2022, shares reserved for issuance under this plan totaled ~~597,275~~578,811 shares and Snap-on held participant contributions of approximately ~~$4.1~~$0.4 million. Participants are able to withdraw from the plan at any time prior to the ending date and receive back all contributions made during the plan year. Compensation expense for plan participants was zero for both the three and six month periods ended July 2, 2022, and $4.8 million and $9.6 million for the respective three and six month periods ended ~~April 2, 2022, and April~~July 3, 2021.

Franchisee stock purchase plan: All franchisees in the United States and Canada are eligible to participate in a franchisee stock purchase plan. The purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. ~~There were no share~~For the six month periods ended July 2, 2022, and July 3, 2021, issuances under this plan ~~for the three month periods ended April 2, 2022,~~totaled 44,937 shares and ~~April 3, 2021.~~143,388 shares, respectively. As of ~~April~~July 2, 2022, shares reserved for issuance under this plan totaled ~~270,162~~225,225 shares and Snap-on held participant contributions of approximately ~~$9.4~~$0.9 million. Participants are able to withdraw from the plan at any time prior to the ending date and generally receive back all contributions made during the plan year. The company recognized mark-to-market expense of zero for both the three and ~~$5.4~~six month periods ended July 2, 2022, and $11.3 million and $16.7 million for the respective three and six month periods ended ~~April 2, 2022, and April~~July 3, 2021.

Note 14: Earnings Per Share

The shares used in the computation of the company’s basic and diluted earnings per common share are as follows:


		Three Months Ended		Three Months Ended			Six Months Ended
		April 2, 2022	April 3, 2021			July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Weighted-average common shares outstanding	Weighted-average common shares outstanding	53,396,714	54,184,438		Weighted-average common shares outstanding	53,312,259	54,051,436	53,354,487	54,117,937
Effect of dilutive securities	Effect of dilutive securities	915,300	933,451		Effect of dilutive securities	926,548	1,256,296	920,924	1,094,874
Weighted-average common shares outstanding, assuming dilution	Weighted-average common shares outstanding, assuming dilution	54,312,014	55,117,889		Weighted-average common shares outstanding, assuming dilution	54,238,807	55,307,732	54,275,411	55,212,811

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The dilutive effect of the potential exercise of outstanding options and stock-settled SARs to purchase common shares is calculated using the treasury stock method. As of ~~April~~both July 2, 2022, ~~there were 358,774 awards outstanding that were anti-dilutive; as of April~~and July 3, 2021, there were ~~400~~no awards outstanding that were anti-dilutive. Performance-based equity awards are included in the diluted earnings per share calculation based on the attainment of the applicable performance metrics to date.

~~Table of Contents~~

~~SNAP-ON INCORPORATED~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

Note 15: Commitments and Contingencies

Snap-on provides product warranties for specific product lines and accrues for estimated future warranty cost in the period in which the sale is recorded. Snap-on calculates its accrual requirements based on historic warranty loss experience that is periodically adjusted for recent actual experience, including the timing of claims during the warranty period and actual costs incurred.

Snap-on’s product warranty accrual activity for the three and six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, is as follows:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Warranty reserve:	Warranty reserve:						Warranty reserve:
Beginning of period	Beginning of period	$	17.3	$	17.6		Beginning of period	$	16.5	$	18.3	$	17.3	$	17.6
Additions	Additions	2.2		4.1			Additions	3.2		3.8		5.4		7.9
Usage	Usage	(3.0)		(3.4)			Usage	(3.7)		(3.6)		(6.7)		(7.0)
End of period	End of period	$	16.5	$	18.3		End of period	$	16.0	$	18.5	$	16.0	$	18.5

Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business. Although it is not possible to predict the outcome of legal matters, management believes that the results of all legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows.

Note 16: Leases

Lessee Accounting: Supplemental balance sheet information related to leases as of ~~April~~July 2, 2022, and January 1, 2022, is as follows:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Finance leases:	Finance leases:					Finance leases:
Property and equipment - gross	Property and equipment - gross	$	21.2	$	22.3	Property and equipment - gross	$	19.0	$	22.3
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(16.9)		(17.4)		Accumulated depreciation and amortization	(15.4)		(17.4)
Property and equipment - net	Property and equipment - net	$	4.3	$	4.9	Property and equipment - net	$	3.6	$	4.9

Other accrued liabilities	Other accrued liabilities	$	2.3	$	2.4	Other accrued liabilities	$	2.1	$	2.4
Other long-term liabilities	Other long-term liabilities	3.7		4.5		Other long-term liabilities	2.9		4.5
Total finance lease liabilities	Total finance lease liabilities	$	6.0	$	6.9	Total finance lease liabilities	$	5.0	$	6.9

Operating leases:	Operating leases:					Operating leases:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	50.1	$	51.9	Operating lease right-of-use assets	$	56.6	$	51.9

Other accrued liabilities	Other accrued liabilities	$	19.5	$	19.6	Other accrued liabilities	$	19.0	$	19.6
Operating lease liabilities	Operating lease liabilities	32.5		34.2		Operating lease liabilities	39.7		34.2
Total operating lease liabilities	Total operating lease liabilities	$	52.0	$	53.8	Total operating lease liabilities	$	58.7	$	53.8

Table of Contents

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Lessor Accounting: Snap-on’s Financial Services business offers its customers lease financing for the lease of tools, diagnostics, and equipment products and to franchisees who require financing for vehicle leases. Sales-type leases are included in both “Finance receivables - net” and “Long-term finance receivables - net” and also in both “Contract receivables - net” and “Long-term contract receivables - net” on the accompanying Condensed Consolidated Balance Sheets.

See Note 4 for further information on finance and contract receivables.

~~Table of Contents~~

~~SNAP-ON INCORPORATED~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

Note 17: Other Income (Expense) – Net

“Other income (expense) – net” on the accompanying Condensed Consolidated Statements of Earnings consists of the following:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Interest income	Interest income	$	0.5	$	0.4		Interest income	$	1.6	$	0.4	$	2.1	$	0.8
Net foreign exchange loss		(1.0)		(0.2)
Net foreign exchange gain (loss)							Net foreign exchange gain (loss)	(1.6)		0.2		(2.6)		—
Net periodic pension and postretirement benefits – non-service	Net periodic pension and postretirement benefits – non-service	8.8		3.8			Net periodic pension and postretirement benefits – non-service	9.3		3.8		18.1		7.6

Foreign currency translation loss from sale of equity interest							Foreign currency translation loss from sale of equity interest	—		(1.0)		—		(1.0)
Other	Other	—		0.3			Other	—		—		—		0.3
Total other income (expense) – net	Total other income (expense) – net	$	8.3	$	4.3		Total other income (expense) – net	$	9.3	$	3.4	$	17.6	$	7.7

Note 18: Accumulated Other Comprehensive Income (Loss)

The following is a summary of net changes in Accumulated OCI by component and net of tax for the three months ended ~~April~~July 2, 2022:


(Amounts in millions)	(Amounts in millions)	Foreign Currency Translation		Cash Flow Hedges		Defined Benefit Pension and Postretirement Plans		Total		(Amounts in millions)	Foreign Currency Translation		Cash Flow Hedges		Defined Benefit Pension and Postretirement Plans		Total
Balance as of January 1, 2022		$	(145.1)	$	8.9	$	(207.7)	$	(343.9)
Balance as of April 2, 2022										Balance as of April 2, 2022	$	(154.8)	$	8.5	$	(204.3)	$	(350.6)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	(9.7)		—		—		(9.7)		Other comprehensive loss before reclassifications	(110.3)		—		—		(110.3)
Amounts reclassified from Accumulated OCI	Amounts reclassified from Accumulated OCI	—		(0.4)		3.4		3.0		Amounts reclassified from Accumulated OCI	—		(0.4)		3.6		3.2
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(9.7)		(0.4)		3.4		(6.7)		Net other comprehensive income (loss)	(110.3)		(0.4)		3.6		(107.1)
Balance as of April 2, 2022		$	(154.8)	$	8.5	$	(204.3)	$	(350.6)
Balance as of July 2, 2022										Balance as of July 2, 2022	$	(265.1)	$	8.1	$	(200.7)	$	(457.7)

The following is a summary of net changes in Accumulated OCI by component and net of tax for the six months ended July 2, 2022:


(Amounts in millions)	Foreign Currency Translation		Cash Flow Hedges		Defined Benefit Pension and Postretirement Plans		Total
Balance as of January 1, 2022	$	(145.1)	$	8.9	$	(207.7)	$	(343.9)
Other comprehensive loss before reclassifications	(120.0)		—		—		(120.0)
Amounts reclassified from Accumulated OCI	—		(0.8)		7.0		6.2
Net other comprehensive income (loss)	(120.0)		(0.8)		7.0		(113.8)
Balance as of July 2, 2022	$	(265.1)	$	8.1	$	(200.7)	$	(457.7)

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SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following is a summary of net changes in Accumulated OCI by component and net of tax for the three months ended ~~April~~July 3, 2021:

(Amounts in millions) Foreign
Currency
Translation Cash Flow
Hedges Defined
Benefit
Pension and
Postretirement
Plans Total
Balance as of January 2, 2021 $ (74.7) $ 10.5 $ (301.6) $ (365.8)
Other comprehensive loss before reclassifications (29.0) — — (29.0)
Amounts reclassified from Accumulated OCI — (0.4) 6.9 6.5
Net other comprehensive income (loss) (29.0) (0.4) 6.9 (22.5)
Balance as of April 3, 2021 $ (103.7) $ 10.1 $ (294.7) $ (388.3)


(Amounts in millions)	Foreign Currency Translation		Cash Flow Hedges		Defined Benefit Pension and Postretirement Plans		Total
Balance as of April 3, 2021	$	(103.7)	$	10.1	$	(294.7)	$	(388.3)
Other comprehensive income before reclassifications	20.2		—		—		20.2
Amounts reclassified from Accumulated OCI	(1.0)		(0.4)		6.8		5.4
Net other comprehensive income (loss)	19.2		(0.4)		6.8		25.6
Balance as of July 3, 2021	$	(84.5)	$	9.7	$	(287.9)	$	(362.7)

The following is a summary of net changes in Accumulated OCI by component and net of tax for the six months ended July 3, 2021:


(Amounts in millions)	Foreign Currency Translation		Cash Flow Hedges		Defined Benefit Pension and Postretirement Plans		Total
Balance as of January 2, 2021	$	(74.7)	$	10.5	$	(301.6)	$	(365.8)


Other comprehensive loss before reclassifications	(8.8)		—		—		(8.8)
Amounts reclassified from Accumulated OCI	(1.0)		(0.8)		13.7		11.9
Net other comprehensive income (loss)	(9.8)		(0.8)		13.7		3.1
Balance as of July 3, 2021	$	(84.5)	$	9.7	$	(287.9)	$	(362.7)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The reclassifications out of Accumulated OCI for the three and six month periods ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, are as follows:


		Amount Reclassified from Accumulated OCI				Amount Reclassified from Accumulated OCI
		Three Months Ended					Three Months Ended					Six Months Ended
		April 2, 2022		April 3, 2021				Statement of Earnings Presentation		July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021		Statement of Earnings Presentation
(Amounts in millions)	(Amounts in millions)								(Amounts in millions)

Foreign currency loss from sale of equity interest:									Foreign currency loss from sale of equity interest:
Foreign currency									Foreign currency	$	—	$	1.0	$	—	$	1.0	Other income (expense) - net
Income tax expense									Income tax expense	—		—		—		—		Income tax expense
Net of tax									Net of tax	—		1.0		—		1.0

Gains on cash flow hedges:	Gains on cash flow hedges:								Gains on cash flow hedges:
Treasury locks	Treasury locks	$	0.4	$	0.4			Interest expense	Treasury locks	$	0.4	$	0.4	$	0.8	$	0.8	Interest expense
Income tax expense	Income tax expense	—		—				Income tax expense	Income tax expense	—		—		—		—		Income tax expense
Net of tax	Net of tax	0.4		0.4					Net of tax	0.4		0.4		0.8		0.8

Amortization of net unrecognized losses	Amortization of net unrecognized losses	$	(4.5)	$	(9.1)			See footnote below*	Amortization of net unrecognized losses	$	(4.7)	$	(9.1)	$	(9.2)	$	(18.2)	See footnote below*
Income tax benefit	Income tax benefit	1.1		2.2				Income tax expense	Income tax benefit	1.1		2.3		2.2		4.5		Income tax expense
Net of tax	Net of tax	(3.4)		(6.9)					Net of tax	(3.6)		(6.8)		(7.0)		(13.7)
Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	(3.0)	$	(6.5)				Total reclassifications for the period, net of tax	$	(3.2)	$	(5.4)	$	(6.2)	$	(11.9)



*			These Accumulated OCI components are included in the computation of net periodic pension and postretirement health care costs; see Note 11 and Note 12 for further information.

Note 19: Segments

Snap-on’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial & Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services. The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels. Financial Services consists of the business operations of Snap-on’s finance subsidiaries.

Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and intersegment net sales, and segment operating earnings. Snap-on accounts for intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Corporate assets consist of cash and cash equivalents (excluding cash held at Financial Services), deferred income taxes and certain other assets. Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Financial Data by Segment:


		Three Months Ended				Three Months Ended				Six Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021			(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales:	Net sales:						Net sales:
Commercial & Industrial Group	Commercial & Industrial Group	$	340.1	$	345.7		Commercial & Industrial Group	$	359.1	$	350.5	$	699.2	$	696.2
Snap-on Tools Group	Snap-on Tools Group	512.1		478.3			Snap-on Tools Group	520.6		484.1		1,032.7		962.4
Repair Systems & Information Group	Repair Systems & Information Group	398.2		347.6			Repair Systems & Information Group	416.8		398.6		815.0		746.2
Segment net sales	Segment net sales	1,250.4		1,171.6			Segment net sales	1,296.5		1,233.2		2,546.9		2,404.8
Intersegment eliminations	Intersegment eliminations	(152.6)		(147.0)			Intersegment eliminations	(159.9)		(151.8)		(312.5)		(298.8)
Total net sales	Total net sales	1,097.8		1,024.6			Total net sales	1,136.6		1,081.4		2,234.4		2,106.0
Financial Services revenue	Financial Services revenue	87.7		88.6			Financial Services revenue	86.4		86.9		174.1		175.5
Total revenues	Total revenues	$	1,185.5	$	1,113.2		Total revenues	$	1,223.0	$	1,168.3	$	2,408.5	$	2,281.5
Operating earnings:	Operating earnings:						Operating earnings:
Commercial & Industrial Group	Commercial & Industrial Group	$	45.7	$	50.7		Commercial & Industrial Group	$	51.7	$	55.5	$	97.4	$	106.2
Snap-on Tools Group	Snap-on Tools Group	116.0		98.9			Snap-on Tools Group	124.4		103.5		240.4		202.4
Repair Systems & Information Group	Repair Systems & Information Group	91.6		81.4			Repair Systems & Information Group	95.7		86.7		187.3		168.1
Financial Services	Financial Services	70.4		65.3			Financial Services	65.3		68.9		135.7		134.2
Segment operating earnings	Segment operating earnings	323.7		296.3			Segment operating earnings	337.1		314.6		660.8		610.9
Corporate	Corporate	(30.2)		(30.1)			Corporate	(25.2)		(28.6)		(55.4)		(58.7)
Operating earnings	Operating earnings	293.5		266.2			Operating earnings	311.9		286.0		605.4		552.2
Interest expense	Interest expense	(11.6)		(14.3)			Interest expense	(11.7)		(14.3)		(23.3)		(28.6)
Other income (expense) – net	Other income (expense) – net	8.3		4.3			Other income (expense) – net	9.3		3.4		17.6		7.7
Earnings before income taxes and equity earnings	Earnings before income taxes and equity earnings	$	290.2	$	256.2		Earnings before income taxes and equity earnings	$	309.5	$	275.1	$	599.7	$	531.3


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Assets:	Assets:					Assets:
Commercial & Industrial Group	Commercial & Industrial Group	$	1,225.1	$	1,209.3	Commercial & Industrial Group	$	1,204.6	$	1,209.3
Snap-on Tools Group	Snap-on Tools Group	828.2		791.4		Snap-on Tools Group	842.3		791.4
Repair Systems & Information Group	Repair Systems & Information Group	1,637.9		1,624.3		Repair Systems & Information Group	1,630.1		1,624.3
Financial Services	Financial Services	2,139.6		2,163.6		Financial Services	2,164.3		2,163.6
Total assets from reportable segments	Total assets from reportable segments	5,830.8		5,788.6		Total assets from reportable segments	5,841.3		5,788.6
Corporate	Corporate	1,152.4		1,039.7		Corporate	1,107.8		1,039.7
Elimination of intersegment receivables	Elimination of intersegment receivables	(88.0)		(68.6)		Elimination of intersegment receivables	(84.8)		(68.6)
Total assets	Total assets	$	6,895.2	$	6,759.7	Total assets	$	6,864.3	$	6,759.7

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements:

Statements in this document that are not historical facts, including statements that (i) are in the future tense, (ii) include the words “expects,” “plans,” “targets,” “estimates,” “believes,” “anticipates,” or similar words that reference Snap-on Incorporated (“Snap-on” or “the company”) or its management, (iii) are specifically identified as forward-looking, or (iv) describe Snap‑on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that any forward-looking statements included in this document that are based upon assumptions and estimates were developed by management in good faith and are subject to risks, uncertainties or other factors that could cause (and in some cases have caused) actual results to differ materially from those described in any such statement. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results or regarded as a representation by the company or its management that the projected results will be achieved. For those forward-looking statements, Snap-on cautions the reader that numerous important factors, such as those listed below, the factors discussed in its Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (“2021 year end”), and those discussed in this document, could affect the company’s actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Snap-on.

Risks and uncertainties include, without limitation:

•The evolving impact and unknown duration of the ongoing coronavirus (“COVID-19”) pandemic, as well as the effects of governmental actions related thereto on Snap-on’s business, which has the potential to amplify the impact of the other risks facing the company;

•Uncertainties related to estimates, assumptions and projections generally;

•The timing and progress with which Snap-on can attain value through its Snap-on Value Creation Processes, including its ability to (i) realize efficiencies and savings from its rapid continuous improvement and other cost reduction initiatives, (ii) improve workforce productivity, (iii) achieve improvements in the company’s manufacturing footprint and greater efficiencies in its supply chain, and (iv) enhance machine maintenance, plant productivity and manufacturing line set-up and change-over practices, any or all of which could result in production inefficiencies, higher costs and/or lost revenues;

•Snap-on’s capability to successfully implement future strategies with respect to its existing businesses;

•Snap-on’s ability to refine its brand and franchise strategies, retain and attract franchisees, and further enhance service and value to franchisees in order to help improve the sales and profitability of franchisees;

•The company’s ability to introduce successful new products;

•Risks related to pursuing, completing and integrating acquisitions;

•Snap-on’s ability to withstand disruption arising from natural disasters, including climate-related events or other unusual occurrences, impacting our operations;

•The impact of labor interruptions or challenges;

•Snap-on’s ability to successfully manage planned facility closures or to withstand disruptions from unexpected closures;

•The effects of external economic factors, including adverse developments in world financial markets, disruptions related to tariffs and other trade issues, and global supply chain interruptions, including as a result of the current war in Ukraine;

•Weakness in certain geographic areas, including as a result of armed conflicts, localized recessions, and the impact of matters related to the United Kingdom’s exit from the European Union;

•Significant changes in the current competitive environment;

•Inflation, interest rate changes and other monetary and market fluctuations;

•Changes in tax rates, laws and regulations as well as uncertainty surrounding potential changes;

•Price and supply fluctuations related to raw materials, components and certain purchased finished goods, such as steel, plastics, and electronics;

•Snap-on’s ability to successfully manage changes in prices and the availability of energy sources, including gasoline;

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OF OPERATIONS

(continued)

•The amount, rate and growth of Snap-on’s general and administrative expenses, including health care and postretirement costs, and continuing and potentially increasing required contributions to pension and postretirement plans;

•The effects of new requirements, legislation, regulations or government-related developments or issues, as well as third party actions, including those addressing climate change;

•Risks associated with data security and technological systems and protections, including the effects of new legislation, regulations or government-related developments;

•Potential reputational damages and costs related to litigation;

•The ability to effectively manage human capital resources; and

•Other world or local events outside Snap-on’s control, including terrorist disruptions, other outbreaks of infectious diseases and civil unrest.

Snap-on disclaims any responsibility to update any forward-looking statement provided in this document, except as required by law.

In addition, investors should be aware that generally accepted accounting principles in the United States of America (“GAAP”) prescribe when a company should reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results, therefore, may appear to be volatile in certain accounting periods.

Non-GAAP Measures

References in this report to “organic sales” refer to sales from continuing operations calculated in accordance with GAAP, adjusted to exclude acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, expanded customer base, geographic expansion, new product development and pricing changes, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. Organic sales also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in the company’s businesses and facilitates comparisons of its sales performance with prior periods.

Recent Acquisitions

On August 1, 2021, Snap-on acquired AutoCrib EMEA GmbH (“AutoCrib Germany”), for a cash purchase price of $4.4 million (or $4.2 million, net of cash acquired). AutoCrib Germany, based in Hamburg, Germany, distributes asset and tool control solutions for a variety of aerospace, automotive, military, natural resources and general industry operations. The acquisition of AutoCrib Germany, a former independent distributor, enhanced and expanded Snap-on’s capabilities in providing solutions for the company’s existing tool control offerings.

On February 26, 2021, Snap-on acquired Dealer-FX Group, Inc. (“Dealer-FX”) for a cash purchase price of $200.1 million (or $200.0 million, net of cash acquired). Dealer-FX, based in Markham, Ontario, is a leading developer, marketer and provider of service operations software solutions for automotive original equipment manufacturer (“OEM”) customers and their dealers. Dealer-FX specializes in software as a service (SaaS) management systems, communications platforms, extensive data integrations, and offers a digitalized solution that increases productivity and enhances the vehicle owners’ experience. The acquisition of Dealer-FX complemented and expanded Snap-on’s existing OEM and dealership business that provides electronic parts catalogs, essential tool and diagnostic programs, and custom analytics to OEMs and dealerships.

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OF OPERATIONS

(continued)

For segment reporting purposes, the results of operations and assets of Dealer-FX has been included in the Repair Systems & Information Group since the acquisition date, and the results of operations and assets of AutoCrib Germany and Pradines have been included in the Commercial & Industrial Group since the respective acquisition dates.

Pro forma financial information has not been presented for these acquisitions as the net effects were neither significant nor material to Snap-on’s results of operations or financial position.

Effect of COVID-19

Our markets and our operations possess and, indeed, have demonstrated considerable resilience against the effects of the pandemic. The company sustained the accommodation of its operations to the virus environment, continuing without significant disruption to serve its franchisees and other professional customers as they performed their essential work, while taking what it believes to be appropriate measures to ensure the health and safety of its people. Throughout the pandemic, Snap-on has generally maintained its workforce and manufacturing capacity, as well as its investments in brand building and product development. As the global supply chain inefficiencies and associated cost increases caused by the COVID-19 pandemic have developed, the company has taken steps to ensure access to raw materials, components and purchased finished goods, and to provide for counterbalancing price and efficiency offsets. See also Part I, Item 1A: Risk Factors in Snap-on’s 2021 Form 10-K for an additional discussion of risks related to COVID-19 and Other Infectious Diseases.

~~Recent Security Incident~~

In early March 2022, Snap-on detected unusual activity in some areas of its information technology environment and quickly took down its network connections as part of the company’s defense protocols. The company launched a comprehensive analysis assisted by a leading external forensics firm, identified the event as a security incident, and notified law enforcement of the incursion. The company continued to pursue its commercial activities and restored connections as system interfaces were cleared. As of the date of this disclosure, substantially all impacted systems have been restored. The incident did not significantly affect the company’s financial results during the first quarter of 2022.

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OF OPERATIONS

(continued)

RESULTS OF OPERATIONS

Results of operations for the three months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, are as follows:


		Three Months Ended													Three Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022				April 3, 2021				Change				(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Net sales	Net sales	$	1,097.8	100.0	%	$	1,024.6	100.0	%	$	73.2	7.1	%	Net sales	$	1,136.6	100.0	%	$	1,081.4	100.0	%	$	55.2	5.1	%
Cost of goods sold	Cost of goods sold	(563.5)		(51.3)	%	(511.0)		(49.9)	%	(52.5)		(10.3)	%	Cost of goods sold	(583.1)		(51.3)	%	(538.3)		(49.8)	%	(44.8)		(8.3)	%
Gross profit	Gross profit	534.3		48.7	%	513.6		50.1	%	20.7		4.0	%	Gross profit	553.5		48.7	%	543.1		50.2	%	10.4		1.9	%
Operating expenses	Operating expenses	(311.2)		(28.4)	%	(312.7)		(30.5)	%	1.5		0.5	%	Operating expenses	(306.9)		(27.0)	%	(326.0)		(30.1)	%	19.1		5.9	%
Operating earnings before financial services	Operating earnings before financial services	223.1		20.3	%	200.9		19.6	%	22.2		11.1	%	Operating earnings before financial services	246.6		21.7	%	217.1		20.1	%	29.5		13.6	%

Financial services revenue	Financial services revenue	87.7		100.0	%	88.6		100.0	%	(0.9)		(1.0)	%	Financial services revenue	86.4		100.0	%	86.9		100.0	%	(0.5)		(0.6)	%
Financial services expenses	Financial services expenses	(17.3)		(19.7)	%	(23.3)		(26.3)	%	6.0		25.8	%	Financial services expenses	(21.1)		(24.4)	%	(18.0)		(20.7)	%	(3.1)		(17.2)	%
Operating earnings from financial services	Operating earnings from financial services	70.4		80.3	%	65.3		73.7	%	5.1		7.8	%	Operating earnings from financial services	65.3		75.6	%	68.9		79.3	%	(3.6)		(5.2)	%

Operating earnings	Operating earnings	293.5		24.8	%	266.2		23.9	%	27.3		10.3	%	Operating earnings	311.9		25.5	%	286.0		24.5	%	25.9		9.1	%
Interest expense	Interest expense	(11.6)		(1.0)	%	(14.3)		(1.3)	%	2.7		18.9	%	Interest expense	(11.7)		(1.0)	%	(14.3)		(1.2)	%	2.6		18.2	%
Other income (expense) – net	Other income (expense) – net	8.3		0.7	%	4.3		0.4	%	4.0		93.0	%	Other income (expense) – net	9.3		0.8	%	3.4		0.2	%	5.9		NM
Earnings before income taxes and equity earnings	Earnings before income taxes and equity earnings	290.2		24.5	%	256.2		23.0	%	34.0		13.3	%	Earnings before income taxes and equity earnings	309.5		25.3	%	275.1		23.5	%	34.4		12.5	%
Income tax expense	Income tax expense	(67.5)		(5.7)	%	(59.1)		(5.3)	%	(8.4)		(14.2)	%	Income tax expense	(72.3)		(5.9)	%	(62.9)		(5.3)	%	(9.4)		(14.9)	%
Earnings before equity earnings	Earnings before equity earnings	222.7		18.8	%	197.1		17.7	%	25.6		13.0	%	Earnings before equity earnings	237.2		19.4	%	212.2		18.2	%	25.0		11.8	%
Equity earnings, net of tax	Equity earnings, net of tax	—		—		0.5		0.1	%	(0.5)		NM		Equity earnings, net of tax	—		—		1.0		—		(1.0)		NM
Net earnings	Net earnings	222.7		18.8	%	197.6		17.8	%	25.1		12.7	%	Net earnings	237.2		19.4	%	213.2		18.2	%	24.0		11.3	%
Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests	(5.3)		(0.5)	%	(5.0)		(0.5)	%	(0.3)		(6.0)	%	Net earnings attributable to noncontrolling interests	(5.7)		(0.5)	%	(5.2)		(0.4)	%	(0.5)		(9.6)	%
Net earnings attributable to Snap-on Inc.	Net earnings attributable to Snap-on Inc.	$	217.4	18.3	%	$	192.6	17.3	%	$	24.8	12.9	%	Net earnings attributable to Snap-on Inc.	$	231.5	18.9	%	$	208.0	17.8	%	$	23.5	11.3	%



NM: Not meaningful
Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales of ~~$1,097.8~~$1,136.6 million in the ~~first~~second quarter of 2022 increased ~~$73.2~~$55.2 million, or ~~7.1%~~5.1%, from 2021 levels, reflecting an ~~$80.4~~$87.6 million, or ~~8.0%~~8.4%, organic gain, ~~and $8.5 million of acquisition-related sales,~~ partially offset by ~~$15.7~~$32.4 million of unfavorable foreign currency translation.

Gross profit of ~~$534.3~~$553.5 million in the ~~first~~second quarter of 2022 increased ~~$20.7~~$10.4 million, or ~~4.0%~~1.9%, compared to ~~$513.6~~$543.1 million last year. Gross margin (gross profit as a percentage of net sales) of 48.7% in the quarter declined ~~140~~150 basis points (100 basis points (“bps”) equals 1.0 percent) from the ~~first~~second quarter of 2021 primarily due to higher material and other costs, partially offset by higher sales volumes and pricing actions, benefits from the company’s “Rapid Continuous Improvement” or “RCI” initiatives, and 30 bps of favorable foreign currency effects.

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 consolidations. 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.

Operating expenses of ~~$311.2~~$306.9 million in the ~~first~~second quarter of 2022 compared to ~~$312.7~~$326.0 million last year. Operating expenses as a percentage of net sales of ~~28.4%~~27.0% improved ~~210~~310 bps from last year primarily due to the higher sales volumes, savings from RCI initiatives, and lower costs associated with stock-based ~~expenses; these improvements were partially offset by 40 bps of unfavorable acquisition effects.~~expenses.

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Operating earnings before financial services of ~~$223.1~~$246.6 million in the ~~first~~second quarter of 2022 increased ~~$22.2~~$29.5 million, or ~~11.1%~~13.6%, compared to ~~$200.9~~$217.1 million in the ~~first~~second quarter of 2021. As a percentage of net sales, operating earnings before financial services of ~~20.3%~~21.7% compared to ~~19.6%~~20.1% last year.

Financial services revenue of ~~$87.7~~$86.4 million in the ~~first~~second quarter of 2022 compared to ~~$88.6~~$86.9 million last year. Financial services operating earnings of ~~$70.4~~$65.3 million in the period compared to ~~$65.3~~$68.9 million in 2021.

Operating earnings of ~~$293.5~~$311.9 million in the ~~first~~second quarter of 2022 increased ~~$27.3~~$25.9 million, or ~~10.3%~~9.1%, compared to ~~$266.2~~$286.0 million last year. As a percentage of revenues (net sales plus financial services revenue), operating earnings of ~~24.8%~~25.5% in the quarter compared to ~~23.9%~~24.5% last year.

Interest expense in the second quarter of 2022 decreased $2.6 million compared to last year. See Note 9 to the Condensed Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.

Other income (expense) – net primarily includes net gains and losses associated with hedging and currency exchange rate transactions, non-service components of net periodic benefit costs, and interest income. See Note 17 to the Condensed Consolidated Financial Statements for information on Other income (expense) – net.

Snap-on’s effective income tax rate on earnings attributable to Snap-on was 23.8% in the second quarter of 2022 and 23.3% in the second quarter of 2021. See Note 8 to the Condensed Consolidated Financial Statements for information on income taxes.

Net earnings attributable to Snap-on in the second quarter of 2022 were $231.5 million, or $4.27 per diluted share. Net earnings attributable to Snap-on in the second quarter of 2021 were $208.0 million, or $3.76 per diluted share.

Results of operations for the six months ended July 2, 2022, and July 3, 2021, are as follows:


	Six Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Net sales	$	2,234.4	100.0	%	$	2,106.0	100.0	%	$	128.4	6.1	%
Cost of goods sold	(1,146.6)		(51.3)	%	(1,049.3)		(49.8)	%	(97.3)		(9.3)	%
Gross profit	1,087.8		48.7	%	1,056.7		50.2	%	31.1		2.9	%
Operating expenses	(618.1)		(27.7)	%	(638.7)		(30.4)	%	20.6		3.2	%
Operating earnings before financial services	469.7		21.0	%	418.0		19.8	%	51.7		12.4	%

Financial services revenue	174.1		100.0	%	175.5		100.0	%	(1.4)		(0.8)	%
Financial services expenses	(38.4)		(22.1)	%	(41.3)		(23.5)	%	2.9		7.0	%
Operating earnings from financial services	135.7		77.9	%	134.2		76.5	%	1.5		1.1	%

Operating earnings	605.4		25.1	%	552.2		24.2	%	53.2		9.6	%
Interest expense	(23.3)		(0.9)	%	(28.6)		(1.2)	%	5.3		18.5	%
Other income (expense) – net	17.6		0.7	%	7.7		0.3	%	9.9		NM
Earnings before income taxes and equity earnings	599.7		24.9	%	531.3		23.3	%	68.4		12.9	%
Income tax expense	(139.8)		(5.8)	%	(122.0)		(5.4)	%	(17.8)		(14.6)	%
Earnings before equity earnings	459.9		19.1	%	409.3		17.9	%	50.6		12.4	%
Equity earnings, net of tax	—		—		1.5		0.1	%	(1.5)		NM
Net earnings	459.9		19.1	%	410.8		18.0	%	49.1		12.0	%
Net earnings attributable to noncontrolling interests	(11.0)		(0.5)	%	(10.2)		(0.4)	%	(0.8)		(7.8)	%
Net earnings attributable to Snap-on Inc.	$	448.9	18.6	%	$	400.6	17.6	%	$	48.3	12.1	%



NM: Not meaningful
Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Table of Contents

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

(continued)

Net sales of $2,234.4 million in the first six months of 2022 increased $128.4 million, or 6.1%, from 2021 levels, reflecting a $168.0 million, or 8.2%, organic gain and $8.5 million of acquisition-related sales, partially offset by $48.1 million of unfavorable foreign currency translation.

Gross profit of $1,087.8 million in the first six months of 2022 increased $31.1 million, or 2.9%, compared to $1,056.7 million last year. Gross margin of 48.7% in the quarter declined 150 bps from last year primarily due to higher material and other costs, partially offset by higher sales volumes and pricing actions, benefits from the company’s RCI initiatives, and 30 bps of favorable foreign currency effects.

Operating expenses of $618.1 million in the first six months of 2022 compared to $638.7 million last year. Operating expenses as a percentage of net sales of 27.7% improved 270 bps from last year primarily due to the higher sales volumes, savings from RCI initiatives, and lower costs associated with stock-based expenses; these improvements were partially offset by 20 bps of unfavorable acquisition effects.

Operating earnings before financial services of $469.7 million in the first six months of 2022 increased $51.7 million, or 12.4%, compared to $418.0 million in 2021. As a percentage of net sales, operating earnings before financial services of 21.0% compared to 19.8% last year.

Financial services revenue of $174.1 million in the first six months of 2022 compared to $175.5 million last year. Financial services operating earnings of $135.7 million in the period compared to $134.2 million in 2021.

Operating earnings of $605.4 million in the first six months of 2022 increased $53.2 million, or 9.6%, compared to $552.2 million last year. As a percentage of revenues, operating earnings of 25.1% in the quarter compared to 24.2% last year.

Interest expense in the first ~~quarter~~six months of 2022 decreased ~~$2.7~~$5.3 million compared to last year. See Note 9 to the Condensed Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.

Snap-on’s effective income tax rate on earnings attributable to Snap-on was 23.7% in the first ~~quarter~~six months of 2022 and ~~23.5%~~23.4% in ~~the first quarter of~~ 2021. See Note 8 to the Condensed Consolidated Financial Statements for information on income taxes.

Net earnings attributable to Snap-on in the first ~~quarter~~six months of 2022 were ~~$217.4~~$448.9 million, or ~~$4.00~~$8.27 per diluted share. Net earnings attributable to Snap-on in the first ~~quarter~~six months of 2021 were ~~$192.6~~$400.6 million, or ~~$3.50~~$7.26 per diluted share.

Segment Results

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Commercial & Industrial Group


		Three Months Ended													Three Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022				April 3, 2021				Change				(Amounts in millions)	July 2, 2022				July 3, 2021				Change
External net sales	External net sales	$	261.2	76.8	%	$	271.1	78.4	%	$	(9.9)	(3.7)	%	External net sales	$	276.1	76.9	%	$	274.7	78.4	%	$	1.4	0.5	%
Intersegment net sales	Intersegment net sales	78.9		23.2	%	74.6		21.6	%	4.3		5.8	%	Intersegment net sales	83.0		23.1	%	75.8		21.6	%	7.2		9.5	%
Segment net sales	Segment net sales	340.1		100.0	%	345.7		100.0	%	(5.6)		(1.6)	%	Segment net sales	359.1		100.0	%	350.5		100.0	%	8.6		2.5	%
Cost of goods sold	Cost of goods sold	(216.4)		(63.6)	%	(211.8)		(61.3)	%	(4.6)		(2.2)	%	Cost of goods sold	(225.3)		(62.7)	%	(212.0)		(60.5)	%	(13.3)		(6.3)	%
Gross profit	Gross profit	123.7		36.4	%	133.9		38.7	%	(10.2)		(7.6)	%	Gross profit	133.8		37.3	%	138.5		39.5	%	(4.7)		(3.4)	%
Operating expenses	Operating expenses	(78.0)		(23.0)	%	(83.2)		(24.0)	%	5.2		6.3	%	Operating expenses	(82.1)		(22.9)	%	(83.0)		(23.7)	%	0.9		1.1	%
Segment operating earnings	Segment operating earnings	$	45.7	13.4	%	$	50.7	14.7	%	$	(5.0)	(9.9)	%	Segment operating earnings	$	51.7	14.4	%	$	55.5	15.8	%	$	(3.8)	(6.8)	%

Segment net sales of ~~$340.1~~$359.1 million in the ~~first~~second quarter of 2022 ~~decreased $5.6~~increased $8.6 million, or ~~1.6%~~2.5%, from 2021 levels, reflecting a ~~$3.6~~$25.3 million, or ~~1.1%~~7.6%, organic sales increase, ~~which was more than~~partially offset by ~~$9.2~~$16.7 million of unfavorable foreign currency translation. The organic ~~gain~~increase primarily reflects a double-digit ~~increase~~gains in the segment’s European-based hand tools business and Asia Pacific operations, ~~partially offset by~~as well as a mid single-digit ~~decline~~increase in sales to customers in critical ~~industries, where lower activity with the military more than offset higher sales to general industry and technical education customers.~~industries.

Segment gross margin in the ~~first~~second quarter of ~~36.4%~~37.3% declined ~~230~~220 bps from last year, primarily due to ~~higher~~increased material and other costs, ~~and 40 bps of unfavorable foreign currency effects,~~ partially offset by benefits from the higher sales volumes and pricing actions, ~~and~~as well as from the segment’s RCI initiatives.

Segment operating expenses as a percentage of sales in the ~~first~~second quarter of ~~23.0%~~22.9% improved ~~100~~80 bps as compared to 2021 primarily ~~reflecting savings from cost containment actions and 10 basis points~~due to the effects of ~~favorable foreign currency effects.~~higher sales volumes.

As a result of these factors, segment operating earnings of ~~$45.7~~$51.7 million in the ~~first~~second quarter of 2022, including ~~$2.2~~$2.0 million of unfavorable foreign currency effects, decreased ~~$5.0~~$3.8 million, or ~~9.9%~~6.8%, compared to ~~$50.7~~$55.5 million in 2021. Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of ~~13.4%~~14.4% in the ~~first~~second quarter of 2022 compared to ~~14.7%~~15.8% in 2021.

~~Snap-on Tools Group~~

Three Months Ended
(Amounts in millions) April 2, 2022 April 3, 2021 Change
Segment net sales $ 512.1 100.0 % $ 478.3 100.0 % $ 33.8 7.1 %
Cost of goods sold (278.9) (54.5) % (258.6) (54.1) % (20.3) (7.8) %
Gross profit 233.2 45.5 % 219.7 45.9 % 13.5 6.1 %
Operating expenses (117.2) (22.8) % (120.8) (25.2) % 3.6 3.0 %
Segment operating earnings $ 116.0 22.7 % $ 98.9 20.7 % $ 17.1 17.3 %


	Six Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
External net sales	$	537.3	76.8	%	$	545.8	78.4	%	$	(8.5)	(1.6)	%
Intersegment net sales	161.9		23.2	%	150.4		21.6	%	11.5		7.6	%
Segment net sales	699.2		100.0	%	696.2		100.0	%	3.0		0.4	%
Cost of goods sold	(441.7)		(63.2)	%	(423.8)		(60.9)	%	(17.9)		(4.2)	%
Gross profit	257.5		36.8	%	272.4		39.1	%	(14.9)		(5.5)	%
Operating expenses	(160.1)		(22.9)	%	(166.2)		(23.8)	%	6.1		3.7	%
Segment operating earnings	$	97.4	13.9	%	$	106.2	15.3	%	$	(8.8)	(8.3)	%

Segment net sales of ~~$512.1~~$699.2 million in the first ~~quarter~~six months of 2022 increased ~~$33.8~~$3.0 million, or ~~7.1%~~0.4%, from 2021 levels, reflecting a ~~$36.8~~$28.9 million, or ~~7.7%~~4.3%, organic sales ~~gain,~~increase, partially offset by ~~$3.0~~$25.9 million of unfavorable foreign currency translation. The organic ~~increase is due to~~gain primarily reflects a double-digit increase in the segment’s Asia Pacific operations and a high single-digit gain in the ~~U.S. franchise business, partially~~segment’s European-based hand tools business. Sales to customers in critical industries were essentially flat, as higher sales to general industry and technical education customers were offset by ~~a low single-digit decline in~~lower activity with the ~~segment’s international operations.~~military.

Segment gross margin in the first ~~quarter~~six months of ~~45.5%~~36.8% declined 40230 bps from last year, primarily due to increased material and other costs ~~which were mostly~~and 20 bps of unfavorable foreign currency effects, partially offset by benefits from the higher sales volumes and pricing actions, ~~and 30 bps of favorable foreign currency effects.~~as well as from the segment’s RCI initiatives.

Segment operating expenses as a percentage of ~~net~~ sales in the first ~~quarter~~six months of ~~22.8%~~22.9% improved ~~240~~90 bps ~~from last year~~as compared to 2021 primarily due to the ~~impact~~effects of higher sales ~~volumes, savings from RCI initiatives, and lower stock-based expenses related to the company’s franchisee stock purchase plan.~~volumes.

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As a result of these factors, segment operating earnings of ~~$116.0~~$97.4 million in the first six months of 2022, including $4.2 million of unfavorable foreign currency effects, decreased $8.8 million, or 8.3%, compared to $106.2 million in 2021. Operating margin for the Commercial & Industrial Group of 13.9% in the first six months of 2022 compared to 15.3% in 2021.

Snap-on Tools Group


	Three Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Segment net sales	$	520.6	100.0	%	$	484.1	100.0	%	$	36.5	7.5	%
Cost of goods sold	(281.1)		(54.0)	%	(257.6)		(53.2)	%	(23.5)		(9.1)	%
Gross profit	239.5		46.0	%	226.5		46.8	%	13.0		5.7	%
Operating expenses	(115.1)		(22.1)	%	(123.0)		(25.4)	%	7.9		6.4	%
Segment operating earnings	$	124.4	23.9	%	$	103.5	21.4	%	$	20.9	20.2	%

Segment net sales of $520.6 million in the second quarter of 2022 increased $36.5 million, or 7.5%, from 2021 levels, reflecting a $44.2 million, or 9.3%, organic sales gain, partially offset by $7.7 million of unfavorable foreign currency translation. The organic increase is due to a double-digit gain in the U.S. franchise business and a low single-digit increase in the segment’s international operations.

Segment gross margin in the second quarter of 46.0% declined 80 bps from last year primarily due to increased material and other costs and 10 bps of unfavorable foreign currency effects, which were partially offset by benefits from the higher sales volumes and pricing actions.

Segment operating expenses as a percentage of net sales in the second quarter of 22.1% improved 330 bps from last year and included the effects of lower expenses related to the company’s franchisee stock purchase plan, benefits from higher sales volumes, and savings associated with RCI initiatives.

As a result of these factors, segment operating earnings of $124.4 million in the second quarter of 2022, including ~~$0.8~~$2.2 million of ~~favorable~~unfavorable foreign currency effects, increased ~~$17.1~~$20.9 million, or ~~17.3%~~20.2%, compared to ~~$98.9~~$103.5 million in 2021. Operating margin for the Snap-on Tools Group of ~~22.7%~~23.9% in the ~~first~~second quarter of 2022 compared to ~~20.7%~~21.4% last year.


	Six Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Segment net sales	$	1,032.7	100.0	%	$	962.4	100.0	%	$	70.3	7.3	%
Cost of goods sold	(560.0)		(54.2)	%	(516.2)		(53.6)	%	(43.8)		(8.5)	%
Gross profit	472.7		45.8	%	446.2		46.4	%	26.5		5.9	%
Operating expenses	(232.3)		(22.5)	%	(243.8)		(25.4)	%	11.5		4.7	%
Segment operating earnings	$	240.4	23.3	%	$	202.4	21.0	%	$	38.0	18.8	%

Segment net sales of $1,032.7 million in the first six months of 2022 increased $70.3 million, or 7.3%, from 2021 levels, reflecting an $81.0 million, or 8.5%, organic sales gain, partially offset by $10.7 million of unfavorable foreign currency translation. The organic increase included a double-digit gain in the U.S. franchise business, while sales in the segment’s international operations were essentially flat.

Segment gross margin in the first six months of 45.8% declined 60 bps from last year primarily due to increased material and other costs, which were partially offset by benefits from the higher sales volumes and pricing actions.

Segment operating expenses as a percentage of net sales in the first six months of 22.5% improved 290 bps from last year and included the effects of lower expenses related to the company’s franchisee stock purchase plan, benefits from higher sales volumes, and savings associated with RCI initiatives.

As a result of these factors, segment operating earnings of $240.4 million in the first six months of 2022, including $1.4 million of unfavorable foreign currency effects, increased $38.0 million, or 18.8%, compared to $202.4 million in 2021. Operating margin for the Snap-on Tools Group of 23.3% in the first six months of 2022 compared to 21.0% last year.

Table of Contents

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OF OPERATIONS

(continued)

Repair Systems & Information Group


		Three Months Ended													Three Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022				April 3, 2021				Change				(Amounts in millions)	July 2, 2022				July 3, 2021				Change
External net sales	External net sales	$	324.5	81.5	%	$	275.2	79.2	%	$	49.3	17.9	%	External net sales	$	339.9	81.5	%	$	322.6	80.9	%	$	17.3	5.4	%
Intersegment net sales	Intersegment net sales	73.7		18.5	%	72.4		20.8	%	1.3		1.8	%	Intersegment net sales	76.9		18.5	%	76.0		19.1	%	0.9		1.2	%
Segment net sales	Segment net sales	398.2		100.0	%	347.6		100.0	%	50.6		14.6	%	Segment net sales	416.8		100.0	%	398.6		100.0	%	18.2		4.6	%
Cost of goods sold	Cost of goods sold	(220.8)		(55.4)	%	(187.6)		(54.0)	%	(33.2)		(17.7)	%	Cost of goods sold	(236.6)		(56.8)	%	(220.5)		(55.3)	%	(16.1)		(7.3)	%
Gross profit	Gross profit	177.4		44.6	%	160.0		46.0	%	17.4		10.9	%	Gross profit	180.2		43.2	%	178.1		44.7	%	2.1		1.2	%
Operating expenses	Operating expenses	(85.8)		(21.6)	%	(78.6)		(22.6)	%	(7.2)		(9.2)	%	Operating expenses	(84.5)		(20.2)	%	(91.4)		(22.9)	%	6.9		7.5	%
Segment operating earnings	Segment operating earnings	$	91.6	23.0	%	$	81.4	23.4	%	$	10.2	12.5	%	Segment operating earnings	$	95.7	23.0	%	$	86.7	21.8	%	$	9.0	10.4	%

Segment net sales of ~~$398.2~~$416.8 million in the ~~first~~second quarter of 2022 increased ~~$50.6~~$18.2 million, or ~~14.6%~~4.6%, from 2021 levels, reflecting a ~~$45.7~~$27.4 million, or ~~13.3%~~7.0%, organic sales increase, ~~and $8.5 million of acquisition-related sales,~~ partially offset by ~~$3.6~~$9.2 million of unfavorable foreign currency translation. The organic gain ~~is comprised of~~included a double-digit ~~increases~~increase in sales of undercar equipment and ~~in activity with OEM dealerships, as well as~~ a low single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and ~~managers.~~managers, while activity with OEM dealerships was essentially flat.

Segment gross margin in the ~~first~~second quarter of ~~44.6%~~43.2% declined ~~140~~150 bps from last year primarily due to higher material and other costs, and increased sales in lower gross margin ~~businesses and higher material and other costs.~~businesses. These declines were partially offset by benefits from pricing actions and ~~50 bps~~savings from ~~acquisitions,~~RCI initiatives, as well as ~~from 30~~50 bps of favorable foreign currency ~~effects and savings from RCI initiatives.~~effects.

Segment operating expenses as a percentage of net sales in the ~~first~~second quarter of ~~21.6%~~20.2%, improved ~~100~~270 bps from 2021 primarily due to ~~the~~ benefits from sales volume leverage, including higher ~~volumes~~activity in lower expense businesses, and savings from RCI ~~initiatives; these improvements were partially offset by 110 bps of unfavorable acquisition effects in 2022.~~initiatives.

As a result of these factors, segment operating earnings of ~~$91.6~~$95.7 million in the ~~first~~second quarter of 2022, including ~~$0.9~~$1.2 million of favorable foreign currency effects, increased ~~$10.2~~$9.0 million, or ~~12.5%~~10.4%, from ~~$81.4~~$86.7 million in 2021. Operating margin for the Repair Systems & Information Group of 23.0% in the second quarter of 2022 compared to 21.8% last year.


	Six Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
External net sales	$	664.4	81.5	%	$	597.8	80.1	%	$	66.6	11.1	%
Intersegment net sales	150.6		18.5	%	148.4		19.9	%	2.2		1.5	%
Segment net sales	815.0		100.0	%	746.2		100.0	%	68.8		9.2	%
Cost of goods sold	(457.4)		(56.1)	%	(408.1)		(54.7)	%	(49.3)		(12.1)	%
Gross profit	357.6		43.9	%	338.1		45.3	%	19.5		5.8	%
Operating expenses	(170.3)		(20.9)	%	(170.0)		(22.8)	%	(0.3)		(0.2)	%
Segment operating earnings	$	187.3	23.0	%	$	168.1	22.5	%	$	19.2	11.4	%

Segment net sales of $815.0 million in the first six months of 2022 increased $68.8 million, or 9.2%, from 2021 levels, reflecting a $73.1 million, or 10.0%, organic sales increase and $8.5 million of acquisition-related sales, partially offset by $12.8 million of unfavorable foreign currency translation. The organic gain is comprised of a double-digit increase in sales of undercar equipment, a high single-digit gain in activity with OEM dealerships, and a low single-digit increase in sales of diagnostic and repair information products to independent repair shop owners and managers.

Segment gross margin in the first six months of 43.9% declined 140 bps from last year primarily due to higher material and other costs, and increased sales in lower gross margin businesses. These declines were partially offset by benefits from pricing actions and savings from RCI initiatives, as well as 40 bps of favorable foreign currency effects and 20 bps from acquisitions.

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Segment operating expenses as a percentage of net sales in the first six months of 20.9%, improved 190 bps from 2021 primarily due to benefits from sales volume leverage, including higher activity in lower expense businesses, and savings from RCI initiatives. These improvements were partially offset by 50 bps of unfavorable acquisition effects in 2022.

As a result of these factors, segment operating earnings of $187.3 million in the first six months of 2022, including $2.1 million of favorable foreign currency effects, increased $19.2 million, or 11.4%, from $168.1 million in 2021. Operating margin for the Repair Systems & Information Group of 23.0% in the first ~~quarter~~six months of 2022 compared to ~~23.4%~~22.5% last year.

Financial Services


		Three Months Ended													Three Months Ended
(Amounts in millions)	(Amounts in millions)	April 2, 2022				April 3, 2021				Change				(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Financial services revenue	Financial services revenue	$	87.7	100.0	%	$	88.6	100.0	%	$	(0.9)	(1.0)	%	Financial services revenue	$	86.4	100.0	%	$	86.9	100.0	%	$	(0.5)	(0.6)	%
Financial services expenses	Financial services expenses	(17.3)		(19.7)	%	(23.3)		(26.3)	%	6.0		25.8	%	Financial services expenses	(21.1)		(24.4)	%	(18.0)		(20.7)	%	(3.1)		(17.2)	%
Segment operating earnings	Segment operating earnings	$	70.4	80.3	%	$	65.3	73.7	%	$	5.1	7.8	%	Segment operating earnings	$	65.3	75.6	%	$	68.9	79.3	%	$	(3.6)	(5.2)	%

Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on ~~receivables in the period.~~receivables. Financial services revenue in the ~~first~~second quarter of 2022 decreased ~~$0.9~~$0.5 million, or ~~1.0%~~0.6%, from ~~2021, primarily due to a decline in the size of the average financial services portfolio during the quarter as compared to last year.~~2021. In both the ~~first~~second quarters of 2022 and 2021, the average ~~yield~~yields on finance receivables ~~was 17.6%. In the first quarters of 2022~~ and ~~2021, the respective average yields on~~ contract receivables were ~~8.5%~~17.5% and ~~8.4%.~~8.5%, respectively. Originations of ~~$245.6~~$307.6 million in the ~~first~~second quarter of 2022 ~~decreased $16.2~~increased $21.8 million, or ~~6.2%~~7.6%, from 2021 levels.

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS~~

~~OF OPERATIONS~~

~~(continued)~~

Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses. These expenses are generally more dependent on changes in the size of the financial services portfolio than they are on the revenue of the segment. Financial services expenses in the second quarter of 2022 increased primarily due to higher provisions for credit losses as compared to those recorded in the second quarter of 2021. As a percentage of the average financial services portfolio, expenses were 1.0% in the second quarter of 2022 and 0.8% in 2021.

Segment operating earnings in the second quarter of 2022, including $0.6 million of unfavorable foreign currency effects, decreased $3.6 million, or 5.2%, from 2021 levels.


	Six Months Ended
(Amounts in millions)	July 2, 2022				July 3, 2021				Change
Financial services revenue	$	174.1	100.0	%	$	175.5	100.0	%	$	(1.4)	(0.8)	%
Financial services expenses	(38.4)		(22.1)	%	(41.3)		(23.5)	%	2.9		7.0	%
Segment operating earnings	$	135.7	77.9	%	$	134.2	76.5	%	$	1.5	1.1	%

Financial services revenue in the first ~~quarter~~six months of 2022 decreased $1.4 million, or 0.8%, from 2021. In both the first six months of 2022 and 2021, the average yield on finance receivables was 17.5%. In the first six months of 2022 and 2021, the respective average yields on contract receivables were 8.5% and 8.4%. Originations of $553.2 million in the first six months of 2022 increased $5.6 million, or 1.0%, from 2021 levels.

Financial services expenses in the first six months of 2022 decreased primarily due to lower provisions for credit losses as compared to those recorded in the first ~~quarter~~six months of 2021. As a percentage of the average financial services portfolio, ~~financial services~~ expenses were ~~0.8%~~1.7% in the first ~~quarter~~six months of 2022 and ~~1.1%~~1.9% in 2021.

~~Financial services~~Segment operating earnings in the first ~~quarter~~six months of 2022, including ~~$0.2~~$0.8 million of unfavorable foreign currency effects, increased ~~$5.1~~$1.5 million, or ~~7.8%~~1.1%, from 2021 levels.

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(continued)

Corporate

Snap-on’s ~~first~~second quarter 2022 general corporate expenses of ~~$30.2~~$25.2 million ~~compared to $30.1~~decreased $3.4 million from $28.6 million last ~~year. Lower~~year, primarily due to lower stock-based compensation, including costs associated with the company’s employee stock purchase ~~plan,~~plan. Snap-on’s general corporate expenses in the first six months 2022 of $55.4 million decreased $3.3 million from $58.7 million last year, as lower stock-based compensation was partially offset by other cost increases.

Non-GAAP Supplemental Data

The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on’s non-financial services (“Operations”) and “Financial Services” businesses.

The supplemental Operations data reflects the results of operations and financial position of Snap-on’s tools, diagnostics, equipment products, software, and other non-financial services operations with Financial Services presented on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on’s U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses are eliminated to arrive at the Condensed Consolidated Financial Statements.

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the three months ended July 2, 2022, and July 3, 2021, are as follows:


	Operations*				Financial Services
(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	$	1,136.6	$	1,081.4	$	—	$	—
Cost of goods sold	(583.1)		(538.3)		—		—
Gross profit	553.5		543.1		—		—
Operating expenses	(306.9)		(326.0)		—		—
Operating earnings before financial services	246.6		217.1		—		—

Financial services revenue	—		—		86.4		86.9
Financial services expenses	—		—		(21.1)		(18.0)
Operating earnings from financial services	—		—		65.3		68.9

Operating earnings	246.6		217.1		65.3		68.9
Interest expense	(11.7)		(14.2)		—		(0.1)
Intersegment interest income (expense) – net	14.9		14.8		(14.9)		(14.8)
Other income (expense) – net	9.2		3.3		0.1		0.1
Earnings before income taxes and equity earnings	259.0		221.0		50.5		54.1
Income tax expense	(59.3)		(49.2)		(13.0)		(13.7)
Earnings before equity earnings	199.7		171.8		37.5		40.4
Financial services – net earnings attributable to Snap-on	37.5		40.4		—		—
Equity earnings, net of tax	—		1.0		—		—
Net earnings	237.2		213.2		37.5		40.4
Net earnings attributable to noncontrolling interests	(5.7)		(5.2)		—		—
Net earnings attributable to Snap-on	$	231.5	$	208.0	$	37.5	$	40.4

* Snap-on with Financial Services presented on the equity method.

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Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the ~~three~~six months ended ~~April~~July 2, 2022, and ~~April~~July 3, 2021, are as follows:


		Operations*				Financial Services					Operations*				Financial Services
(Amounts in millions)	(Amounts in millions)	April 2, 2022		April 3, 2021		April 2, 2022		April 3, 2021		(Amounts in millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	Net sales	$	1,097.8	$	1,024.6	$	—	$	—	Net sales	$	2,234.4	$	2,106.0	$	—	$	—
Cost of goods sold	Cost of goods sold	(563.5)		(511.0)		—		—		Cost of goods sold	(1,146.6)		(1,049.3)		—		—
Gross profit	Gross profit	534.3		513.6		—		—		Gross profit	1,087.8		1,056.7		—		—
Operating expenses	Operating expenses	(311.2)		(312.7)		—		—		Operating expenses	(618.1)		(638.7)		—		—
Operating earnings before financial services	Operating earnings before financial services	223.1		200.9		—		—		Operating earnings before financial services	469.7		418.0		—		—

Financial services revenue	Financial services revenue	—		—		87.7		88.6		Financial services revenue	—		—		174.1		175.5
Financial services expenses	Financial services expenses	—		—		(17.3)		(23.3)		Financial services expenses	—		—		(38.4)		(41.3)
Operating earnings from financial services	Operating earnings from financial services	—		—		70.4		65.3		Operating earnings from financial services	—		—		135.7		134.2

Operating earnings	Operating earnings	223.1		200.9		70.4		65.3		Operating earnings	469.7		418.0		135.7		134.2
Interest expense	Interest expense	(11.6)		(14.3)		—		—		Interest expense	(23.3)		(28.5)		—		(0.1)
Intersegment interest income (expense) – net	Intersegment interest income (expense) – net	14.9		14.4		(14.9)		(14.4)		Intersegment interest income (expense) – net	29.8		29.2		(29.8)		(29.2)
Other income (expense) – net	Other income (expense) – net	8.3		4.3		—		—		Other income (expense) – net	17.5		7.6		0.1		0.1
Earnings before income taxes and equity earnings	Earnings before income taxes and equity earnings	234.7		205.3		55.5		50.9		Earnings before income taxes and equity earnings	493.7		426.3		106.0		105.0
Income tax expense	Income tax expense	(53.2)		(46.5)		(14.3)		(12.6)		Income tax expense	(112.5)		(95.7)		(27.3)		(26.3)
Earnings before equity earnings	Earnings before equity earnings	181.5		158.8		41.2		38.3		Earnings before equity earnings	381.2		330.6		78.7		78.7
Financial services – net earnings attributable to Snap-on	Financial services – net earnings attributable to Snap-on	41.2		38.3		—		—		Financial services – net earnings attributable to Snap-on	78.7		78.7		—		—
Equity earnings, net of tax	Equity earnings, net of tax	—		0.5		—		—		Equity earnings, net of tax	—		1.5		—		—
Net earnings	Net earnings	222.7		197.6		41.2		38.3		Net earnings	459.9		410.8		78.7		78.7
Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests	(5.3)		(5.0)		—		—		Net earnings attributable to noncontrolling interests	(11.0)		(10.2)		—		—
Net earnings attributable to Snap-on	Net earnings attributable to Snap-on	$	217.4	$	192.6	$	41.2	$	38.3	Net earnings attributable to Snap-on	$	448.9	$	400.6	$	78.7	$	78.7

* Snap-on with Financial Services presented on the equity method.

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheet information as of July 2, 2022, and January 1, 2022, is as follows:

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~~Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheet information as of April 2, 2022, and January 1, 2022, is as follows:~~


		Operations*				Financial Services					Operations*				Financial Services
(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		April 2 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022		July 2, 2022		January 1, 2022
ASSETS	ASSETS									ASSETS
Current assets:	Current assets:									Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	860.8	$	779.9	$	0.3	$	0.1	Cash and cash equivalents	$	812.6	$	779.9	$	0.3	$	0.1
Intersegment receivables	Intersegment receivables	13.1		12.5		—		—		Intersegment receivables	14.1		12.5		—		—
Trade and other accounts receivable – net	Trade and other accounts receivable – net	730.3		681.7		1.0		0.6		Trade and other accounts receivable – net	728.5		681.7		0.6		0.6
Finance receivables – net	Finance receivables – net	—		—		542.7		542.3		Finance receivables – net	—		—		547.0		542.3
Contract receivables – net	Contract receivables – net	6.4		6.4		95.7		104.0		Contract receivables – net	6.1		6.4		92.2		104.0
Inventories – net	Inventories – net	864.1		803.8		—		—		Inventories – net	893.3		803.8		—		—
Prepaid expenses and other assets	Prepaid expenses and other assets	136.9		136.8		7.3		7.4		Prepaid expenses and other assets	153.4		136.8		6.4		7.4
Total current assets	Total current assets	2,611.6		2,421.1		647.0		654.4		Total current assets	2,608.0		2,421.1		646.5		654.4

Property and equipment – net	Property and equipment – net	511.2		516.5		1.9		1.7		Property and equipment – net	501.8		516.5		1.7		1.7
Operating lease right-of-use assets	Operating lease right-of-use assets	48.4		50.0		1.7		1.9		Operating lease right-of-use assets	55.0		50.0		1.6		1.9
Investment in Financial Services	Investment in Financial Services	345.2		350.6		—		—		Investment in Financial Services	350.3		350.6		—		—
Deferred income tax assets	Deferred income tax assets	48.1		26.5		21.2		23.0		Deferred income tax assets	46.2		26.5		21.3		23.0
Intersegment long-term notes receivable	Intersegment long-term notes receivable	542.8		570.1		—		—		Intersegment long-term notes receivable	568.3		570.1		—		—
Long-term finance receivables – net	Long-term finance receivables – net	—		—		1,099.2		1,114.0		Long-term finance receivables – net	—		—		1,127.0		1,114.0
Long-term contract receivables – net	Long-term contract receivables – net	9.1		9.7		368.5		368.5		Long-term contract receivables – net	9.4		9.7		366.0		368.5
Goodwill	Goodwill	1,077.8		1,116.5		—		—		Goodwill	1,046.0		1,116.5		—		—
Other intangibles – net	Other intangibles – net	295.5		301.7		—		—		Other intangibles – net	283.5		301.7		—		—
Other assets	Other assets	188.7		188.6		0.1		0.1		Other assets	186.6		188.6		0.2		0.1
Total assets	Total assets	$	5,678.4	$	5,551.3	$	2,139.6	$	2,163.6	Total assets	$	5,655.1	$	5,551.3	$	2,164.3	$	2,163.6

* Snap-on with Financial Services presented on the equity method.

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Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheets Information (continued):


		Operations*				Financial Services					Operations*				Financial Services
(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022		July 2, 2022		January 1, 2022
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY									LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:									Current liabilities:
Notes payable	Notes payable	$	19.6	$	17.4	$	—	$	—	Notes payable	$	18.8	$	17.4	$	—	$	—
Accounts payable	Accounts payable	296.9		276.6		0.4		1.0		Accounts payable	306.8		276.6		1.7		1.0
Intersegment payables	Intersegment payables	—		—		13.1		12.5		Intersegment payables	—		—		14.1		12.5
Accrued benefits	Accrued benefits	73.0		67.4		0.1		—		Accrued benefits	59.2		67.4		—		—
Accrued compensation	Accrued compensation	72.8		110.9		2.0		3.9		Accrued compensation	79.4		110.9		2.2		3.9
Franchisee deposits	Franchisee deposits	74.8		80.7		—		—		Franchisee deposits	77.5		80.7		—		—
Other accrued liabilities	Other accrued liabilities	456.4		407.1		37.6		26.8		Other accrued liabilities	421.4		407.1		28.8		26.8
Total current liabilities	Total current liabilities	993.5		960.1		53.2		44.2		Total current liabilities	963.1		960.1		46.8		44.2

Long-term debt and intersegment long-term debt	Long-term debt and intersegment long-term debt	—		—		1,726.0		1,753.0		Long-term debt and intersegment long-term debt	—		—		1,751.7		1,753.0
Deferred income tax liabilities	Deferred income tax liabilities	112.9		122.7		—		—		Deferred income tax liabilities	102.2		122.7		—		—
Retiree health care benefits	Retiree health care benefits	30.4		31.1		—		—		Retiree health care benefits	29.7		31.1		—		—
Pension liabilities	Pension liabilities	96.4		104.9		—		—		Pension liabilities	83.1		104.9		—		—
Operating lease liabilities	Operating lease liabilities	31.0		32.5		1.5		1.7		Operating lease liabilities	38.3		32.5		1.4		1.7
Other long-term liabilities	Other long-term liabilities	93.6		96.2		13.7		14.1		Other long-term liabilities	91.9		96.2		14.1		14.1
Total liabilities	Total liabilities	1,357.8		1,347.5		1,794.4		1,813.0		Total liabilities	1,308.3		1,347.5		1,814.0		1,813.0
Total shareholders’ equity attributable to Snap-on	Total shareholders’ equity attributable to Snap-on	4,298.3		4,181.9		345.2		350.6		Total shareholders’ equity attributable to Snap-on	4,324.4		4,181.9		350.3		350.6
Noncontrolling interests	Noncontrolling interests	22.3		21.9		—		—		Noncontrolling interests	22.4		21.9		—		—
Total equity	Total equity	4,320.6		4,203.8		345.2		350.6		Total equity	4,346.8		4,203.8		350.3		350.6
Total liabilities and equity	Total liabilities and equity	$	5,678.4	$	5,551.3	$	2,139.6	$	2,163.6	Total liabilities and equity	$	5,655.1	$	5,551.3	$	2,164.3	$	2,163.6

* Snap-on with Financial Services presented on the equity method.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

(continued)

Liquidity and Capital Resources

Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. Snap-on believes that its cash from operations and collections of finance receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently anticipated requirements for scheduled debt repayments, payments of interest and dividends, new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise.

Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost. As of ~~April~~July 15, 2022, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service; A- and A-2 by Standard & Poor’s; and A and F1 by Fitch Ratings. Snap-on believes that its current credit arrangements are sound and that the strength of its balance sheet affords the company the financial flexibility, including through access to financial markets for potential new financing, to respond to both internal growth opportunities and those available through acquisitions. However, Snap-on cannot provide any assurance that financing will be available in the future on acceptable terms, or that its debt ratings will not decrease.

The following discussion focuses on information included in the accompanying Condensed Consolidated Balance Sheets.

As of ~~April~~July 2, 2022, working capital (current assets less current liabilities) of ~~$2,211.9~~$2,244.6 million increased ~~$140.7~~$173.4 million from $2,071.2 million as of January 1, 2022 (fiscal 2021 year end), primarily as a result of the net changes discussed below.

The following represents the company’s working capital position as of ~~April~~July 2, 2022, and January 1, 2022:


(Amounts in millions)	(Amounts in millions)	April 2, 2022		January 1, 2022		(Amounts in millions)	July 2, 2022		January 1, 2022
Cash and cash equivalents	Cash and cash equivalents	$	861.1	$	780.0	Cash and cash equivalents	$	812.9	$	780.0
Trade and other accounts receivable – net	Trade and other accounts receivable – net	731.3		682.3		Trade and other accounts receivable – net	729.1		682.3
Finance receivables – net	Finance receivables – net	542.7		542.3		Finance receivables – net	547.0		542.3
Contract receivables – net	Contract receivables – net	102.1		110.4		Contract receivables – net	98.3		110.4
Inventories – net	Inventories – net	864.1		803.8		Inventories – net	893.3		803.8
Prepaid expenses and other assets	Prepaid expenses and other assets	134.7		134.6		Prepaid expenses and other assets	150.1		134.6
Total current assets	Total current assets	3,236.0		3,053.4		Total current assets	3,230.7		3,053.4

Notes payable	Notes payable	(19.6)		(17.4)		Notes payable	(18.8)		(17.4)
Accounts payable	Accounts payable	(297.3)		(277.6)		Accounts payable	(308.5)		(277.6)
Other current liabilities	Other current liabilities	(707.2)		(687.2)		Other current liabilities	(658.8)		(687.2)
Total current liabilities	Total current liabilities	(1,024.1)		(982.2)		Total current liabilities	(986.1)		(982.2)
Working capital	Working capital	$	2,211.9	$	2,071.2	Working capital	$	2,244.6	$	2,071.2

Cash and cash equivalents of ~~$861.1~~$812.9 million as of ~~April~~July 2, 2022, increased ~~$81.1~~$32.9 million from 2021 year-end levels primarily due to: (i) ~~$215.6~~$426.2 million of cash from collections of finance receivables; (ii) ~~$193.9~~$334.7 million of cash generated from operations; (iii) ~~$5.8~~$29.2 million of cash proceeds from stock purchase and option plan exercises; and (iv) ~~$2.3~~$2.8 million of net proceeds from other short-term borrowings. These increases in cash and cash equivalents were partially offset by: (i) the funding of ~~$205.5~~$469.6 million of new finance receivables; (ii) dividend payments to shareholders of ~~$75.7~~$151.4 million; (iii) the repurchase of ~~136,000~~387,000 shares of the company’s common stock for ~~$28.8~~$82.6 million; and (iv) the funding of ~~$20.2~~$41.5 million of capital expenditures.

Of the ~~$861.1~~$812.9 million of cash and cash equivalents as of ~~April~~July 2, 2022, ~~$286.2~~$264.0 million was held outside of the United States. Snap-on maintains non-U.S. funds in its foreign operations to: (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise. Although the Tax Cuts and Jobs Act (“Tax Act”) generally eliminated U.S. federal taxation of dividends from foreign subsidiaries, such dividends may still be subject to state income taxation and foreign withholding taxes. Snap-on periodically evaluates its cash held outside the United States and may pursue opportunities to repatriate certain foreign cash amounts to the extent that it can be accomplished in a tax efficient manner.

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SNAP-ON INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

(continued)

Trade and other accounts receivable – net of ~~$731.3~~$729.1 million as of ~~April~~July 2, 2022, increased ~~$49.0~~$46.8 million from 2021 year-end levels primarily due to higher sales, ~~and $0.1~~partially offset by $16.8 million of foreign currency translation. Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months sales, times 360 days) was 6160 days at ~~April~~July 2, 2022, and 58 days at January 1, 2022.

The current portions of net finance and contract receivables of ~~$644.8~~$645.3 million as of ~~April~~July 2, 2022, compared to $652.7 million at 2021 year end. The long-term portions of net finance and contract receivables of ~~$1,476.8~~$1,502.4 million as of ~~April~~July 2, 2022, compared to $1,492.2 million at 2021 year end. The combined ~~$23.3~~$2.8 million ~~decrease~~increase in net current and long-term finance and contract receivables over 2021 year-end levels is primarily due to an increase in net ~~collections,~~receivable originations, partially offset by ~~$2.9~~$14.6 million of foreign currency translation.

Inventories – net of ~~$864.1~~$893.3 million as of ~~April~~July 2, 2022, increased ~~$60.3~~$89.5 million from 2021 year-end levels primarily to support higher customer demand and new product innovation, partially offset by ~~$0.2~~$27.3 million of foreign currency translation. Inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balance for the trailing 12 months) were 2.7 turns and 2.8 turns as of ~~both April~~July 2, 2022, and January 1, ~~2022.~~2022, respectively. Inventories accounted for using the first-in, first-out (“FIFO”) method approximated 61% and 60% of total inventories as of ~~April~~July 2, 2022, and January 1, 2022, respectively. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve was ~~$88.7~~$90.7 million and $87.2 million as of ~~April~~July 2, 2022, and January 1, 2022, respectively.

Notes payable of ~~$19.6~~$18.8 million as of ~~April~~July 2, 2022, compared to $17.4 million as of 2021 year end.

Accounts payable of ~~$297.3~~$308.5 million as of ~~April~~July 2, 2022, increased ~~$19.7~~$30.9 million from 2021 year-end levels primarily due to the timing of payments, partially offset by ~~$0.5~~$7.1 million of foreign currency translation.

Other accrued liabilities of ~~$484.5~~$440.5 million as of ~~April~~July 2, 2022, increased ~~$60.2~~$16.2 million from 2021 year-end levels primarily due to higher tax accruals, partially offset by ~~$0.7~~$10.8 million of foreign currency translation.

Long-term debt of ~~$1,183.2~~$1,183.4 million as of ~~April~~July 2, 2022, consisted of: (i) $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”); (ii) $400 million of unsecured 4.10% notes that mature on March 1, 2048 (the “2048 Notes”); and (iii) $500 million of 3.10% notes that mature on May 1, 2050 (“the 2050 Notes”), partially offset by ~~$16.8~~$16.6 million of unamortized debt issuance costs.

Snap-on has an $800 million multi-currency revolving credit facility that terminates on September 16, 2024 (the “Credit Facility”); no amounts were outstanding under the Credit Facility as of ~~April~~July 2, 2022. Borrowings under the Credit Facility bear interest at varying rates based on either: (i) Snap-on’s then-current, long-term debt ratings; or (ii) Snap-on’s then-current ratio of consolidated debt net of certain cash adjustments (“Consolidated Net Debt”) to earnings before interest, taxes, depreciation, amortization and certain other adjustments for the preceding four fiscal quarters then ended (the “Consolidated Net Debt to EBITDA Ratio”). The Credit Facility’s financial covenant requires that Snap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to 1.00 of Consolidated Net Debt to the sum of Consolidated Net Debt plus total equity and less accumulated other comprehensive income or loss (the “Leverage Ratio”); or (ii) a Consolidated Net Debt to EBITDA Ratio not greater than 3.50 to 1.00. Snap-on may, up to two times during any five-year period during the term of the Credit Facility (including any extensions thereof), elect to increase the maximum Leverage Ratio to 0.65 to 1.00 and/or increase the maximum Consolidated Net Debt to EBITDA Ratio to 4.00 to 1.00 for four consecutive fiscal quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of ~~April~~July 2, 2022, the company’s actual ratios of ~~0.08~~0.09 and ~~0.30~~0.34 respectively, were both within the permitted ranges set forth in this financial covenant. Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit Facility as back-up liquidity to support such commercial paper issuances. As of ~~April~~July 2, 2022, there were no commercial paper issuances outstanding.

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SNAP-ON INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

(continued)

Snap-on believes it has sufficient available cash and access to both committed and uncommitted credit facilities to cover its expected funding needs on both a short-term and long-term basis. Snap-on manages its aggregate short-term borrowings so as not to exceed its availability under the Credit Facility. Snap-on believes that it can access short-term debt markets, predominantly through commercial paper issuances and existing lines of credit, to fund its short-term requirements and to ensure near-term liquidity. Snap-on regularly monitors the credit and financial markets and, if it believes conditions are favorable, it may take advantage of such conditions to issue long-term debt to further improve its liquidity and capital resources. Near-term liquidity requirements for Snap-on include payments of interest and dividends, funding to support new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise. Snap-on intends to make contributions of $9.4 million to its foreign pension plans and $9.5 million to its domestic pension plans in 2022, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2022.

Snap-on’s long-term financing strategy is to maintain continuous access to the debt markets to accommodate its liquidity needs, including the potential use of commercial paper, additional fixed-term debt and/or securitizations.

The following discussion focuses on information included in the accompanying Condensed Consolidated Statements of Cash Flows.

Operating Activities

Net cash provided by operating activities was ~~$193.9~~$334.7 million and ~~$319.3~~$557.5 million in the first ~~three~~six months of 2022 and 2021, respectively. The ~~$125.4~~$222.8 million year-over-year decrease in net cash provided by operating activities primarily reflects a ~~$141.7~~$247.2 million decrease from net changes in operating assets and liabilities, partially offset by a ~~$25.1~~$49.1 million increase in net earnings.

Investing Activities

Net cash used by investing activities of ~~$6.6~~$80.4 million in the first ~~three~~six months of 2022 included additions to finance receivables of ~~$205.5~~$469.6 million, offset by collections of ~~$215.6~~$426.2 million. Net cash used by investing activities of ~~$207.2~~$236.9 million in the first ~~three~~six months of 2021 included additions to finance receivables of ~~$216.5~~$454.5 million, offset by collections of ~~$228.6~~$447.9 million. Finance receivables are comprised of extended-term installment payment contracts to both technicians and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools, diagnostics, and equipment products on an extended-term payment plan, ~~generally~~ with average payment terms of approximately four years.

Net cash used by investing activities in the respective first ~~three~~six months of 2022 and 2021 also included ~~a net $200.0~~$0.5 million of cash provided by and $195.8 million of cash used for acquisitions. See Note 3 to the Condensed Consolidated Financial Statements for information about acquisitions.

Capital expenditures were ~~$20.2~~$41.5 million and ~~$19.3~~$37.6 million in the first ~~three~~six months of 2022 and 2021, respectively. Capital expenditures in both years included continued investments related to the company’s execution of its strategic Value Creation Processes around safety, quality, customer connection, innovation and RCI.

Financing Activities

Net cash used by financing activities of ~~$106.3~~$218.5 million in the first ~~three~~six months of 2022 included net proceeds from other short-term borrowings of ~~$2.3~~$2.8 million. Net cash used by financing activities of ~~$131.0~~$278.9 million in the first ~~three~~six months of 2021 included net proceeds from other short-term borrowings of ~~$2.4~~$2.9 million.

Proceeds from stock purchase and option plan exercises totaled ~~$5.8~~$29.2 million and ~~$93.0~~$154.8 million in the first ~~three~~six months of 2022 and 2021, respectively. Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and franchisee stock purchase plans, as well as stock options, and for other corporate purposes. In the first ~~three~~six months of 2022, Snap-on repurchased ~~136,000~~387,000 shares of its common stock for ~~$28.8~~$82.6 million under its previously announced share repurchase programs. In the first ~~three~~six months of 2021, Snap-on repurchased ~~722,000~~1,288,900 shares of its common stock for ~~$151.9~~$289.3 million under its previously announced share repurchase programs. As of ~~April~~July 2, 2022, Snap-on had remaining availability to repurchase up to an additional ~~$442.2~~$420.8 million in common stock pursuant to its Board’s authorizations. The ~~purchase~~repurchase of Snap-on common stock to offset dilution related to equity plan issuances or for other corporate purposes is at the company’s discretion, subject to prevailing financial and market conditions. Snap‑on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any.

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SNAP-ON INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

(continued)

Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends totaled ~~$75.7~~$151.4 million and ~~$66.7~~$133.4 million in the first ~~three~~six months of 2022 and 2021, respectively. On November 4, 2021, the Board increased the quarterly cash dividend by 15.4% to $1.42 per share ($5.68 per share annualized). Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends.

Critical Accounting Policies and Estimates

Snap-on’s discussion of its critical accounting policies and estimates, contained in its Annual Report on Form 10-K for the fiscal year ended January 1, 2022, have not materially changed since the report was filed.

Outlook

COVID-19 and its subsequent variants, as well as ~~related~~ supply chain inefficiencies, continue to impact economic activity worldwide in 2022. The company believes that our markets and our operations possess and, indeed, have demonstrated considerable resilience against the impact of the virus and that there will be ongoing advancement even in the midst of the turbulence. The trajectory, however, may be uncertain due to the evolving nature of the situation.

Snap-on expects to make continued progress in 2022 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, the company anticipates that capital expenditures in 2022 will be in a range of $90 million to $100 million, of which ~~$20.2~~$41.5 million was incurred in the first ~~three~~six months of the year. Snap-on continues to respond to the global macroeconomic challenges through its RCI process and other cost reduction initiatives.

Snap-on currently anticipates that its full year 2022 effective income tax rate will be in the range of 23% to 24%.

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Item 3: Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in the company’s exposure to market risk during the ~~first~~second quarter of 2022. Refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on Form 10-K for the year ended January 1, 2022 for further discussion.

Interest Rate Risk Management

Snap-on may manage the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements. Treasury lock agreements are used from time to time to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt. See Note 10 to the Condensed Consolidated Financial Statements for information on interest rate risk management.

Snap-on utilizes a Value-at-Risk (“VAR”) model to determine the potential one-day loss in the fair value of its interest rate and foreign exchange-sensitive financial instruments from adverse changes in market factors. The VAR model estimates were made assuming normal market conditions and a 95% confidence level. Snap-on’s computations are based on the inter-relationships among movements in various currencies and interest rates (variance/co-variance technique). These inter-relationships were determined by observing interest rate and foreign currency market changes over the preceding quarter.

The estimated maximum potential net one-day loss in fair value, calculated using the VAR model, as of ~~April~~July 2, 2022, was ~~$25.4~~$28.9 million, consisting of a $29.0 million loss on interest rate-sensitive financial instruments and ~~$0.4~~a $0.1 million gain on foreign currency-sensitive financial instruments. The VAR model is a risk management tool and does not purport to represent actual losses in fair value that will be incurred by Snap-on, nor does it consider the potential effect of favorable changes in market factors.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Snap-on maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that material information relating to the company and its consolidated subsidiaries is timely communicated to the officers who certify Snap-on’s financial reports and to other members of senior management and the Board, as appropriate.

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~April~~July 2, 2022. Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of ~~April~~July 2, 2022, to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control

There has not been any change in the company’s internal control over financial reporting during the quarter ended ~~April~~July 2, 2022, that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).

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PART II. OTHER INFORMATION

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following chart discloses information regarding the shares of Snap-on’s common stock repurchased by the company during the ~~first~~second quarter of fiscal 2022, all of which were purchased pursuant to the Board’s authorizations that the company has publicly announced. Snap-on has undertaken stock repurchases from time to time to offset dilution ~~created by shares issued for employee and franchisee stock purchase plans and~~related to equity ~~plans, and~~plan issuances or for other corporate purposes, as well as when the company believes market conditions are favorable. The repurchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions, and pursuant to the Board’s authorizations that the company has publicly announced.


Period	Period	Shares purchased	Average price per share	Shares purchased as part of publicly announced plans or programs	Approximate value of shares that may yet be purchased under publicly announced plans or programs*	Period	Shares purchased	Average price per share	Shares purchased as part of publicly announced plans or programs	Approximate value of shares that may yet be purchased under publicly announced plans or programs*
01/02/2022 to 01/29/2022		—	—	—	$456.7 million
01/30/2022 to 02/26/2022		118,000	$212.62	118,000	$445.8 million
02/27/2022 to 04/02/2022		18,000	$207.91	18,000	$442.2 million
04/03/2022 to 04/30/2022						04/03/2022 to 04/30/2022	40,000	$219.39	40,000	$441.3 million
05/01/2022 to 05/28/2022						05/01/2022 to 05/28/2022	121,000	$216.24	121,000	$430.3 million
05/29/2022 to 07/02/2022						05/29/2022 to 07/02/2022	90,000	$209.19	90,000	$420.8 million
Total/Average	Total/Average	136,000	$212.00	136,000	N/A	Total/Average	251,000	$214.21	251,000	N/A

N/A: Not applicable	N/A: Not applicable					N/A: Not applicable

* Subject to further adjustment pursuant to the 1996 Authorization described below, as of ~~April~~July 2, 2022, the approximate value of shares that may yet be

purchased pursuant to the outstanding Board authorizations discussed below is ~~$442.2~~$420.8 million.

•In 1996, the Board authorized the company to repurchase shares of the company’s common stock from time to time in the open market or in privately negotiated transactions (the “1996 Authorization”). The 1996 Authorization allows the repurchase of up to the number of shares issued or delivered from treasury from time to time under the various plans the company has in place that call for the issuance of the company’s common stock. Because the number of shares that are purchased pursuant to the 1996 Authorization will change from time to time as (i) the company issues shares under its various plans; and (ii) shares are repurchased pursuant to this authorization, the number of shares authorized to be repurchased will vary from time to time. The 1996 Authorization will expire when terminated by the Board. When calculating the approximate value of shares that the company may yet purchase under the 1996 Authorization, the company assumed a price of ~~$206.54, $212.10~~$212.49, $222.90 and ~~$203.70~~$198.24 per share of common stock as of the end of the respective fiscal 2022 months ended ~~January 29,~~April 30, 2022, ~~February 26,~~May 28, 2022, and ~~April~~July 2, 2022.

•On November 4, 2021, the Board authorized the repurchase of up to $500 million of the company’s common stock (the “2021 Authorization”). The 2021 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board.

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Other Purchases or Sales of Equity Securities

The following chart discloses information regarding transactions in shares of Snap-on’s common stock by Citibank, N.A. (“Citibank”) during the ~~first~~second quarter of 2022 pursuant to a prepaid equity forward agreement (the “Agreement”) with Citibank that is intended to reduce the impact of market risk associated with the stock-based portion of the company’s deferred compensation plans. The company’s stock-based deferred compensation liabilities, which are impacted by changes in the company’s stock price, increase as the company’s stock price rises and decrease as the company’s stock price declines. Pursuant to the Agreement, Citibank may purchase or sell shares of the company’s common stock (for Citibank’s account) in the market or in privately negotiated transactions. The Agreement has no stated expiration date and does not provide for Snap-on to purchase or repurchase its shares.

Citibank Purchases of Snap-on Stock
Period Shares
Purchased Average
Price
per Share
01/02/2022 to 01/29/2022 — —
01/30/2022 to 02/26/2022 1,900 $201.75
02/27/2022 to 04/02/2022 — —
Total/Average 1,900 $201.75


Citibank Purchases (Sales) of Snap-on Stock
Period	Shares purchased (sold)	Average Price per Share
04/03/2022 to 04/30/2022	(3,300)	$220.00
05/01/2022 to 05/28/2022	—	—
05/29/2022 to 07/02/2022	500	$221.04
Total/Average	(2,800)	$220.14

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Item 6: Exhibits

Exhibit 31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Exhibit 101.SCH						Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104						Cover page Inline XBRL data (contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Snap-on Incorporated has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			SNAP-ON INCORPORATED
Date: ~~April~~July 21, 2022			/s/ Aldo J. Pagliari
			Aldo J. Pagliari, Principal Financial Officer,
			Senior Vice President – Finance and
			Chief Financial Officer

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Citibank Purchases of Snap-on Stock
Period	Shares Purchased	Average Price per Share
01/02/2022 to 01/29/2022	—	—
01/30/2022 to 02/26/2022	1,900	$201.75
02/27/2022 to 04/02/2022	—	—
Total/Average	1,900	$201.75