TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 x Class Outstanding at Net sales Cost of goods sold Gross profit Operating expenses Operating earnings before financial services Financial services revenue Financial services expenses Operating earnings from financial services Operating earnings Interest expense Other income (expense) – net Earnings before income taxes and equity earnings Income tax expense Earnings before equity earnings Equity earnings, net of tax Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable toSnap-on Incorporated Net earnings per share attributable toSnap-on Incorporated: Basic Diluted Weighted-average shares outstanding: Basic Effect of dilutive securities Diluted Dividends declared per common share Comprehensive income (loss): Net earnings Other comprehensive income (loss): Foreign currency translation* Unrealized cash flow hedges, net of tax: Other comprehensive income before reclassifications Reclassification of cash flow hedges to net earnings Defined benefit pension and postretirement plans: Amortization of net unrecognized losses and prior service credits included in net periodic benefit cost Income tax benefit Net of tax Total comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive income attributable toSnap-on Incorporated ASSETS Current assets: Cash and cash equivalents Trade and other accounts receivable – net Finance receivables – net Contract receivables – net Inventories – net Prepaid expenses and other assets Total current assets Property and equipment: Land Buildings and improvements Machinery, equipment and computer software Accumulated depreciation and amortization Property and equipment – net Deferred income tax assets Long-term finance receivables – net Long-term contract receivables – net Goodwill Other intangibles – net Other assets Total assets LIABILITIES AND EQUITY Current liabilities: Notes payable and current maturities of long-term debt Accounts payable Accrued benefits Accrued compensation Franchisee deposits Other accrued liabilities Total current liabilities Long-term debt Deferred income tax liabilities Retiree health care benefits Pension liabilities Other long-term liabilities Total liabilities Commitments and contingencies (Note 14) Equity Shareholders’ equity attributable toSnap-on Incorporated: 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 67,407,599 and 67,400,250 shares, respectively) Additionalpaid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock at cost(10,400,929 and 9,450,393 shares, respectively) Total shareholders’ equity attributable toSnap-on Incorporated Noncontrolling interests Total equity Total liabilities and equity Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Equity Balance at December 31, 2016 Net earnings for the nine months ended September 30, 2017 Other comprehensive income Cash dividends – $2.13 per share Stock compensation plans Share repurchases – 1,348,000 shares Other Balance at September 30, 2017 The following summarizes the changes in total equity for the nine month period ended October 1, 2016: Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Equity Balance at January 2, 2016 Net earnings for the nine months ended Other comprehensive loss Cash dividends – $1.83 per share Stock compensation plans Share repurchases – 492,000 shares Other Balance at October 1, 2016 Operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation Amortization of other intangibles Provision for losses on finance receivables Provision for losses onnon-finance receivables Stock-based compensation expense Deferred income tax benefit Gain on sale of assets Settlement of treasury lock Changes in operating assets and liabilities, net of effects of acquisitions: Increase in trade and other accounts receivable Increase in contract receivables Increase in inventories Increase in prepaid and other assets Increase in accounts payable Decrease in accruals and other liabilities Net cash provided by operating activities Investing activities: Additions to finance receivables Collections of finance receivables Capital expenditures Acquisitions of businesses, net of cash acquired Disposal of property and equipment Other Net cash used by investing activities Financing activities: Proceeds from issuance of long-term debt Repayments of long-term debt Proceeds from notes payable Repayments of notes payable Net increase in other short-term borrowings Cash dividends paid Purchases of treasury stock Proceeds from stock purchase and option plans Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period Supplemental cash flow disclosures: Cash paid for interest Net cash paid for income taxes year 2018: the company’s Condensed Consolidated Statements of Earnings. this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years; the ASU allows for early adoption as of the beginning of an interim or annual reporting period beginning after December 15, 2018. The company is currently assessing the impact this ASU will have on its consolidated financial statements. segments. All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results. June 30, 2018. Snap-on expects to recognize approximately 60% of these contracts as revenue by the end of fiscal 2019, an additional 30% by the end of fiscal 2021 and the balance thereafter. accompanying Condensed Consolidated Balance Sheets. In the second quarter of 2017, the company completed the purchase accounting valuations for the acquired net assets of BTC, including intangible assets. The $5.9 million excess of See Note Trade and other accounts receivable Allowances for doubtful accounts Total trade and other accounts receivable – net Finance receivables, net of unearned finance charges of $20.7 million and $17.0 million, respectively Contract receivables, net of unearned finance charges of $17.0 million and $15.6 million, respectively Total Allowances for doubtful accounts: Finance receivables Contract receivables Total Total current finance and contract receivables – net Finance receivables – net Contract receivables – net Total current finance and contract receivables – net Finance receivables, net of unearned finance charges of $16.4 million and $13.0 million, respectively Contract receivables, net of unearned finance charges of $24.3 million and $21.5 million, respectively Total Allowances for doubtful accounts: Finance receivables Contract receivables Total Total long-term finance and contract receivables – net Finance receivables – net Contract receivables – net Total long-term finance and contract receivables – net 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 due date. Removal from delinquent status occurs when the cumulative number of monthly payments due has been received by the company. September 30, 2017: Finance receivables Contract receivables December 31, 2016: Finance receivables Contract receivables Performing Nonperforming Total Finance receivables Contract receivables Allowances for doubtful accounts: Beginning of period Provision Charge-offs Recoveries Currency translation End of period Allowances for doubtful accounts: Beginning of period Provision Charge-offs Recoveries End of period 2017: Finished goods Work in progress Raw materials Total FIFO value Excess of current cost over LIFO cost Total inventories – net Balance as of December 31, 2016 Currency translation Acquisitions and related adjustments Balance as of September 30, 2017 Amortized other intangible assets: Customer relationships Developed technology Internally developed software Patents Trademarks Other Total Non-amortized trademarks Total other intangible assets Customer relationships Internally developed software Patents Other 2023. remains incomplete as of June 30, 2018. However, the company was able to make reasonable estimates of the effects and, therefore, recorded provisional estimates for these items. In connection with its initial analysis of the impact of the Tax Act, the company recorded a provisional discrete net tax expense of $7.0 million in the period ended December 30, 2017. This provisional estimate consists of a net expense of $13.7 million for the one-time transition tax and a net benefit of $6.7 million related to revaluation of deferred tax assets and liabilities, caused by the new lower corporate tax rate. To determine the transition tax, the company must determine the amount of post-1986 accumulated earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. While the company was able to make a reasonable estimate of the transition tax, it is continuing to gather additional information to more precisely compute the final amount. Likewise, while the company was able to make a reasonable estimate of the impact of the reduction to the corporate tax rate, its rate may be affected by other analyses related to the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences. Due to the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under GAAP, the company is allowed to make an accounting policy choice to either (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”); or (ii) factor in such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The company’s selection of an accounting policy with respect to the new GILTI tax rules is dependent on additional analysis and potential future modifications to existing structures, which are not currently known. The company has not made a policy decision regarding whether to record September 30, December 31, 5.50% unsecured notes due 2017 4.25% unsecured notes due 2018 6.70% unsecured notes due 2019 6.125% unsecured notes due 2021 3.25% unsecured notes due 2027 Other debt* Less: notes payable and current maturities of long-term debt: Current maturities of long-term debt Commercial paper borrowings Other notes Total long-term debt purposes. Interest Rate Risk Management:Snap-on aims to control funding costs by managing the exposure created by the differing maturities and interest rate structures ofSnap-on’s borrowings through the use of interest rate swap agreements (“interest rate swaps”) and treasury lock agreements (“treasury locks”). 30, 2017. Earnings. Balance Sheet Presentation Interest rate swaps Treasury locks Foreign currency forwards Foreign currency forwards Equity forwards Total Total derivative instruments Interest rate swaps Treasury locks Treasury locks Statement of Earnings Presentation Foreign currency forwards Other income (expense) – net Equity forwards Operating expenses Counterparty Risk:Snap-on is exposed to credit losses in the event ofnon-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 ofA- or better.Snap-on does not anticipatenon-performance by its counterparties, but cannot provide assurances. Finance receivables – net Contract receivables – net Long-term debt, notes payable and current maturities of long-term debt Service cost Interest cost Expected return on plan assets Amortization of unrecognized loss Amortization of prior service credit Net periodic pension cost Interest cost Expected return on plan assets Amortization of unrecognized gain Net periodic postretirement health care cost 2017. Expected term of option(in years) Expected volatility factor Expected dividend yield Risk-free interest rate 2017: Outstanding at December 31, 2016 Granted Exercised Forfeited or expired Outstanding at September 30, 2017 Exercisable at September 30, 2017 2017. Non-vested performance awards at December 31, 2016 Granted Vested Cancellations and other Non-vested performance awards at September 30, 2017 Expected term of stock-settled SARs(in years) Expected volatility factor Expected dividend yield Risk-free interest rate 2017: Outstanding at December 31, 2016 Granted Exercised Forfeited or expired Outstanding at September 30, 2017 Exercisable at September 30, 2017 2017. Expected term of cash-settled SARs(in years) Expected volatility factor Expected dividend yield Risk-free interest rate 2017: July 1, 2017. Non-vested cash-settled SARs at December 31, 2016 Granted Vested Non-vested cash-settled SARs at September 30, 2017 Weighted-average common shares outstanding Effect of dilutive securities Weighted-average common shares outstanding, assuming dilution Warranty reserve: Beginning of period Additions Usage End of period Interest income Net foreign exchange loss Other Total other income (expense) – net Balance as of July 1, 2017 Other comprehensive income before reclassifications Amounts reclassified from Accumulated OCI Net other comprehensive income (loss) Balance as of September 30, 2017 2018: Balance as of December 31, 2016 Other comprehensive income before reclassifications Amounts reclassified from Accumulated OCI Net other comprehensive income Balance as of September 30, 2017 2018: Balance as of July 2, 2016 Other comprehensive loss before reclassifications Amounts reclassified from Accumulated OCI Net other comprehensive income (loss) Balance as of October 1, 2016 2017: Balance as of January 2, 2016 Other comprehensive loss before reclassifications Amounts reclassified from Accumulated OCI Net other comprehensive income (loss) Balance as of October 1, 2016 2017: Details about Accumulated OCI Components Statement of Earnings Gains on cash flow hedges: Treasury locks Income tax expense Net of tax Amortization of net unrecognized losses and prior service credits Income tax benefit Net of tax Total reclassifications for the period, net of tax These Accumulated OCI components are included in the computation of net periodic pension and postretirement health care costs; see Note 10 and Note 11 for further information. See Note 1 for additional information on the retrospective adoption of ASU No. 2017-07 for the three and six months ended July 1, 2017. Net sales: Commercial & Industrial Group Snap-on Tools Group Repair Systems & Information Group Segment net sales Intersegment eliminations Total net sales Financial Services revenue Total revenues Operating earnings: Commercial & Industrial Group Snap-on Tools Group Repair Systems & Information Group Financial Services Segment operating earnings Corporate Operating earnings Interest expense Other income (expense) – net Earnings before income taxes and equity earnings Assets: Commercial & Industrial Group Snap-on Tools Group Repair Systems & Information Group Financial Services Total assets from reportable segments Corporate Elimination of intersegment receivables Total assets Accounting for Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for a certain income tax effect of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires changes to be applied retrospectively; as such, prior periods have been restated to reflect this adoption. See Note 1 to the Condensed Consolidated Financial Statements for further information on the adoption of this ASU. Net sales Cost of goods sold Gross profit Operating expenses Operating earnings before financial services Financial services revenue Financial services expenses Operating earnings from financial services Operating earnings Interest expense Other income (expense) – net Earnings before income taxes and equity earnings Income tax expense Earnings before equity earnings Equity earnings, net of tax Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable toSnap-on Inc. “RCI” initiatives and 10 bps of favorable foreign currency effects, partially offset by higher material and other costs. 10 bps of favorable foreign currency effects. Net sales Cost of goods sold Gross profit Operating expenses Operating earnings before financial services Financial services revenue Financial services expenses Operating earnings from financial services Operating earnings Interest expense Other income (expense) – net Earnings before income taxes and equity earnings Income tax expense Earnings before equity earnings Equity earnings, net of tax Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable toSnap-on Inc. year. $4.98 per diluted share. External net sales Intersegment net sales Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings tools. initiatives, partially offset by 30 bps of unfavorable foreign currency effects. 2017. External net sales Intersegment net sales Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings 2017. of unfavorable foreign currency effects. unfavorable foreign currency effects were more than offset by benefits from higher sales volume and other cost reduction initiatives. unfavorable foreign currency effects, compared to 13.9% in 2017. Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings effects, higher sales of higher margin products and benefits from the company’s RCI initiatives. sales volume. Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings External net sales Intersegment net sales Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings were essentially flat. initiatives, partially offset by 20 bps of unfavorable foreign currency effects. year. External net sales Intersegment net sales Segment net sales Cost of goods sold Gross profit Operating expenses Segment operating earnings were essentially flat. Financial services revenue Financial services expenses Segment operating earnings 2017. Financial services revenue Financial services expenses Segment operating earnings 2017. Net sales Cost of goods sold Gross profit Operating expenses Operating earnings before financial services Financial services revenue Financial services expenses Operating earnings from financial services Operating earnings Interest expense Intersegment interest income (expense) – net Other income (expense) – net Earnings before income taxes and equity earnings Income tax expense Earnings before equity earnings Financial services – net earnings attributable toSnap-on Equity earnings, net of tax Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable toSnap-on Net sales Cost of goods sold Gross profit Operating expenses Operating earnings before financial services Financial services revenue Financial services expenses Operating earnings from financial services Operating earnings Interest expense Intersegment interest income (expense) – net Other income (expense) – net Earnings before income taxes and equity earnings Income tax expense Earnings before equity earnings Financial services – net earnings attributable toSnap-on Equity earnings, net of tax Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable toSnap-on *Snap-on with Financial Services on the equity method. ASSETS Current assets: Cash and cash equivalents Intersegment receivables Trade and other accounts receivable – net Finance receivables – net Contract receivables – net Inventories – net Prepaid expenses and other assets Total current assets Property and equipment – net Investment in Financial Services Deferred income tax assets Intersegment long-term notes receivable Long-term finance receivables – net Long-term contract receivables – net Goodwill Other intangibles – net Other assets Total assets LIABILITIES AND EQUITY Current liabilities: Notes payable and current maturities of long-term debt Accounts payable Intersegment payables Accrued benefits Accrued compensation Franchisee deposits Other accrued liabilities Total current liabilities Long-term debt and intersegment long-term Deferred income tax liabilities Retiree health care benefits Pension liabilities Other long-term liabilities Total liabilities Total shareholders’ equity attributable toSnap-on Inc. Noncontrolling interests Total equity Total liabilities and equity Cash and cash equivalents Trade and other accounts receivable – net Finance receivables – net Contract receivables – net Inventories – net Prepaid expenses and other assets Total current assets Notes payable and current maturities of long-term debt Accounts payable Other current liabilities Total current liabilities Total working capital 30, 2017 , respectively. 2018. RCI. 2017. . Period Total/Average * Subject to further adjustment pursuant to the 1996 Authorization described below, as of June 30, 2018, the approximate value of shares that may yet be Period Total/Average Aldo J. Pagliari, Principal Financial Officer, Senior Vice President – Finance and Chief Financial Officer☒x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 September June 30, 20172018☐ Delaware 39-0622040 (State of incorporation) (I.R.S. Employer Identification No.) 53143 (Address of principal executive offices) (Zip code) ☒x No ☐ and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒x No ☐Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐Emerging growth company ☐Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ ☒ OctoberJuly 13, 2017Common Stock, $1.00 par value 57,007,18856,402,181 shares Page Item 1. 3 4 5-6 7 8 9-36 37-56 57-58 Item 4.58-59 59-60 Item 6.6162SNAP-ON INCORPORATED Three Months Ended Nine Months Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 903.8 $ 834.1 $ 2,712.3 $ 2,540.6 (455.2) (415.0) (1,352.7) (1,274.9) 448.6 419.1 1,359.6 1,265.7 (295.5) (261.5) (853.3) (786.3) 153.1 157.6 506.3 479.4 79.0 71.6 233.5 207.2 (23.0) (21.0) (70.4) (60.1) 56.0 50.6 163.1 147.1 209.1 208.2 669.4 626.5 (13.1) (13.1) (38.8) (39.1) (2.1) (0.8) (5.7) (0.3) 193.9 194.3 624.9 587.1 (57.2) (59.6) (187.1) (179.4) 136.7 134.7 437.8 407.7 0.4 0.5 1.2 2.2 137.1 135.2 439.0 409.9 (3.7) (3.5) (10.8) (9.8) $ 133.4 $ 131.7 $ 428.2 $ 400.1 $ 2.33 $ 2.27 $ 7.43 $ 6.89 2.29 2.22 7.27 6.74 57.2 58.0 57.6 58.1 1.1 1.3 1.3 1.3 58.3 59.3 58.9 59.4 $ 0.71 $ 0.61 $ 2.13 $ 1.83 Three Months Ended Six Months Ended June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Net sales $ 954.6 $ 921.4 $ 1,890.1 $ 1,808.5 Cost of goods sold (467.5 ) (458.2 ) (931.4 ) (897.0 ) Gross profit 487.1 463.2 958.7 911.5 Operating expenses (294.0 ) (279.5 ) (587.9 ) (557.6 ) Operating earnings before financial services 193.1 183.7 370.8 353.9 Financial services revenue 82.0 77.7 165.0 154.5 Financial services expenses (24.2 ) (23.1 ) (50.3 ) (47.4 ) Operating earnings from financial services 57.8 54.6 114.7 107.1 Operating earnings 250.9 238.3 485.5 461.0 Interest expense (12.0 ) (13.0 ) (25.6 ) (25.7 ) Other income (expense) – net (0.6 ) (1.9 ) 2.2 (4.3 ) Earnings before income taxes and equity earnings 238.3 223.4 462.1 431.0 Income tax expense (55.8 ) (67.3 ) (113.4 ) (129.9 ) Earnings before equity earnings 182.5 156.1 348.7 301.1 Equity earnings, net of tax 0.2 0.7 0.8 0.8 Net earnings 182.7 156.8 349.5 301.9 Net earnings attributable to noncontrolling interests (4.0 ) (3.6 ) (7.8 ) (7.1 ) Net earnings attributable to Snap-on Incorporated $ 178.7 $ 153.2 $ 341.7 $ 294.8 Net earnings per share attributable to Snap-on Incorporated: Basic $ 3.17 $ 2.65 $ 6.04 $ 5.09 Diluted 3.12 2.60 5.93 4.98 Weighted-average shares outstanding: Basic 56.4 57.8 56.6 57.9 Effect of dilutive securities 0.9 1.2 1.0 1.3 Diluted 57.3 59.0 57.6 59.2 Dividends declared per common share $ 0.82 $ 0.71 $ 1.64 $ 1.42 SNAP-ON INCORPORATED Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 $ 137.1 $ 135.2 $ 439.0 $ 409.9 51.4 (7.8) 138.9 (22.8) – – 6.1 – (0.5) (0.1) (1.2) (0.3) 6.6 7.6 19.8 22.7 (2.3) (2.8) (6.9) (8.3) 4.3 4.8 12.9 14.4 $ 192.3 $ 132.1 $ 595.7 $ 401.2 (3.7) (3.5) (10.8) (9.8) $ 188.6 $ 128.6 $ 584.9 $ 391.4 *There is no reclassification adjustment as there was no sale or liquidation of any foreign entity during any period presented. Three Months Ended Six Months Ended June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Comprehensive income (loss): Net earnings $ 182.7 $ 156.8 $ 349.5 $ 301.9 Other comprehensive income (loss): Foreign currency translation* (97.6 ) 49.4 (58.5 ) 87.5 Unrealized gain/loss on cash flow hedges, net of tax: Other comprehensive income (loss) before reclassifications — — (0.8 ) 6.1 Reclassification of cash flow hedges to net earnings (0.3 ) (0.4 ) (0.8 ) (0.7 ) Defined benefit pension and postretirement plans: Amortization of net unrecognized losses and prior service credits included in net periodic benefit cost 8.0 6.7 15.6 13.2 Income tax benefit (2.0 ) (2.3 ) (3.8 ) (4.6 ) Net of tax 6.0 4.4 11.8 8.6 Total comprehensive income $ 90.8 $ 210.2 $ 301.2 $ 403.4 Comprehensive income attributable to noncontrolling interests (4.0 ) (3.6 ) (7.8 ) (7.1 ) Comprehensive income attributable to Snap-on Incorporated $ 86.8 $ 206.6 $ 293.4 $ 396.3 SNAP-ON INCORPORATED September 30,
2017 December 31,
2016 $ 94.1 $ 77.6 675.2 598.8 505.8 472.5 99.8 88.1 649.9 530.5 121.1 116.5 2,145.9 1,884.0 24.4 19.1 350.3 309.4 872.8 809.6 1,247.5 1,138.1 (773.3) (712.9) 474.2 425.2 81.2 72.8 1,018.6 934.5 310.4 286.7 924.0 895.5 258.3 184.6 43.6 39.9 $ 5,256.2 $ 4,723.2 June 30,
2018 December 30,
2017ASSETS Current assets: Cash and cash equivalents $ 112.3 $ 92.0 Trade and other accounts receivable – net 667.1 675.6 Finance receivables – net 514.4 505.4 Contract receivables – net 87.6 96.8 Inventories – net 668.3 638.8 Prepaid expenses and other assets 105.7 110.7 Total current assets 2,155.4 2,119.3 Property and equipment: Land 24.1 24.5 Buildings and improvements 364.5 357.4 Machinery, equipment and computer software 924.5 889.2 1,313.1 1,271.1 Accumulated depreciation and amortization (833.7 ) (786.7 ) Property and equipment – net 479.4 484.4 Deferred income tax assets 51.7 52.0 Long-term finance receivables – net 1,051.3 1,039.2 Long-term contract receivables – net 332.6 322.6 Goodwill 911.0 924.1 Other intangibles – net 240.9 253.7 Other assets 49.7 53.8 Total assets $ 5,272.0 $ 5,249.1 September 30,
2017 December 31,
2016 $ 453.4 $ 301.4 204.7 170.9 47.8 52.8 74.8 89.8 76.1 66.7 366.0 307.9 1,222.8 989.5 755.0 708.8 28.5 13.1 34.3 36.7 181.8 246.5 93.8 93.4 2,316.2 2,088.0 – – 67.4 67.4 344.4 317.3 3,689.5 3,384.9 (341.8) (498.5) (837.7) (653.9) 2,921.8 2,617.2 18.2 18.0 2,940.0 2,635.2 $ 5,256.2 $ 4,723.2 June 30,
2018 December 30,
2017LIABILITIES AND EQUITY Current liabilities: Notes payable and current maturities of long-term debt $ 127.6 $ 433.2 Accounts payable 198.5 178.2 Accrued benefits 44.6 55.8 Accrued compensation 68.1 71.5 Franchisee deposits 68.7 66.5 Other accrued liabilities 419.5 388.1 Total current liabilities 927.0 1,193.3 Long-term debt 945.4 753.6 Deferred income tax liabilities 27.2 28.4 Retiree health care benefits 34.5 36.0 Pension liabilities 117.8 158.9 Other long-term liabilities 108.5 106.6 Total liabilities 2,160.4 2,276.8 Commitments and contingencies (Note 14) Equity Shareholders’ equity attributable to Snap-on Incorporated: — — 67.4 67.4 Additional paid-in capital 352.6 343.2 Retained earnings 4,018.9 3,772.3 Accumulated other comprehensive loss (377.3 ) (329.0 ) (968.4 ) (900.0 ) Total shareholders’ equity attributable to Snap-on Incorporated 3,093.2 2,953.9 Noncontrolling interests 18.4 18.4 Total equity 3,111.6 2,972.3 Total liabilities and equity $ 5,272.0 $ 5,249.1 SNAP-ON INCORPORATEDninesix month period ended SeptemberJune 30, 2018: Shareholders’ Equity Attributable to Snap-on Incorporated Balance at December 30, 2017 $ 67.4 $ 343.2 $ 3,772.3 $ (329.0 ) $ (900.0 ) $ 18.4 $ 2,972.3 Net earnings for the six months ended June 30, 2018 — — 341.7 — — 7.8 349.5 Other comprehensive loss — — — (48.3 ) — — (48.3 ) Cash dividends – $1.64 per share — — (92.8 ) — — — (92.8 ) Stock compensation plans — 9.4 — — 30.3 — 39.7 Share repurchases – 646,000 shares — — — — (98.7 ) — (98.7 ) Other — — (2.3 ) — — (7.8 ) (10.1 ) Balance at June 30, 2018 $ 67.4 $ 352.6 $ 4,018.9 $ (377.3 ) $ (968.4 ) $ 18.4 $ 3,111.6 Shareholders’ Equity Attributable toSnap-on Incorporated Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interests $ 67.4 $ 317.3 $ 3,384.9 $ (498.5) $ (653.9) $ 18.0 $ 2,635.2 – – 428.2 – – 10.8 439.0 – – – 156.7 – – 156.7 – – (123.0) – – – (123.0) – 27.1 – – 28.8 – 55.9 – – – – (212.6) – (212.6) – – (0.6) – – (10.6) (11.2) $ 67.4 $ 344.4 $ 3,689.5 $ (341.8) $ (837.7) $ 18.2 $ 2,940.0 Shareholders’ Equity Attributable toSnap-on Incorporated Accumulated
Other
Comprehensive
Loss Noncontrolling
Interests $ 67.4 $ 296.3 $ 2,986.9 $ (364.2) $ (573.7) $ 18.0 $ 2,430.7
October 1, 2016 – – 400.1 – – 9.8 409.9 – – – (8.7) – – (8.7) – – (106.3) – – – (106.3) – 22.8 – – 27.1 – 49.9 – – – – (76.4) – (76.4) – – (0.7) – – (9.8) (10.5) $ 67.4 $ 319.1 $ 3,280.0 $ (372.9) $ (623.0) $ 18.0 $ 2,688.6 Shareholders’ Equity Attributable to Snap-on Incorporated Balance at December 31, 2016 $ 67.4 $ 317.3 $ 3,384.9 $ (498.5 ) $ (653.9 ) $ 18.0 $ 2,635.2 Net earnings for the six months ended July 1, 2017 — — 294.8 — — 7.1 301.9 Other comprehensive income — — — 101.5 — — 101.5 Cash dividends – $1.42 per share — — (82.3 ) — — — (82.3 ) Stock compensation plans — 19.8 — — 26.8 — 46.6 Share repurchases – 745,000 shares — — — — (122.5 ) — (122.5 ) Other — — (0.4 ) — — (7.0 ) (7.4 ) Balance at July 1, 2017 $ 67.4 $ 337.1 $ 3,597.0 $ (397.0 ) $ (749.6 ) $ 18.1 $ 2,873.0 SNAP-ON INCORPORATED Nine Months Ended September 30,
2017 October 1,
2016 $ 439.0 $ 409.9 48.7 45.7 20.7 18.2 38.6 30.4 7.9 6.1 21.4 21.5 (10.1) (12.5) (0.1) (0.1) 14.9 – (50.8) (31.2) (31.8) (30.8) (86.9) (29.9) (9.7) (28.5) 26.5 27.7 (13.3) (10.9) 415.0 415.6 (670.0) (691.4) 528.9 501.7 (57.3) (56.6) (82.9) – 1.4 1.9 (2.5) 0.3 (282.4) (244.1) 297.8 – (150.0) – 16.8 4.5 (4.5) (5.3) 38.7 15.6 (123.0) (106.3) (212.6) (76.4) 36.2 32.4 (18.9) (11.3) (119.5) (146.8) 3.4 – 16.5 24.7 77.6 92.8 $ 94.1 $ 117.5 $ (49.7) $ (49.2) (168.3) (175.7) Six Months Ended June 30,
2018 July 1,
2017Operating activities: Net earnings $ 349.5 $ 301.9 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation 35.0 32.3 Amortization of other intangibles 13.0 13.6 Provision for losses on finance receivables 29.4 25.8 Provision for losses on non-finance receivables 5.5 4.6 Stock-based compensation expense 14.6 14.4 Deferred income tax provision (benefit) (4.1 ) 3.1 Loss (gain) on sales of assets 0.1 (0.2 ) Settlement of treasury lock — 14.9 Loss on early extinguishment of debt 7.8 — Changes in operating assets and liabilities, net of effects of acquisitions: Increase in trade and other accounts receivable (9.1 ) (26.8 ) Increase in contract receivables (4.5 ) (5.6 ) Increase in inventories (24.5 ) (48.3 ) (Increase) decrease in prepaid and other assets 6.4 (9.9 ) Increase in accounts payable 25.4 27.7 Decrease in accruals and other liabilities (25.7 ) (28.0 ) Net cash provided by operating activities 418.8 319.5 Investing activities: Additions to finance receivables (436.7 ) (458.8 ) Collections of finance receivables 379.9 352.9 Capital expenditures (38.6 ) (34.4 ) Acquisitions of businesses, net of cash acquired (3.0 ) (80.2 ) Disposals of property and equipment 0.5 0.9 Other (2.9 ) (0.7 ) Net cash used by investing activities (100.8 ) (220.3 ) Financing activities: Proceeds from issuance of long-term debt 395.4 297.8 Repayments of long-term debt (457.8 ) (150.0 ) Repayment of notes payable (16.8 ) — Net decrease in other short-term borrowings (37.2 ) (52.7 ) Cash dividends paid (92.8 ) (82.3 ) Purchases of treasury stock (98.7 ) (122.5 ) Proceeds from stock purchase and option plans 28.3 34.6 Other (16.2 ) (14.9 ) Net cash used by financing activities (295.8 ) (90.0 ) Effect of exchange rate changes on cash and cash equivalents (1.9 ) 2.2 Increase in cash and cash equivalents 20.3 11.4 Cash and cash equivalents at beginning of year 92.0 77.6 Cash and cash equivalents at end of period $ 112.3 $ 89.0 Supplemental cash flow disclosures: Cash paid for interest $ (27.8 ) $ (24.9 ) Net cash paid for income taxes (97.4 ) (99.8 ) SNAP-ON INCORPORATED“Snap-on” “Snap-on” or “the company”the “company”).These. 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 inSnap-on’s 2016 2017 Annual Report on Form10-K for the fiscal year ended December 31, 201630, 2017 (“20162017 year end”). The company’s 20172018 fiscal thirdsecond quarter ended on SeptemberJune 30, 2017;2018; the 20162017 fiscal thirdsecond quarter ended on OctoberJuly 1, 2016. The2017. Each of the company’s 20172018 and 20162017 fiscal first second and thirdsecond quarters each contained 13 weeks of operating results.Snap-on accounts for investments in unconsolidated affiliates whereSnap-on has a greater than 20% but less than 50% ownership interest underCertain prior year amounts have been reclassified on the equity methodCondensed Consolidated Statements of accounting. Investments in unconsolidated affiliatesEarnings to conform to the 2018 presentation following the retrospective adoption of $18.4ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Expense of $0.2 million as of September 30, 2017, and $15.2 million as of December 31, 2016, are included in “Cost of goods sold” and income of $0.2 million included in “Operating expenses” in the second quarter of 2017 were reclassified to “Other assets” on the accompanying Condensed Consolidated Balance Sheets; no equity investment dividends were received in any period presented. In the normal courseincome (expense) - net”. As a result, previously reported “Cost of business, the company may purchase products or services from, or sell products and services to, unconsolidated affiliates. Purchases from unconsolidated affiliates were $2.4goods sold” of $458.4 million is now $458.2 million, “Operating expenses” of $279.3 million is now $279.5 million and $2.7“Other income (expense) - net” of $1.9 million of expense remains $1.9 million of expense. Expense of $0.5 million included in “Cost of goods sold” and expense of $0.2 million included in “Operating expenses” in the respective fiscal third quarterssix months ended July 1, 2017 were reclassified to “Other income (expense) - net”. As a result, previously reported “Cost of 2017 and 2016, and $8.1goods sold” of $897.5 million is now $897.0 million, “Operating expenses” of $557.8 million is now $557.6 million and $10.1“Other income (expense) - net” of $3.6 million in the respective first nine months of 2017 and 2016. Sales to unconsolidated affiliates were $0.1expense is now $4.3 million and zero in the respective fiscal third quarters of 2017 and 2016, and $0.3 million and zero in the respective first nine months of 2017 and 2016. The Condensed Consolidated Financial Statements do not include the accounts of the company’s independent franchisees.Snap-on’s Condensed Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany accounts and transactionsexpense. Additionally, prior year “Operating earnings” for certain reportable business segments have been eliminated.restated to reflect these reclassifications. See Note 17 for information on Snap-on’s reportable business segments.ninesix month periods ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, have been made. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.GAAPgenerally accepted accounting principles in the United States of America (“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.The following new accounting pronouncement was adopted in fiscal year 2017:In January 2017, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-04,Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fairvalue. Snap-on early adopted this ASU in the second quarter of 2017 in conjunction with its annual impairment test. The amendments in this ASU are being applied on a prospective basis and the adoption did not have a significant impact on the company’s consolidated financial statements.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)and related impacts on adoption, are being evaluated by the company:In August 2017, the FASB issued ASUNo. 2017-12,Derivatives and Hedging (Topic 815) –Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activitieswere adopted in its financial statements. The amendments in this update also make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ASUNo. 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; the ASU allows for early adoption in any interim period after issuance of the update. The company is currently assessing the impact this ASU will have on its consolidated financial statements.FASBFinancial Accounting Standards Board (the “FASB”) issued ASUNo. 2017-07,Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The amendments in this ASU require that an employer report the service cost component of the net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. Thenon-service-cost components of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The ASU also allows for the capitalization of the service cost components, when applicable (i.e., as a cost of internally manufactured inventory or a self-constructed asset).Theis effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods; early adoption is permitted as ofat the beginning of an annual periodits 2018 fiscal year, with the changes related to the presentation in the statements of earnings of the service cost and non-service-cost components of net periodic benefit costs applied retrospectively, using the practical expedient permitting the use of the amounts disclosed in pension and other postretirement benefit plan notes as the estimation basis for which financialthe presentation of the prior comparative periods. For fiscal 2018 and all comparative periods, the non-service-cost components of net periodic benefit costs are included in “Other income (expense) - net” on the accompanying condensed consolidated statements (interim or annual) have not been issued or made available for issuance.of earnings. Beginning in fiscal 2018, changes related to the capitalization in assets of the service cost component of net periodic benefit costs were applied prospectively. The amendments in this ASU are to be applied retrospectively. The company does not expect the adoption of this ASU todid not have a significant impact on its consolidated income statement.years; early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance (i.e., the first interim period if an entity issues interim financial statements).years. The amendments in this ASU arewere to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the time of adoption. The company does not expect the adoption of this ASU todid not have a significantan impact on its the company’s consolidated financial statements.years; early adoption is permitted.years. The company does not expect the adoption of thethis ASU todid not have a significant impact to the designations of operating, investing and financing activities on its consolidated statementthe company’s Condensed Consolidated Statements of cash flows.Cash Flows.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)In June 2016, the FASB issued ASUNo. 2016-13,Financial Instruments – Credit Losses (Topic 326), to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASUNo. 2016-13 is effective for fiscal years beginning afterOn December 15, 2019, including interim periods within those fiscal years; the ASU allows for early adoption as of31, 2017, the beginning of an interim or annual reporting period beginning after December 15, 2018. The company is currently assessing the impact thisSnap-on’s 2018 fiscal year, Snap-on adopted ASU will have on its consolidated financial statements.In February 2016, the FASB issued ASUNo. 2016-02,Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is intended to represent an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. This ASU, which supersedes most current lease guidance, affects any entity that enters into a lease (as that term is defined in the ASU), with some specified scope exemptions. ASUNo. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; the ASU allows for early adoption as of the beginning of an interim or annual reporting period. The company is currently assessing the impact this ASU will have on its consolidated financial statements.In May 2014, the FASB issued ASUNo. 2014-09,Revenue from Contracts with Customers (Topic 606), that, together with several subsequent updates,which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Topic 606 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.Entities havejudgments and assets recognized from costs incurred to fulfill a contract. Snap-on adopted Topic 606 using the option of adopting this standard using either a full retrospective approach or a modified retrospective approach (i.e.applied to those contracts that were not completed as of December 31, 2017, which means Topic 606 has been applied to the fiscal 2018 financial statements and disclosures going forward, but that prior period financial statements and disclosures reflect the prior revenue recognition standard. See Note 2 for additional information on revenue recognition.throughwhich allows for a cumulative-effect adjustment directlyreclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from “H.R.1”, formerly known as the Tax Cuts and Jobs Act (the “Tax Act”). ASU No. 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; the ASU allows for early adoption in any interim period after issuance of the update. The company is currently assessing the impact this ASU will have on its consolidated financial statements.timereporting date based on historical experience, current conditions and reasonable forecasts. The main objective of adoption).606842 during the second half of 20142017 and developed a comprehensive project plan that included representatives from across the company’s business segments. The project plan included evaluating Snap-on’s lease portfolio, analyzing the standard’s impact on the company’s various revenue streams, comparing its historical accounting policiestypes of lease contracts and practices toidentifying the reporting requirements of the new standard, identifying potential differences from applying the requirements of the new standard to its contracts, and providing updates on implementation progress.standard. The company is in the process of identifying and implementing appropriate changes to its business processes, systems and controls to support revenue recognitionlease accounting and disclosures under Topic 606. As842. The company is currently assessing the impact this ASU will have on its consolidated financial statements.Septembertools, diagnostic and equipment products 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.and subject to the company’s ongoing evaluation of new transactions and contracts, the company has substantially completed its evaluation of the expected impact of adopting Topic 606 and anticipates thatconsolidated balance sheet for the adoption of this standard willTopic 606 were as follows: Balance at Topic 606 Opening Balance at (Amounts in millions) December 30, 2017 Adjustments December 31, 2017 Assets Inventories - net $ 638.8 $ 20.9 $ 659.7 Deferred income tax assets 52.0 0.6 52.6 Liabilities and Equity Other accrued liabilities $ 388.1 $ 23.3 $ 411.4 Retained earnings 3,772.3 (1.8 ) 3,770.5 company believes that the adoption will resultresulted in the recognition of an inventory asset related to certain product returns by increasing the returns liability and recognizing an inventory asset for the anticipated value of the returns;returns to recognize Snap-on’s contractual obligation to recover products from customers; this gross up had no corresponding impact on the corresponding increase inCondensed Consolidated Statement of Earnings. For the inventory asset andanticipated value of the returns, liability is expected to be in the range of $24 million to $28 million at the date of adoption. The adoption will also resultresulted in the recognition of an increase in the inventory obsolescence reserve related to the anticipated value on returns in the range of $2 million to $3$2.4 million with a corresponding adjustment to fiscal 2018 beginning retained earnings.The company expects to adopt Other than the amounts recorded for the adoption of Topic 606 aton the beginningCondensed Consolidated Balance Sheets, there were no other changes since the adoption that would be materially different from previous accounting standards that would affect the Condensed Consolidated Statements of Earnings, Balance Sheets, or Cash Flows. Three Months Ended Six Months Ended (Amounts in millions) June 30, 2018 June 30, 2018 Revenue from contracts with customers $ 949.2 $ 1,879.6 Other revenues 5.4 10.5 Total net sales 954.6 1,890.1 Financial services revenue 82.0 165.0 Total revenues $ 1,036.6 $ 2,055.1 2018 fiscal year usingoperating segments based on segment revenues, including both external and intersegment net sales, and segment operating earnings. Snap-on accounts for both intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the modified retrospective approach. For the three months ended June 30, 2018 Commercial & Snap-on Repair Systems Industrial Tools & Information Financial Snap-on (Amounts in millions) Group Group Group Services Eliminations Incorporated Net sales by geographic region: North America* $ 118.3 $ 346.2 $ 189.4 $ — $ — $ 653.9 Europe 76.6 43.7 68.2 — — 188.5 All other 72.2 22.0 18.0 — — 112.2 External net sales 267.1 411.9 275.6 — — 954.6 Intersegment net sales 70.7 — 67.5 — (138.2 ) — Total net sales 337.8 411.9 343.1 — (138.2 ) 954.6 Financial services revenue — — — 82.0 — 82.0 Total revenue $ 337.8 $ 411.9 $ 343.1 $ 82.0 $ (138.2 ) $ 1,036.6 For the six months ended June 30, 2018 Commercial & Snap-on Repair Systems Industrial Tools & Information Financial Snap-on (Amounts in millions) Group Group Group Services Eliminations Incorporated Net sales by geographic region: North America* $ 225.8 $ 685.1 $ 374.7 $ — $ — $ 1,285.6 Europe 159.5 85.2 135.2 — — 379.9 All other 140.6 46.3 37.7 — — 224.6 External net sales 525.9 816.6 547.6 — — 1,890.1 Intersegment net sales 143.5 — 132.5 — (276.0 ) — Total net sales 669.4 816.6 680.1 — (276.0 ) 1,890.1 Financial services revenue — — — 165.0 — 165.0 Total revenue $ 669.4 $ 816.6 $ 680.1 $ 165.0 $ (276.0 ) $ 2,055.1 * North America is comprised of the United States, Canada and Mexico. For the three months ended June 30, 2018 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 $ 25.6 $ 411.9 $ 275.6 $ — $ — $ 713.1 All other professionals 241.5 — — — — 241.5 External net sales 267.1 411.9 275.6 — — 954.6 Intersegment net sales 70.7 — 67.5 — (138.2 ) — Total net sales 337.8 411.9 343.1 — (138.2 ) 954.6 Financial services revenue — — — 82.0 — 82.0 Total revenue $ 337.8 $ 411.9 $ 343.1 $ 82.0 $ (138.2 ) $ 1,036.6 For the six months ended June 30, 2018 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 $ 48.1 $ 816.6 $ 547.6 $ — $ — $ 1,412.3 All other professionals 477.8 — — — — 477.8 External net sales 525.9 816.6 547.6 — — 1,890.1 Intersegment net sales 143.5 — 132.5 — (276.0 ) — Total net sales 669.4 816.6 680.1 — (276.0 ) 1,890.1 Financial services revenue — — — 165.0 — 165.0 Total revenue $ 669.4 $ 816.6 $ 680.1 $ 165.0 $ (276.0 ) $ 2,055.1 2:3: AcquisitionsJuly 28, 2017,January 31, 2018, Snap-on acquired Torque Control Specialist (“TCS”),substantially all of the assets of George A. Sturdevant, Inc. (d/b/a Fastorq) for a cash purchase price of $3.6 million (or $3.5 million, net of cash acquired). TCS,$3.0 million. Fastorq, based in Adelaide, Australia,New Caney, Texas, designs, assembles and distributes a full range ofhydraulic torque products, including wrenches, multipliers and calibratorshydraulic tensioning products for use in critical industries.In As of the thirdsecond quarter of 2017,2018, the company substantiallyhas completed the purchase accounting valuations for the acquired net assets of TCS.Fastorq. The $1.9$2.6 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets. For segment reporting purposes, the results of operations and assets of TCS have been included in the Commercial & Industrial Group since the acquisition date.May 4,July 28, 2017,Snap-on acquired Norbar Torque Tools Holding Limited, along with its U.S. and Chinese joint venturesControl Specialists Pty Ltd (“Norbar”TCS”), for a cash purchase price of $71.6$3.6 million (or $69.9$3.5 million, net of cash acquired), which reflects a $0.8 million working capital adjustment finalized in the third quarter of 2017. Norbar, based in Banbury, U.K., designs and manufactures. TCS distributes a full range of torque products, including wrenches, multipliers and calibrators for use in critical industries.In As of the thirdsecond quarter of 2017,2018, the company substantiallyhas completed the purchase accounting valuations for the acquired net assets of Norbar, including intangible assets.TCS. The $23.7$2.0 million excess of the Norbar purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets. For segment reporting purposes,resultssecond quarter of operations and2018, the company has completed the purchase accounting valuations for the acquired net assets of Norbar, have been includedincluding intangible assets. The $25.1 million excess of purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the Commercial & Industrial Group since the acquisition date.based in Crewe, U.K., designs and implements automotive vehicle inspection and management software for original equipment manufacturer (“OEM”)OEM franchise repair shops.the BTC purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets.On November 16, 2016,Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a purchase price of $13.0 million (or $12.6 million, net of cash acquired), which reflects a $0.1 million working capital adjustment finalized in the first quarter of 2017. Sturtevant Richmont designs, manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems for a variety of industrial applications.In the first quarter of 2017, the company completed the purchase accounting valuations for the acquired net assets, including intangible assets. The $5.0 million excess of the Sturtevant Richmont purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets. For segment reporting purposes, the results of operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the acquisition date.On October 31, 2016,Snap-on acquiredCar-O-Liner Holding AB(“Car-O-Liner”) for a purchase price of $152.0 million (or $148.1 million, net of cash acquired), which reflects a $0.2 million working capital adjustment finalized in the first quarter of 2017.Car-O-Liner designs and manufactures collision repair equipment, and information and truck alignment systems.In the third quarter of 2017, the company substantially completed the purchase accounting valuations for the acquired net assets ofCar-O-Liner, including intangible assets. The $77.7 million excess of theCar-O-Liner purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Condensed Consolidated Balance Sheets. For segment reporting purposes, substantially all ofCar-O-Liner’s results of operations and assets have been included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the Commercial & Industrial Group.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)The following is a summary of the values of the assets acquired and liabilities assumed ofCar-O-Liner, including adjustments recorded as of the nine months ended September 30, 2017, as a result of new information obtained about facts and circumstances that existed as of the October 31, 2016 acquisition date:(Amounts in millions)Amounts as ofOctober 31, 2016(As Adjusted)Assets acquired:Cash $3.9 Trade and other accounts receivable17.0 Inventories18.3 Property and equipment17.3 Goodwill77.7 Other intangibles:Customer relationships27.2 Non-amortized trademarks27.7 Other assets5.9 Total assets acquired195.0 Liabilities assumed:Accounts payable9.8 Deferred income tax liabilities15.4 Accrued expenses13.5 Pension liabilities4.3 Total liabilities assumed43.0 Net assets acquired $ 152.0 In the nine month period ended September 30, 2017,Snap-on recognized expense of $0.5 million (of which $0.2 million was in “Cost of goods sold” and $0.3 million was in “Operating expenses”) in the accompanying Condensed Consolidated Statements of Earnings related toCar-O-Liner that would have been recognized in 2016 if the provisional adjustments identified in the current reporting period had been recognized as of the October 31, 2016 acquisition date; there was no such expense in the three months ended September 30, 2017.3:6 for further information on goodwill and other intangible assets.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, are as follows:(Amounts in millions) September 30,
2017 December 31,
2016 $ 689.6 $ 612.8 (14.4) (14.0) $ 675.2 $ 598.8 (Amounts in millions) June 30,
2018 December 30,
2017Trade and other accounts receivable $ 683.3 $ 690.2 Allowances for doubtful accounts (16.2 ) (14.6 ) Total trade and other accounts receivable – net $ 667.1 $ 675.6 SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, are as follows:(Amounts in millions) September 30,
2017 December 31,
2016 $ 522.8 $ 488.1 101.4 89.3 624.2 577.4 (17.0) (15.6) (1.6) (1.2) (18.6) (16.8) $ 605.6 $ 560.6 $ 505.8 $ 472.5 99.8 88.1 $ 605.6 $ 560.6 (Amounts in millions) June 30,
2018 December 30,
2017Finance receivables, net of unearned finance charges of $20.7 million and $21.0 million, respectively $ 533.4 $ 523.1 Contract receivables, net of unearned finance charges of $18.6 million and $17.6 million, respectively 88.9 98.1 Total 622.3 621.2 Allowances for doubtful accounts: Finance receivables (19.0 ) (17.7 ) Contract receivables (1.3 ) (1.3 ) Total (20.3 ) (19.0 ) Total current finance and contract receivables – net $ 602.0 $ 602.2 Finance receivables – net $ 514.4 $ 505.4 Contract receivables – net 87.6 96.8 Total current finance and contract receivables – net $ 602.0 $ 602.2 SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, are as follows:(Amounts in millions) September 30,
2017 December 31,
2016 $ 1,055.8 $ 967.5 313.9 289.4 1,369.7 1,256.9 (37.2) (33.0) (3.5) (2.7) (40.7) (35.7) $ 1,329.0 $ 1,221.2 $ 1,018.6 $ 934.5 310.4 286.7 $ 1,329.0 $ 1,221.2 (Amounts in millions) June 30,
2018 December 30,
2017Finance receivables, net of unearned finance charges of $16.7 million and $16.7 million, respectively $ 1,091.3 $ 1,078.0 Contract receivables, net of unearned finance charges of $27.6 million and $25.5 million, respectively 336.1 325.9 Total 1,427.4 1,403.9 Allowances for doubtful accounts: Finance receivables (40.0 ) (38.8 ) Contract receivables (3.5 ) (3.3 ) Total (43.5 ) (42.1 ) Total long-term finance and contract receivables – net $ 1,383.9 $ 1,361.8 Finance receivables – net $ 1,051.3 $ 1,039.2 Contract receivables – net 332.6 322.6 Total long-term finance and contract receivables – net $ 1,383.9 $ 1,361.8 Receivable balances areThe entire receivable balance of a contract is considered delinquent when contractual payments become 30 days past due.SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, there were $27.8$24.6 million and $24.9$28.0 million, respectively, of impaired finance receivables, and there were $2.2$4.5 million and $2.0$2.3 million, respectively, of impaired contract receivables.SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, were immaterial to both the financial services portfolio and the company’s results of operations and financial position.SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, is as follows:(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 $ 16.0 $ 11.6 $ 19.3 $ 46.9 $ 1,531.6 $ 1,578.5 $ 15.1 1.4 0.7 1.7 3.8 411.6 415.4 0.8 $ 15.1 $ 9.8 $ 17.0 $ 41.9 $ 1,413.7 $ 1,455.6 $ 13.2 1.4 0.9 1.4 3.7 375.0 378.7 0.5 (Amounts in millions) Total June 30, 2018: Finance receivables $ 16.9 $ 10.6 $ 16.2 $ 43.7 $ 1,581.0 $ 1,624.7 $ 12.3 Contract receivables 2.0 0.9 3.5 6.4 418.6 425.0 0.2 December 30, 2017: Finance receivables $ 19.3 $ 13.9 $ 20.1 $ 53.3 $ 1,547.8 $ 1,601.1 $ 15.4 Contract receivables 1.2 0.6 1.9 3.7 420.3 424.0 0.6 SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, is as follows: September 30, 2017 December 31, 2016 (Amounts in millions) Finance
Receivables Contract
Receivables Finance
Receivables Contract
Receivables $ 1,550.7 $ 413.2 $ 1,430.7 $ 376.7 27.8 2.2 24.9 2.0 $ 1,578.5 $ 415.4 $ 1,455.6 $ 378.7 June 30, 2018 December 30, 2017 (Amounts in millions) Performing $ 1,600.1 $ 420.5 $ 1,573.1 $ 421.7 Nonperforming 24.6 4.5 28.0 2.3 Total $ 1,624.7 $ 425.0 $ 1,601.1 $ 424.0 SeptemberJune 30, 2018, and December 30, 2017, and December 31, 2016, is as follows:(Amounts in millions) September 30,
2017 December 31,
2016 $ 12.7 $ 11.7 1.5 1.5 (Amounts in millions) June 30, 2018 December 30,
2017Finance receivables $ 12.3 $ 12.6 Contract receivables 4.3 1.7 ninesix months ended SeptemberJune 30, 2017: Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017 (Amounts in millions) Finance
Receivables Contract
Receivables Finance
Receivables Contract
Receivables $ 52.5 $ 4.8 $ 48.6 $ 3.9 12.8 0.8 38.6 2.7 (12.6) (0.7) (38.0) (1.9) 1.5 0.2 4.9 0.3 – – 0.1 0.1 $ 54.2 $ 5.1 $ 54.2 $ 5.1 SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)The following is a rollforward of the allowances for doubtful accounts for finance2018, and contract receivables for the three and nine months ended OctoberJuly 1, 2016: Three Months Ended
October 1, 2016 Nine Months Ended
October 1, 2016 (Amounts in millions) Finance
Receivables Contract
Receivables Finance
Receivables Contract
Receivables $ 42.6 $ 4.5 $ 38.2 $ 4.4 10.8 0.5 30.4 1.1 (9.2) (0.6) (28.0) (1.3) 1.4 0.1 5.0 0.3 $ 45.6 $ 4.5 $ 45.6 $ 4.5 Three Months Ended
June 30, 2018 Six Months Ended
June 30, 2018(Amounts in millions) Allowances for doubtful accounts: Beginning of period $ 58.3 $ 4.6 $ 56.5 $ 4.6 Provision 13.6 0.6 29.4 1.1 Charge-offs (14.6 ) (0.5 ) (30.4 ) (1.1 ) Recoveries 1.7 0.1 3.6 0.2 Currency translation — — (0.1 ) — End of period $ 59.0 $ 4.8 $ 59.0 $ 4.8 Three Months Ended
July 1, 2017 Six Months Ended
July 1, 2017(Amounts in millions) Allowances for doubtful accounts: Beginning of period $ 50.5 $ 4.7 $ 48.6 $ 3.9 Provision 12.8 0.6 25.8 1.9 Charge-offs (12.5 ) (0.6 ) (25.4 ) (1.2 ) Recoveries 1.7 — 3.4 0.1 Currency translation — 0.1 0.1 0.1 End of period $ 52.5 $ 4.8 $ 52.5 $ 4.8 4:5: Inventories(Amounts in millions) September 30,
2017 December 31,
2016 $ 556.6 $ 467.4 49.5 42.7 118.2 93.6 724.3 603.7 (74.4) (73.2) $ 649.9 $ 530.5 (Amounts in millions) June 30,
2018 December 30,
2017Finished goods $ 566.9 $ 541.9 Work in progress 50.7 49.3 Raw materials 127.1 122.7 Total FIFO value 744.7 713.9 Excess of current cost over LIFO cost (76.4 ) (75.1 ) Total inventories – net $ 668.3 $ 638.8 60% and 59%61% of total inventories as of Septemberboth June 30, 2017,2018, and December 31, 2016, respectively.30, 2017. The company accounts for itsnon-U.S. inventory on the FIFO method. As of SeptemberJune 30, 2017,2018, approximately 32%35% of the company’s U.S. inventory was accounted for using the FIFO method and 68%65% was accounted for using thelast-in,first-out (“LIFO”) method. There were no LIFO inventory liquidations in the three and ninesix months ended SeptemberJune 30, 2017,2018, or OctoberJuly 1, 2016.2017.5:6: Goodwill and Other Intangible Assetsninesix months ended SeptemberJune 30, 2017,2018, are as follows:(Amounts in millions) Commercial
& Industrial
Group Snap-on
Tools Group Repair Systems
& Information
Group Total $ 242.4 $ 12.5 $ 640.6 $ 895.5 29.1 – 16.5 45.6 25.7 – (42.8) (17.1) $ 297.2 $ 12.5 $ 614.3 $ 924.0 SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)(Amounts in millions) Total Balance as of December 30, 2017 $ 298.4 $ 12.5 $ 613.2 $ 924.1 Currency translation (10.7 ) — (6.5 ) (17.2 ) Acquisitions and related adjustments 4.1 — — 4.1 Balance as of June 30, 2018 $ 291.8 $ 12.5 $ 606.7 $ 911.0 $924.0$911.0 million as of SeptemberJune 30, 2017, includes2018, includes: (i) $77.7$25.1 million on a preliminary basis, from the acquisition ofCar-O-Liner, (ii) $23.7 million, on a preliminary basis, from the acquisition of Norbar, (iii) $5.9(ii) $2.6 million from the acquisition of BTC, (iv) $5.0Fastorq, and (iii) $2.0 million from the acquisition of Sturtevant Richmont, and (v) $1.9 million, on a preliminary basis, fromTCS, which reflects the acquisition of TCS. The goodwill from theCar-O-Liner acquisition is distributed as follows: $76.9 millionfinal purchase accounting that was completed in the Repair Systems & Information Group and $0.8 million in the Commercial & Industrial Group.second quarter of 2018. The goodwill from the Norbar, Sturtevant RichmontFastorq and TCS acquisitions is included in the Commercial & Industrial Group and the goodwill from the BTC acquisition is included in the Repair Systems & Information Group. See Note 23 for additional information on acquisitions.Since the purchase accounting for deferred taxes for the acquired net assets ofCar-O-Liner, Norbar and TCS were not complete as of September 30, 2017, the allocation of the respective purchase prices and resulting goodwill has been prepared on a preliminary basis and changes to the allocations will occur as the deferred taxes are determined. The company anticipates completing the purchase accounting for these acquisitions in the fourth quarter of 2017. September 30, 2017 December 31, 2016 (Amounts in millions) Gross Carrying
Value Accumulated
Amortization Gross Carrying
Value Accumulated
Amortization $ 175.5 $ (95.6) $ 142.6 $ (86.0) 18.9 (18.4) 17.7 (17.7) 174.5 (129.7) 165.7 (118.3) 33.7 (22.5) 31.9 (21.5) 2.9 (1.9) 2.8 (1.8) 7.7 (2.6) 7.2 (2.2) 413.2 (270.7) 367.9 (247.5) 115.8 – 64.2 – $ 529.0 $ (270.7) $ 432.1 $ (247.5) As of September 30, 2017, the $175.5 million gross carrying value of customer relationships includes $29.1 million related to theCar-O-Liner acquisition, $1.2 million related to the BTC acquisition and $1.1 million related to the Norbar acquisition. The $115.8 million gross carrying value ofnon-amortized trademarks as of September 30, 2017, includes $30.2 million related to theCar-O-Liner acquisition, $16.9 million related to the Norbar acquisition and $2.1 million related to the BTC acquisition. June 30, 2018 December 30, 2017 (Amounts in millions) Amortized other intangible assets: Customer relationships $ 173.3 $ (103.0 ) $ 175.2 $ (98.2 ) Developed technology 18.7 (18.4 ) 18.9 (18.4 ) Internally developed software 181.1 (139.8 ) 177.0 (133.4 ) Patents 34.4 (22.7 ) 34.1 (22.7 ) Trademarks 3.0 (1.9 ) 3.0 (2.0 ) Other 7.7 (2.9 ) 7.7 (2.7 ) Total 418.2 (288.7 ) 415.9 (277.4 ) Non-amortized trademarks 111.4 — 115.2 — Total other intangible assets $ 529.6 $ (288.7 ) $ 531.1 $ (277.4 ) 2017,2018, the results of which did not result in any impairment. 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, could require a provision for impairment of goodwill and/or other intangible assets in a future period. As of SeptemberJune 30, 2017,2018, the company had no accumulated impairment losses.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited) In Years 15 Developed technology 3 34 8 Trademarks 6 Trademarks639 $7.1$6.4 million and $20.7$13.0 million for the respective three and ninesix months ended SeptemberJune 30, 2017,2018, and $5.9$6.5 million and $18.2$13.6 million for the respective three and ninesix months ended OctoberJuly 1, 2016.2017. Based on current levels of amortizable intangible assets and estimated weighted-average useful lives, estimated annual amortization expense is expected to be $27.6 million in 2017, $26.3$25.4 million in 2018, $22.7$22.8 million in 2019, $18.0$18.6 million in 2020, $14.7$15.7 million in 2021, and $9.9$14.3 million in 2022.Note 6: Exit2022, and Disposal ActivitiesSnap-on did not record any costs for exit and disposal activities$12.4 million in the three and nine months ended September 30, 2017, or in the three months ended October 1, 2016.Snap-on recorded $0.9 million of costs for exit and disposal activities in the nine months ended October 1, 2016. The majority of the $0.8 million exit and disposal accrual as of September 30, 2017, is expected to be utilized in 2017.Snap-on anticipates funding the remaining cash requirements of its exit and disposal activities with available cash on hand, cash flows from operations 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 judgment under prevailing circumstances.30.5%25.0% and 31.1%30.6% in the first ninesix months of 2018 and 2017, respectively. The effective tax rate for 2018 includes the net tax benefits attributable to the Tax Act, which was signed into law on December 22, 2017.2016, respectively. $2.3$0.7 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 $1.3$1.5 million over the next 12 months for uncertain tax positions expected to be taken in future tax filings.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, consisted of the following:(Amounts in millions)
2017
2016 $ – $ 150.0 250.0 250.0 200.0 200.0 250.0 250.0 300.0 – 208.4 160.2 1,208.4 1,010.2 (250.0) (150.0) (170.0) (130.0) (33.4) (21.4) (453.4) (301.4) $ 755.0 $ 708.8 *Includes fair value adjustments related to interest rate swaps, debt discounts and debt issuance costs.(Amounts in millions) June 30,
2018 December 30,
20174.25% unsecured notes due 2018 $ — $ 250.0 6.70% unsecured notes due 2019 — 200.0 6.125% unsecured notes due 2021 250.0 250.0 3.25% unsecured notes due 2027 300.0 300.0 4.10% unsecured notes due 2048 400.0 — Other debt* 123.0 186.8 1,073.0 1,186.8 Less: notes payable and current maturities of long-term debt: Current maturities of long-term debt — (250.0 ) Commercial paper borrowings (115.5 ) (151.0 ) Other notes (12.1 ) (32.2 ) (127.6 ) (433.2 ) Total long-term debt $ 945.4 $ 753.6 * Includes fair value adjustments related to interest rate swaps, debt discounts and debt issuance costs. $453.4$127.6 million as of SeptemberJune 30, 2017,2018, included $250 million of 4.25% unsecured notes that mature on January 15, 2018 (the “2018 Notes”), $170$115.5 million of commercial paper borrowings and $33.4$12.1 million of other notes. As of 20162017 year end, notes payable and current maturities of long-term debt of $301.4$433.2 million included $150$250 million of unsecured 5.50%4.25% notes due on January 16, 2018 (the “2018 Notes”), that were repaid in January 2017 upon maturity $130in accordance with their terms, $151.0 million of commercial paper borrowings and $21.4$32.2 million of other notes. As of 20162017 year end, the 2018 Notes$200 million of unsecured 6.70% notes due March 1, 2019 (the “2019 Notes”) were included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as their scheduled maturity was in excess of one year of the 20162017 year-end balance sheet date.2017,for additional information on Other income (expense) - net.$300$400 million of unsecured 3.25%4.10% long-term notes that mature on March 1, 20272048 (the “2027“2048 Notes”). Interest on the 20272048 Notes is payable semi-annually beginning September 1, 2017.2018. Snap-on used a portion of the $297.8$395.4 million of net proceeds from the sale of the 20272048 Notes, reflecting $1.9$3.5 million of transaction costs, to repay the 2019 Notes. The remaining net proceeds were used to repay a portion of its then-outstanding commercial paper borrowings and the remainder was retained for general corporate purposes, which may include working capital, capital expenditures and possible acquisitions.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)SeptemberJune 30, 2017.2018. Borrowings under the Credit Facility bear interest at varying rates based onSnap-on’s then-current, long-term debt ratings. The Credit Facility’s financial covenant requires thatSnap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to 1.00 of consolidated net debt (consolidated debt net of certain cash adjustments) to the sum of such consolidated net debt plus total equity and less accumulated other comprehensive income or loss (the “Debt Ratio”); or (ii) a ratio not greater than 3.50 to 1.00 of such consolidated net debt to earnings before interest, taxes, depreciation, amortization and certain other adjustments for the preceding four fiscal quarters then ended (the “Debt to EBITDA Ratio”).Snap-on may, up to two times during any five-year period during the term of the Credit Facility (including any extensions thereof), increase the maximum Debt Ratio to 0.65 to 1.00 and/or increase the maximum Debt to EBITDA Ratio to 3.75 to 1.00 for four consecutive fiscal quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of SeptemberJune 30, 2017,2018, the company’s actual ratios of 0.260.23 and 1.161.00, 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 asback-up liquidity to support such commercial paper issuances.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 Accumulated other comprehensive income (loss) (“Accumulated OCI”) must be reclassified to earnings in the period in which earnings are affected by the underlying hedged item and the ineffective portion of all hedges must be recognized in earnings in the period that such portion is determined to be ineffective.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)As of September 30, 2017,Snap-on had $179.1 million of net foreign currency forward buy contracts outstanding comprised of buy contracts including $66.4 million in euros, $53.6 million in Swedish kronor, $50.6 million in British pounds, $13.1 million in Hong Kong dollars, $11.1 million in Singapore dollars, $6.7 million in South Korean won, $4.4 million in Mexican pesos, $3.3 million in Danish kroner, $3.2 million in Norwegian kroner, and $2.2 million in other currencies, and sell contracts including $13.7 million in Australian dollars, $6.5 million in Canadian dollars, $5.4 million in Indian rupees, $2.8 million in Thai baht, and $7.1 million in other currencies. As of 2016 year end,Snap-on had $144.4 million of net foreign currency forward buy contracts outstanding comprised of buy contracts including $55.0 million in euros, $53.6 million in British pounds, $47.0 million in Swedish kronor, $9.0 million in Hong Kong dollars, $7.0 million in South Korean won, $5.5 million in Singapore dollars, $4.9 million in Mexican pesos, $4.6 million in Norwegian kroner, and $6.4 million in other currencies, and sell contracts including $16.6 million in Japanese yen, $11.8 million in Canadian dollars, $4.4 million in Australian dollars, $4.0 million in Brazilian real, and $11.8 million in other currencies.SeptemberJune 30, 2017,2018, and December 31, 2016.$250$300 million treasury lock in the fourth quarter of 20162017 to manage the potential change in interest rates in anticipation of the possible issuance of fixed rate debt.debt in the first quarter of 2018. Treasury locks are accounted for as cash flow hedges. The effective differentials to be paid or received on treasury locks related to the anticipated issuance of fixed rate debt are initially recorded in Accumulated OCI. OCI, net of tax effect.consolidated statementsCondensed Consolidated Statements of earnings. As of September 30, 2017, no treasury locks were outstanding. The notional amount of treasury locks outstanding and designated as cash flow hedges as of December 31, 2016, was $250 million.SeptemberJune 30, 2017,2018, Snap-on had equity forwards in place intended to manage market risk with respect to 120,900119,300 shares ofSnap-on common stock associated with its deferred compensation plans.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)Fair Value Measurements:Snap-on has derivative assets and liabilities related to interest rate swaps, treasury locks, foreign currency forwards and equity forwards that are measured at Level 2 fair value on a recurring basis. The fair value of derivative instruments included within the Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016, are as follows: September 30, 2017 December 31, 2016 (Amounts in millions) Asset
Derivatives
Fair Value Liability
Derivatives
Fair Value Asset
Derivatives
Fair Value Liability
Derivatives
Fair Value Derivatives designated as hedging instruments: Other assets $ 8.1 $ – $ 9.8 $ – Other assets – – 14.3 – 8.1 – 24.1 – Derivatives not designated as hedging instruments: Prepaid expenses and other assets $ 8.5 $ – $ 4.4 $ – Other accrued liabilities – 3.0 – 13.5 Prepaid expenses and other assets 18.0 – 17.9 – 26.5 3.0 22.3 13.5 $ 34.6 $ 3.0 $ 46.4 $ 13.5 As of September 30, 2017, and December 31, 2016, the fair value adjustment to long-term debt related to the interest rate swaps was $8.1 million and $9.8 million, respectively.Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Level 2 fair value measurements for derivative assets and liabilities are measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on thesix-month LIBOR swap rate for similar instruments. Treasury locks are valued based on the10-year U.S. treasury interest rate. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. Equity forwards are valued using a market approach based primarily on the company’s stock price at the reporting date. The company did not have any derivative assets or liabilities measured at Level 1 or Level 3, nor did it implement any changes in its valuation techniques as of and for the nine months ended September 30, 2017.The effect of derivative instruments designated as fair value hedges as included in the Condensed Consolidated Statements of Earnings is as follows: Effective Portion of Gain Recognized in Income Three months ended Nine months ended (Amounts in millions) Statement of Earnings
Presentation September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 Derivatives designated as fair value hedges: Interest expense $ 0.7 $ 0.4 $ 2.1 $ 1.9 SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)The effect of derivative instruments designated as cash flow hedges as included in Accumulated OCI on the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Earnings is as follows: Effective Portion of Gain
Recognized in
Accumulated OCI
Three months ended Statement of
Earnings
Presentation Effective Portion of Gain
Reclassified from Accumulated
OCI into Income
Three months ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 Derivatives designated as cash flow hedges: $ – $ – Interest expense $ 0.5 $ 0.1 Effective Portion of Gain
Recognized in
Accumulated OCI
Nine months ended Statement of
Earnings
Presentation Effective Portion of Gain
Reclassified from Accumulated
OCI into Income
Nine months ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 Derivatives designated as cash flow hedges: $ 6.1 $ – Interest expense $ 1.2 $ 0.3 The effects of derivative instruments not designated as hedging instruments as included in the Condensed Consolidated Statements of Earnings are as follows: Gain (Loss) Recognized in Income Three months ended Nine months ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 Derivatives not designated as hedging instruments: $ 1.6 $ (0.7) $ (2.3) $ (4.9) (0.9) (0.7) (2.2) (1.4) Snap-on’s foreign currency forwards are typically not designated as hedges for financial reporting purposes. The fair value changes of foreign currency forwards not designated as hedging instruments are reported in earnings as foreign exchange gain or loss in “Other income (expense) – net” on the accompanying Condensed Consolidated Statements of Earnings. The $1.6 million derivative gain recognized in the third quarter of 2017 was more than offset by transaction losses on net exposures of $3.6 million, resulting in a net foreign exchange loss of $2.0 million for the quarter. The $0.7 million derivative loss recognized in the third quarter of 2016 was increased by transaction losses on net exposures of $0.3 million, resulting in a foreign exchange loss of $1.0 million for the quarter. The $2.3 million derivative loss recognized in the first nine months of 2017 was increased by transaction losses on net exposures of $3.4 million, resulting in a 2017year-to-date net foreign exchange loss of $5.7 million. The $4.9 million derivative loss recognized in the first nine months of 2016 was partially offset by transaction gains on net exposures of $4.0 million, resulting in a 2016year-to-date net foreign exchange loss of $0.9 million. The resulting net foreign exchange gains and losses are included in “Other income (expense) – net” on the accompanying Condensed Consolidated Statements of Earnings. See Note 15 for additional information on “Other income (expense) – net.”SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)Snap-on’s equity forwards are not designated as hedges for financial reporting purposes. Fair value changes of both the equity forwards and related stock-based(mark-to-market) deferred compensation liabilities are reported in “Operating expenses” on the accompanying Condensed Consolidated Statements of Earnings. The $0.9 million derivative loss recognized in the third quarter of 2017 was offset by $0.9 million ofmark-to-market deferred compensation benefit. The $0.7 million derivative loss recognized in the third quarter of 2016 was offset by $0.7 million ofmark-to-market deferred compensation benefit. The $2.2 million derivative loss recognized in the first nine months of 2017 was substantially offset by amark-to-market deferred compensation benefit of $2.1 million. The $1.4 million derivative loss recognized in the first nine months of 2016 was more than offset by amark-to-market deferred compensation benefit of $1.8 million.As of September 30, 2017, the maximum maturity date of any fair value hedge was four years. During the next 12 months,Snap-on expects to reclassify into earnings net gains from Accumulated OCI of approximately $1.0 million after tax at the time the underlying hedge transactions are realized. September 30, 2017 December 31, 2016 (Amounts in millions) Carrying
Value Fair
Value Carrying
Value Fair
Value $ 1,524.4 $ 1,767.1 $ 1,407.0 $ 1,631.2 410.2 448.4 374.8 409.7 1,208.4 1,264.7 1,010.2 1,076.7 June 30, 2018 December 30, 2017 (Amounts in millions) Finance receivables – net $ 1,565.7 $ 1,806.3 $ 1,544.6 $ 1,791.5 Contract receivables – net 420.2 458.0 419.4 459.1 Long-term debt, notes payable and current maturities of long-term debt 1,073.0 1,085.4 1,186.8 1,235.6 waswere estimated, using Level 2 fair value measurements, based on quoted market values ofSnap-on’s publicly traded senior debt. The carrying value of long-term debt includes adjustments related to fair value hedges. The fair value of notes payable approximates such instruments’ carrying value due to their short-term nature.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited) Three Months Ended Nine Months Ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 5.6 $ 4.8 $ 16.8 $ 14.5 13.9 14.2 41.8 42.6 (21.2) (20.4) (62.2) (60.8) 6.9 7.8 20.8 23.5 (0.2) (0.2) (0.8) (0.8) $ 5.0 $ 6.2 $ 16.4 $ 19.0 Three Months Ended Six Months Ended (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Service cost $ 6.1 $ 5.3 $ 12.6 $ 11.2 Interest cost 13.2 13.9 26.4 27.9 Expected return on plan assets (22.2 ) (20.9 ) (43.9 ) (41.0 ) Amortization of unrecognized loss 8.4 7.0 16.4 13.9 Amortization of prior service credit (0.3 ) (0.3 ) (0.6 ) (0.6 ) Net periodic pension cost $ 5.2 $ 5.0 $ 10.9 $ 11.4 $7.1$9.7 million to its foreign pension plans and $2.3$2.4 million to its domestic pension plans in 2017,2018, as required by law. In the first ninesix months of 2017,2018, Snap-on made $61.2$30.8 million of cash contributions to its domestic pension plans consisting of (i) $60.0$30.0 million of discretionary contributions and (ii) $1.2$0.8 million of required contributions. Depending on market and other conditions,Snap-on may make additional discretionary cash contributions to its pension plans in 2017.2018. Three Months Ended Nine Months Ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 0.5 $ 0.6 $ 1.5 $ 1.7 (0.2) (0.3) (0.6) (0.7) (0.1) – (0.2) – $ 0.2 $ 0.3 $ 0.7 $ 1.0 Three Months Ended Six Months Ended (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Interest cost $ 0.4 $ 0.5 $ 0.9 $ 1.0 Expected return on plan assets (0.2 ) (0.2 ) (0.4 ) (0.4 ) Amortization of unrecognized gain (0.1 ) — (0.2 ) (0.1 ) Net periodic postretirement health care cost $ 0.1 $ 0.3 $ 0.3 $ 0.5 will continue in accordance with their terms. As of SeptemberJune 30, 2017,2018, the 2011 Plan had 3,287,4032,606,100 shares available for future grants. The company uses treasury stock to deliver shares under both the 2001 and 2011 Plans.$7.0$7.9 million and $21.4$14.6 million for the respective three and ninesix months ended SeptemberJune 30, 2017,2018, and $7.3$7.0 million and $21.5$14.4 million for the respective three and ninesix months ended OctoberJuly 1, 2016.2017. Cash received from stock purchase and option plan exercises during the respective three and ninesix months ended SeptemberJune 30, 2017,2018, totaled $1.6$16.8 million and $36.2 million, respectively.$28.3 million. Cash received from stock purchase and option plan exercises during the respective three and ninesix months ended OctoberJuly 1, 2016,2017, totaled $4.0$20.5 million and $32.4 million, respectively.$34.6 million. The tax benefit realized from both the exercise and vesting of share-based payment arrangements was $0.8$2.5 million and $12.9$7.6 million for the respective three and ninesix months ended SeptemberJune 30, 2017,2018, and $1.8$3.1 million and $14.9$12.1 million for the respective three and ninesix months ended OctoberJuly 1, 2016.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, using the Black-Scholes valuation model; there were no stock options granted during the three months ended SeptemberJune 30, 2017,2018, or OctoberJuly 1, 2016: Nine Months Ended September 30,
2017 October 1,
2016 5.15 5.05 22.01% 22.17% 1.63% 1.77% 1.78% 1.04% Six Months Ended June 30,
2018 July 1,
20175.35 5.15 Expected volatility factor 20.08% 22.01% Expected dividend yield 1.68% 1.63% Risk-free interest rate 2.71% 1.78% ninesix months ended SeptemberJune 30, 2017,2018, is presented below: Shares
(in thousands) Exercise
Price Per
Share* Remaining
Contractual
Term*
(in years) Aggregate
Intrinsic
Value
(in millions) 3,011 $ 100.78 655 168.71 (278) 87.00 (71) 153.52 3,317 114.22 6.6 $ 127.7 2,108 90.90 5.3 122.5 * Weighted-average Outstanding at December 30, 2017 3,198 $ 115.30 Granted 515 161.18 Exercised (244 ) 73.33 Forfeited or expired (34 ) 159.17 Outstanding at June 30, 2018 3,435 124.72 6.6 $ 128.8 Exercisable at June 30, 2018 2,340 108.26 5.5 124.4 * Weighted-average ninesix months ended SeptemberJune 30, 2018, and July 1, 2017, was $30.21 and October 1, 2016, was $31.13, and $22.99, respectively. The intrinsic value of options exercised was $2.0$10.2 million and $23.4$21.2 million during the respective three and ninesix months ended SeptemberJune 30, 2017,2018, and $4.8$8.2 million and $22.2$21.4 million during the respective three and ninesix months ended OctoberJuly 1, 2016.2017. The fair value of stock options vested was $14.0$16.0 million and $12.7$14.0 million during the respective ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)SeptemberJune 30, 2017,2018, there was $23.3$26.0 million of unrecognized compensation cost related tonon-vested stock options that is expected to be recognized as a charge to earnings over a weighted-average period of 1.71.9 years.a certain level,specified levels, the recipient may earn additional shares of stock, not to exceed 100% of the number of performance awards initially granted.ninesix months ended SeptemberJune 30, 2018, and July 1, 2017, was $160.25 and October 1, 2016, was $168.70, and $138.80, respectively. PSUs related to 60,98050,182 shares and 94,18660,980 shares were paid out during the respective ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016.2017. Earned PSUs 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”).assuming continued employment, these RSUs will vest at the end of fiscal 2017. Based on the company’s 2014 performance, 78,585 RSUs granted in 2014 were earned; these RSUs vested as of fiscal 20162017 year end and were paid out shortly thereafter.ninesix months ended SeptemberJune 30, 2017,2018, are as follows: Shares
(in thousands) Fair Value
Price per
Share* 207 $ 141.94 77 168.70 (5) 142.78 (28) 154.46 251 148.64 * Weighted-average Non-vested performance awards at December 30, 2017 132 $ 149.93 Granted 93 160.25 Vested — — Cancellations and other (7 ) 158.90 Non-vested performance awards at June 30, 2018 218 154.06 * Weighted-average SeptemberJune 30, 2017,2018, there was $14.1$17.6 million of unrecognized compensation cost related tonon-vested performance awards that is expected to be recognized as a charge to earnings over a weighted-average period of 1.72.0 years.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)Snap-on’speriod-end 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 company’s historical dividend payments. 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.ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, using the Black-Scholes valuation model; there were no stock-settled SARs granted during the three months ended SeptemberJune 30, 2017,2018, or OctoberJuly 1, 2016: Nine Months Ended September 30,
2017 October 1,
2016 3.99 4.03 19.39% 20.09% 1.46% 1.66% 1.55% 1.11% Six Months Ended June 30,
2018 July 1,
20173.58 3.99 Expected volatility factor 20.08% 19.39% Expected dividend yield 1.63% 1.46% Risk-free interest rate 2.40% 1.55% ninesix months ended SeptemberJune 30, 2017,2018, are as follows: Stock-settled
SARs
(in thousands) Exercise
Price Per
Share* Remaining
Contractual
Term*
(in years) Aggregate
Intrinsic
Value
(in millions) 303 $ 125.38 100 168.73 (8) 106.07 (22) 124.88 373 137.49 7.8 $ 6.3 179 118.54 6.8 5.4 * Weighted-averageSNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited) Outstanding at December 30, 2017 360 $ 138.63 Granted 89 161.18 Exercised (8 ) 101.87 Forfeited or expired (21 ) 131.42 Outstanding at June 30, 2018 420 144.43 7.7 $ 7.7 Exercisable at June 30, 2018 238 132.55 6.7 7.0 * Weighted-average ninesix months ended SeptemberJune 30, 2018, and July 1, 2017, was $24.71 and October 1, 2016, was $24.13, and $19.47, respectively. The intrinsic value of stock-settled SARs exercised was zero and $0.6 million during the respective three and six months ended June 30, 2018, and zero and $0.5 million during the respective three and ninesix months ended September 30, 2017, and $0.1 million and $0.8 million during the respective three and nine months ended OctoberJuly 1, 2016.2017. The fair value of stock-settled SARs vested was $2.2 million and $2.1 million during both the ninerespective six months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016, was $2.1 million.SeptemberJune 30, 2017,2018, there was $3.0$3.5 million of unrecognized compensation cost related tonon-vested stock-settled SARs that is expected to be recognized as a charge to earnings over a weighted-average period of 1.71.9 years.ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, using the Black-Scholes valuation model; no cash-settled SARs were granted during the three months ended SeptemberJune 30, 2017,2018, or OctoberJuly 1, 2016: Nine Months Ended September 30,
2017 October 1,
2016 3.38 3.43 19.58% 19.03% 1.57% 1.58% 1.62% 0.88% Six Months Ended June 30,
2018 July 1,
20173.26 3.62 Expected volatility factor 20.54% 19.56% Expected dividend yield 1.67% 1.55% Risk-free interest rate 2.63% 1.55% zero$0.1 million and $2.1 million during the respective three and six months ended June 30, 2018, and $0.2 million and $0.8 million during the respective three and ninesix months ended September 30, 2017, and $0.1 million and $0.9 million during the respective three and nine months ended OctoberJuly 1, 2016.2017. The fair value of cash-settled SARs vested during the nine months ended September 30, 2017, and October 1, 2016, was $0.1 million during both the six months ended June 30, 2018, and $0.2 million, respectively.ninesix months ended SeptemberJune 30, 2017,2018, are as follows: Cash-settled
SARs
(in thousands) Fair Value
Price per
Share* 7 $ 40.83 1 13.52 (3) 26.11 5 18.78 * Weighted-average Non-vested cash-settled SARs at December 30, 2017 5 $ 35.41 Granted 1 24.26 Vested (3 ) 24.30 Non-vested cash-settled SARs at June 30, 2018 3 23.94 * Weighted-average SeptemberJune 30, 2017,2018, there was $0.1 million of unrecognized compensation cost related tonon-vested cash-settled SARs that is expected to be recognized as a charge to earnings over a weighted-average period of 1.41.6 years.6,9666,975 shares and 7,1456,966 shares of restricted stock tonon-employee directors in the first ninesix months of 20172018 and 2016,2017, respectively. The fair value of the restricted stock awards is expensed over aone-year vesting period based on the fair value on the date of grant. All restrictions for the restricted stock 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.SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)Employee Stock Purchase PlanSubstantially allSnap-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. For the nine months ended September 30, 2017, and October 1, 2016, issuances under this plan totaled 26,963 shares and 27,156 shares, respectively. As of September 30, 2017, shares reserved for issuance under this plan totaled 753,600 shares andSnap-on held participant contributions of approximately $1.4 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. No compensation costs were recognized for plan participants in the third quarters of 2017 and 2016. The company recognized compensation costs for plan participants of $0.1 million of expense and a $0.1 million benefit for the respective nine months ended September 30, 2017, and October 1, 2016.Franchisee Stock Purchase PlanAll 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. For the nine months ended September 30, 2017, and October 1, 2016, issuances under this plan totaled 47,314 shares and 42,867 shares, respectively. As of September 30, 2017, shares reserved for issuance under this plan totaled 566,155 shares andSnap-on held participant contributions of approximately $2.8 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. The company did not recognize anymark-to-market costs for plan participants in the third quarters of 2017 and 2016. Expense for plan participants was $0.1 million and a $0.4 million benefit for the respective nine months ended September 30, 2017, and October 1, 2016. Three Months Ended Nine Months Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 57,200,880 58,013,852 57,643,948 58,076,627 1,054,360 1,251,062 1,220,575 1,292,765 58,255,240 59,264,914 58,864,523 59,369,392 Three Months Ended Six Months Ended June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Weighted-average common shares outstanding 56,429,715 57,790,299 56,540,611 57,865,481 Effect of dilutive securities 912,347 1,223,560 1,013,034 1,303,683 Weighted-average common shares outstanding, assuming dilution 57,342,062 59,013,859 57,553,645 59,169,164 SeptemberJune 30, 2017,2018, there were 723,2151,295,441 awards outstanding that were anti-dilutive; as of OctoberJuly 1, 2016,2017, there were 1,600722,015 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. SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)Snap-on’sninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, is as follows: Three Months Ended Nine Months Ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 18.9 $ 16.1 $ 16.0 $ 16.4 1.1 2.8 10.4 8.8 (2.2) (3.3) (8.6) (9.6) $ 17.8 $ 15.6 $ 17.8 $ 15.6 Three Months Ended Six Months Ended (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Warranty reserve: Beginning of period $ 17.5 $ 17.1 $ 17.2 $ 16.0 Additions 4.1 5.6 7.9 9.3 Usage (4.1 ) (3.8 ) (7.6 ) (6.4 ) End of period $ 17.5 $ 18.9 $ 17.5 $ 18.9 three months ended SeptemberCondensed Consolidated Balance Sheets as of June 30, 2018, and December 30, 2017, included a $15.0fiscal 2017 accruals of $30.9 million charge related to a judgementjudgment in a patent-related litigation matter, as well as $15.0 million related to a judgment in an employment-related litigation matter brought by an individual that isindividual; both judgments are being appealed.theseall legal matters will not have a material impact onSnap-on’s consolidated financial position, results of operations or cash flows. Three Months Ended Nine Months Ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ – $ 0.2 $ 0.2 $ 0.5 (2.0) (1.0) (5.7) (0.9) (0.1) – (0.2) 0.1 $ (2.1) $ (0.8) $ (5.7) $ (0.3) Three Months Ended Six Months Ended (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Interest income $ 0.2 $ 0.1 $ 0.3 $ 0.2 Net foreign exchange loss (0.3 ) (2.0 ) (2.4 ) (3.7 ) Net periodic pension and postretirement benefits (costs) – non-service 0.8 — 1.4 (0.7 ) Settlement of treasury lock — — 13.3 — Loss on early extinguishment of debt — — (7.8 ) — Other (1.3 ) — (2.6 ) (0.1 ) Total other income (expense) – net $ (0.6 ) $ (1.9 ) $ 2.2 $ (4.3 ) SeptemberJune 30, 2017:(Amounts in millions) Foreign
Currency
Translation Cash Flow
Hedges Defined
Benefit
Pension and
Postretirement
Plans Total $ (130.2) $ 14.6 $ (281.4) $ (397.0) 51.4 – – 51.4 – (0.5) 4.3 3.8 51.4 (0.5) 4.3 55.2 $ (78.8) $ 14.1 $ (277.1) $ (341.8) (Amounts in millions) Total Balance as of March 31, 2018 $ (43.4 ) $ 13.2 $ (255.2 ) $ (285.4 ) Other comprehensive loss before reclassifications (97.6 ) — — (97.6 ) Amounts reclassified from Accumulated OCI — (0.3 ) 6.0 5.7 Net other comprehensive income (loss) (97.6 ) (0.3 ) 6.0 (91.9 ) Balance as of June 30, 2018 $ (141.0 ) $ 12.9 $ (249.2 ) $ (377.3 ) ninesix months ended SeptemberJune 30, 2017:(Amounts in millions) Foreign
Currency
Translation Cash Flow
Hedges Defined
Benefit
Pension and
Postretirement
Plans Total $ (217.7) $ 9.2 $ (290.0) $ (498.5) 138.9 6.1 – 145.0 – (1.2) 12.9 11.7 138.9 4.9 12.9 156.7 $ (78.8) $ 14.1 $ (277.1) $ (341.8) (Amounts in millions) Total Balance as of December 30, 2017 $ (82.5 ) $ 14.5 $ (261.0 ) $ (329.0 ) Other comprehensive loss before reclassifications (58.5 ) (0.8 ) — (59.3 ) Amounts reclassified from Accumulated OCI — (0.8 ) 11.8 11.0 Net other comprehensive income (loss) (58.5 ) (1.6 ) 11.8 (48.3 ) Balance as of June 30, 2018 $ (141.0 ) $ 12.9 $ (249.2 ) $ (377.3 ) OctoberJuly 1, 2016:(Amounts in millions) Foreign
Currency
Translation Cash Flow
Hedges Defined
Benefit
Pension and
Postretirement
Plans Total $ (133.5) $ 0.5 $ (236.8) $ (369.8) (7.8) – – (7.8) – (0.1) 4.8 4.7 (7.8) (0.1) 4.8 (3.1) $ (141.3) $ 0.4 $ (232.0) $ (372.9) (Amounts in millions) Total Balance as of April 1, 2017 $ (179.6 ) $ 15.0 $ (285.8 ) $ (450.4 ) Other comprehensive income before reclassifications 49.4 — — 49.4 Amounts reclassified from Accumulated OCI — (0.4 ) 4.4 4.0 Net other comprehensive income (loss) 49.4 (0.4 ) 4.4 53.4 Balance as of July 1, 2017 $ (130.2 ) $ 14.6 $ (281.4 ) $ (397.0 ) ninethe six months ended OctoberJuly 1, 2016:(Amounts in millions) Foreign
Currency
Translation Cash Flow
Hedges Defined
Benefit
Pension and
Postretirement
Plans Total $ (118.5) $ 0.7 $ (246.4) $ (364.2) (22.8) – – (22.8) – (0.3) 14.4 14.1 (22.8) (0.3) 14.4 (8.7) $ (141.3) $ 0.4 $ (232.0) $ (372.9) (Amounts in millions) Total Balance as of December 31, 2016 $ (217.7 ) $ 9.2 $ (290.0 ) $ (498.5 ) Other comprehensive income before reclassifications 87.5 6.1 — 93.6 Amounts reclassified from Accumulated OCI — (0.7 ) 8.6 7.9 Net other comprehensive income 87.5 5.4 8.6 101.5 Balance as of July 1, 2017 $ (130.2 ) $ 14.6 $ (281.4 ) $ (397.0 ) ninesix month periods ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, are as follows: Amount Reclassified from Accumulated OCI Three Months Ended Nine Months Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Presentation(Amounts in millions) $ 0.5 $ 0.1 $ 1.2 $ 0.3 Interest expense – – – – Income tax expense 0.5 0.1 1.2 0.3 (6.6) (7.6) (19.8) (22.7) See footnote below* 2.3 2.8 6.9 8.3 Income tax expense (4.3) (4.8) (12.9) (14.4) $ (3.8) $ (4.7) $ (11.7) $ (14.1) Amount Reclassified from Accumulated OCI Three Months Ended Six Months Ended June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017 (Amounts in millions) Gains on cash flow hedges: Treasury locks $ 0.3 $ 0.4 $ 0.8 $ 0.7 Interest expense Income tax expense — — — — Income tax expense Net of tax 0.3 0.4 0.8 0.7 Amortization of net unrecognized losses and prior service credits (8.0 ) (6.7 ) (15.6 ) (13.2 ) See footnote below* Income tax benefit 2.0 2.3 3.8 4.6 Income tax expense Net of tax (6.0 ) (4.4 ) (11.8 ) (8.6 ) Total reclassifications for the period, net of tax $ (5.7 ) $ (4.0 ) $ (11.0 ) $ (7.9 ) * SNAP-ON INCORPORATEDNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)dealership service and repair shops (“OEM dealerships”),dealerships, through direct and distributor channels. Financial Services consists of the business operations ofSnap-on’s finance subsidiaries. Three Months Ended Nine Months Ended (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 314.6 $ 289.3 $ 923.3 $ 862.0 392.7 397.2 1,215.9 1,216.4 333.5 286.1 990.4 860.1 1,040.8 972.6 3,129.6 2,938.5 (137.0) (138.5) (417.3) (397.9) $ 903.8 $ 834.1 $ 2,712.3 $ 2,540.6 79.0 71.6 233.5 207.2 $ 982.8 $ 905.7 $ 2,945.8 $ 2,747.8 $ 50.1 $ 43.7 $ 134.4 $ 124.1 56.3 64.6 207.2 207.6 83.4 71.8 244.0 215.3 56.0 50.6 163.1 147.1 245.8 230.7 748.7 694.1 (36.7) (22.5) (79.3) (67.6) $ 209.1 $ 208.2 $ 669.4 $ 626.5 (13.1) (13.1) (38.8) (39.1) (2.1) (0.8) (5.7) (0.3) $ 193.9 $ 194.3 $ 624.9 $ 587.1 Three Months Ended Six Months Ended (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Net sales: Commercial & Industrial Group $ 337.8 $ 310.0 $ 669.4 $ 608.7 Snap-on Tools Group 411.9 413.8 816.6 823.2 Repair Systems & Information Group 343.1 338.1 680.1 656.9 Segment net sales 1,092.8 1,061.9 2,166.1 2,088.8 Intersegment eliminations (138.2 ) (140.5 ) (276.0 ) (280.3 ) Total net sales $ 954.6 $ 921.4 $ 1,890.1 $ 1,808.5 Financial Services revenue 82.0 77.7 165.0 154.5 Total revenues $ 1,036.6 $ 999.1 $ 2,055.1 $ 1,963.0 Operating earnings: Commercial & Industrial Group $ 49.0 $ 43.0 $ 95.5 $ 84.9 Snap-on Tools Group 79.0 80.7 147.9 151.0 Repair Systems & Information Group 88.7 82.2 174.5 161.3 Financial Services 57.8 54.6 114.7 107.1 Segment operating earnings 274.5 260.5 532.6 504.3 Corporate (23.6 ) (22.2 ) (47.1 ) (43.3 ) Operating earnings $ 250.9 $ 238.3 $ 485.5 $ 461.0 Interest expense (12.0 ) (13.0 ) (25.6 ) (25.7 ) Other income (expense) – net (0.6 ) (1.9 ) 2.2 (4.3 ) Earnings before income taxes and equity earnings $ 238.3 $ 223.4 $ 462.1 $ 431.0 (Amounts in millions) June 30,
2018 December 30,
2017Assets: Commercial & Industrial Group $ 1,087.4 $ 1,113.9 Snap-on Tools Group 746.7 714.3 Repair Systems & Information Group 1,289.0 1,314.3 Financial Services 1,988.4 1,971.8 Total assets from reportable segments $ 5,111.5 $ 5,114.3 Corporate 225.1 200.6 Elimination of intersegment receivables (64.6 ) (65.8 ) Total assets $ 5,272.0 $ 5,249.1 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(Unaudited)(Amounts in millions) September 30,
2017 December 31,
2016 $ 1,104.0 $ 907.1 734.9 668.1 1,313.5 1,211.0 1,944.3 1,789.7 $ 5,096.7 $ 4,575.9 224.2 212.3 (64.7) (65.0) $ 5,256.2 $ 4,723.2 SNAP-ON INCORPORATED(“ (“Snap-on” or “the company”) or its management; (iii) are specifically identified as forward-looking; or (iv) describeSnap-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, as well as those factors discussed in its Annual Report on Form10-K for the fiscal year ended December 31, 2016,30, 2017, which are incorporated herein by reference, 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.(such as the recent hurricanes in the southern United States and the Caribbean), planned facility closures or other labor interruptions, the effects of external negative factors, including adverse developments in world financial markets, developments related to tariffs and other trade issues or disputes, weakness in certain areas of the global economy (including as a result of the United Kingdom’s pending exit from the European Union), and significant changes in the current competitive environment, inflation, interest rates and other monetary and market fluctuations, changes in tax rates, ruleslaws and regulations, and the impact of energy and raw material supply and pricing, including steel (as a result of recently-imposed U.S. tariffs on certain steel imports or otherwise) and gasoline, the amount, rate and growth ofSnap-on’s general and administrative expenses, including health care and postretirement costs (resulting from, among other matters, U.S. health care legislation and its ongoing implementation or reform), continuing and potentially increasing required contributions to pension and postretirement plans, the impacts ofnon-strategic business and/or product line rationalizations, and the effects on business as a result of new legislation, regulations or government-related developments or issues, risks associated with data security and technological systems and protections, thepotential reputational damages and costs related to litigation as well as an inability to assure that costs related to litigation will be reduced or eliminated on appeal, and other world or local events outsideSnap-on’s control, including terrorist disruptions.Snap-on disclaims any responsibility to update any forward-looking statement provided in this document, except as required by law.Recent AcquisitionsSpecialistSpecialists Pty Ltd (“TCS”), for a cash purchase price of $3.6 million (or $3.5 million, net of cash acquired). TCS based in Adelaide, Australia, distributes a full range of torque products, including wrenches, multipliers and calibrators for use in critical industries. For segment reporting purposes, the results of operations and assets of TCS have been included in the Commercial & Industrial Group since the acquisition date.HoldingHoldings Limited, along with its U.S. and Chinese joint ventures (“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired), which reflects a $0.8 million working capital adjustment finalized in the third quarter of 2017.. Norbar based in Banbury, U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators for use in critical industries. For segment reporting purposes, the results of operations and assets of Norbar have been included in the Commercial & Industrial Group since the acquisition date. based in Crewe, U.K., designs and implements automotive vehicle inspection and management software for original equipment manufacturer (“OEM”) franchise repair shops.&and Information Group since the acquisition date.On November 16, 2016,Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a purchase price of $13.0 million (or $12.6 million, net of cash acquired), which reflects a $0.1 million working capital adjustment finalized in the first quarter of 2017. Sturtevant Richmont designs, manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems for a variety of industrial applications. For segment reporting purposes, the results of operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the acquisition date.On October 31, 2016,Snap-on acquiredCar-O-Liner Holding AB(“Car-O-Liner”) for a purchase price of $152.0 million (or $148.1 million, net of cash acquired), which reflects a $0.2 million working capital adjustment finalized in the first quarter of 2017.Car-O-Liner designs and manufactures collision repair equipment, and information and truck alignment systems. For segment reporting purposes, substantially all ofCar-O-Liner’s results of operations and assets have been included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the Commercial & Industrial Group.SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, are as follows: Three Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 903.8 100.0% $ 834.1 100.0% $ 69.7 8.4% (455.2) -50.4% (415.0) -49.8% (40.2) -9.7% 448.6 49.6% 419.1 50.2% 29.5 7.0% (295.5) -32.7% (261.5) -31.3% (34.0) -13.0% 153.1 16.9% 157.6 18.9% (4.5) -2.9% 79.0 100.0% 71.6 100.0% 7.4 10.3% (23.0) -29.1% (21.0) -29.3% (2.0) -9.5% 56.0 70.9% 50.6 70.7% 5.4 10.7% 209.1 21.3% 208.2 23.0% 0.9 0.4% (13.1) -1.4% (13.1) -1.4% – – (2.1) -0.2% (0.8) -0.1% (1.3) NM 193.9 19.7% 194.3 21.5% (0.4) -0.2% (57.2) -5.8% (59.6) -6.6% 2.4 4.0% 136.7 13.9% 134.7 14.9% 2.0 1.5% 0.4 – 0.5 – (0.1) -20.0% 137.1 13.9% 135.2 14.9% 1.9 1.4% (3.7) -0.3% (3.5) -0.4% (0.2) -5.7% $ 133.4 13.6% $ 131.7 14.5% $ 1.7 1.3% NM: Not meaningfulPercentage 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. Three Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Net sales $ 954.6 100.0 % $ 921.4 100.0 % $ 33.2 3.6 % Cost of goods sold (467.5 ) (49.0 )% (458.2 ) (49.7 )% (9.3 ) (2.0 )% Gross profit 487.1 51.0 % 463.2 50.3 % 23.9 5.2 % Operating expenses (294.0 ) (30.8 )% (279.5 ) (30.4 )% (14.5 ) (5.2 )% Operating earnings before financial services 193.1 20.2 % 183.7 19.9 % 9.4 5.1 % Financial services revenue 82.0 100.0 % 77.7 100.0 % 4.3 5.5 % Financial services expenses (24.2 ) (29.5 )% (23.1 ) (29.7 )% (1.1 ) (4.8 )% Operating earnings from financial services 57.8 70.5 % 54.6 70.3 % 3.2 5.9 % Operating earnings 250.9 24.2 % 238.3 23.9 % 12.6 5.3 % Interest expense (12.0 ) (1.1 )% (13.0 ) (1.3 )% 1.0 7.7 % Other income (expense) – net (0.6 ) (0.1 )% (1.9 ) (0.2 )% 1.3 NM Earnings before income taxes and equity earnings 238.3 23.0 % 223.4 22.4 % 14.9 6.7 % Income tax expense (55.8 ) (5.4 )% (67.3 ) (6.8 )% 11.5 17.1 % Earnings before equity earnings 182.5 17.6 % 156.1 15.6 % 26.4 16.9 % Equity earnings, net of tax 0.2 — 0.7 0.1 % (0.5 ) NM Net earnings 182.7 17.6 % 156.8 15.7 % 25.9 16.5 % Net earnings attributable to noncontrolling interests (4.0 ) (0.4 )% (3.6 ) (0.4 )% (0.4 ) (11.1 )% Net earnings attributable to Snap-on Inc. $ 178.7 17.2 % $ 153.2 15.3 % $ 25.5 16.6 % 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. $903.8$954.6 million in the thirdsecond quarter of 20172018 increased $69.7$33.2 million, or 8.4%3.6%, from 20162017 levels, reflecting a $19.5$12.1 million, or 2.3%1.3%, increase in organic sales (anon-GAAP financial measure that excludes acquisition-related sales and the impact of foreign currency translation), $44.3$8.1 million of acquisition-related sales, and $5.9$13.0 million of favorable foreign currency translation.Snap-on has significant international operations and is subject to risks inherent with foreign operations, including foreign currency translation fluctuations.adjusted to excludeexcluding 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, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. The company’s organic sales disclosures 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 thenon-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 our businesses and facilitating comparisons of our sales performance with prior periods.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$448.6$487.1 million in the thirdsecond quarter of 20172018 compared to $419.1$463.2 million last year. Gross margin (gross profit as a percentage of net sales) of 49.6%51.0% in the quarter declined 60improved 70 basis points (100 basis points (“bps”) equals 1.0 percent) from 50.2%50.3% last year primarily due to 40 bps of unfavorable foreign currency effects and lower gross margin on acquisition relatedbenefits from higher sales, partially offset by savings from the company’s “Rapid Continuous Improvement” or “RCI initiatives.”consolidations.optimization. Unless individually significant, it is not practicable to disclose each RCI activity that generated savings and/or segregate RCI savings embedded in sales volume increases.$295.5$294.0 million in the thirdsecond quarter of 20172018 compared to $261.5$279.5 million last year, as 2017 included a $15.0 million charge related to a judgment in an employment-related litigation matter brought by an individual that is being appealed (“legal charge”). The company can provide no assurance as to the results of that appeal.year. The operating expense margin (operating expenses as a percentage of net sales) of 32.7% was 14030.8% increased 40 bps higher thanfrom 30.4% last year as 170 bps for the legal chargeprimarily due to higher costs and 3010 bps of operating expenses forfrom acquisitions, were partially offset by sales volume leverage.$153.1$193.1 million in the thirdsecond quarter of 2017,2018, including $1.9$4.5 million of unfavorablefavorable foreign currency effects, and $15.0 million for the legal charge, decreased $4.5increased $9.4 million, or 2.9%5.1%, as compared to $157.6$183.7 million last year. As a percentage of net sales, operating earnings before financial services of 16.9%, including the legal charge,20.2% compared to 18.9%19.9% last year.$79.0$82.0 million in the thirdsecond quarter of 20172018 compared to revenue of $71.6$77.7 million last year. Financial services operating earnings of $56.0$57.8 million in the thirdsecond quarter of 2017,2018, including $0.1$0.3 million of favorable foreign currency effects, increased $5.4$3.2 million, or 10.7%5.9%, as compared to $50.6$54.6 million last year. The year-over-year increases in both revenue and operating earnings primarily reflect continued growth of the company’s financial services portfolio.$209.1$250.9 million in the thirdsecond quarter of 2017,2018, including $1.8$4.8 million of unfavorablefavorable foreign currency effects, and $15.0 million for the legal charge, increased $0.9$12.6 million, or 0.4%5.3%, from $208.2$238.3 million last year. As a percentage of revenues (net sales plus financial services revenue), operating earnings of 21.3%24.2% in the quarter compared to 23.0%23.9% last year.unchanged at $13.1$12.0 million and $13.0 million in the respective thirdsecond quarters of 20172018 and 2016.2017. See Note 8 to the Condensed Consolidated Financial Statements for information onSnap-on’s debt and credit facilities.$2.1$0.6 million and $0.8$1.9 million in the respective thirdsecond quarters of 20172018 and 2016.2017. Other income (expense) – net reflectsincludes 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 15 to the Condensed Consolidated Financial Statements for information on other income (expense) – net. third 2018 second quarter effective income tax rate on earnings attributable toSnap-on was 30.1%23.8%, including a 0.6%20 bps of benefit fromrelated to newly issued guidance associated with the legal charge,Tax Act (the “tax benefit”), as compared to 30.6% in 2017 and 31.2% in 2016.2017. See Note 7 to the Condensed Consolidated Financial Statements for information on income taxes.$133.4$178.7 million, or $2.29$3.12 per diluted share, in the thirdsecond quarter of 2017,2018, including $9.3$0.5 million, or $0.16$0.01 per diluted share, for the after tax legal charge,benefit, increased $1.7$25.5 million, or $0.07$0.52 per diluted share, from 20162017 levels. Net earnings attributable toSnap-on in the thirdsecond quarter of 20162017 were $131.7$153.2 million, or $2.22$2.60 per diluted share.Results of operations for the nine months ended September 30, 2017, and October 1, 2016, are as follows: Nine Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 2,712.3 100.0% $ 2,540.6 100.0% $ 171.7 6.8% (1,352.7) -49.9% (1,274.9) -50.2% (77.8) -6.1% 1,359.6 50.1% 1,265.7 49.8% 93.9 7.4% (853.3) -31.4% (786.3) -30.9% (67.0) -8.5% 506.3 18.7% 479.4 18.9% 26.9 5.6% 233.5 100.0% 207.2 100.0% 26.3 12.7% (70.4) -30.1% (60.1) -29.0% (10.3) -17.1% 163.1 69.9% 147.1 71.0% 16.0 10.9% 669.4 22.7% 626.5 22.8% 42.9 6.8% (38.8) -1.3% (39.1) -1.4% 0.3 0.8% (5.7) -0.2% (0.3) – (5.4) NM 624.9 21.2% 587.1 21.4% 37.8 6.4% (187.1) -6.3% (179.4) -6.6% (7.7) -4.3% 437.8 14.9% 407.7 14.8% 30.1 7.4% 1.2 – 2.2 0.1% (1.0) -45.5% 439.0 14.9% 409.9 14.9% 29.1 7.1% (10.8) -0.4% (9.8) -0.3% (1.0) 10.2% $ 428.2 14.5% $ 400.1 14.6% $ 28.1 7.0% NM: Not meaningfulPercentage 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. Six Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Net sales $ 1,890.1 100.0 % $ 1,808.5 100.0 % $ 81.6 4.5 % Cost of goods sold (931.4 ) (49.3 )% (897.0 ) (49.6 )% (34.4 ) (3.8 )% Gross profit 958.7 50.7 % 911.5 50.4 % 47.2 5.2 % Operating expenses (587.9 ) (31.1 )% (557.6 ) (30.8 )% (30.3 ) (5.4 )% Operating earnings before financial services 370.8 19.6 % 353.9 19.6 % 16.9 4.8 % Financial services revenue 165.0 100.0 % 154.5 100.0 % 10.5 6.8 % Financial services expenses (50.3 ) (30.5 )% (47.4 ) (30.7 )% (2.9 ) (6.1 )% Operating earnings from financial services 114.7 69.5 % 107.1 69.3 % 7.6 7.1 % Operating earnings 485.5 23.6 % 461.0 23.5 % 24.5 5.3 % Interest expense (25.6 ) (1.2 )% (25.7 ) (1.3 )% 0.1 0.4 % Other income (expense) – net 2.2 0.1 % (4.3 ) (0.2 )% 6.5 NM Earnings before income taxes and equity earnings 462.1 22.5 % 431.0 22.0 % 31.1 7.2 % Income tax expense (113.4 ) (5.5 )% (129.9 ) (6.6 )% 16.5 12.7 % Earnings before equity earnings 348.7 17.0 % 301.1 15.4 % 47.6 15.8 % Equity earnings, net of tax 0.8 — 0.8 — — NM Net earnings 349.5 17.0 % 301.9 15.4 % 47.6 15.8 % Net earnings attributable to noncontrolling interests (7.8 ) (0.4 )% (7.1 ) (0.4 )% (0.7 ) (9.9 )% Net earnings attributable to Snap-on Inc. $ 341.7 16.6 % $ 294.8 15.0 % $ 46.9 15.9 % 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. $2,712.3$1,890.1 million in the first ninesix months of 20172018 increased $171.7$81.6 million, or 6.8%4.5%, from 20162017 levels, reflecting a $76.1$19.3 million, or 3.0%1.0%, increase in organic sales, gain and $111.8$22.4 million of acquisition-related sales, partially offset by $16.2and $39.9 million of unfavorablefavorable foreign currency translation.$1,359.6$958.7 million in the first ninesix months of 20172018 compared to $1,265.7$911.5 million last year. Gross margin of 50.1% in 201750.7% improved 30 bpsbasis points from 49.8%50.4% last year primarily due to benefits from higher sales and savings from the company’s RCI initiatives, partially offset by 20 bpshigher material and other costs.unfavorable foreign currency effects. Restructuring costs reflected in gross profit were $0.8$587.9 million in the first ninesix months of 2016.Operating expenses of $853.3 million in the first nine months of 2017, including $15.0 million for the legal charge,2018 compared to $786.3$557.6 million last year. The operating expense margin of 31.4% in 2017 increased 50 bps from 30.9%31.1% compared to 30.8% last year as 50 bps of operating expenses from acquisitions and 50 bps from the legal charge were partially offset by benefits from sales volume leverage. Restructuring costs included in operating expenses were $0.1 million in the first nine months of 2016.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$506.3$370.8 million in the first ninesix months of 2017,2018, including $10.1$8.2 million of unfavorablefavorable foreign currency effects, and $15.0 million for the legal charge, increased $26.9$16.9 million, or 5.6%4.8%, as compared to $479.4 $353.9��million last year. As a percentage of net sales, operating earnings before financial services of 18.7%19.6%, including the legal charge, compared to 18.9%was unchanged from last year.$233.5$165.0 million in the first ninesix months of 20172018 compared to revenue of $207.2$154.5 million last year. Financial services operating earnings of $163.1$114.7 million in 2017,2018, including $0.7$0.8 million of unfavorablefavorable foreign currency effects, increased $16.0$7.6 million, or 10.9%7.1%, as compared to $147.1$107.1 million last year. The year-over-year increases in both revenue and operating earnings primarily reflect continued growth of the company’s financial services portfolio.$669.4$485.5 million in the first ninesix months of 2017,2018, including $10.8$9.0 million of unfavorablefavorable foreign currency effects, and $15.0 million for the legal charge, increased $42.9$24.5 million, or 6.8%5.3%, from $626.5$461.0 million last year. As a percentage of revenues, operating earnings of 22.7% declined23.6% improved 10 bps from 22.8%23.5% last year.of $38.8was $25.6 million and $25.7 million in the respective first ninesix months of 2017 decreased $0.3 million from $39.1 million last year.2018 and 2017. See Note 8 to the Condensed Consolidated Financial Statements for information onSnap-on’s debt and credit facilities.$5.7 million and $0.3$4.3 million in the respective first ninesix months of 20172018 and 2016.2017. Other income (expense) – net in fiscal 2018 includes a net gain of $5.5 million associated with a treasury lock settlement gain of $13.3 million related to the issuance of debt, partially offset by $7.8 million of expense related to the early extinguishment of debt (collectively, the “net debt items”). Other income (expense) - net also 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 15 to the Condensed Consolidated Financial Statements for information on other income (expense) – net.ninesix months of 2017,2018, Snap-on’s effective income tax rate on earnings attributable toSnap-on was 30.5%25.0%, including a 0.2% benefit from50 bps of charges related to newly issued guidance associated with the legal charge, and 31.1%Tax Act (the “tax charge”), as compared to 30.6% in 2016.2017. See Note 7 to the Condensed Consolidated Financial Statements for information on income taxes.$428.2$341.7 million, or $7.27$5.93 per diluted share, in the first ninesix months of 2017,2018, including $9.3$4.1 million, or $0.16$0.07 per diluted share, for the afterafter-tax net debt items, and $2.1 million, or $0.04 per diluted share for the tax legal charge, increased $28.1$46.9 million, or $0.53$0.95 per diluted share, from 20162017 levels. Net earnings attributable toSnap-on in the first nine months of 2016 were $400.1 million, or $6.74 per diluted share. Exit and Disposal ActivitiesSnap-on did not record any costs for exit and disposal activities in the first ninesix months of 2017 were $294.8 million, or the third quarter of 2016.Snap-on recorded $0.9 million of costs for exit and disposal activities in the first nine months of 2016. See Note 6 to the Condensed Consolidated Financial Statements for information onSnap-on’s exit and disposal activities.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued) Three Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 250.8 79.7% $ 213.1 73.7% $ 37.7 17.7% 63.8 20.3% 76.2 26.3% (12.4) -16.3% 314.6 100.0% 289.3 100.0% 25.3 8.7% (187.9) -59.7% (176.6) -61.0% (11.3) -6.4% 126.7 40.3% 112.7 39.0% 14.0 12.4% (76.6) -24.4% (69.0) -23.9% (7.6) -11.0% $ 50.1 15.9% $ 43.7 15.1% $ 6.4 14.6% Three Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change External net sales $ 267.1 79.1 % $ 236.5 76.3 % $ 30.6 12.9 % Intersegment net sales 70.7 20.9 % 73.5 23.7 % (2.8 ) (3.8 )% Segment net sales 337.8 100.0 % 310.0 100.0 % 27.8 9.0 % Cost of goods sold (204.8 ) (60.6 )% (189.1 ) (61.0 )% (15.7 ) (8.3 )% Gross profit 133.0 39.4 % 120.9 39.0 % 12.1 10.0 % Operating expenses (84.0 ) (24.9 )% (77.9 ) (25.1 )% (6.1 ) (7.8 )% Segment operating earnings $ 49.0 14.5 % $ 43.0 13.9 % $ 6.0 14.0 % $314.6$337.8 million in the thirdsecond quarter of 20172018 increased $25.3$27.8 million, or 8.7%9.0%, from 20162017 levels, reflecting a $0.6$13.9 million, or 0.2%4.4%, organic sales gain, $22.7$8.1 million of acquisition-related sales, and $2.0$5.8 million of favorable foreign currency translation. The organic sales increase primarily includes a high single-digitdouble-digit gain in sales to customers in critical industries a low single-digit gain inand slightly higher sales in the segment’s European-based hand tools business, substantiallypartially offset by a double-digitlow single-digit decrease in sales of power tools, and a mid single-digit sales decrease in the segment’s Asia Pacific operations.$126.7$133.0 million in the thirdsecond quarter of 20172018 compared to $112.7$120.9 million last year. ThirdSecond quarter gross margin of 40.3%39.4% in 2017 increased 1302018 improved 40 bps from 39.0% in 20162017 primarily due to favorable business mixhigher sales volume and benefits from the company’s RCI initiatives.$76.6$84.0 million in the thirdsecond quarter of 20172018 compared to $69.0$77.9 million last year. The operating expense margin of 24.4%24.9% in 2017 increased 50 bps from 23.9%2018 compared to 25.1% in 2016 primarily due to 40 bps of operating expenses for acquisitions. $50.1$49.0 million in the thirdsecond quarter of 2017,2018, including $0.1$0.2 million of favorableunfavorable foreign currency effects, increased $6.4$6.0 million from 20162017 levels. Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 15.9%14.5% in 2017 improved 802018, including 30 bps from 15.1%of unfavorable foreign currency effects, compared to13.9% in 2016. Nine Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 712.9 77.2% $ 644.5 74.8% $ 68.4 10.6% 210.4 22.8% 217.5 25.2% (7.1) -3.3% 923.3 100.0% 862.0 100.0% 61.3 7.1% (559.2) -60.6% (527.4) -61.2% (31.8) -6.0% 364.1 39.4% 334.6 38.8% 29.5 8.8% (229.7) -24.8% (210.5) -24.4% (19.2) -9.1% $ 134.4 14.6% $ 124.1 14.4% $ 10.3 8.3% SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued) Six Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change External net sales $ 525.9 78.6 % $ 462.1 75.9 % $ 63.8 13.8 % Intersegment net sales 143.5 21.4 % 146.6 24.1 % (3.1 ) (2.1 )% Segment net sales 669.4 100.0 % 608.7 100.0 % 60.7 10.0 % Cost of goods sold (407.1 ) (60.8 )% (371.1 ) (61.0 )% (36.0 ) (9.7 )% Gross profit $ 262.3 39.2 % 237.6 39.0 % 24.7 10.4 % Operating expenses (166.8 ) (24.9 )% (152.7 ) (25.1 )% (14.1 ) (9.2 )% Segment operating earnings 95.5 14.3 % $ 84.9 13.9 % $ 10.6 12.5 % $923.3$669.4 million in the first ninesix months of 20172018 increased $61.3$60.7 million, or 7.1%10.0%, from 20162017 levels, reflecting a $22.5$19.9 million, or 2.6%3.2%, organic sales gain, and $46.4$21.7 million of acquisition-related sales, partially offset by $7.6and $19.1 million of unfavorablefavorable foreign currency translation. The organic sales increase primarily includes midhigh single-digit gains in sales to customers in critical industries, low single-digit gains in sales in the segment’s European-based hand tools business and in sales to customers in critical industries,its Asia/Pacific operations, partially offset by a midlow single-digit decrease in sales of power tools.$364.1$262.3 million in the first ninesix months of 20172018 compared to $334.6$237.6 million last year. Gross margin of 39.4%39.2% in 2018 improved 6020 bps from 38.8% last year39.0% in 2017 primarily due to higher sales savingsvolume and benefits from the company’s RCI initiatives, and 20 bps of favorable foreign currency effects, partially offset by a 1040 bps impact from acquisitions. $229.7$166.8 million in the first ninesix months of 20172018 compared to $210.5$152.7 million last year. The operating expense margin of 24.8% increased 4024.9% in 2018 improved 20 bps from 24.4% last year primarily due to increased costs, including higher costs for research and engineering activities, and 2025.1% in 2017, as 10 bps of operating expenses for acquisitions.$134.4$95.5 million in the first ninesix months of 2017,2018, including $1.0$0.7 million of favorableunfavorable foreign currency effects, increased $10.3$10.6 million from 20162017 levels. Operating margin for the Commercial & Industrial Group of 14.6%14.3% in the first nine months2018, including 50 bps of 2017 increased 20 bps from 14.4% last year. Three Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 392.7 100.0% $ 397.2 100.0% $ (4.5) -1.1% (228.5) -58.2% (223.9) -56.4% (4.6) -2.1% 164.2 41.8% 173.3 43.6% (9.1) -5.3% (107.9) -27.5% (108.7) -27.3% 0.8 0.7% $ 56.3 14.3% $ 64.6 16.3% $ (8.3) -12.8% Three Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Segment net sales $ 411.9 100.0 % $ 413.8 100.0 % $ (1.9 ) (0.5 )% Cost of goods sold (222.7 ) (54.1 )% (230.2 ) (55.6 )% 7.5 3.3 % Gross profit 189.2 45.9 % 183.6 44.4 % 5.6 3.1 % Operating expenses (110.2 ) (26.7 )% (102.9 ) (24.9 )% (7.3 ) (7.1 )% Segment operating earnings $ 79.0 19.2 % $ 80.7 19.5 % $ (1.7 ) (2.1 )% $392.7$411.9 million in the thirdsecond quarter of 20172018 decreased $4.5$1.9 million, or 1.1%0.5%, from 20162017 levels, reflecting a $6.5$6.1 million, or 1.6%1.5%, organic sales decrease,decline, partially offset by $2.0$4.2 million of favorable foreign currency translation. Theorganic sales decreasedecline includes a midlow single-digit decrease in the company’s U.S. franchise operations, while sales in the company’s international franchise operations were essentially flat. Six Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Segment net sales $ 816.6 100.0 % $ 823.2 100.0 % $ (6.6 ) (0.8 )% Cost of goods sold (447.1 ) (54.8 )% (462.5 ) (56.2 )% 15.4 3.3 % Gross profit 369.5 45.2 % 360.7 43.8 % 8.8 2.4 % Operating expenses (221.6 ) (27.1 )% (209.7 ) (25.5 )% (11.9 ) (5.7 )% Segment operating earnings $ 147.9 18.1 % $ 151.0 18.3 % $ (3.1 ) (2.1 )% double-digitlow single-digit sales gain in the company’s international franchise operations.$164.2$369.5 million in the third quarterfirst six months of 20172018 compared to $173.3$360.7 million last year. Gross margin of 41.8% decreased 18045.2% improved 140 bps from 43.6%43.8% last year primarily due to a year-over-year shift in product mix and 7060 bps of unfavorablefavorable foreign currency effects.$107.9$221.6 million in the third quarterfirst six months of 20172018 compared to $108.7$209.7 million last year. The operating expense margin of 27.5%27.1% increased 20160 bps from 27.3%25.5% last year primarily due to higher costs and the effect of the lower sales.$56.3$147.9 million in the third quarterfirst six months of 2017,2018, including $2.3$7.8 million of unfavorablefavorable foreign currency effects, decreased $8.3$3.1 million from 20162017 levels. Operating margin for theSnap-on Tools Group of 14.3%18.1% in the third quarterfirst six months of 20172018 compared to 16.3%18.3% last year. Nine Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 1,215.9 100.0% $ 1,216.4 100.0% $ (0.5) – (691.0) -56.8% (687.8) -56.5% (3.2) -0.5% 524.9 43.2% 528.6 43.5% (3.7) -0.7% (317.7) -26.2% (321.0) -26.4% 3.3 1.0% $ 207.2 17.0% $ 207.6 17.1% $ (0.4) -0.2% Segment net sales of $1,215.9 million in the first nine months of 2017 decreased $0.5 million from 2016 levels, reflecting a $5.7 million, or 0.5%, organic sales gain, which was more than offset by $6.2 million of unfavorable foreign currency translation. The organic sales increase includes a double-digit sales gain in the company’s international franchise operations partially offset by a low single-digit sales decrease in the company’s U.S. franchise operations.Segment gross profit of $524.9 million in the first nine months of 2017 compared to $528.6 million last year. Gross margin of 43.2% declined 30 bps from 43.5% last year primarily due to 60 bps of unfavorable foreign currency effects, partially offset by savings from the company’s RCI initiatives.Segment operating expenses of $317.7 million in the first nine months of 2017 compared to $321.0 million last year. The operating expense margin of 26.2% improved 20 bps from 26.4% last year primarily due to sales volume leverage in the company’s international franchise operations.As a result of these factors, segment operating earnings of $207.2 million in the first nine months of 2017, including $9.2 million of unfavorable foreign currency effects, decreased $0.4 million from 2016 levels. Operating margin for theSnap-on Tools Group of 17.0% in the first nine months of 2017 compared to 17.1% last year. Three Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 260.3 78.1% $ 223.8 78.2% $ 36.5 16.3% 73.2 21.9% 62.3 21.8% 10.9 17.5% 333.5 100.0% 286.1 100.0% 47.4 16.6% (175.8) -52.7% (153.0) -53.5% (22.8) -14.9% 157.7 47.3% 133.1 46.5% 24.6 18.5% (74.3) -22.3% (61.3) -21.4% (13.0) -21.2% $ 83.4 25.0% $ 71.8 25.1% $ 11.6 16.2% Three Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change External net sales $ 275.6 80.3 % $ 271.1 80.2 % $ 4.5 1.7 % Intersegment net sales 67.5 19.7 % 67.0 19.8 % 0.5 0.7 % Segment net sales 343.1 100.0 % 338.1 100.0 % 5.0 1.5 % Cost of goods sold (178.2 ) (51.9 )% (179.4 ) (53.1 )% 1.2 0.7 % Gross profit 164.9 48.1 % 158.7 46.9 % 6.2 3.9 % Operating expenses (76.2 ) (22.2 )% (76.5 ) (22.6 )% 0.3 0.4 % Segment operating earnings $ 88.7 25.9 % $ 82.2 24.3 % $ 6.5 7.9 % $333.5$343.1 million in the thirdsecond quarter of 20172018 increased $47.4$5.0 million, or 16.6%1.5%, from 20162017 levels, reflecting a $23.7$0.1 million, or 8.2%,essentially flat, organic sales gain, $21.6 million of acquisition-related sales and $2.1$4.9 million of favorable foreign currency translation. The organic sales increase includes double-digit gainsa mid single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers, largely offset by a highmid single-digit sales increasedecrease of undercar equipment; sales to OEM dealerships and a low single-digit sales increase of undercar equipment.$157.7$164.9 million in the thirdsecond quarter of 20172018 compared to $133.1$158.7 million last year. Gross margin of 47.3%48.1% improved 80120 bps from 46.5%46.9% last year primarily as a result of 40 bpsa shift in sales that included higher volumes of benefits from acquisitionshigh gross margin products and savingsbenefits from the company’s RCI initiatives.$74.3$76.2 million in the thirdsecond quarter of 20172018 compared to $61.3$76.5 million last year. The operating expense margin of 22.3% increased 9022.2% improved 40 bps from 21.4%22.6% last year primarily due to 180 bps of impact from acquisitions, partially offset by benefits of sales volume leverage.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$83.4$88.7 million in the thirdsecond quarter of 2017,2018, including $0.3$0.6 million of favorable foreign currency effects, increased $11.6$6.5 million from 20162017 levels. Operating margin for the Repair Systems & Information Group of 25.0%25.9% in the thirdsecond quarter of 2017 compared to 25.1%2018 improved 160 bps from 24.3% last year. Nine Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 783.5 79.1% $ 679.7 79.0% $ 103.8 15.3% 206.9 20.9% 180.4 21.0% 26.5 14.7% 990.4 100.0% 860.1 100.0% 130.3 15.1% (519.8) -52.5% (457.6) -53.2% (62.2) -13.6% 470.6 47.5% 402.5 46.8% 68.1 16.9% (226.6) -22.9% (187.2) -21.8% (39.4) -21.0% $ 244.0 24.6% $ 215.3 25.0% $ 28.7 13.3% Six Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change External net sales $ 547.6 80.5 % $ 523.2 79.6 % $ 24.4 4.7 % Intersegment net sales 132.5 19.5 % 133.7 20.4 % (1.2 ) (0.9 )% Segment net sales 680.1 100.0 % 656.9 100.0 % 23.2 3.5 % Cost of goods sold (353.2 ) (51.9 )% (343.7 ) (52.3 )% (9.5 ) (2.8 )% Gross profit 326.9 48.1 % 313.2 47.7 % 13.7 4.4 % Operating expenses (152.4 ) (22.4 )% (151.9 ) (23.1 )% (0.5 ) (0.3 )% Segment operating earnings $ 174.5 25.7 % $ 161.3 24.6 % $ 13.2 8.2 % $990.4$680.1 million in the first ninesix months of 20172018 increased $130.3$23.2 million, or 15.1%3.5%, from 20162017 levels, reflecting a $69.4an $8.5 million, or 8.1%1.3%, organic sales gain, and $65.4$0.7 million of acquisition-related sales, partially offset by $4.5and $14.0 million of unfavorablefavorable foreign currency translation. The organic sales increase includes higha mid single-digit gainsgain in sales of diagnostic and repair information products to independent repair shop owners and managers, and inpartially offset by a low single-digit sales decrease of undercar equipment; sales to OEM dealerships and a mid single-digit gain in sales of undercar equipment.$470.6$326.9 million in the first ninesix months of 20172018 compared to $402.5$313.2 million last year. Gross margin of 47.5%48.1% improved 7040 bps from 46.8%47.7% last year primarily due toas a result of a shift in sales that included higher volumes of high gross margin products and benefits from acquisitions and savings from the company’s RCI initiatives. Restructuring costs included in gross profit were $0.8initiatives, partially offset by 30 bps of unfavorable foreign currency effects.ninesix months of 2016.Segment operating expenses of $226.6 million in the first nine months of 20172018 compared to $187.2$151.9 million last year. The operating expense margin of 22.9% increased 11022.4% improved 70 bps from 21.8%23.1% last year primarily due to 190 bps of impactbenefits from acquisitions,sales volume leverage and RCI initiatives, partially offset by sales volume leverage. Restructuring costs included in operating expenses were $0.1 million in the first nine monthsa 10 bps impact from unfavorable foreign currency effects.$244.0$174.5 million in the first ninesix months of 2017,2018, including $1.9$1.1 million of unfavorablefavorable foreign currency effects, increased $28.7$13.2 million from 20162017 levels. Operating margin for the Repair Systems & Information Group of 24.6%25.7% in the first ninesix months of 2017 compared to 25.0%2018 improved 110 bps from 24.6% last year. Three Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 79.0 100.0% $ 71.6 100.0% $ 7.4 10.3% (23.0) -29.1% (21.0) -29.3% (2.0) -9.5% $ 56.0 70.9% $ 50.6 70.7% $ 5.4 10.7% Three Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Financial services revenue $ 82.0 100.0 % $ 77.7 100.0 % $ 4.3 5.5 % Financial services expenses (24.2 ) (29.5 )% (23.1 ) (29.7 )% (1.1 ) (4.8 )% Segment operating earnings $ 57.8 70.5 % $ 54.6 70.3 % $ 3.2 5.9 % $79.0$82.0 million in the thirdsecond quarter of 20172018 increased $7.4$4.3 million, or 10.3%5.5%, from $71.6$77.7 million last year primarily due to $8.0$5.0 million of higher revenue as a result of growth of the company’s financial services portfolio, partially offset by $0.7 million of decreased revenue from lower average yields on finance and contract receivables. In the thirdsecond quarter, the average yield on finance receivables was 17.7% for 2018 and 17.9% for 2017, and 18.0% for 2016, and the respective average yield on contract receivables was 9.2%9.1% for both 2018 and 9.4%.2017. Originations of $271.8$276.1 million in the thirdsecond quarter of 20172018 increased $2.0$5.5 million, or 0.7%2.0%, from 20162017 levels.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$23.0$24.2 million in the thirdsecond quarter of 20172018 increased $2.0$1.1 million from $21.0$23.1 million last year primarily due to changes in both the size of the portfolio and in the provisions for credit losses. As a percentage of the average financial services portfolio, financial services expenses were 1.2% in both of the thirdsecond quarters of 20172018 and 2016.$56.0$57.8 million in the thirdsecond quarter of 2017,2018, including $0.1$0.3 million of favorable foreign currency effects, increased $5.4$3.2 million, or 10.7%5.9%, from 20162017 levels. Nine Months Ended (Amounts in millions) September 30, 2017 October 1, 2016 Change $ 233.5 100.0% $ 207.2 100.0% $ 26.3 12.7% (70.4) -30.1% (60.1) -29.0% (10.3) -17.1% $ 163.1 69.9% $ 147.1 71.0% $ 16.0 10.9% Six Months Ended (Amounts in millions) June 30, 2018 July 1, 2017 Change Financial services revenue $ 165.0 100.0 % $ 154.5 100.0 % $ 10.5 6.8 % Financial services expenses (50.3 ) (30.5 )% (47.4 ) (30.7 )% (2.9 ) (6.1 )% Segment operating earnings $ 114.7 69.5 % $ 107.1 69.3 % $ 7.6 7.1 % $233.5$165.0 million in the first ninesix months of 20172018 increased $26.3$10.5 million, or 12.7%6.8%, from $207.2$154.5 million last year primarily due to $27.2$11.8 million of higher revenue as a result of continued growth of the company’s financial services portfolio, partially offset by $0.6$1.3 million of decreased revenue from lower average yields on contractfinance receivables. In the first ninesix months, of 2017 and 2016, the average yield on finance receivables was 17.8% for 2018 and 17.9% for both periods,2017, and the respective average yield on contract receivables was 9.2% for both 2018 and 9.4%.2017. Originations of $807.0$523.4 million in 2017the first six months of 2018 decreased $8.4$11.8 million, or 1.0%2.2%, from 20162017 levels.$70.4$50.3 million in the first ninesix months of 20172018 increased $10.3$2.9 million from $60.1$47.4 million last year primarily due to changes in both the size of the portfolio and in the provisions for credit losses. As a percentage of the average financial services portfolio, financial services expenses were 3.7% and 3.6%2.5% in both of the respective first ninesix months of 20172018 and 2016.$163.1$114.7 million in the first ninesix months of 2017,2018, including $0.7$0.8 million of unfavorablefavorable foreign currency effects, increased $16.0$7.6 million, or 10.9%7.1%, from 20162017 levels.34 to the Condensed Consolidated Financial Statements for further information on financial services. third second quarter 20172018 general corporate expenses of $36.7$23.6 million increased $14.2$1.4 million from $22.5$22.2 million last year. The year-over-year increase in general corporate expenses primarily reflects $15.0 million for the legal charge partially offset by lower pension expense.ninesix months of 20172018 of $79.3$47.1 million increased $11.7$3.8 million from $67.6$43.3 million last year. The year-over-year increase in general corporate expenses primarily reflects $15.0 million for the legal charge partially offset by lower pension expense.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)informationInformation for the three months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, is as follows: Operations* Financial Services (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 903.8 $ 834.1 $ – $ – (455.2) (415.0) – – 448.6 419.1 – – (295.5) (261.5) – – 153.1 157.6 – – – – 79.0 71.6 – – (23.0) (21.0) – – 56.0 50.6 153.1 157.6 56.0 50.6 (13.1) (13.0) – (0.1) 17.7 18.3 (17.7) (18.3) (2.1) (0.9) – 0.1 155.6 162.0 38.3 32.3 (43.2) (47.7) (14.0) (11.9) 112.4 114.3 24.3 20.4 24.3 20.4 – – 0.4 0.5 – – 137.1 135.2 24.3 20.4 (3.7) (3.5) – – $ 133.4 $ 131.7 $ 24.3 $ 20.4 Operations* Financial Services (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Net sales $ 954.6 $ 921.4 $ — $ — Cost of goods sold (467.5 ) (458.2 ) — — Gross profit 487.1 463.2 — — Operating expenses (294.0 ) (279.5 ) — — Operating earnings before financial services 193.1 183.7 — — Financial services revenue — — 82.0 77.7 Financial services expenses — — (24.2 ) (23.1 ) Operating earnings from financial services — — 57.8 54.6 Operating earnings 193.1 183.7 57.8 54.6 Interest expense (11.9 ) (12.9 ) (0.1 ) (0.1 ) Intersegment interest income (expense) – net 17.2 17.9 (17.2 ) (17.9 ) Other income (expense) – net (0.7 ) (1.9 ) 0.1 — Earnings before income taxes and equity earnings 197.7 186.8 40.6 36.6 Income tax expense (45.2 ) (53.7 ) (10.6 ) (13.6 ) Earnings before equity earnings 152.5 133.1 30.0 23.0 Financial services – net earnings attributable to Snap-on 30.0 23.0 — — Equity earnings, net of tax 0.2 0.7 — — Net earnings 182.7 156.8 30.0 23.0 Net earnings attributable to noncontrolling interests (4.0 ) (3.6 ) — — Net earnings attributable to Snap-on $ 178.7 $ 153.2 $ 30.0 $ 23.0 –- Supplemental Condensed Statements of Earnings informationInformation for the ninesix months ended SeptemberJune 30, 2017,2018, and OctoberJuly 1, 2016,2017, is as follows: Operations* Financial Services (Amounts in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 2,712.3 $ 2,540.6 $ – $ – (1,352.7) (1,274.9) – – 1,359.6 1,265.7 – – (853.3) (786.3) – – 506.3 479.4 – – – – 233.5 207.2 – – (70.4) (60.1) – – 163.1 147.1 506.3 479.4 163.1 147.1 (38.6) (38.8) (0.2) (0.3) 53.1 53.9 (53.1) (53.9) (5.7) (0.4) – 0.1 515.1 494.1 109.8 93.0 (146.6) (145.1) (40.5) (34.3) 368.5 349.0 69.3 58.7 69.3 58.7 – – 1.2 2.2 – – 439.0 409.9 69.3 58.7 (10.8) (9.8) – – $ 428.2 $ 400.1 $ 69.3 $ 58.7 Operations* Financial Services (Amounts in millions) June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017Net sales $ 1,890.1 $ 1,808.5 $ — $ — Cost of goods sold (931.4 ) (897.0 ) — — Gross profit 958.7 911.5 — — Operating expenses (587.9 ) (557.6 ) — — Operating earnings before financial services 370.8 353.9 — — Financial services revenue — — 165.0 154.5 Financial services expenses — — (50.3 ) (47.4 ) Operating earnings from financial services — — 114.7 107.1 Operating earnings 370.8 353.9 114.7 107.1 Interest expense (25.4 ) (25.5 ) (0.2 ) (0.2 ) Intersegment interest income (expense) – net 36.1 35.4 (36.1 ) (35.4 ) Other income (expense) – net 2.1 (4.3 ) 0.1 — Earnings before income taxes and equity earnings 383.6 359.5 78.5 71.5 Income tax expense (93.0 ) (103.4 ) (20.4 ) (26.5 ) Earnings before equity earnings 290.6 256.1 58.1 45.0 Financial services – net earnings attributable to Snap-on 58.1 45.0 — — Equity earnings, net of tax 0.8 0.8 — — Net earnings 349.5 301.9 58.1 45.0 Net earnings attributable to noncontrolling interests (7.8 ) (7.1 ) — — Net earnings attributable to Snap-on $ 341.7 $ 294.8 $ 58.1 $ 45.0 informationInformation as of SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, is as follows: Operations* Financial Services (Amounts in millions) September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016 $ 93.9 $ 77.5 $ 0.2 $ 0.1 21.0 15.0 – – 674.6 598.2 0.6 0.6 – – 505.8 472.5 8.3 7.9 91.5 80.2 649.9 530.5 – – 127.6 122.4 0.8 1.1 1,575.3 1,351.5 598.9 554.5 472.6 423.8 1.6 1.4 311.6 288.7 – – 55.2 49.1 26.0 23.7 553.0 584.7 – – – – 1,018.6 934.5 11.2 11.2 299.2 275.5 924.0 895.5 – – 258.3 184.6 – – 52.6 47.9 – 0.1 $ 4,213.8 $ 3,837.0 $ 1,944.3 $ 1,789.7 Operations* Financial Services (Amounts in millions) June 30,
2018December 30,
2017June 30,
2018December 30,
2017ASSETS Current assets: Cash and cash equivalents $ 112.3 $ 91.8 $ — $ 0.2 Intersegment receivables 18.2 17.1 — — Trade and other accounts receivable – net 666.5 674.9 0.6 0.7 Finance receivables – net — — 514.4 505.4 Contract receivables – net 6.8 9.4 80.8 87.4 Inventories – net 668.3 638.8 — — Prepaid expenses and other assets 112.5 117.6 0.8 0.7 Total current assets 1,584.6 1,549.6 596.6 594.4 Property and equipment – net 477.6 482.4 1.8 2.0 Investment in Financial Services 320.0 317.4 — — Deferred income tax assets 33.7 25.2 18.0 26.8 Intersegment long-term notes receivable 654.3 583.7 — — Long-term finance receivables – net — — 1,051.3 1,039.2 Long-term contract receivables – net 12.0 13.2 320.6 309.4 Goodwill 911.0 924.1 — — Other intangibles – net 240.9 253.7 — — Other assets 59.2 63.1 0.1 — Total assets $ 4,293.3 $ 4,212.4 $ 1,988.4 $ 1,971.8 SheetsSheet Information (continued): Operations* Financial Services (Amounts in millions) September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016 $ 203.4 $ 151.4 $ 250.0 $ 150.0 203.4 170.3 1.3 0.6 – – 21.0 15.0 47.7 52.8 0.1 – 72.2 85.7 2.6 4.1 76.1 66.7 – – 338.9 292.1 34.5 22.8 941.7 819.0 309.5 192.5 – – 1,308.0 1,293.5 28.5 13.1 – – 34.3 36.7 – – 181.8 246.5 – – 87.5 86.5 15.2 15.0 1,273.8 1,201.8 1,632.7 1,501.0 2,921.8 2,617.2 311.6 288.7 18.2 18.0 – – 2,940.0 2,635.2 311.6 288.7 $ 4,213.8 $ 3,837.0 $ 1,944.3 $ 1,789.7 Operations* Financial Services (Amounts in millions) June 30,
2018 December 30,
2017 June 30,
2018 December 30,
2017LIABILITIES AND EQUITY Current liabilities: Notes payable and current maturities of long-term debt $ 127.6 $ 183.2 $ — $ 250.0 Accounts payable 197.5 177.1 1.0 1.1 Intersegment payables — — 18.2 17.1 Accrued benefits 44.6 55.8 — — Accrued compensation 65.4 67.8 2.7 3.7 Franchisee deposits 68.7 66.5 — — Other accrued liabilities 396.2 366.0 30.9 29.7 Total current liabilities 900.0 916.4 52.8 301.6 Long-term debt and intersegment long-term — — 1,599.7 1,337.3 Deferred income tax liabilities 27.2 28.4 — — Retiree health care benefits 34.5 36.0 — — Pension liabilities 117.8 158.9 — — Other long-term liabilities 102.2 100.4 15.9 15.5 Total liabilities 1,181.7 1,240.1 1,668.4 1,654.4 Total shareholders’ equity attributable to Snap-on Inc. 3,093.2 2,953.9 320.0 317.4 Noncontrolling interests 18.4 18.4 — — Total equity 3,111.6 2,972.3 320.0 317.4 Total liabilities and equity $ 4,293.3 $ 4,212.4 $ 1,988.4 $ 1,971.8 (including the repayment of $250 million of unsecured 4.25% notes, due January 15, 2018 (the “2018 Notes”)), 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.OctoberJuly 13, 2017,2018, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 andP-1 by Moody’s Investors Service;A- andA-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 assurances of the availability of future financing or the terms on which it might be available, or that its debt ratings may not decrease.SeptemberJune 30, 2017,2018, working capital (current assets less current liabilities) of $923.1$1,228.4 million increased $28.6$302.4 million from $894.5$926.0 million as of December 31, 201630, 2017 (fiscal 20162017 year end) due toprimarily as a $261.9 millionresult of the net increasechanges in total current assets, partially offset by a $233.3 million increase in total current liabilities asworking capital discussed below.SeptemberJune 30, 2017,2018, and December 31, 2016:(Amounts in millions) September 30,
2017 December 31,
2016 $ 94.1 $ 77.6 675.2 598.8 505.8 472.5 99.8 88.1 649.9 530.5 121.1 116.5 2,145.9 1,884.0 (453.4) (301.4) (204.7) (170.9) (564.7) (517.2) (1,222.8) (989.5) $ 923.1 $ 894.5 (Amounts in millions) June 30,
2018 December 30,
2017Cash and cash equivalents $ 112.3 $ 92.0 Trade and other accounts receivable – net 667.1 675.6 Finance receivables – net 514.4 505.4 Contract receivables – net 87.6 96.8 Inventories – net 668.3 638.8 Prepaid expenses and other assets 105.7 110.7 Total current assets 2,155.4 2,119.3 Notes payable and current maturities of long-term debt (127.6 ) (433.2 ) Accounts payable (198.5 ) (178.2 ) Other current liabilities (600.9 ) (581.9 ) Total current liabilities (927.0 ) (1,193.3 ) Total working capital $ 1,228.4 $ 926.0 $94.1$112.3 million as of SeptemberJune 30, 2017,2018, increased $16.5$20.3 million from 20162017year-end levels primarily due to (i) $528.9$418.8 million of cash generated from operations; (ii) $395.4 million of net proceeds from the issuance of the 2048 Notes; (iii) $379.9 million of cash from collections of finance receivables; (ii) $415.0 million of cash generated from operations, including $14.9 million of cash proceeds from the first-quarter 2017 settlement of a treasury lock; (iii) $297.8 million of net proceeds from the February 15, 2017 issuance of $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”);and (iv) $51.0 million of net proceeds from notes payable and other short-term borrowings; and (v) $36.2$28.3 million of cash proceeds from stock purchase and option plan exercises. These increases in cash and cash equivalents were partially offset by (i) the funding of $670.0$436.7 million of new finance receivables; (ii) the repayment of $250 million of the 2018 Notes; (iii) the repayment of $200 million of the 2019 Notes; (iv) the repurchase of 1,348,000646,000 shares of the company’s common stock for $212.6$98.7 million; (iii) the January 2017 repayment of $150 million of long-term notes at maturity (the “2017 Notes”); (iv)(v) dividend payments to shareholders of $123.0$92.8 million; (v)(vi) $54.0 million of repayments of notes payable and other short-term borrowings; (vii) the funding of $82.9$38.6 million for acquisitions;of capital expenditures; (viii) the $7.8 million loss on early extinguishment of debt; and (vi)(ix) the funding of $57.3$3.0 million for acquisitions.$94.1$112.3 million of cash and cash equivalents as of SeptemberJune 30, 2017, $76.72018, $95.5 million was held outside of the United States.Snap-on Snap‑on maintainsnon-U.S. funds in its foreign operations to:to (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise. The repatriation of cash from certain foreign subsidiaries could have adverse net tax consequences on the company shouldSnap-on be required to pay and record U.S. income taxes and foreign withholding taxes on such funds. Alternatively, the repatriation of cash from certain other foreign subsidiaries could result in favorable net tax consequences for the company.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 does not incur unfavorable net tax consequences.$675.2$667.1 million as of SeptemberJune 30, 2017, increased $76.42018, decreased $8.5 million from 20162017year-end levels primarily due to higher sales, $22.2$12.9 million of foreign currency translation, and $9.1partially offset by $0.2 million of receivables related to the Norbar, BTC and TCS acquisitions.Fastorq acquisition. 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 67were 64 days and 66 days at SeptemberJune 30, 2017,2018, and 63 days at December 31, 2016.30, 2017$605.6$602.0 million as of SeptemberJune 30, 2017,2018, compared to $560.6$602.2 million at 20162017 year end. The long-term portions of net finance and contract receivables of $1,329.0$1,383.9 million as of SeptemberJune 30, 2017,2018, compared to $1,221.2$1,361.8 million at 20162017 year end. The combined $152.8$21.9 million increase in net current and long-term finance and contract receivables over 20162017year-end levels is primarily due to continued growth of the company’s financial services portfolio, and $20.0partially offset by $8.9 million of foreign currency translation. $649.9$668.3 million as of SeptemberJune 30, 2017,2018, increased $119.4$29.5 million from 20162017year-end levels primarily due to $20.9 million related to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), continued support continuedfor higher customer demand and new product introductions, as well as from $24.1 million of foreign currency translation and $6.0$0.5 million of inventories related to the Norbar and TCS acquisitions.Fastorq acquisition, partially offset by $13.9 million of foreign currency translation. For additional information on Topic 606, see Note 2 to the Condensed Consolidated Financial Statements. 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 3.13.0 turns and 3.33.2 turns as of SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, respectively. Inventories accounted for using thefirst-in,first-out (“FIFO”) method approximated 60% and 59%61% of total inventories as of Septemberboth June 30, 2017,2018, and December 31, 2016, respectively.30, 2017. All other inventories are accounted for using thelast-in,first-out (“LIFO”) method. The company’s LIFO reserve was $74.4$76.4 million and $73.2$75.1 million as of SeptemberJune 30, 2017,2018, and December 31, 2016,30, 2017, respectively.$453.4$127.6 million as of SeptemberJune 30, 2017,2018, included $250 million of the 2018 Notes, $170$115.5 million of commercial paper borrowings and $33.4$12.1 million of other notes. As of 20162017 year end, notes payable and current maturities of long-term debt of $301.4$433.2 million included $150$250 million of the 20172018 Notes (that were repaid upon maturity in January 2017)2018), $130$151.0 million of commercial paper borrowings and $21.4$32.2 million of other notes. As of 20162017 year end, the 2019 Notes, which were redeemed and repaid in the first quarter of 2018, Notes were included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as their scheduled maturity was in excess of one year of the 20162017 year-end balance sheet date.$204.7$198.5 million as of SeptemberJune 30, 2017,2018, increased $33.8$20.3 million from 20162017year-end levels primarily due to the timing of payments, and $6.5partially offset by $2.8 million of foreign currency translation. $366.0$419.5 million as of SeptemberJune 30, 2017,2018, increased $58.1$31.4 million from 20162017year-end levels primarily due to $23.3 million related to the adoption of Topic 606 and higher income tax accruals, the $15.0 million legal charge and $10.3partially offset by $4.9 million of foreign currency translation. For additional information on Topic 606, see Note 2 to the Condensed Consolidated Financial Statements.SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$755.0$945.4 million as of SeptemberJune 30, 2018, consisted of: (i) $250 million of unsecured 6.125% notes that mature in 2021; (ii) $300 million of unsecured 3.25% notes that mature in 2027; and (iii) $400 million of the 2048 Notes, partially offset by $4.6 million of fair value adjustments related to interest rate swaps, debt discounts and debt issuance costs. Long-term debt of $753.6 million as of 2017 year end consisted of (i) $200 million of unsecured 6.70% notes that mature in 2019;the 2019 Notes; (ii) $250 million of unsecured 6.125% notes that mature in 2021; (iii) $300 million of the 2027 Notes;unsecured 3.25% notes that mature in 2027; and (iv) $5.0$3.6 million of other long-term debt. Long-term debt of $708.8 million as of 2016 year end consisted of (i) $250 million of the 2018 Notes; (ii) $200 million of unsecured 6.70% notes that mature in 2019; (iii) $250 million of unsecured 6.125% notes that mature in 2021; and (iv) $8.8 million of other long-term debt. As of 2016 year end, the 2018 Notes were included in “Long-term debt” on the accompanying Consolidated Balance Sheets as their scheduled maturity was in excess of one year of the 2016year-end balance sheet date; the 2027 Notes were issued in February 2017.SeptemberJune 30, 2017,2018, no amounts were outstanding under the Credit Facility. Borrowings under the Credit Facility bear interest at varying rates based onSnap-on’s then-current, long-term debt ratings. The Credit Facility’s financial covenant requires thatSnap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to 1.00 of consolidated net debt (consolidatedSeptemberJune 30, 2017,2018, the company’s actual ratios of 0.260.23 and 1.16,1.00, 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 asback-up liquidity to support such commercial paper issuances.SeptemberJune 30, 2017,2018, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements.basis, including the repayment of the 2018 Notes upon maturity.basis. Snap-on manages its aggregate short-term borrowings so as not to exceed its availability under the revolving 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 may take advantage of what it believes are favorable market conditions to issue long-term debt to further improve its liquidity and capital resources. Near-term liquidity requirements forSnap-on include scheduled debt payments, (including the repayment of the 2018 Notes), 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 $7.1$9.7 million to its foreign pension plans and $2.3$2.4 million to its domestic pension plans in 2017,2018, as required by law. In the first ninesix months of 2017,2018, Snap-on made $60.0$30.0 million of discretionary cash contributions to its domestic pension plans; depending on market and other conditions,Snap-on Snap‑on may make additional discretionary cash contributions to its pension plans in the balance of 2017.$415.0$418.8 million and $415.6$319.5 million in the first ninesix months of 20172018 and 2016,2017, respectively. The $0.6$99.3 million year-over-year decreaseincrease in net cash provided by operating activities primarily reflects an increase of $58.9 million from net changes in operating assets and liabilities partially offset byand $47.6 million of higher net earnings, andpartially offset by $14.9 million of cash proceeds from the settlement of a treasury lock.SNAP-ON INCORPORATEDlock in 2017.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)$282.4$100.8 million in the first ninesix months of 20172018 included additions to finance receivables of $670.0$436.7 million, partially offset by collections of $528.9$379.9 million. Net cash used by investing activities of $244.1$220.3 million in the first ninesix months of 20162017 included additions to finance receivables of $691.4$458.8 million, partially offset by collections of $501.7$352.9 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 and diagnostic and equipment products on an extended-term payment plan, generally with average payment terms approaching four years.ninesix months of 20172018 also included a total of $82.9$3.0 million (net of $1.8 million of cash acquired) for acquisitions. See Note 23 to the Consolidated Financial Statements for information on acquisitions.$57.3$38.6 million and $56.6$34.4 million in the first ninesix months of 20172018 and 2016,2017, 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 Rapid Continuous Improvement.$119.5$295.8 million in the first ninesix months of 20172018 included the $150repayments of $250 million repayment of the 20172018 Notes at maturity and $200 million of the 2019 Notes, and a $7.8 million loss on early extinguishment of debt, as well as repayments of notes payable and other items discussed below.short-term borrowings of $54.0 million. These amounts were partially offset bySnap-on’s sale, on February 15, 2017,20, 2018, of $300$400 million of the 20272048 Notes at a discount, from whichSnap-on received $297.8$395.4 million of net proceeds, reflecting $1.9$3.5 million of transaction costs, and $51.0 million of net proceeds from notes payable and other short-term borrowings.costs. Net cash used by financing activities was $146.8$90.0 million in the first ninesix months of 2016. $36.2$28.3 million and $32.4$34.6 million in the respective first ninesix months of 20172018 and 2016.2017. 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 stock options as well as forand other corporate purposes. In the first ninesix months of 2017,Snap-on2018, Snap‑on repurchased 1,348,000646,000 shares of its common stock for $212.6$98.7 million under its previously announced share repurchase programs, including the up to $500 million share repurchase program approved by the Board of Directors on August 3, 2017. The 2017 share repurchase program replaced the company’s 1998 and 1999 share repurchase programs; the company’s 1996 repurchase program remains unchanged.programs. In the first ninesix months of 2016,2017, Snap-on repurchased 492,000745,000 shares of its common stock for $76.4$122.5 million under its previously announced share repurchase programs. As of SeptemberJune 30, 2017,2018, Snap-on had remaining availability to repurchase up to an additional $438.8$345.1 million in common stock pursuant to its Board of Directors’ (“Board”) authorizations. The purchase ofSnap-on common stock 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, in the balance of 2017.2018.$123.0$92.8 million and $106.3$82.3 million in the first ninesix months of 20172018 and 2016,2017, respectively. On November 3, 2016,6, 2017, the Board increased the quarterly cash dividend by 16.4%15.5% to $0.71$0.82 per share ($2.843.28 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 in the balance of 2017.2018. SNAP-ON INCORPORATEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS(continued)SeptemberJune 30, 2017.201831, 2016,30, 2017, have not materially changed since that report was filed.20172018 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,Snap-on expects that capital expenditures in 20172018 will be in a range of $80$90 million to $90$100 million, of which $57.3$38.6 million was expended in the first ninesix months.Snap-on also anticipates that its full year 20172018 effective income tax rate will be comparablein the range of 24% to 25%. This compares to its 20162017 full year rate.rate of 31.1%.rates, including as a result of the weakening of the British poundvis-à-vis the U.S. dollar following the United Kingdom’s vote to exit from the European Union.rates. Snap-on is also exposed to market risk associated with the stock-based portion of its deferred compensation plans.Snap-on monitors its exposure to these risks and attempts to manage the underlying economic exposures through the use of financial instruments such as foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements (“equity forwards”).Snap-on does not use derivative instruments for speculative or trading purposes.Snap-on’s broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on its operating earnings as a whole.Snap-on’s management takes an active role in the risk management process and has developed policies and procedures that require specific administrative and business functions to assist in the identification, assessment and control of various risks.(variance/ (variance/co-variance technique). These inter-relationships were determined by observing interest rate and foreign currency market changes over the preceding quarter.SeptemberJune 30, 2017,2018, was $1.8$7.0 million on interest rate-sensitive financial instruments and $0.5$0.1 million 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 bySnap-on, nor does it consider the potential effect of favorable changes in market factors.SeptemberJune 30, 2017.2018. 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 SeptemberJune 30, 2017,2018, 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.SeptemberJune 30, 2017,2018, 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 Rules13a-15(f) and15d-15(f)).thirdsecond quarter of fiscal 2017,2018, 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, stock optionsequity plans and for other corporate purposes, as well as when the company believes market conditions are favorable. The repurchase ofSnap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions. 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* 07/02/17 to 07/29/17 90,000 $ 151.12 90,000 $ 131.2 million 07/30/17 to 08/26/17 390,000 $ 150.16 390,000 $ 456.4 million 08/27/17 to 09/30/17 123,000 $ 146.05 123,000 $ 438.8 million 603,000 $ 149.46 603,000 N/A N/A: Not applicablePeriod 04/01/18 to 04/28/18 85,000 $146.71 85,000 $360.3 million 04/29/18 to 05/26/18 196,000 $148.02 196,000 $342.2 million 05/27/18 to 06/30/18 90,000 $152.02 90,000 $345.1 million Total/Average 371,000 $148.69 371,000 N/A *Subject to further adjustment pursuant to the 1996 Authorization described below, as of September 30, 2017, the approximate value of shares that may yet be purchased pursuant to the outstanding Board authorizations discussed below is $438.8 million.N/A: Not applicable $152.43, $144.91$147.23, $151.23 and $149.01$160.72 per share of common stock as of the end of the respective fiscal 20172018 months ended July 29, 2017, AugustApril 28, 2018, May 26, 2017,2018, and SeptemberJune 30, 2017.2018.On August 3, The 2017 Authorization replaced both the 1998 $100 million authorization and the 1999 $50 million authorization, as discussed in “Item 2; Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” above.thirdsecond quarter of 20172018 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 forSnap-on to purchase or repurchase its shares.Period 04/01/18 to 04/28/18 — — 04/29/18 to 05/26/18 17,000 $146.76 05/27/18 to 06/30/18 — — Total/Average 17,000 $146.76 Citibank Purchases ofSnap-on Stock Shares
purchased Average
price
per share 07/02/17 to 07/29/17 – – 07/30/17 to 08/26/17 – – 08/27/17 to 09/30/17 12,500 $ 144.50 12,500 $ 144.50 Exhibit 10.1Item 6: Exhibits Snap-on Incorporated 2011 Incentive Stock and Awards Plan (As Amended and Restated) *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 XBRL Instance Document* *Exhibit 101.SCH XBRL Taxonomy Extension Schema Document* *Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* *Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* *Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document* *Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* **Reflectsnon-material changes**Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2017, and October 1, 2016; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017, and October 1, 2016; (iii) Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016; (iv) Condensed Consolidated Statements of Equity for the nine months ended September 30, 2017, and October 1, 2016; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017, and October 1, 2016; and (vi) Notes to Condensed Consolidated Financial Statements. OctoberJuly 19, 20172018 /s//s/ Aldo J. Pagliari 62