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

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

Caution Regarding Forward-Looking Statements:

Statements in this document that are not historical facts, including statements that (i) are in the future tense, (ii) include the words “expects,” “plans,” “targets,” “estimates,” “believes,” “anticipates,” or similar words that reference Snap-on Incorporated (“Snap-on” or “the company”) or its management, (iii) are specifically identified as forward-looking, or (iv) describe Snap‑on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that any forward-looking statements included in this document that are based upon assumptions and estimates were developed by management in good faith and are subject to risks, uncertainties or other factors that could cause (and in some cases have caused) actual results to differ materially from those described in any such statement. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results or regarded as a representation by the company or its management that the projected results will be achieved. For those forward-looking statements, Snap-on cautions the reader that numerous important factors, such as those listed below, as well as those factors discussed in its Annual Report on Form 10-K for the fiscal year ended December 28, 2024 (“2024 year end”), particularly those in Part I, Item 1A: Risk Factors, and those discussed in this document, could affect the company’s actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Snap-on.

Risks and uncertainties include, without limitation:

  • Uncertainties related to estimates, assumptions and projections generally;

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

  • Snap-on’s capability to successfully implement future strategies with respect to its existing businesses, including increasing or optimizing selling, designing, or manufacturing capacity;

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

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

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

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

  • The effects of external economic factors, including adverse developments in world financial markets, disruptions related to tariffs and other trade or sanction issues, and global supply chain inefficiencies, including as a result of the ongoing war in Ukraine, as well as conflicts in the Middle East and other regions;

  • Significant changes in the current competitive environment;

  • Risks related to pursuing, completing and integrating acquisitions;

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

  • The company’s ability to withstand disruption arising from natural disasters, including climate-related events or other unusual occurrences;

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

  • Snap-on’s ability to effectively manage human capital resources;

  • The impact of production and sourcing challenges, including labor interruptions and supply chain disruptions, to both Snap-on and relevant third parties;

  • Weakness in certain geographic areas, including as a result of localized recessions;

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

  • The amount, rate and growth of health care and postretirement costs, including continuing and potentially increasing required contributions to pension and postretirement plans;

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

  • Potential reputational damages and costs related to litigation;

  • The impact of outbreaks of infectious diseases as well as the effects of governmental actions related thereto on Snap-on’s business, which could have the potential to amplify the impact of the other risks facing the company; and

  • Other world or local events outside Snap-on’s control, including terrorist disruptions, armed conflicts and civil unrest.

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

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

Non-GAAP Measures

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

Recent Developments

As disclosed in Part I, Item 1A: Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, the company’s business is subject to risks related to, among other factors, tariffs and other trade protection measures put in the place by the United States or other countries, as well as U.S. international trade relations, including those with China, Canada and the European Union. Starting in the first quarter of 2025, the United States government announced additional tariffs on goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. The U.S. government continues to negotiate with other countries regarding the tariffs. While the company is relatively advantaged in the tariff environment, generally manufacturing products in the markets where they are sold, its costs can be affected by trade policies. In that regard, in the third quarter and first nine months of 2025, Snap-on mitigated the effects of incremental tariffs.

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RESULTS OF OPERATIONS

Results of operations for the three months ended September 27, 2025, and September 28, 2024, are as follows:

Three Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Net sales$1,190.8100.0%$1,147.0100.0%$43.83.8%
Cost of goods sold(584.9)(49.1)%(559.2)(48.8)%(25.7)(4.6)%
Gross profit605.950.9%587.851.2%18.13.1%
Operating expenses(327.4)(27.5)%(335.4)(29.2)%8.02.4%
Operating earnings before financial services278.523.4%252.422.0%26.110.3%
Financial services revenue101.1100.0%100.4100.0%0.70.7%
Financial services expenses(32.2)(31.8)%(28.7)(28.6)%(3.5)(12.2)%
Operating earnings from financial services68.968.2%71.771.4%(2.8)(3.9)%
Operating earnings347.426.9%324.126.0%23.37.2%
Interest expense(12.4)(1.0)%(12.5)(1.0)%0.10.8%
Other income (expense) – net14.31.1%20.61.7%(6.3)(30.6)%
Earnings before income taxes349.327.0%332.226.7%17.15.1%
Income tax expense(77.5)(6.0)%(74.7)(6.1)%(2.8)(3.7)%
Net earnings271.821.0%257.520.6%14.35.6%
Net earnings attributable to noncontrolling interests(6.4)(0.5)%(6.4)(0.5)%——%
Net earnings attributable to Snap-on Inc.$265.420.5%$251.120.1%$14.35.7%
Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales of $1,190.8 million in the third quarter of 2025 represented an increase of $43.8 million from 2024 levels, reflecting a $34.8 million, or 3.0%, organic gain and $9.0 million of favorable foreign currency translation.

Gross profit of $605.9 million in the third quarter of 2025 compared to $587.8 million last year. Gross margin (gross profit as a percentage of net sales) in the quarter decreased 30 basis points (100 basis points (“bps”) equals 1.0 percent) from the third quarter of 2024 primarily reflecting 20 bps of unfavorable foreign currency effects. The impact of tariffs in the third quarter was largely offset by the higher sales volumes and benefits from the company’s “Rapid Continuous Improvement” or “RCI” initiatives.

Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect benefits from a wide variety of ongoing efficiency, productivity and process improvements, including savings generated from product design cost reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing initiatives, and facility consolidations. Unless individually significant, it is not practicable to disclose each RCI activity that generated savings and/or segregate RCI savings embedded in sales volume increases.

Operating expenses of $327.4 million in the third quarter of 2025, including a $22.0 million benefit from the settlement of a legal matter (the “2025 legal settlement”), compared to $335.4 million last year. Operating expenses as a percentage of net sales improved 170 bps from last year primarily reflecting a 190 bps benefit from the 2025 legal settlement.

Operating earnings before financial services of $278.5 million in the third quarter of 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $252.4 million in 2024. As a percentage of net sales, operating earnings before financial services were 23.4% compared to 22.0% last year.

Financial services revenue of $101.1 million in the third quarter of 2025 compared to $100.4 million last year. Financial services operating earnings of $68.9 million compared to $71.7 million in 2024.

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Operating earnings of $347.4 million in the third quarter of 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $324.1 million in 2024. As a percentage of revenues (net sales plus financial services revenue), operating earnings were 26.9% in the quarter compared to 26.0% last year.

Interest expense in the third quarter of 2025 decreased $0.1 million from last year. See Note 7 to the Condensed Consolidated Financial Statements for additional information on debt and credit facilities.

Other income (expense) – net primarily includes interest income, non-service components of net periodic benefit costs, and net gains and losses associated with hedging and currency exchange rate transactions. In the third quarter of 2025, other income (expense) – net included $6.0 million of increased year-over-year non-service net periodic benefit costs, primarily reflecting higher amortization of actuarial losses. See Note 15 to the Condensed Consolidated Financial Statements for additional information on Other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on was 22.6% and 22.9% in the third quarters of 2025 and 2024, respectively. See Note 6 to the Condensed Consolidated Financial Statements for additional information on income taxes.

Net earnings attributable to Snap-on of $265.4 million, or $5.02 per diluted share, in the third quarter of 2025, including a $16.2 million, or $0.31 per diluted share, after-tax benefit from the 2025 legal settlement, compared to $251.1 million, or $4.70 per diluted share, in the third quarter of 2024.

Results of operations for the nine months ended September 27, 2025, and September 28, 2024, are as follows:

Nine Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Net sales$3,511.3100.0%$3,508.7100.0%$2.60.1%
Cost of goods sold(1,731.4)(49.3)%(1,726.9)(49.2)%(4.5)(0.3)%
Gross profit1,779.950.7%1,781.850.8%(1.9)(0.1)%
Operating expenses(999.2)(28.5)%(978.2)(27.9)%(21.0)(2.1)%
Operating earnings before financial services780.722.2%803.622.9%(22.9)(2.8)%
Financial services revenue304.9100.0%300.5100.0%4.41.5%
Financial services expenses(97.5)(32.0)%(90.3)(30.0)%(7.2)(8.0)%
Operating earnings from financial services207.468.0%210.270.0%(2.8)(1.3)%
Operating earnings988.125.9%1,013.826.6%(25.7)(2.5)%
Interest expense(37.1)(1.0)%(37.3)(1.0)%0.20.5%
Other income (expense) – net43.01.1%57.41.5%(14.4)(25.1)%
Earnings before income taxes994.026.0%1,033.927.1%(39.9)(3.9)%
Income tax expense(218.7)(5.7)%(229.2)(6.0)%10.54.6%
Net earnings775.320.3%804.721.1%(29.4)(3.7)%
Net earnings attributable to noncontrolling interests(19.1)(0.5)%(18.9)(0.5)%(0.2)(1.1)%
Net earnings attributable to Snap-on Inc.$756.219.8%$785.820.6%$(29.6)(3.8)%
Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales of $3,511.3 million in the first nine months of 2025 represented an increase of $2.6 million from 2024 levels, reflecting $3.7 million of favorable foreign currency translation, partially offset by a $1.1 million organic sales decline.

Gross profit of $1,779.9 million in the first nine months of 2025 compared to $1,781.8 million last year. Gross margin in the first nine months decreased 10 bps from 2024 primarily reflecting 20 bps of unfavorable foreign currency effects. The impact of tariffs in the first nine months of 2025 was largely offset by benefits from the company’s RCI initiatives.

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Operating expenses of $999.2 million in the first nine months of 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $978.2 million in 2024, which included a $22.5 million benefit for the final payments received associated with a separate legal matter (the “2024 legal payments”). Operating expenses as a percentage of net sales rose 60 bps from last year primarily due to increased personnel and other costs.

The effects of the $22.0 million benefit from the 2025 legal settlement and the $22.5 million benefit from the 2024 legal payments (collectively “the legal items”) were included in operating expenses, operating earnings before financial services, and operating earnings in 2025 and 2024, respectively. As a percentage of net sales, the legal items contributed a 60 bps benefit to operating expenses and operating earnings before financial services in their respective periods. As a percentage of revenues, operating earnings also included a 60 bps benefit from the legal items in both 2025 and 2024. Therefore, the legal items had no net effect on these year-over-year comparisons.

Operating earnings before financial services of $780.7 million in the first nine months of 2025 compared to $803.6 million in 2024. As a percentage of net sales, operating earnings before financial services were 22.2% compared to 22.9% last year.

Financial services revenue of $304.9 million in the first nine months of 2025 compared to $300.5 million last year. Financial services operating earnings of $207.4 million compared to $210.2 million in the first nine months of 2024.

Operating earnings of $988.1 million in the first nine months of 2025 compared to $1,013.8 million in 2024. As a percentage of revenues, operating earnings were 25.9% compared to 26.6% last year.

Interest expense in the first nine months of 2025 decreased $0.2 million from last year. See Note 7 to the Condensed Consolidated Financial Statements for additional information on debt and credit facilities.

Other income (expense) – net primarily includes interest income, non-service components of net periodic benefit costs, and net gains and losses associated with hedging and currency exchange rate transactions. In the first nine months of 2025, other income (expense) – net included $17.9 million of increased year-over-year non-service net periodic benefit costs, primarily reflecting higher amortization of actuarial losses. See Note 15 to the Condensed Consolidated Financial Statements for additional information on Other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on was 22.4% and 22.6% in the first nine months of 2025 and 2024, respectively. See Note 6 to the Condensed Consolidated Financial Statements for additional information on income taxes.

Net earnings attributable to Snap-on of $756.2 million, or $14.24 per diluted share, in the first nine months of 2025, including a $16.2 million, or $0.31 per diluted share, after-tax benefit from the 2025 legal settlement, compared to $785.8 million, or $14.69 per diluted share, in the first nine months of 2024, which included a $17.5 million, or $0.32 per diluted share, after-tax benefit from the 2024 legal payments.

Segment Results

Snap-on’s operating segments, which represent Snap-on’s reportable segments, are based on the organizational structure used by the Chief Executive Officer, its CODM, to make operating and investment determinations and to assess performance. Snap‑on’s reportable operating 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 and military, power generation, transportation and technical education market segments, 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 multinational 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.

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The CODM evaluates the performance of the Commercial & Industrial Group, the Snap-on Tools Group and the Repair Systems & Information Group operating segments based on segment net sales and segment operating earnings. The segment net sales of the Snap-on Tools Group reflect external net sales, while the segment net sales of the Commercial & Industrial Group and the Repair Systems & Information Group include both external and intersegment net sales. Snap-on accounts for intersegment net sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. The Financial Services operating segment is evaluated based on financial services revenue and segment operating earnings. Corporate expenses primarily reflect stock-based compensation and other costs not attributable to an operating segment. Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

Commercial & Industrial Group

Three Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
External net sales$297.881.0%$288.778.9%$9.13.2%
Intersegment net sales69.919.0%77.021.1%(7.1)(9.2)%
Segment net sales367.7100.0%365.7100.0%2.00.5%
Segment cost of goods sold(217.2)(59.1)%(214.9)(58.8)%(2.3)(1.1)%
Segment gross profit150.540.9%150.841.2%(0.3)(0.2)%
Segment operating expenses(93.0)(25.3)%(89.8)(24.5)%(3.2)(3.6)%
Segment operating earnings$57.515.6%$61.016.7%$(3.5)(5.7)%

Segment net sales of $367.7 million in the third quarter of 2025 represented an increase of $2.0 million, or 0.5%, from 2024 levels, reflecting $4.8 million of favorable foreign currency translation, partially offset by a $2.8 million, or 0.8%, organic sales decline. The organic decrease includes a mid single-digit reduction in the segment’s Asia Pacific business, partially offset by low single-digit gains with customers in the critical industry arena and in the specialty torque operation.

Segment gross margin in the third quarter decreased 30 bps from last year due to 30 bps of unfavorable foreign currency effects. Higher material and other costs were offset by increased sales volumes in the higher-gross-margin critical industry sectors and savings from the segment’s RCI initiatives.

Segment operating expenses as a percentage of net sales in the third quarter rose 80 bps as compared to 2024 primarily reflecting the impact of lower sales in the Asia Pacific business, as well as increased personnel and other costs.

As a result of these factors, segment operating earnings of $57.5 million in the third quarter of 2025 compared to $61.0 million in 2024. Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 15.6% in the third quarter of 2025 compared to 16.7% in 2024.

Nine Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
External net sales$863.781.5%$884.780.6%$(21.0)(2.4)%
Intersegment net sales195.718.5%212.919.4%(17.2)(8.1)%
Segment net sales1,059.4100.0%1,097.6100.0%(38.2)(3.5)%
Cost of goods sold(623.2)(58.8)%(644.8)(58.7)%21.63.3%
Gross profit436.241.2%452.841.3%(16.6)(3.7)%
Operating expenses(278.6)(26.3)%(274.2)(25.0)%(4.4)(1.6)%
Segment operating earnings$157.614.9%$178.616.3%$(21.0)(11.8)%

Segment net sales of $1,059.4 million in the first nine months of 2025 represented a decrease of $38.2 million, or 3.5%, from 2024 levels, reflecting a $41.9 million, or 3.8%, organic sales decline, partially offset by $3.7 million of favorable foreign currency translation. The organic decline includes a high single-digit reduction in the segment’s Asia Pacific operations, a mid single-digit decrease in the European-based hand tools business, and a low single-digit decline in activity with customers in critical industries, partially offset by a mid single-digit increase in specialty torque.

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Segment gross margin in the first nine months decreased 10 bps from last year primarily reflecting the reduced sales volumes and 30 bps of unfavorable currency effects, partially offset by savings from the segment’s RCI initiatives.

Segment operating expenses as a percentage of net sales in the first nine months rose 130 bps as compared to 2024 primarily due to the impact of lower sales volumes, and increased personnel and other costs.

As a result of these factors, segment operating earnings of $157.6 million in the first nine months of 2025 compared to $178.6 million in 2024. Operating margin for the Commercial & Industrial Group of 14.9% in the first nine months of 2025 compared to 16.3% in 2024.

Snap-on Tools Group

Three Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Segment net sales$506.0100.0%$500.5100.0%$5.51.1%
Segment cost of goods sold(269.2)(53.2)%(264.0)(52.7)%(5.2)(2.0)%
Segment gross profit236.846.8%236.547.3%0.30.1%
Segment operating expenses(126.9)(25.1)%(128.2)(25.7)%1.31.0%
Segment operating earnings$109.921.7%$108.321.6%$1.61.5%

Segment net sales of $506.0 million in the third quarter of 2025 represented an increase of $5.5 million, or 1.1%, from 2024 levels, reflecting a $4.9 million, or 1.0%, organic sales gain and $0.6 million of favorable foreign currency translation. The organic improvement was due to a low single-digit rise in the segment’s international operations and slightly higher sales in the U.S. business.

Segment gross margin in the third quarter decreased 50 bps from last year primarily due to a year-over-year shift in product mix.

Segment operating expenses as a percentage of net sales in the third quarter improved 60 bps as compared to 2024 primarily reflecting the higher sales volumes.

As a result of these factors, segment operating earnings of $109.9 million in the third quarter of 2025 compared to $108.3 million in 2024. Operating margin for the Snap-on Tools Group of 21.7% in the third quarter of 2025 compared to 21.6% last year.

Nine Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Segment net sales$1,459.9100.0%$1,482.6100.0%$(22.7)(1.5)%
Cost of goods sold(771.4)(52.8)%(769.8)(51.9)%(1.6)(0.2)%
Gross profit688.547.2%712.848.1%(24.3)(3.4)%
Operating expenses(369.5)(25.3)%(372.4)(25.1)%2.90.8%
Segment operating earnings$319.021.9%$340.423.0%$(21.4)(6.3)%

Segment net sales of $1,459.9 million in the first nine months of 2025 represented a decrease of $22.7 million, or 1.5%, from 2024 levels, reflecting a $20.9 million, or 1.4%, organic sales decline and $1.8 million of unfavorable foreign currency translation. The organic reduction was due to a low single-digit decrease in the U.S., partially offset by a low single-digit gain in the segment’s international operations.

Segment gross margin in the first nine months decreased 90 bps from last year primarily due to a year-over-year shift in product mix, as well as a result of the reduced volumes.

Segment operating expenses as a percentage of net sales in the first nine months rose 20 bps as compared to 2024 primarily reflecting the lower sales volumes.

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As a result of these factors, segment operating earnings of $319.0 million in the first nine months of 2025 compared to $340.4 million in 2024. Operating margin for the Snap-on Tools Group of 21.9% in the first nine months of 2025 compared to 23.0% last year.

Repair Systems & Information Group

Three Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
External net sales$387.083.3%$357.884.6%$29.28.2%
Intersegment net sales77.816.7%64.915.4%12.919.9%
Segment net sales464.8100.0%422.7100.0%42.110.0%
Segment cost of goods sold(246.2)(53.0)%(222.2)(52.6)%(24.0)(10.8)%
Segment gross profit218.647.0%200.547.4%18.19.0%
Segment operating expenses(77.4)(16.6)%(93.2)(22.0)%15.817.0%
Segment operating earnings$141.230.4%$107.325.4%$33.931.6%

Segment net sales of $464.8 million in the third quarter of 2025 represented an increase of $42.1 million, or 10.0%, from 2024 levels, reflecting a $38.1 million, or 8.9%, organic sales gain and $4.0 million of favorable foreign currency translation. The organic improvement includes a double-digit increase in activity with OEM dealerships and a high single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers, partially offset by a low single-digit decline in sales of undercar equipment.

Segment gross margin in the third quarter decreased 40 bps from last year primarily reflecting increased sales of lower-gross-margin products, higher material and other costs, and 20 bps of unfavorable foreign currency effects, partially offset by savings from the segment’s RCI initiatives.

Segment operating expenses in the third quarter of 2025 included a $22.0 million benefit from the 2025 legal settlement. Segment operating expenses as a percentage of net sales in the third quarter improved 540 bps from 2024 primarily due to a 480 bps benefit from the 2025 legal settlement, as well as from the higher sales volumes.

As a result of these factors, segment operating earnings of $141.2 million in the third quarter of 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $107.3 million in 2024. Operating margin for the Repair Systems & Information Group of 30.4% in the third quarter of 2025 compared to 25.4% last year.

Nine Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
External net sales$1,187.784.3%$1,141.485.1%$46.34.1%
Intersegment net sales221.615.7%199.914.9%21.710.9%
Segment net sales1,409.3100.0%1,341.3100.0%68.05.1%
Cost of goods sold(754.1)(53.5)%(725.1)(54.1)%(29.0)(4.0)%
Gross profit655.246.5%616.245.9%39.06.3%
Operating expenses(272.1)(19.3)%(282.4)(21.0)%10.33.6%
Segment operating earnings$383.127.2%$333.824.9%$49.314.8%

Segment net sales of $1,409.3 million in the first nine months of 2025 represented an increase of $68.0 million, or 5.1%, from 2024 levels, reflecting a $65.8 million, or 4.9%, organic sales gain and $2.2 million of favorable foreign currency translation. The organic improvement includes a double-digit increase in activity with OEM dealerships and a mid single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers, partially offset by a mid single-digit decline in sales of undercar equipment.

Segment gross margin in the first nine months improved 60 bps from last year primarily due to favorable business mix and benefits from the segment’s RCI initiatives, partially offset by higher material and other costs, as well as 20 bps of unfavorable foreign currency effects.

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Segment operating expenses in the first nine months of 2025 included a $22.0 million benefit from the 2025 legal settlement. Segment operating expenses as a percentage of net sales in the first nine months improved 170 bps from 2024 reflecting a 160 bps benefit from the 2025 legal settlement, while the effects of higher sales volumes and savings from RCI initiatives, were partially offset by increased personnel and other costs.

As a result of these factors, segment operating earnings of $383.1 million in the first nine months of 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $333.8 million in 2024. Operating margin for the Repair Systems & Information Group of 27.2% in the first nine months of 2025 compared to 24.9% last year.

Financial Services

Three Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Financial services revenue$101.1100.0%$100.4100.0%$0.70.7%
Financial services expenses(32.2)(31.8)%(28.7)(28.6)%(3.5)(12.2)%
Segment operating earnings$68.968.2%$71.771.4%$(2.8)(3.9)%

Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on receivables. Financial services revenue of $101.1 million in the third quarter of 2025 represented an increase of $0.7 million, or 0.7%, from last year. In the third quarters of both 2025 and 2024, the average yield on finance receivables was 17.7% and the average yield on contract receivables was 9.1%. Originations of $274.1 million in the third quarter of 2025 represented a decrease of $13.9 million, or 4.8%, from 2024 levels.

Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses. These expenses are generally more dependent on changes in the size of the financial services portfolio than they are on the revenue of the segment. Financial services expenses in the third quarter of 2025 increased $3.5 million from last year primarily due to $2.6 million of higher provisions for credit losses, as well as increased personnel and other costs. As a percentage of the average financial services portfolio, expenses were 1.3% and 1.1% in the respective third quarters of 2025 and 2024.

As a result of these factors, segment operating earnings of $68.9 million in the third quarter of 2025 compared to $71.7 million in 2024.

Nine Months Ended
(Amounts in millions)September 27, 2025September 28, 2024Change
Financial services revenue$304.9100.0%$300.5100.0%$4.41.5%
Financial services expenses(97.5)(32.0)%(90.3)(30.0)%(7.2)(8.0)%
Segment operating earnings$207.468.0%$210.270.0%$(2.8)(1.3)%

Financial services revenue of $304.9 million in the first nine months of 2025 represented an increase of $4.4 million, or 1.5%, from last year. In the first nine months of 2025 and 2024, the respective average yields on finance receivables were 17.6% and 17.7%. In the first nine months of 2025 and 2024, the average yields on contract receivables were 9.1% and 9.0%, respectively. Originations of $835.8 million in the first nine months of 2025 represented a decrease of $62.0 million, or 6.9%, from 2024 levels.

Financial services expenses in the first nine months of 2025 increased $7.2 million from last year primarily due to $4.4 million of higher provisions for credit losses, as well as increased personnel and other costs. As a percentage of the average financial services portfolio, expenses were 3.9% and 3.6% in the respective first nine months of 2025 and 2024.

As a result of these factors, segment operating earnings of $207.4 million in the first nine months of 2025 compared to $210.2 million in 2024.

Corporate

Snap-on’s third quarter 2025 general corporate expenses of $30.1 million compared to $24.2 million last year. The year-over-year increase in general corporate expenses primarily reflects higher stock-based compensation and brand-building costs.

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For the first nine months of 2025, general corporate expenses of $79.0 million compared to $49.2 million in 2024. The year-over-year increase primarily reflects benefits from the 2024 legal payments received in the first nine months of 2024, as well as higher brand-building costs in 2025.

Non-GAAP Supplemental Data

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

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

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the three months ended September 27, 2025, and September 28, 2024, is as follows:

Operations*Financial Services
(Amounts in millions)September 27, 2025September 28, 2024September 27, 2025September 28, 2024
Net sales$1,190.8$1,147.0$—$—
Cost of goods sold(584.9)(559.2)——
Gross profit605.9587.8——
Operating expenses(327.4)(335.4)——
Operating earnings before financial services278.5252.4——
Financial services revenue——101.1100.4
Financial services expenses——(32.2)(28.7)
Operating earnings from financial services——68.971.7
Operating earnings278.5252.468.971.7
Interest expense(12.4)(12.5)——
Intersegment interest income (expense) – net16.716.8(16.7)(16.8)
Other income (expense) – net14.220.60.1—
Earnings before income taxes and equity earnings297.0277.352.354.9
Income tax expense(64.5)(62.0)(13.0)(12.7)
Earnings before equity earnings232.5215.339.342.2
Financial services – net earnings attributable to Snap-on39.342.2——
Net earnings271.8257.539.342.2
Net earnings attributable to noncontrolling interests(6.4)(6.4)——
Net earnings attributable to Snap-on$265.4$251.1$39.3$42.2
* Snap-on with Financial Services presented on the equity method.

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Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the nine months ended September 27, 2025, and September 28, 2024, is as follows:

Operations*Financial Services
(Amounts in millions)September 27, 2025September 28, 2024September 27, 2025September 28, 2024
Net sales$3,511.3$3,508.7$—$—
Cost of goods sold(1,731.4)(1,726.9)——
Gross profit1,779.91,781.8——
Operating expenses(999.2)(978.2)——
Operating earnings before financial services780.7803.6——
Financial services revenue——304.9300.5
Financial services expenses——(97.5)(90.3)
Operating earnings from financial services——207.4210.2
Operating earnings780.7803.6207.4210.2
Interest expense(37.1)(37.3)——
Intersegment interest income (expense) – net51.150.6(51.1)(50.6)
Other income (expense) – net42.857.30.20.1
Earnings before income taxes and equity earnings837.5874.2156.5159.7
Income tax expense(179.6)(189.3)(39.1)(39.9)
Earnings before equity earnings657.9684.9117.4119.8
Financial services – net earnings attributable to Snap-on117.4119.8——
Net earnings775.3804.7117.4119.8
Net earnings attributable to noncontrolling interests(19.1)(18.9)——
Net earnings attributable to Snap-on$756.2$785.8$117.4$119.8

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Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheets information as of September 27, 2025, and December 28, 2024, is as follows:

Operations*Financial Services
(Amounts in millions)September 27, 2025December 28, 2024September 27, 2025December 28, 2024
ASSETS
Current assets:
Cash and cash equivalents$1,533.9$1,360.4$0.2$0.1
Intersegment receivables18.515.1——
Trade and other accounts receivable – net924.8815.00.90.6
Finance receivables – net——625.1610.3
Contract receivables – net5.04.8121.5115.2
Inventories – net1,024.5943.4——
Prepaid expenses and other current assets152.3143.811.29.4
Total current assets3,659.03,282.5758.9735.6
Property and equipment – net557.2540.22.52.4
Operating lease right-of-use assets81.983.85.35.6
Investment in Financial Services403.5403.5——
Deferred income tax assets46.351.827.226.2
Intersegment long-term notes receivable831.3831.8——
Long-term finance receivables – net——1,291.51,312.0
Long-term contract receivables – net8.08.4415.0409.9
Goodwill1,105.81,056.8——
Other intangible assets – net275.4267.6——
Pension assets130.1125.4——
Other long-term assets42.635.60.30.2
Total assets$7,141.1$6,687.4$2,500.7$2,491.9
* Snap-on with Financial Services presented on the equity method.

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

Operations*Financial Services
(Amounts in millions)September 27, 2025December 28, 2024September 27, 2025December 28, 2024
LIABILITIES AND EQUITY
Current liabilities:
Notes payable$21.3$13.7$—$—
Accounts payable269.7265.41.60.5
Intersegment payables——18.515.1
Accrued benefits62.167.2——
Accrued compensation81.883.52.72.6
Franchisee deposits73.870.9——
Other accrued liabilities466.8443.631.127.7
Total current liabilities975.5944.353.945.9
Long-term debt and intersegment long-term debt——2,017.52,017.3
Deferred income tax liabilities74.373.5——
Retiree health care benefits17.919.4——
Pension liabilities75.078.4——
Operating lease liabilities59.163.05.55.6
Other long-term liabilities95.591.820.319.6
Total liabilities1,297.31,270.42,097.22,088.4
Total shareholders’ equity attributable to Snap-on5,819.05,394.1403.5403.5
Noncontrolling interests24.822.9——
Total equity5,843.85,417.0403.5403.5
Total liabilities and equity$7,141.1$6,687.4$2,500.7$2,491.9
* Snap-on with Financial Services presented on the equity method.

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Liquidity and Capital Resources

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

Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost. As of October 10, 2025, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service; A- and A-2 by Standard & Poor’s; and A and F1 by Fitch Ratings. Snap-on believes that its current credit arrangements are sound and that the strength of its balance sheet affords the company the financial flexibility, including through access to financial markets for potential new financing, to respond to both internal growth opportunities and those available through acquisitions. However, Snap-on cannot provide any assurance that financing will be available in the future on acceptable terms, or that its debt ratings will not decrease.

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

Working capital (current assets less current liabilities) of $3,388.5 million as of September 27, 2025, represented an increase of $360.6 million from $3,027.9 million as of December 28, 2024 (fiscal 2024 year end), primarily as a result of the net changes discussed below.

The following represents the company’s working capital position as of September 27, 2025, and December 28, 2024:

(Amounts in millions)September 27, 2025December 28, 2024
Cash and cash equivalents$1,534.1$1,360.5
Trade and other accounts receivable – net925.7815.6
Finance receivables – net625.1610.3
Contract receivables – net126.5120.0
Inventories – net1,024.5943.4
Prepaid expenses and other current assets149.4139.6
Total current assets4,385.33,989.4
Notes payable(21.3)(13.7)
Accounts payable(271.3)(265.9)
Other current liabilities(704.2)(681.9)
Total current liabilities(996.8)(961.5)
Working capital$3,388.5$3,027.9

Cash and cash equivalents of $1,534.1 million as of September 27, 2025, represented an increase of $173.6 million from 2024 year-end levels primarily due to: (i) $813.6 million of cash generated from operations; (ii) $642.5 million of cash from collections of finance receivables; and (iii) $60.0 million of cash proceeds from stock purchase plans and stock option exercises. These increases in cash and cash equivalents were partially offset by: (i) the funding of $678.4 million of new finance receivables; (ii) dividend payments to shareholders of $335.5 million; (iii) the repurchase of 760,000 shares of the company’s common stock for $248.2 million; and (iv) the funding of $62.5 million of capital expenditures.

Of the $1,534.1 million of cash and cash equivalents as of September 27, 2025, $604.3 million was held outside of the United States. Snap-on maintains non-U.S. funds in its foreign operations to: (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise. Although the Tax Cuts and Jobs Act generally eliminated U.S. federal taxation of dividends from foreign subsidiaries, such dividends may still be subject to state income taxation and foreign withholding taxes. Snap-on periodically evaluates its cash held outside the United States and may pursue opportunities to repatriate certain foreign cash amounts to the extent that it can be accomplished in a tax efficient manner.

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Trade and other accounts receivable – net of $925.7 million as of September 27, 2025, represented an increase of $110.1 million from 2024 year-end levels. The increase primarily reflects a higher mix of sales with longer payment terms, $25.1 million of foreign currency translation, and $17.7 million from the 2025 legal settlement. Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months of sales, times 360 days) was 71 days for September 27, 2025, and 62 days for December 28, 2024.

The current portions of net finance and contract receivables of $751.6 million as of September 27, 2025, compared to $730.3 million at 2024 year end. The long-term portions of net finance and contract receivables of $1,714.5 million as of September 27, 2025, compared to $1,730.3 million at 2024 year end.

Inventories – net of $1,024.5 million as of September 27, 2025, represented an increase of $81.1 million from December 28, 2024, primarily due to uncertainty in the current trade environment and $38.9 million of foreign currency translation. Inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balances for the trailing 12 months) were 2.3 turns and 2.4 turns as of September 27, 2025, and December 28, 2024, respectively. Inventories accounted for using the first-in, first-out (“FIFO”) method approximated 63% of total inventories as of September 27, 2025, and 57% of total inventories as of December 28, 2024. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve was $126.8 million and $122.4 million as of September 27, 2025, and December 28, 2024, respectively.

Notes payable of $21.3 million as of September 27, 2025, compared to $13.7 million as of 2024 year end.

Accounts payable of $271.3 million as of September 27, 2025, represented an increase of $5.4 million from December 28, 2024, primarily due to $7.5 million of foreign currency translation.

Other accrued liabilities of $483.8 million as of September 27, 2025, represented an increase of $26.1 million from 2024 year-end levels primarily due to an increase in accrued income taxes and $12.5 million of foreign currency translation.

Long-term debt of $1,186.2 million as of September 27, 2025, consisted of: (i) $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”); (ii) $400 million of unsecured 4.10% notes that mature on March 1, 2048 (the “2048 Notes”); and (iii) $500 million of 3.10% notes that mature on May 1, 2050 (“the 2050 Notes”), partially offset by $13.8 million of unamortized debt issuance costs and issuance discounts.

Snap-on has a $900 million multicurrency revolving credit facility that terminates on September 12, 2028 (the “Credit Facility”). The Credit Facility contains an accordion feature that, subject to certain customary conditions, may allow the maximum commitment to be increased by up to $450 million with the approval of the lenders providing additional commitments. No amounts were borrowed or outstanding under the Credit Facility during the nine months ended and as of September 27, 2025.

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 September 27, 2025, the company’s consolidated cash balance, net of certain adjustments, exceeded consolidated debt resulting in actual ratios of (0.04) and (0.16), respectively. Both ratios are 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 September 27, 2025, there were no commercial paper issuances outstanding.

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Snap-on believes it has sufficient available cash and access to both committed and uncommitted credit facilities to cover its expected funding needs on both a short-term and long-term basis. Snap-on manages its aggregate short-term borrowings so as not to exceed its availability under the Credit Facility. Snap-on believes that it can access short-term debt markets, predominantly through commercial paper issuances and existing lines of credit, to fund its short-term requirements and to ensure near-term liquidity. Snap-on regularly monitors the credit and financial markets and, if it believes conditions are favorable, it may take advantage of such conditions to issue long-term debt to further improve its liquidity and capital resources. Near-term liquidity requirements for Snap-on include payments of interest and dividends, funding to support new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise. Snap-on intends to make contributions of $4.3 million to its foreign pension plans and $6.5 million to its domestic pension plans in 2025, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2025.

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

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

Operating Activities

Net cash provided by operating activities was $813.6 million and $924.0 million in the respective first nine months of 2025 and 2024. The $110.4 million year-over-year decrease in net cash provided by operating activities primarily reflects an $88.8 million change in net operating assets and liabilities and a $29.4 million decrease in net earnings.

Investing Activities

Net cash used by investing activities of $99.0 million in the first nine months of 2025 included additions to finance receivables of $678.4 million, partially offset by collections of $642.5 million. Net cash used by investing activities of $163.9 million in the first nine months of 2024 included additions to finance receivables of $731.3 million, partially offset by collections of $629.3 million. Finance receivables are comprised of extended-term installment payment contracts to both technicians and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools, diagnostics, and equipment products on an extended-term payment plan, with average payment terms of approximately four years.

Capital expenditures were $62.5 million and $65.4 million in the respective first nine months of 2025 and 2024. Capital expenditures in both years included continued investments related to the company’s execution of its strategic growth initiatives and Value Creation Processes around safety, quality, customer connection, innovation and RCI.

Financing Activities

Net cash used by financing activities was $545.4 million in the first nine months of 2025 and $448.3 million in the first nine months of 2024. Proceeds from stock purchase plans and stock option exercises totaled $60.0 million and $61.6 million in the respective first nine months of 2025 and 2024. In the first nine months of 2025, Snap-on repurchased 760,000 shares of its common stock for $248.2 million under its previously announced share repurchase programs. In the first nine months of 2024, Snap-on repurchased 637,000 shares of its common stock for $177.5 million under its previously announced share repurchase programs. As of September 27, 2025, Snap-on had remaining availability to repurchase up to an additional $306.0 million in common stock pursuant to its Board’s authorizations. The repurchase of Snap-on common stock to offset dilution related to equity plan issuances or for other corporate purposes is at the company’s discretion, subject to prevailing financial and market conditions. Snap‑on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any.

Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends totaled $335.5 million and $294.1 million in the respective first nine months of 2025 and 2024. On November 8, 2024, the Board increased the quarterly cash dividend by 15.1% to $2.14 per share ($8.56 per share annualized). Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends.

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Critical Accounting Policies and Estimates

Snap-on’s critical accounting policies and estimates, which are discussed in its Annual Report on Form 10-K for the fiscal year ended December 28, 2024, have not materially changed since the report was filed.

Outlook

We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment. Snap-on expects to make ongoing progress along its decisive runways for coherent growth, leveraging capabilities already proven in the automotive repair arena, developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, we project that capital expenditures in 2025 will approximate $100 million, of which $62.5 million was incurred in the first nine months of the year.

Snap-on currently anticipates that its full-year 2025 effective income tax rate will be in the range of 22% to 23%.

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