Item 1. Financial Statements

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in millions, except per share data)

(Unaudited)

			Three Months Ended												Six Months Ended
			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Net sales			$	1,136.6					$	1,081.4					$	2,234.4					$	2,106.0
Cost of goods sold			(583.1)						(538.3)						(1,146.6)						(1,049.3)
Gross profit			553.5						543.1						1,087.8						1,056.7
Operating expenses			(306.9)						(326.0)						(618.1)						(638.7)
Operating earnings before financial services			246.6						217.1						469.7						418.0
Financial services revenue			86.4						86.9						174.1						175.5
Financial services expenses			(21.1)						(18.0)						(38.4)						(41.3)
Operating earnings from financial services			65.3						68.9						135.7						134.2
Operating earnings			311.9						286.0						605.4						552.2
Interest expense			(11.7)						(14.3)						(23.3)						(28.6)
Other income (expense) – net			9.3						3.4						17.6						7.7
Earnings before income taxes and equity earnings			309.5						275.1						599.7						531.3
Income tax expense			(72.3)						(62.9)						(139.8)						(122.0)
Earnings before equity earnings			237.2						212.2						459.9						409.3
Equity earnings, net of tax			—						1.0						—						1.5
Net earnings			237.2						213.2						459.9						410.8
Net earnings attributable to noncontrolling interests			(5.7)						(5.2)						(11.0)						(10.2)
Net earnings attributable to Snap-on Incorporated			$	231.5					$	208.0					$	448.9					$	400.6
Net earnings per share attributable to Snap-on Incorporated:
Basic			$	4.34					$	3.85					$	8.41					$	7.40
Diluted			4.27						3.76						8.27						7.26
Weighted-average shares outstanding:
Basic			53.3						54.0						53.4						54.1
Effect of dilutive securities			0.9						1.3						0.9						1.1
Diluted			54.2						55.3						54.3						55.2
Dividends declared per common share			$	1.42					$	1.23					$	2.84					$	2.46

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)

(Unaudited)

			Three Months Ended												Six Months Ended
			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Comprehensive income (loss):
Net earnings			$	237.2					$	213.2					$	459.9					$	410.8
Other comprehensive income (loss):
Foreign currency translation			(110.3)						20.2						(120.0)						(8.8)
Reclassification of foreign currency translation loss from sale of equity interest to net earnings			—						(1.0)						—						(1.0)
Unrealized cash flow hedges, net of tax:
Reclassification of cash flow hedges to net earnings			(0.4)						(0.4)						(0.8)						(0.8)
Defined benefit pension and postretirement plans:
Amortization of net unrecognized losses			4.7						9.1						9.2						18.2
Income tax benefit			(1.1)						(2.3)						(2.2)						(4.5)
Net of tax			3.6						6.8						7.0						13.7
Total comprehensive income			$	130.1					$	238.8					$	346.1					$	413.9
Comprehensive income attributable to noncontrolling interests			(5.7)						(5.2)						(11.0)						(10.2)
Comprehensive income attributable to Snap-on Incorporated			$	124.4					$	233.6					$	335.1					$	403.7

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share data)

(Unaudited)

			July 2, 2022						January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	812.9					$	780.0
Trade and other accounts receivable – net			729.1						682.3
Finance receivables – net			547.0						542.3
Contract receivables – net			98.3						110.4
Inventories – net			893.3						803.8
Prepaid expenses and other assets			150.1						134.6
Total current assets			3,230.7						3,053.4
Property and equipment:
Land			32.5						33.8
Buildings and improvements			419.1						434.4
Machinery, equipment and computer software			1,058.5						1,059.2
Property and equipment – gross			1,510.1						1,527.4
Accumulated depreciation and amortization			(1,006.6)						(1,009.2)
Property and equipment – net			503.5						518.2
Operating lease right-of-use assets			56.6						51.9
Deferred income tax assets			67.5						49.5
Long-term finance receivables – net			1,127.0						1,114.0
Long-term contract receivables – net			375.4						378.2
Goodwill			1,046.0						1,116.5
Other intangibles – net			283.5						301.7
Other assets			174.1						176.3
Total assets			$	6,864.3					$	6,759.7

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share data)

(Unaudited)

			July 2, 2022						January 1, 2022
LIABILITIES AND EQUITY
Current liabilities:
Notes payable			$	18.8					$	17.4
Accounts payable			308.5						277.6
Accrued benefits			59.2						67.4
Accrued compensation			81.6						114.8
Franchisee deposits			77.5						80.7
Other accrued liabilities			440.5						424.3
Total current liabilities			986.1						982.2
Long-term debt			1,183.4						1,182.9
Deferred income tax liabilities			102.2						122.7
Retiree health care benefits			29.7						31.1
Pension liabilities			83.1						104.9
Operating lease liabilities			39.7						34.2
Other long-term liabilities			93.3						97.9
Total liabilities			2,517.5						2,555.9
Commitments and contingencies (Note 15)
Equity
Shareholders’ equity attributable to Snap-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 67,444,855 and 67,438,129 shares, respectively)			67.4						67.4
Additional paid-in capital			488.1						472.7
Retained earnings			5,996.2						5,699.9
Accumulated other comprehensive loss			(457.7)						(343.9)
Treasury stock at cost (14,177,040 and 14,008,479 shares, respectively)			(1,769.6)						(1,714.2)
Total shareholders’ equity attributable to Snap-on Incorporated			4,324.4						4,181.9
Noncontrolling interests			22.4						21.9
Total equity			4,346.8						4,203.8
Total liabilities and equity			$	6,864.3					$	6,759.7

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in millions, except share data)

(Unaudited)

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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in millions, except share data)

(Unaudited)

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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)

			Six Months Ended
			July 2, 2022						July 3, 2021
Operating activities:
Net earnings			$	459.9					$	410.8
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation			36.7						37.9
Amortization of other intangibles			14.4						12.3
Provision for losses on finance receivables			15.4						17.9
Provision for losses on non-finance receivables			6.7						8.1
Stock-based compensation expense			17.5						23.8
Deferred income tax provision (benefit)			(7.1)						4.0
Loss (gain) on sales of assets			(2.9)						1.4
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade and other accounts receivable			(73.7)						(4.0)
Contract receivables			10.4						4.5
Inventories			(123.4)						(16.1)
Prepaid expenses and other assets			(23.4)						(14.3)
Accounts payable			42.1						59.5
Accruals and other liabilities			(37.9)						11.7
Net cash provided by operating activities			334.7						557.5
Investing activities:
Additions to finance receivables			(469.6)						(454.5)
Collections of finance receivables			426.2						447.9
Capital expenditures			(41.5)						(37.6)
Acquisitions of businesses, net of cash acquired			0.5						(195.8)
Disposals of property and equipment			4.2						1.4
Other			(0.2)						1.7
Net cash used by investing activities			(80.4)						(236.9)
Financing activities:
Net increase in other short-term borrowings			2.8						2.9
Cash dividends paid			(151.4)						(133.4)
Purchases of treasury stock			(82.6)						(289.3)
Proceeds from stock purchase and option plans			29.2						154.8
Other			(16.5)						(13.9)
Net cash used by financing activities			(218.5)						(278.9)
Effect of exchange rate changes on cash and cash equivalents			(2.9)						0.8
Increase in cash and cash equivalents			32.9						42.5
Cash and cash equivalents at beginning of year			780.0						923.4
Cash and cash equivalents at end of period			$	812.9					$	965.9
Supplemental cash flow disclosures:
Cash paid for interest			$	(22.4)					$	(27.9)
Net cash paid for income taxes			(129.2)						(126.6)

See Notes to Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Accounting Policies

Principles of consolidation and presentation

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

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

Use of Estimates

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

Financial Instruments

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

New Accounting Standards

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

Note 2: Revenue Recognition

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

			Three Months Ended												Six Months Ended
(Amounts in millions)			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Revenue from contracts with customers			$	1,130.5					$	1,075.3					$	2,222.4					$	2,094.1
Other revenues			6.1						6.1						12.0						11.9
Total net sales			1,136.6						1,081.4						2,234.4						2,106.0
Financial services revenue			86.4						86.9						174.1						175.5
Total revenues			$	1,223.0					$	1,168.3					$	2,408.5					$	2,281.5

Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and intersegment net sales, and segment operating earnings. Snap-on accounts for both intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

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

						For the Three Months Ended July 2, 2022
						Commercial						Snap-on						Repair Systems
						& Industrial						Tools						& Information						Financial												Snap-on
(Amounts in millions)						Group						Group						Group						Services						Eliminations						Incorporated
Net sales:
North America*						$	128.7					$	460.3					$	254.7					$	—					$	—					$	843.7
Europe						73.1						36.4						60.4						—						—						169.9
All other						74.3						23.9						24.8						—						—						123.0
External net sales						276.1						520.6						339.9						—						—						1,136.6
Intersegment net sales						83.0						—						76.9						—						(159.9)						—
Total net sales						359.1						520.6						416.8						—						(159.9)						1,136.6
Financial services revenue						—						—						—						86.4						—						86.4
Total revenue						$	359.1					$	520.6					$	416.8					$	86.4					$	(159.9)					$	1,223.0

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

Note 3: Acquisitions

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

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

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

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

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

Note 4: Receivables

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

(Amounts in millions)			July 2, 2022						January 1, 2022
Finance installment receivables			$	562.6					$	557.0
Finance lease receivables, net of unearned finance charges of $0.7 million and $1.3 million, respectively			4.2						7.1
Total finance receivables			566.8						564.1
Contract installment receivables			42.8						55.2
Contract lease receivables, net of unearned finance charges of $18.4 million and $18.7 million, respectively			57.3						57.3
Total contract receivables			100.1						112.5
Total			666.9						676.6
Allowances for credit losses:
Finance installment receivables			(19.8)						(21.7)
Finance lease receivables			—						(0.1)
Total finance allowance for credit losses			(19.8)						(21.8)
Contract installment receivables			(0.7)						(0.9)
Contract lease receivables			(1.1)						(1.2)
Total contract allowance for credit losses			(1.8)						(2.1)
Total allowance for credit losses			(21.6)						(23.9)
Total current finance and contract receivables – net			$	645.3					$	652.7
Finance receivables – net			$	547.0					$	542.3
Contract receivables – net			98.3						110.4
Total current finance and contract receivables – net			$	645.3					$	652.7

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

(Amounts in millions)			July 2, 2022						January 1, 2022
Finance installment receivables			$	1,166.1					$	1,155.3
Finance lease receivables, net of unearned finance charges of $0.3 million and $0.5 million, respectively			2.4						4.2
Total finance receivables			1,168.5						1,159.5
Contract installment receivables			196.7						197.1
Contract lease receivables, net of unearned finance charges of $29.6 million and $30.3 million, respectively			184.1						187.4
Total contract receivables			380.8						384.5
Total			1,549.3						1,544.0
Allowances for credit losses:
Finance installment receivables			(41.5)						(45.4)
Finance lease receivables			—						(0.1)
Total finance allowance for credit losses			(41.5)						(45.5)
Contract installment receivables			(3.2)						(3.2)
Contract lease receivables			(2.2)						(3.1)
Total contract allowance for credit losses			(5.4)						(6.3)
Total allowance for credit losses			(46.9)						(51.8)
Total long-term finance and contract receivables – net			$	1,502.4					$	1,492.2
Finance receivables – net			$	1,127.0					$	1,114.0
Contract receivables – net			375.4						378.2
Total long-term finance and contract receivables – net			$	1,502.4					$	1,492.2

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

(Amounts in millions)			2022						2021						2020						2019						2018						Prior						Total
Finance Receivables:
Delinquent			$	2.9					$	16.5					$	11.3					$	5.4					$	2.8					$	1.4					$	40.3
Non-delinquent			747.6						572.2						247.7						89.3						30.7						7.5						1,695.0
Total Finance receivables			$	750.5					$	588.7					$	259.0					$	94.7					$	33.5					$	8.9					$	1,735.3
Contract receivables:
Delinquent			$	0.2					$	0.7					$	0.7					$	0.9					$	0.3					$	0.2					$	3.0
Non-delinquent			83.8						138.5						101.0						71.3						44.5						38.8						477.9
Total Contract receivables			$	84.0					$	139.2					$	101.7					$	72.2					$	44.8					$	39.0					$	480.9

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

			Three Months Ended July 2, 2022												Six Months Ended July 2, 2022
(Amounts in millions)			Finance Receivables						Contract Receivables						Finance Receivables						Contract Receivables
Allowances for credit losses:
Beginning of period			$	62.5					$	7.7					$	67.3					$	8.4
Provision for credit losses			9.1						—						15.4						0.1
Charge-offs			(12.8)						(0.6)						(26.2)						(1.4)
Recoveries			2.7						0.1						5.0						0.1
Currency translation			(0.2)						—						(0.2)						—
End of period			$	61.3					$	7.2					$	61.3					$	7.2

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The aging of finance and contract receivables as of July 2, 2022, and January 1, 2022, 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
July 2, 2022:
Finance receivables			$	15.1					$	9.6					$	15.6					$	40.3					$	1,695.0					$	1,735.3					$	13.3
Contract receivables			1.4						0.3						1.3						3.0						477.9						480.9						0.2
January 1, 2022:
Finance receivables			$	16.0					$	10.5					$	18.0					$	44.5					$	1,679.1					$	1,723.6					$	16.0
Contract receivables			1.7						0.9						0.9						3.5						493.5						497.0						0.1

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

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

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

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

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

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

Note 5: Inventories

Inventories by major classification are as follows:

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

Note 6: Goodwill and Other Intangible Assets

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

(Amounts in millions)			Commercial & Industrial Group						Snap-on Tools Group						Repair Systems & Information Group						Total
Balance as of January 1, 2022			$	325.8					$	12.4					$	778.3					$	1,116.5
Currency translation			(22.7)						—						(14.7)						(37.4)
Acquisition-related adjustments			(0.5)						—						(32.6)						(33.1)
Balance as of July 2, 2022			$	302.6					$	12.4					$	731.0					$	1,046.0

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

Additional disclosures related to other intangible assets are as follows:

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Snap-on completed its annual impairment testing of goodwill and other indefinite-lived intangible assets in the second quarter of 2022, and the testing did not result in any impairment. Provision for impairment of goodwill and/or other intangible assets could arise in a future period due to significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to significant and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price and/or other events, including effects from the sale or disposal of a reporting unit. As of July 2, 2022, the company had no accumulated impairment losses.

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

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

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

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

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

Note 7: Exit and Disposal Activities

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 8: Income Taxes

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

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

Note 9: Short-term and Long-term Debt

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

(Amounts in millions)			July 2, 2022						January 1, 2022
3.25% unsecured notes due 2027			$	300.0					$	300.0
4.10% unsecured notes due 2048			400.0						400.0
3.10% unsecured notes due 2050			500.0						500.0
Other*			2.2						0.3
			1,202.2						1,200.3
Less: notes payable			(18.8)						(17.4)
Total long-term debt			$	1,183.4					$	1,182.9

*			Includes unamortized debt issuance costs.

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10: Financial Instruments

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

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

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 11: Pension Plans

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

			Three Months Ended												Six Months Ended
(Amounts in millions)			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Service cost			$	6.3					$	6.9					$	13.4					$	14.4
Interest cost			11.2						10.5						22.3						21.1
Expected return on plan assets			(25.4)						(23.5)						(49.9)						(47.1)
Amortization of unrecognized loss			4.7						9.1						9.2						18.2
Net periodic pension (benefit) cost			$	(3.2)					$	3.0					$	(5.0)					$	6.6

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

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

Note 12: Postretirement Health Care Plans

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

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

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

Note 13: Stock-based Compensation and Other Stock Plans

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

			Shares (in thousands)						Exercise Price Per Share*						Remaining Contractual Term* (in years)						Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022			2,432						$	151.32
Granted			289						211.41
Exercised			(118)						131.85
Forfeited or expired			(16)						183.40
Outstanding at July 2, 2022			2,587						158.72						5.7						$	106.0
Exercisable at July 2, 2022			1,954						147.97						4.7						98.2

*			Weighted-average

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

*			Weighted-average

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

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

*			Weighted-average

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

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

*			Weighted-average

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

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

Employee stock purchase plan: Substantially all Snap-on employees in the United States and Canada are eligible to participate in an employee stock purchase plan. The purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. For the six month periods ended July 2, 2022, and July 3, 2021, issuances under this plan totaled 18,464 shares and 82,286 shares, respectively. As of July 2, 2022, shares reserved for issuance under this plan totaled 578,811 shares and Snap-on held participant contributions of approximately $0.4 million. Participants are able to withdraw from the plan at any time prior to the ending date and receive back all contributions made during the plan year. Compensation expense for plan participants was zero for both the three and six month periods ended July 2, 2022, and $4.8 million and $9.6 million for the respective three and six month periods ended July 3, 2021.

Franchisee stock purchase plan: All franchisees in the United States and Canada are eligible to participate in a franchisee stock purchase plan. The purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. For the six month periods ended July 2, 2022, and July 3, 2021, issuances under this plan totaled 44,937 shares and 143,388 shares, respectively. As of July 2, 2022, shares reserved for issuance under this plan totaled 225,225 shares and Snap-on held participant contributions of approximately $0.9 million. Participants are able to withdraw from the plan at any time prior to the ending date and generally receive back all contributions made during the plan year. The company recognized mark-to-market expense of zero for both the three and six month periods ended July 2, 2022, and $11.3 million and $16.7 million for the respective three and six month periods ended July 3, 2021.

Note 14: Earnings Per Share

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

Note 15: Commitments and Contingencies

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

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

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

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

Note 16: Leases

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

(Amounts in millions)			July 2, 2022						January 1, 2022
Finance leases:
Property and equipment - gross			$	19.0					$	22.3
Accumulated depreciation and amortization			(15.4)						(17.4)
Property and equipment - net			$	3.6					$	4.9
Other accrued liabilities			$	2.1					$	2.4
Other long-term liabilities			2.9						4.5
Total finance lease liabilities			$	5.0					$	6.9
Operating leases:
Operating lease right-of-use assets			$	56.6					$	51.9
Other accrued liabilities			$	19.0					$	19.6
Operating lease liabilities			39.7						34.2
Total operating lease liabilities			$	58.7					$	53.8

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

Note 17: Other Income (Expense) – Net

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

			Three Months Ended												Six Months Ended
(Amounts in millions)			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Interest income			$	1.6					$	0.4					$	2.1					$	0.8
Net foreign exchange gain (loss)			(1.6)						0.2						(2.6)						—
Net periodic pension and postretirement benefits – non-service			9.3						3.8						18.1						7.6
Foreign currency translation loss from sale of equity interest			—						(1.0)						—						(1.0)
Other			—						—						—						0.3
Total other income (expense) – net			$	9.3					$	3.4					$	17.6					$	7.7

Note 18: Accumulated Other Comprehensive Income (Loss)

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

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

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

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

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

(Amounts in millions)			Foreign Currency Translation						Cash Flow Hedges						Defined Benefit Pension and Postretirement Plans						Total
Balance as of January 2, 2021			$	(74.7)					$	10.5					$	(301.6)					$	(365.8)
Other comprehensive loss before reclassifications			(8.8)						—						—						(8.8)
Amounts reclassified from Accumulated OCI			(1.0)						(0.8)						13.7						11.9
Net other comprehensive income (loss)			(9.8)						(0.8)						13.7						3.1
Balance as of July 3, 2021			$	(84.5)					$	9.7					$	(287.9)					$	(362.7)

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

			Amount Reclassified from Accumulated OCI
			Three Months Ended												Six Months Ended
			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021			Statement of Earnings Presentation
(Amounts in millions)
Foreign currency loss from sale of equity interest:
Foreign currency			$	—					$	1.0					$	—					$	1.0		Other income (expense) - net
Income tax expense			—						—						—						—			Income tax expense
Net of tax			—						1.0						—						1.0
Gains on cash flow hedges:
Treasury locks			$	0.4					$	0.4					$	0.8					$	0.8		Interest expense
Income tax expense			—						—						—						—			Income tax expense
Net of tax			0.4						0.4						0.8						0.8
Amortization of net unrecognized losses			$	(4.7)					$	(9.1)					$	(9.2)					$	(18.2)		See footnote below*
Income tax benefit			1.1						2.3						2.2						4.5			Income tax expense
Net of tax			(3.6)						(6.8)						(7.0)						(13.7)
Total reclassifications for the period, net of tax			$	(3.2)					$	(5.4)					$	(6.2)					$	(11.9)

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

Note 19: Segments

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

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

SNAP-ON INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Financial Data by Segment:

			Three Months Ended												Six Months Ended
(Amounts in millions)			July 2, 2022						July 3, 2021						July 2, 2022						July 3, 2021
Net sales:
Commercial & Industrial Group			$	359.1					$	350.5					$	699.2					$	696.2
Snap-on Tools Group			520.6						484.1						1,032.7						962.4
Repair Systems & Information Group			416.8						398.6						815.0						746.2
Segment net sales			1,296.5						1,233.2						2,546.9						2,404.8
Intersegment eliminations			(159.9)						(151.8)						(312.5)						(298.8)
Total net sales			1,136.6						1,081.4						2,234.4						2,106.0
Financial Services revenue			86.4						86.9						174.1						175.5
Total revenues			$	1,223.0					$	1,168.3					$	2,408.5					$	2,281.5
Operating earnings:
Commercial & Industrial Group			$	51.7					$	55.5					$	97.4					$	106.2
Snap-on Tools Group			124.4						103.5						240.4						202.4
Repair Systems & Information Group			95.7						86.7						187.3						168.1
Financial Services			65.3						68.9						135.7						134.2
Segment operating earnings			337.1						314.6						660.8						610.9
Corporate			(25.2)						(28.6)						(55.4)						(58.7)
Operating earnings			311.9						286.0						605.4						552.2
Interest expense			(11.7)						(14.3)						(23.3)						(28.6)
Other income (expense) – net			9.3						3.4						17.6						7.7
Earnings before income taxes and equity earnings			$	309.5					$	275.1					$	599.7					$	531.3

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

Table of Contents

SNAP-ON INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS