What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-11 · 273 added, 262 removed, 495 unchanged (52% of the section changed)

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Management Overview

In 2020, the COVID-19 pandemic impacted the company’s sales and earnings as a result of decreased activity in the first half of the year.

By safely pursuing opportunities in the COVID-19 environment, we believe our 2020 operating results demonstrate our continued commitment to providing repeatability and reliability to a wide range of professional customers performing critical and essential tasks in workplaces of consequence.

Leveraging capabilities already demonstrated in the automotive repair arena, our strategy continued to focus on developing and expanding our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including critical industries, where the cost and penalties for failure can be high.

We believe our 2021 operating results demonstrate the continued momentum of our operations and confirms the resilience of our markets and our considerable capabilities to overcome the challenges of the COVID environment.

Throughout the turbulence, we maintained and further developed our ongoing advantages in our products, brands and people.

At the same time, we leveraged existing proficiencies to focus on expanding our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including critical industries, where the cost and penalties for failure can be high.

Snap-on’s value proposition of making work easier for serious professionals is an ongoing strength as we move forward along our runways for coherent growth:

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• Expanding with repair shop owners and managers, where we continued to make progress in connecting with customers and translating the resulting insights into innovation that solves specific challenges in the repair facility;

• Further extending to critical industries, where we continued to grow our lines of products customized for specific industries, including through acquisitions;

• Further extending to critical industries, where we continued to grow our lines of products customized for specific industries, including through further integration of acquisitions;

• Building in emerging markets, where we continued to maintain manufacturing capacity, as well as refine product lines and distribution capabilities.

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Recent Acquisitions

On August 1, 2021, Snap-on acquired AutoCrib EMEA GmbH (“AutoCrib Germany”), for a cash purchase price of $4.4 million (or $4.2 million, net of cash acquired).

AutoCrib Germany, based in Hamburg, Germany, distributes asset and tool control solutions for a variety of aerospace, automotive, military, natural resources and general industry operations.

The acquisition of AutoCrib Germany, a former independent distributor, enhanced and expanded Snap-on’s capabilities in providing solutions for the company’s existing tool control offerings.

On July 1, 2021, Snap-on exchanged its 35% equity interest in Deville S.A., valued at $21.8 million, for 100% ownership of Secateurs Pradines (“Pradines”), a wholly owned subsidiary of Deville S.A.

with a fair value of $20.7 million (or $16.2 million, net of cash acquired), and cash of $1.1 million.

Pradines, located in Bauge-en-Anjou, France, designs and manufactures horticultural hand tools for professionals and individuals.

Pradines has been the primary supplier of pruning products to Snap‑on and the acquisition allows the company to improve and expand its pruning tool offering.

SNAP-ON INCORPORATED

On February 26, 2021, Snap-on acquired Dealer-FX Group, Inc.

(“Dealer-FX”) for a cash purchase price of $200.1 million (or $200.0 million, net of cash acquired).

Dealer-FX, based in Markham, Ontario, is a leading developer, marketer and provider of service-operations software solutions for automotive original equipment manufacturer (“OEM”) customers and their dealers.

Dealer-FX specializes in software as a service (SaaS) management systems, communications platforms, extensive data integrations, and offers a digitalized solution that increases productivity and enhances the vehicle owners’ experience.

The acquisition of Dealer-FX complemented and expanded Snap-on’s existing OEM and dealership business that provides electronic parts catalogs, essential tool and diagnostic programs, and custom analytics to OEMs and dealerships.

On September 28, 2020, Snap-on acquired substantially all of the assets of AutoCrib, Inc.

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The acquisition of the TreadReader product line enhanced and expanded Snap-on’s existing capabilities in serving vehicle repair facilities and expanded the company’s presence with repair shop owners and managers.

2020 ANNUAL REPORT 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

On August 7, 2019, Snap-on acquired Cognitran Limited (“Cognitran”) for a cash purchase price of $30.6 million (or $29.6 million, net of cash acquired), which reflects a $0.2 million working capital adjustment finalized in fiscal 2020.

Cognitran, based in Chelmsford, U.K., specializes in flexible, modular and highly scalable “Software as a Service” (SaaS) products for Original Equipment Manufacturer (“OEM”) customers and their dealers, focused on the creation and delivery of service, diagnostics, parts and repair information to the OEM dealers and connected vehicle platforms.

The acquisition of Cognitran enhanced and expanded Snap-on’s capabilities in providing shop efficiency solutions through integrated upstream services to OEM customers in automotive, heavy duty, agricultural and recreational applications.

On April 2, 2019, Snap-on acquired Power Hawk Technologies, Inc.

(“Power Hawk”) for a cash purchase price of $7.9 million.

Power Hawk, based in Rockaway, New Jersey, designs, manufactures and distributes rescue tools and related equipment for a variety of military, governmental, fire and rescue, and emergency operations.

The acquisition of the Power Hawk product line complemented and increased Snap-on’s existing product offering and broadened its established capabilities in serving critical industries.

On January 25, 2019, Snap-on acquired substantially all of the assets of TMB GeoMarketing Limited (“TMB”) for a cash purchase price of $1.3 million.

TMB, based in Dorking, U.K., designs planning software used by OEMs to optimize dealer locations and manage the performance of dealer outlets.

The acquisition of TMB extended Snap-on’s product line in its core dealer network solutions business.

For segment reporting purposes, the results of operations and assets of Sigmavision, Cognitran and TMB have been included in the Repair Systems & Information Group since the respective acquisition dates, and the results of operations and assets of AutoCrib and Power Hawk have been included in the Commercial & Industrial Group since the respective acquisition dates.

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

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

Fiscal 2019 as Compared to Fiscal 2018

A discussion regarding our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 can be found under “Part II, Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended December 28, 2019, which was filed with the SEC on February 13, 2020, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our corporate website at www.snapon.com .

Non-GAAP Measures

References in this 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 generally accepted accounting principles in the United States of America (“GAAP”), excluding acquisition-related sales and the impact of foreign currency translation.

Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period.

The company’s organic sales disclosures also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends.

Management believes that 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 our businesses and facilitating comparisons of our sales performance with prior periods.

Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31.

Unless otherwise indicated, references in this document to “fiscal 2021” or “2021” refer to the fiscal year ended January 1, 2022;

references to “fiscal 2019” or “2019” refer to the fiscal year ended December 28, 2019;

references to “fiscal 2020” or “2020” refer to the fiscal year ended January 2, 2021;

and references to “fiscal 2019” or “2019” refer to the fiscal year ended December 28, 2019.

References in this document to 2020, 2019 and 2018 year end refer to January 2, 2021, December 28, 2019, and December 29, 2018, respectively.

Snap-on’s 2020 fiscal year contained 53 weeks of operating results with the extra week occurring in the fourth quarter.

References in this document to 2021, 2020 and 2019 year end refer to January 1, 2022, January 2, 2021, and December 28, 2019, respectively.

Snap-on’s 2021 and 2019 fiscal years each contained 52 weeks of operating results.

Snap-on’s 2020 fiscal year contained 53 weeks of operating results with the extra week occurring in the fourth quarter.

The impact of the additional week of operations in fiscal 2020 was not material to Snap-on’s full year or fourth quarter total revenues or net earnings.

SNAP-ON INCORPORATED

Impact of COVID-19

As discussed in Part I, Item 1A:

Risk Factors, the company faces risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic, which caused disruption and volatility in the global capital markets and authored an economic slowdown.

In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first quarter of 2020, impacting Snap-on’s sales volumes in most geographies and across a variety of customers, including those in automotive repair.

In addition, the impact of economic uncertainty caused by COVID-19 led to an increase in the credit reserve requirements for the company’s financial services portfolio.

During the second quarter of 2020, the COVID-19 pandemic and associated government measures to limit the spread of the virus heavily impacted Snap-on’s sales and earnings and, as anticipated, resulted in substantially lower performance in that period as compared to 2019.

The company accommodated its operations to the virus environment, continuing without significant disruption to serve its franchisees and other professional customers as they performed essential work, while taking what it believes to be appropriate measures to ensure the health and safety of its personnel.

Snap-on also provided direct assistance to its franchisees as they accommodated the turbulence caused by the virus to enable continued service to their essential technician customers.

As a result of these accommodations, the impact of the virus on operations lessened as the year progressed.

The company has invested in offsetting the virus impact, including absorbing temporary closures of certain facilities, wages for quarantined associates, event cancellation fees, as well as other related costs (collectively, “direct COVID-19-related costs” or “direct costs associated with COVID-19”).

Snap-on has generally maintained its headcount, manufacturing capacity and product development, in anticipation of the return to pre-COVID-19 demand levels.

The company’s supply chain and distribution channels have not been materially impacted by the pandemic, and the company has taken steps to ensure access to raw materials and components, but it cannot provide assurances with respect to the future due to the evolving nature of the pandemic.

The ultimate impact of COVID-19 on our b usiness, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

Fiscal 2020 as Compared to Fiscal 2019

A discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be found under “Part II, Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended January 2, 2021, which was filed with the SEC on February 11, 2021, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our corporate website at www.snapon.com .

2021 ANNUAL REPORT 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Non-GAAP Measures

References in this 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 generally accepted accounting principles in the United States of America (“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.

Effect of COVID-19

Our markets and our operations possess and, indeed, have demonstrated considerable resilience against the effects of the pandemic.

During 2021, the impact on sales and the need for remediating costs associated with the pandemic have lessened, particularly from the heavily-impacted second quarter of 2020.

The company sustained the accommodation of its operations to the virus environment, continuing without significant disruption to serve its franchisees and other professional customers as they performed their essential work, while taking what it believes to be appropriate measures to ensure the health and safety of its people.

Throughout the pandemic, Snap-on has generally maintained its workforce and manufacturing capacity, as well as its investments in brand building and product development.

As the global supply chain inefficiencies and associated cost increases caused by the COVID-19 pandemic have developed, the company has taken steps to ensure access to raw materials, components and purchased finished goods, and to provide for counterbalancing price and efficiency offsets.

See also Part I, Item 1A:

Risk Factors - Risk related to COVID-19 and Other Infectious Diseases.

Summary of Consolidated Performance

Consolidated net sales of $3,592.5 million in 2020, reflecting a $140.9 million, or 3.8%, decrease in organic sales and $10.9 million of unfavorable foreign currency translation, partially offset by $14.3 million of acquisition-related sales, compared to $3,730.0 million in 2019.

The lower sales volume is primarily due to decreased activity in the first half of the year as a result of the initial economic impact associated with the COVID-19 pandemic.

Operating earnings before financial services of $631.9 million in 2020, including $12.5 million of exit and disposal (“restructuring”) charges, $11.9 million of direct costs associated with COVID-19 and $13.1 million of unfavorable foreign currency effects, compared to $716.4 million in 2019, which in cluded an $11.6 million benefit from a legal settlement in a patent-related litigation matter that was being appealed (the “legal settlement”).

Consolidated net sales of $4,252.0 million in 2021 increased $659.5 million, or 18.4%, from 2020 levels, reflecting a $550.5 million, or 15.1%, organic gain, $62.6 million of acquisition-related sales and $46.4 million of favorable foreign currency translation.

Operating earnings before financial services of $851.5 million in 2021 increased $219.6 million, or 34.8%, compared to $631.9 million in 2020, which included $12.5 million of exit and disposal (“restructuring”) charges.

As a percentage of net sales, operating earnings before financial services of 20.0% compared to 17.6% last year.

Operating earnings of $880.5 million in 2020, including $12.5 million of restructuring charges, $11.9 million of direct costs associated with COVID-19 and $13.2 million of unfavorable foreign currency effects, compared to $962.3 million last year, which included the benefit from the $11.6 million legal settlement.

Operating earnings of $1,123.5 million in 2021 increased $243.0 million, or 27.6%, compared to $880.5 million last year, which included $12.5 million of charges for restructuring actions.

As a percentage of revenues, operating earnings of 24.4%, compared to 22.3% last year.

Net earnings attributable to Snap-on in 2020 of $627.0 million, or $11.44 per diluted share, included a $10.3 million, or $0.19 per diluted share, after-tax charge related to restructuring actions.

Net earnings attributable to Snap-on in 2019 were $693.5 million, or $12.41 per diluted share and included an $8.7 million, or $0.15 per diluted share, after-tax benefit from the legal settlement.

2020 ANNUAL REPORT 29

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net earnings attributable to Snap-on in 2021 of $820.5 million, or $14.92 per diluted share, increased $193.5 million, or $3.48 per diluted share, from 2020 levels.

Net earnings attributable to Snap-on in 2020 were $627.0 million, or $11.44 per diluted share and included a $10.3 million, or $0.19 per diluted share, after-tax charge related to the restructuring actions.

SNAP-ON INCORPORATED

Summary of Segment Performance

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.

Segment net sales of $1,234.6 million in 2020, reflecting a $115.8 million, or 8.6%, organic sales decline and $3.5 million of unfavorable currency translation, partially offset by $8.2 million of acquisition-related sales, compared to $1,345.7 million in 2019.

The organic sales decrease primarily includes a double-digit decline in the segment’s Asia Pacific operations, a high single-digit decrease in sales to customers in critical industries and a low single-digit decline in sales in the segment’s European-based hand tools business.

Operating earnings of $153.7 million in 2020, including $6.5 million of direct costs associated with COVID-19, $6.4 million of restructuring charges and $5.8 million of unfavorable foreign currency effects, compared to $188.7 million in 2019.

Segment net sales of $1,406.3 million in 2021 increased $171.7 million, or 13.9%, from 2020 levels, reflecting a $131.9 million, or 10.5%, organic sales increase, $22.5 million of acquisition-related sales and $17.3 million of favorable currency translation.

The organic gain reflects higher activity in all of the segment’s operations and includes mid single-digit increases in sales to customers in critical industries.

Operating earnings of $209.9 million in 2021, including $3.8 million of unfavorable foreign currency effects, increased $56.2 million, or 36.6%, compared to $153.7 million in 2020, which included $6.4 million of restructuring charges.

The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2022:

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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.

Segment net sales of $1,643.9 million in 2020, reflecting a $32.8 million, or 2.0%, organic sales gain, partially offset by $1.8 million of unfavorable foreign currency translation, compared to $1,612.9 million in 2019.

The organic sales increase reflects a low single-digit gain in the U.S.

franchise operations, partially offset by a low single-digit decline in the segment’s international operations.

Operating earnings of $267.7 million in 2020, including $3.5 million of direct costs associated with COVID-19, $0.6 million of restructuring charges and $5.4 million of unfavorable foreign currency effects, compared to $245.8 million in 2019 .

Segment net sales of $1,938.6 million in 2021 increased $294.7 million, or 17.9%, from 2020 levels, reflecting a $274.4 million, or 16.5%, organic sales gain and $20.3 million of favorable foreign currency translation.

The organic increase reflects double-digit gains in both the U.S.

and international operations.

Operating earnings of $411.1 million in 2021, including $17.0 million of favorable foreign currency effects, increased $143.4 million, or 53.6%, compared to $267.7 million in 2020.

In 2022, the Snap-on Tools Group intends to continue these initiatives, with specific focus on the following:

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• Increasing customer service levels and productivity in back office support functions, manufacturing and the supply chain through RCI initiatives and investment.

By focusing on these areas, we believe that Snap-on, as well as its franchisees, will have the opportunity to continue to serve customers more effectively, more profitably and with improved satisfaction.

By focusing on these areas, we believe that Snap-on, as well as its franchisees, will have the opportunity to serve more customers, more effectively, more profitably and with improved satisfaction.

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 dealership service and repair shops (“OEM dealerships”) through direct and distributor channels.

Segment net sales of $1,238.2 million in 2020, reflecting a $97.6 million, or 7.3%, organic sales decline and $4.8 million of unfavorable foreign currency translation, partially offset by $6.1 million of acquisition-related sales, compared to $1,334.5 million in 2019.

The organic sales decrease includes double-digit declines in both sales of undercar equipment and in sales to OEM dealerships.

Sales of diagnostic and repair information products to independent repair shop owners and managers were essentially flat.

Operating earnings of $298.0 million in 2020, including $5.5 million of costs related to restructuring actions, $1.2 million of direct costs associated with COVID-19 and $1.9 million of unfavorable foreign currency effects, compared to $342.7 million in 2019.

SNAP-ON INCORPORATED

Segment net sales of $1,503.1 million in 2021 increased $264.9 million, or 21.4% from 2020 levels, reflecting a $211.3 million, or 16.9%, organic sales increase, $40.1 million of acquisition-related sales and $13.5 million of favorable foreign currency translation.

The organic gain reflects an increase of more than 25% in sales of undercar equipment, as well as double-digit gains in both sales of diagnostic and repair information products to independent repair shop owners and managers and in activity focused on OEM dealerships.

Operating earnings of $348.6 million in 2021, including $1.6 million of unfavorable foreign currency effects, increased $50.6 million, or 17.0%, from $298.0 million in 2020, which included $5.5 million of restructuring charges.

2021 ANNUAL REPORT 29

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The Repair Systems & Information Group intends to focus on the following strategic priorities in 2022:

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• Increasing penetration in geographic markets, including emerging markets.

Financial Services revenue was $349.7 million in 2020 and $337.7 million in 2019.

Financial Services generates revenue from various financing programs and is a strategic partner of the company’s mobile franchise van channel.

Financial services revenue was $349.7 million in both 2021 and 2020.

Originations of $1,073.2 million in 2021 increased $36.6 million, or 3.5%, from 2020 levels.

Operating earnings from financial services in 2020 of $248.6 million, compared to $245.9 million last year.

In 2020, financial services expenses included higher provisions for credit losses related to the company’s adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326 ), and $2.6 million of higher credit reserve requirements associated with the COVID-19 pandemic, which were recorded in the first quarter of 2020.

Snap-on continues to grow its financial services portfolio by providing financing for finance and contract receivables originated by our global financial services operations.

Operating earnings from financial services in 2021 of $272.0 million, including $2.3 million of favorable foreign currency effects, increased $23.4 million, or 9.4%, compared to $248.6 million last year.

Financial Services intends to focus on the following strategic priorities in 2022:

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• Maintaining healthy portfolio performance levels.

Net cash provided by operating activities of $1,008.6 million in 2020 increased $334.0 million from $674.6 million in 2019.

The $334.0 million increase is primarily due to $430.2 million from net changes in operating assets and liabilities, partially offset by a $64.8 million decrease in net earnings.

Net cash provided by operating activities of $966.6 million in 2021 decreased $42.0 million from $1,008.6 million in 2020.

The $42.0 million decrease is primarily due to a $253.6 million change in net operating assets and liabilities, partially offset by a $195.0 million increase in net earnings.

Net cash used by investing activities of $290.4 million in 2021 included additions to finance receivables of $878.1 million, partially offset by collections of $854.2 million, as well as a total of $199.7 million for the acquisitions of Dealer-FX, AutoCrib Germany and Pradines.

Net cash used by investing activities of $187.8 million in 2020 included additions to finance receivables of $835.0 million, partially offset by collections of $750.3 million, as well as a total of $41.5 million for the acquisitions of Sigmavision and AutoCrib, and a $0.2 million working capital adjustment for the 2019 Cognitran acquisition.

Net cash used by investing activities of $222.1 million in 2019 included additions to finance receivables of $841.9 million, partially offset by collections of $754.3 million, as well as a total of $38.6 million (net of $1.0 million of cash acquired) for the acquisitions of TMB, Power Hawk and Cognitran.

Capital expenditures in 2021 and 2020 totaled $70.1 million and $65.6 million, respectively.

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.

Net cash used by financing activities of $818.8 million in 2021 included $431.3 million for the repurchase of 1,943,900 shares of Snap-on’s common stock, $275.8 million for dividend payments to shareholders and the September 2021 repayment of $250.0 million of 6.125% unsecured notes upon maturity (the “2021 Notes”).

These amounts were partially offset by $162.4 million of proceeds from stock purchase and option plan exercises and net proceeds from notes payable and other short-term borrowings of $3.3 million.

Net cash used by financing activities of $84.3 million in 2020 included $243.3 million for dividend payments to shareholders, $187.2 million for repayments of notes payable and other short-term borrowings and $174.3 million for the repurchase of 1,109,000 shares of Snap-on’s common stock.

These amounts were partially offset by Snap-on’s sale, on April 27, 2020, of $500 million of unsecured 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), at a discount, from which Snap-on received $489.9 million of net proceeds, reflecting $4.4 million of transaction costs, and $55.8 million of proceeds from stock purchase and option plan exercises.

Net cash used by financing activities of $409.4 million in 2019 included $238.4 million for the repurchase of 1,495,000 shares of Snap-on’s common stock and $216.6 million for dividend payments to shareholders, partially offset by $51.4 million of proceeds from stock purchase and option plan exercises and $17.6 million of net proceeds from other short-term borrowings.

2020 ANNUAL REPORT 31

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

SNAP-ON INCORPORATED

Results of Operations

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Earnings before equity earnings 839.9 18.3 % 646.1 16.4 % 193.8 30.0 %

Equity earnings, net of tax 0.3 — 0.9 — (0.6) (66.7) %

Equity earnings, net of tax 1.5 — 0.3 — 1.2 NM

Net earnings 841.4 18.3 % 646.4 16.4 % 195.0 30.2 %

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$ 820.5 17.8 % $ 627.0 15.9 % $ 193.5 30.9 %

Not meaningful

Percentage Disclosure:

All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales of $3,592.5 million in 2020, reflecting a $140.9 million, or 3.8%, decrease in organic sales and $10.9 million of unfavorable foreign currency translation, partially offset by $14.3 million of acquisition-related sales, compared to $3,730.0 million in 2019.

The lower sales volume is primarily due to decreased activity in the first half of the year as a result of the initial economic impact associated with the COVID-19 pandemic.

Gross profit of $1,748.5 million in 2020, including $7.1 million of restructuring costs, $6.2 million of direct costs associated with COVID-19 and $15.6 million of unfavorable foreign currency effects, compared to $1,844.0 million in 2019.

Gross margin (gross profit as a percentage of net sales) of 48.7% in 2020 declined 70 basis points (100 basis points (“bps”) equals 1.0 percent) from last year primarily due to the impact of lower sales volumes, including costs to maintain manufacturing capacity, 20 bps from costs related to restructuring actions outside of the United States, 10 bps of direct costs associated with COVID-19 and 30 bps of unfavorable foreign currency effects.

These decreases were partially offset by benefits from the company’s RCI initiatives.

Operating expenses of $1,116.6 million in 2020, including $5.7 million of direct costs as sociated with COVID-19 and $5.4 million of restructuring charges, compared to $1,127.6 million in 2019, which included the $11.6 million benefit related to the legal settlement.

Operating expenses as a percentage of net sales of 31.1% in 2020 increased 90 bps from last year primarily due to lower sales volumes, 30 bps of a non-recurring benefit from the legal settlement in 2019, 20 bps of direct costs associated with COVID-19 and 10 bps of costs from restructuring actions.

These items were partially offset by savings from cost containment actions in response to lower sales volumes.

SNAP-ON INCORPORATED

Operating earnings before financial services of $631.9 million in 2020, including $12.5 million of restructuring charges, $11.9 million of direct costs associated with COVID-19 and $13.1 million of unfavorable foreign currency effects, compared to $716.4 million in 2019, which benefited from the $11.6 million legal settlement.

As a percentage of net sales, operating earnings before financial services of 17.6%, including 30 bps of costs from restructuring actions, 30 bps of direct costs associated with COVID-19 and 30 bps of unfavorable foreign currency effects, compared to 19.2% last year, which included 30 bps of a non-recurring benefit from the legal settlement.

Financial services revenue of $349.7 million in 2020 compared to $337.7 million last year.

Financial services operating earnings of $248.6 million in 2020, including a $2.6 million charge for higher credit reserve requirements associated with the impact of the COVID-19 pandemic recorded in the first quarter of 2020, and $0.1 million of unfavorable foreign currency effects, compared to $245.9 million last year.

As a percentage of revenues, operating earnings of 22.3%, including 30 bps of costs from restructuring actions, 30 bps of direct costs associated with COVID-19 and 30 bps of unfavorable foreign currency effects, compared to 23.7% last year, which included 30 bps of a non-recurring benefit from the legal settlement.

Interest expense in 2020 increased $5.0 million from last year.

Net sales of $4,252.0 million in 2021 increased $659.5 million, or 18.4%, from 2020 levels, reflecting a $550.5 million, or 15.1%, organic gain, $62.6 million of acquisition-related sales and $46.4 million of favorable foreign currency translation.

Gross profit of $2,110.8 million in 2021 increased $362.3 million, or 20.7%, compared to $1,748.5 million last year.

Gross margin (gross profit as a percentage of net sales) of 49.6% in 2021 improved 90 basis points (100 basis points (“bps”) equals 1.0 percent) from last year primarily due to higher sales volumes, pricing actions, benefits from the company’s RCI initiatives and 20 basis points from lower costs related to $7.1 million of restructuring charges recorded last year, partially offset by higher material and other costs.

Operating expenses of $1,259.3 million in 2021 compared to $1,116.6 million in 2020.

Operating expenses as a percentage of net sales of 29.6% in 2021 improved 150 bps from last year primarily due to higher sales volumes and 10 bps from lower costs related to $5.4 million of restructuring actions recorded in 2020.

These items were partially offset by costs associated with higher stock-based expenses and 50 bps of unfavorable acquisition effects.

Operating earnings before financial services of $851.5 million in 2021 increased $219.6 million, or 34.8%, compared to $631.9 million in 2020 , which included $12.5 million of charges for restructuring actions.

As a percentage of net sales, operating earnings before financial services of 20.0% improved 240 bps from 17.6% last year, which included 30 bps of costs from restructuring actions.

2021 ANNUAL REPORT 31

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Financial services revenue of $349.7 million in 2021 was unchanged from 2020.

Financial services operating earnings of $272.0 million in 2021 compared to $248.6 million last year.

Operating earnings of $1,123.5 million in 2021 increased $243.0 million, or 27.6%, compared to $880.5 million last year, which included $12.5 million of charges for restructuring actions.

As a percentage of revenues, operating earnings of 24.4% improved 210 bps from 22.3% last year, which included 30 bps of costs from restructuring actions.

Interest expense in 2021 decreased $0.9 million from last year.

See Note 10 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.

1 unchanged sentence

See Note 18 to the Consolidated Financial Statements for information on other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on in 2020 was 23.2%, which included a 10 bps increase related to restructuring actions.

The 2019 effective tax rate was 23.4%.

The effective income tax rate on earnings attributable to Snap-on in both 2021 and 2020 was 23.2%.

The 2020 effective tax rate included a 10 bps increase related to restructuring actions.

See Note 9 to the Consolidated Financial Statements for information on income taxes.

Net earnings attributable to Snap-on in 2020 of $627.0 million, or $11.44 per diluted share, included a $10.3 million, or $0.19 per diluted share, after-tax charge related to restructuring actions.

Net earnings attributable to Snap-on in 2019 were $693.5 million, or $12.41 per diluted share, and included an $8.7 million, or $0.15 per diluted share, after-tax benefit from the legal settlement.

Net earnings attributable to Snap-on in 2021 of $820.5 million, or $14.92 per diluted share, increased $193.5 million, or $3.48 per diluted share, from 2020 levels.

Net earnings attributable to Snap-on in 2020 were $627.0 million, or $11.44 per diluted share, which included a $10.3 million, or $0.19 per diluted share, after-tax charge related to the restructuring actions.

Exit and Disposal Activities

Snap-on recorded costs for exit and disposal activities outside of the United States of $12.5 million in 2020.

Snap-on did not record any costs for exit and disposal activities in 2021 .

Snap-on recorded costs for exit and disposal activities outside of the United States of $12.5 million in 2020.

See Note 8 to the Consolidated Financial Statements for information on Snap-on’s exit and disposal activities.

15 unchanged sentences

All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

2020 ANNUAL REPORT 33

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

SNAP-ON INCORPORATED

Commercial & Industrial Group

7 unchanged sentences

Segment operating earnings $ 209.9 14.9 % $ 153.7 12.4 % $ 56.2 36.6 %

Segment gross margin of 36.7% in 2020 declined 130 bps from last year primarily due to the impact of decreased sales volumes, including lower utilization of manufacturing capacity, 60 bps from $6.4 million of costs related to restructuring actions in the segment’s European-based hand tools business, 30 bps for direct COVID-19-related costs and 40 bps of unfavorable foreign currency effects.

These items were partially offset by material cost savings and benefits from RCI initiatives.

Segment operating expenses as a percentage of net sales of 24.3% in 2020, including 30 bps of direct costs associated with COVID-19, compared to 24.0% in 2019.

As a result of these factors, segment operating earnings of $153.7 million in 2020, including $6.5 million of direct costs associated with COVID-19, $6.4 million of restructuring charges and $5.8 million of unfavorable foreign currency effects, compared to $188.7 million in 2019.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 12.4% in 2020 compared to 14.0% in 2019.

The organic gain reflects higher activity in all of the segment’s operations and includes mid single-digit increases in sales to customers in critical industries.

Segment gross margin in 2021 of 38.2% improved 150 bps from last year, primarily due to benefits from higher sales volumes and 60 bps from lower costs related to $6.4 million of restructuring actions recorded in 2020, partially offset by 40 bps of unfavorable foreign currency effects.

Segment operating expenses as a percentage of net sales in 2021 of 23.3% improved 100 bps as compared to 2020 primarily reflecting the higher sales.

As a result of these factors, segment operating earnings of $209.9 million in 2021, including $3.8 million of unfavorable foreign currency effects, increased $56.2 million, or 36.6%, compared to $153.7 million in 2020, which included $6.4 million of restructuring charges.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 14.9% in 2021 compared to 12.4% last year.

Snap-on Tools Group

5 unchanged sentences

Segment operating earnings $ 411.1 21.2 % $ 267.7 16.3 % $ 143.4 53.6 %

The organic sales increase reflects a low single-digit gain in the U.S.

franchise operations, which more than overcame the impacts of the ongoing COVID-19 pandemic, partially offset by a low single-digit decline in the segment’s international operations.

Segment gross margin in 2020 of 43.3%, including 30 bps of unfavorable foreign currency effects, was unchanged from last year.

Segment operating expenses as a percentage of net sales of 27.0% in 2020 improved 110 bps from last year primarily due to savings from cost containment actions.

As a result of these factors, segment operating earnings of $267.7 million in 2020, including $3.5 million of direct costs associated with COVID-19, $0.6 million of restructuring charges and $5.4 million of unfavorable foreign currency effects, compared to $245.8 million in 2019.

The organic increase is due to double-digit gains in both the U.S.

and international operations.

Segment gross margin in 2021 of 45.6% improved 230 bps from last year primarily due to higher sales volumes, pricing actions, benefits from RCI initiatives, and 70 bps of favorable foreign currency effects, partially offset by higher material and other costs.

Segment operating expenses as a percentage of net sales in 2021 of 24.4% improved 260 bps from last year primarily reflecting the higher sales, partially offset by higher stock-based expenses related to the company’s franchisee stock purchase plan.

As a result of these factors, segment operating earnings of $411.1 million in 2021, including $17.0 million of favorable foreign currency effects, increased $143.4 million, or 53.6%, compared to $267.7 million in 2020.

Operating margin for the Snap‑on Tools Group of 21.2% in 2021 compared to 16.3% last year.

SNAP-ON INCORPORATED

2021 ANNUAL REPORT 33

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Repair Systems & Information Group

7 unchanged sentences

Segment operating earnings $ 348.6 23.2 % $ 298.0 24.1 % $ 50.6 17.0 %

The organic sales decrease includes double-digit declines in both sales of undercar equipment and in sales to OEM dealerships.

Sales of diagnostic and repair information products to independent repair shop owners and managers were essentially flat.

Segment gross margin in 2020 of 47.1%, including 10 bps from $0.7 million of costs from restructuring actions in Europe and 10 bps of unfavorable foreign currency effects, declined 40 bps from last year.

Segment operating expenses as a percentage of net sales of 23.0% in 2020 increased 120 bps from last year primarily due to the impact of lower sales volumes and 30 bps related to $4.8 million of costs from restructuring actions, partially offset by savings from cost containment and RCI initiatives.

As a result of these factors, segment operating earnings of $298.0 million in 2020, including $5.5 million of costs related to restructuring actions, $1.2 million of direct costs associated with COVID-19 and $1.9 million of unfavorable foreign currency effects, compared to $342.7 million last year.

Operating margin for the Repair Systems & Information Group was 24.1% in 2020 compared to 25.7% in 2019.

Segment net sales of $1,503.1 million in 2021 increased $264.9 million, or 21.4%, from 2020 levels, reflecting a $211.3 million, or 16.9%, organic sales increase, $40.1 million of acquisition-related sales and $13.5 million of favorable foreign currency translation.

The organic gain is comprised of an increase of more tha n 25% in sales of undercar equipment, as well as double-digit gains both in sales of diagnostic and repair information products to independent repair shop owners and managers and in activity focused on OEM dealerships.

Segment gross margin in 2021 of 45.9% declined 120 bps from last year primarily due to the impact of higher sales in lower gross margin businesses, increased material and other costs, and 20 bps o f unfavorable foreign currency effects.

These declines were partially offset by 60 bps of benefits from acquisitions.

Segment operating expenses as a percentage of net sales in 2021 of 22.7% improved 30 bps from last year primarily due to the higher sales volumes and 30 bps from lower costs related to $4.8 million of restructuring actions recorded in 2020, partially offset by 150 bps of unfavorable acquisition effects.

As a result of these factors, segment operating earnings of $348.6 million in 2021, including $1.6 million of unfavorable foreign currency effects, increased $50.6 million, or 17.0%, from $298.0 million in 2020, which included $5.5 million of restructuring charges.

Operating margin for the Repair Systems & Information Group of 23.2% in 2021 compared to 24.1% last year.

Financial Services

3 unchanged sentences

Segment operating earnings $ 272.0 77.8 % $ 248.6 71.1 % $ 23.4 9.4 %

Financial services revenue of $349.7 million in 2020 increased $12.0 million, or 3.6%, from last year, primarily reflecting $13.9 million of higher revenue as a result of growth of the company’s financial services portfolio, partially offset by $1.9 million of decreased revenue from lower average portfolio yields.

In 2020 and 2019, the respective average yields on finance receivables were 17.7% and 17.6%, and the respective average yields on contract receivables were 8.5% and 9.1%.

The lower yield on contract receivables in 2020 includes the impact of business operation support loans provided to franchisees in the second quarter of 2020 in response to the COVID-19 environment.

Financial Services continues to work closely with franchisees and customers to support those adversely impacted by the ongoing COVID-19 pandemic.

Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on receivables in the period.

Financial services revenue of $349.7 million in 2021 was unchanged from 2020, as the size of the average financial services portfolio and the average yields on receivables were largely the same in both years.

In both 2021 and 2020, the average yield on finance receivables was 17.7% and the average yield on contract receivables was 8.5%.

Originations of $1,073.2 million in 2021 increased $36.6 million, or 3.5%, from 2020 levels.

1 unchanged sentence

These expenses are generally more dependent on changes in the financial services portfolio than they are on the revenue of the segment.

Financial services expenses in 2020 increased $9.3 million from last year primarily due to increases in the provisions for credit losses including the company’s adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326 ), $2.6 million of higher credit reserve requirements associated with the COVID-19 pandemic, recorded in the first quarter of 2020, as well as higher variable compensation and other costs.

Financial services expenses in 2021 decreased $23.4 million from last year primarily due to lower provisions for credit losses as compared to those recorded in 2020, which included a $2.6 million charge related to higher credit reserves resulting from the economic uncertainty associated with the COVID-19 pandemic.

As a percentage of the average financial services portfolio, financial services expenses were 3.5% and 4.6% in 2021 and 2020, respectively.

Financial services operating earnings of $248.6 million in 2020, including $0.1 million of unfavorable foreign currency effects, increased $2.7 million, or 1.1%, from 2019 levels.

As a result of these factors, segment operating earnings of $272.0 million in 2021, including $2.3 million of favorable foreign currency effects, increased $23.4 million, or 9.4%, from 2020 levels.

See Note 1 and Note 4 to the Consolidated Financial Statements for further information on financial services.

SNAP-ON INCORPORATED

Snap-on’s general corporate expenses in 2021 of $118.1 million compared to $87.5 million last year.

The year-over-year increase primarily reflects higher stock-based and performance-based compensation, including costs associated with the company’s employee stock purchase plan, and increased brand-building expenses.

Quarterly Data

(Amounts in millions, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Net sales $ 1,024.6 $ 1,081.4 $ 1,037.7 $ 1,108.3 $ 4,252.0

Gross profit 513.6 543.1 520.7 533.4 2,110.8

Financial services revenue 88.6 86.9 87.3 86.9 349.7

Financial services expenses (23.3) (18.0) (16.7) (19.7) (77.7)

Net earnings 197.6 213.2 201.5 229.1 841.4

Net earnings attributable to Snap-on Incorporated 192.6 208.0 196.2 223.7 820.5

Earnings per share – basic* 3.55 3.85 3.65 4.18 15.22

Earnings per share – diluted* 3.50 3.76 3.57 4.10 14.92

Cash dividends paid per share 1.23 1.23 1.23 1.42 5.11

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Net sales $ 852.2 $ 724.3 $ 941.6 $ 1,074.4 $ 3,592.5

Gross profit 421.6 341.2 469.5 516.2 1,748.5

Financial services revenue 85.9 84.6 85.8 93.4 349.7

Financial services expenses (29.0) (27.0) (20.2) (24.9) (101.1)

Net earnings 142.0 105.9 184.7 213.8 646.4

Net earnings attributable to Snap-on Incorporated 137.2 101.2 179.7 208.9 627.0

Earnings per share – basic* 2.52 1.86 3.31 3.85 11.55

Earnings per share – diluted* 2.49 1.85 3.28 3.82 11.44

Cash dividends paid per share 1.08 1.08 1.08 1.23 4.47

* Amounts may not total to annual earnings per share because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during each respective period.

2021 ANNUAL REPORT 35

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Snap-on’s general corporate expenses in 2020 of $87.5 million compared to $60.8 million last year, which included an $11.6 million non-recurring benefit from the legal settlement recorded in the first quarter of 2019.

The year-over-year increase in general corporate expenses primarily reflects higher variable compensation, brand building and other costs.

Fourth Quarter

12 unchanged sentences

Interest expense (11.3) (0.9) % (15.4) (1.3) % 4.1 26.6 %

Other income (expense) – net 2.4 0.2 % 2.4 0.2 % — —

Other income (expense) – net 5.1 0.3 % 2.4 0.2 % 2.7 NM

Earnings before income taxes and equity earnings

2 unchanged sentences

Earnings before equity earnings 229.1 19.2 % 213.5 18.3 % 15.6 7.3 %

Equity earnings, net of tax 0.3 — — — 0.3 —

Equity earnings, net of tax — — 0.3 — (0.3) NM

Net earnings 229.1 19.2 % 213.8 18.3 % 15.3 7.2 %

3 unchanged sentences

$ 223.7 18.7 % $ 208.9 17.9 % $ 14.8 7.1 %

Not meaningful

Percentage Disclosure:

All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales of $1,074.4 million in the fourth quarter of 2020, reflecting a $102.1 million, or 10.6%, organic sales gain, $7.5 million of acquisition-related sales and $9.6 million of favorable foreign currency translation, compared to $955.2 million in 2019.

Gross profit of $516.2 million in the fourth quarter of 2020, including $0.9 million of direct costs associated with COVID-19 and $1.5 million of favorable foreign currency effects, compared to $450.5 million last year.

Gross margin of 48.0% in the quarter improved 80 bps from 2019 primarily due to the impact of higher sales volumes and benefits from the company’s RCI initiatives, partially offset by 30 bps of unfavorable foreign currency effects.

Operating expenses of $300.0 million in the fourth quarter of 2020, including $1.9 million of direct costs associated with COVID-19, $1.0 million of restructuring charges in Europe and $3.0 million of unfavorable foreign currency effects, compared to $279.1 million in the fourth quarter of 2019.

Operating expenses as a percentage of net sales of 27.9% in the quarter improved 140 bps from last year primarily due to the effects of higher sales volumes.

Operating earnings before financial services of $216.2 million in the fourth quarter of 2020, including $2.8 million of direct costs associated with COVID-19, $1.0 million of restructuring costs and $1.5 million of unfavorable foreign currency effects, compared to $171.4 million last year.

As a percentage of net sales, operating earnings before financial services of 20.1%, including 30 bps of direct costs associated with COVID-19, 10 bps of costs from restructuring actions and 30 bps of unfavorable foreign currency effects in the quarter, improved 220 bps compared to 17.9% last year.

Net sales of $1,108.3 million in the fourth quarter of 2021 increased $33.9 million, or 3.2%, from 2020 levels, reflecting a $24.7 million, or 2.3%, organic gain and $12.2 million of acquisition-related sales, partially offset by $3.0 million of unfavorable foreign currency translation.

Gross profit of $533.4 million in the fourth quarter of 2021 increased $17.2 million, or 3.3%, compared to $516.2 million last year.

Gross margin of 48.1% in the quarter improved 10 bps from the fourth quarter of 2020 primarily due to higher sales volumes, pricing actions, 30 bps of favorable foreign currency effects, and benefits from the company’s RCI initiatives, which offset higher material and other costs.

Operating expenses of $301.2 million in the fourth quarter of 2021 compared to $300.0 million last year.

Operating expenses as a percentage of net sales of 27.1% in the quarter improved 80 bps from last year primarily due to higher sales volumes and 10 bps from lower costs related to $1.0 million of restructuring actions recorded in the fourth quarter of 2020.

These items were partially offset by 40 bps of unfavorable acquisition effects.

Operating earnings before financial services of $232.2 million in the fourth quarter of 2021 increased $16.0 million, or 7.4%, compared to $216.2 million in the fourth quarter of 2020, which included $1.0 million of charges for restructuring actions.

As a percentage of net sales, operating earnings before financial services of 21.0%, improved 90 bps from 20.1% last year.

Financial services revenue of $86.9 million in the fourth quarter of 2021 compared to $93.4 million last year.

Financial services operating earnings of $67.2 million in the period compared to $68.5 million in 2020.

SNAP-ON INCORPORATED

Financial services revenue of $93.4 million in the fourth quarter of 2020 compared to $83.9 million in 2019.

Financial services operating earnings of $68.5 million in the fourth quarter of 2020, including $0.2 million of favorable foreign currency effects, compared to $62.2 million last year.

Operating earnings of $284.7 million in the fourth quarter of 2020, including $2.8 million of direct costs associated with COVID-19, $1.0 million of restructuring charges and $1.3 million of unfavorable foreign currency effects, compared to $233.6 million last year.

As a percentage of revenues, operating earnings of 24.4% in the quarter, including 20 bps of direct costs associated with COVID-19, 10 bps of costs from restructuring actions and 30 bps of unfavorable foreign currency effects, compared to 22.5% last year.

Interest expense in the fourth quarter of 2020 increased $3.3 million from last year.

Operating earnings of $299.4 million in the fourth quarter of 2021, increased $14.7 million, or 5.2%, compared to $284.7 million last year, which included $1.0 million of charges for restructuring actions.

As a percentage of revenues, operating earnings of 25.1% in the quarter compared to 24.4% last year.

Interest expense in the fourth quarter of 2021 decreased $4.1 million from last year primarily as a result of lower year-over-year outstanding debt levels.

See Note 10 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.

1 unchanged sentence

See Note 18 to the Consolidated Financial Statements for information on other income (expense) – net.

Snap-on’s fourth quarter 2020 effective income tax rate on earnings attributable to Snap-on was 21.8%, which included a 10 bps increase related to restructuring actions, compared to 22.3% in 2019.

Snap-on’s fourth quarter 2021 effective income tax rate on earnings attributable to Snap-on was 22.3%.

The 2020 effective income tax rate was 21.8%, which included a 10 bps increase related to the restructuring actions.

See Note 9 to the Consolidated Financial Statements for information on income taxes.

Net earnings attributable to Snap-on in the fourth quarter of 2020 of $208.9 million, or $3.82 per diluted share, included a $1.0 million, or $0.02 per diluted share, after-tax charge related to restructuring actions.

Net earnings attributable to Snap-on in the fourth quarter of 2019 were $170.6 million, or $3.08 per diluted share.

Net earnings attributable to Snap-on in the fourth quarter of 2021 of $223.7 million, or $4.10 per diluted share, increased $14.8 million, or $0.28 per diluted share, from 2020 levels.

Net earnings attributable to Snap-on in the fourth quarter of 2020 were $208.9 million, or $3.82 per diluted share, which included a $1.0 million, or $0.02 per diluted share, after-tax charge related to the restructuring actions.

Exit and Disposal Activities

Snap-on did not record any exit and disposal costs for the three months ended January 1, 2022 .

Snap-on recorded costs for exit and disposal activities in Europe of $1.0 million in the three months ended January 2, 2021.

Snap-on did not record any exit and disposal costs for the three months ended December 28, 2019.

See Note 8 to the Consolidated Financial Statements for information on Snap-on’s exit and disposal activities.

10 unchanged sentences

Segment operating earnings $ 50.1 14.0 % $ 56.2 15.4 % $ (6.1) (10.9) %

Segment net sales of $364.4 million in the fourth quarter of 2020 increased $11.5 million, or 3.3%, from 2019 levels, including $7.5 million of acquisition-related sales and $6.5 million of favorable foreign currency translation, partially offset by a $2.5 million, or 0.7%, organic sales decline.

The organic sales decrease primarily includes a mid single-digit decline in the segment’s Asia Pacific operations and a low single-digit decline in sales to customers in critical industries, partially offset by a double-digit increase in sales in the segment’s European-based hand tools business.

Segment gross margin in the fourth quarter of 2020 of 37.8% improved 230 bps from last year primarily due to increased sales in higher gross margin businesses and benefits from the segment’s RCI initiatives.

These items were partially offset by 20 bps of direct costs associated with COVID-19 and 60 bps of unfavorable foreign currency effects.

Segment operating expenses as a percentage of net sales of 22.4% in the fourth quarter improved 30 bps as compared to last year.

Segment net sales of $358.7 million in the fourth quarter of 2021 decreased $5.7 million, or 1.6%, from 2020 levels, including a $1.6 million, or 0.4%, organic sales decline and $4.1 million of unfavorable foreign currency translation.

The organic decrease primarily reflects a low single-digit decline in sales to customers in critical industries, including lower sales to the military.

Segment gross margin in the fourth quarter of 2021 of 36.5% declined 130 bps primarily due to higher material and other costs and 10 bps of unfavorable foreign currency effects, partially offset by benefits from the segment’s RCI initiatives.

Segment operating expenses as a percentage of net sales of 22.5% in the fourth quarter of 2021 compared to 22.4% last year.

As a result of these factors, segment operating earnings of $50.1 million in the fourth quarter of 2021, including $1.2 million of unfavorable foreign currency effects, decreased $6.1 million from 2020 levels.

Operating margin for the Commercial & Industrial Group of 14.0% in the quarter compared to 15.4% last year.

2021 ANNUAL REPORT 37

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

As a result of these factors, segment operating earnings of $56.2 million in the fourth quarter of 2020, including $1.0 million of direct costs associated with COVID-19 and $1.3 million of unfavorable foreign currency effects, increased $11.2 million from 2019 levels.

Operating margin for the Commercial & Industrial Group of 15.4% in the quarter compared to 12.8% last year.

Snap-on Tools Group

6 unchanged sentences

Segment operating earnings $ 110.5 21.9 % $ 93.6 18.9 % $ 16.9 18.1 %

Segment net sales of $494.9 million in the fourth quarter of 2020, reflecting an $81.0 million, or 19.6%, organic sales increase and $2.2 million of favorable foreign currency translation, compared to $411.7 million in the fourth quarter of 2019.

The organic sales increase reflects a double-digit gain in both the segment’s U.S.

and international operations.

Segment gross margin in the fourth quarter of 42.9% improved 270 bps from last year primarily due to higher sales volumes and benefits from the company’s RCI initiatives.

Segment operating expenses as a percentage of net sales of 24.0% in the fourth quarter improved 300 bps from last year primarily due to the impact of higher sales volumes and savings from cost containment actions.

As a result of these factors, segment operating earnings of $93.6 million in the fourth quarter of 2020, including $1.2 million of direct costs associated with COVID-19, increased $39.3 million from 2019 levels.

Segment net sales of $504.8 million in the fourth quarter of 2021 increased $9.9 million, or 2.0%, from 2020 levels, reflecting a $7.9 million, or 1.6%, organic sales increase and $2.0 million of favorable foreign currency translation.

The organic increase is due to a low single-digit gain in the U.S.

franchise business, partially offset by a low single-digit decline in the segment’s international operations.

Segment gross margin in the fourth quarter of 43.9% improved 100 bps from last year primarily due to higher sales volumes, pricing actions, and 60 bps of favorable foreign currency effects, which offset higher material and other costs.

Segment operating expenses as a percentage of net sales of 22.0% in the fourth quarter improved 200 bps from last year primarily reflecting the higher sales, as well as benefits from ongoing cost containment efforts.

As a result of these factors, segment operating earnings of $110.5 million in the fourth quarter of 2021, including $3.6 million of favorable foreign currency effects, increased $16.9 million, or 18.1%, from 2020 levels.

Operating margin for the Snap‑on Tools Group of 21.9% in the quarter compared to 18.9% last year.

9 unchanged sentences

Segment operating earnings $ 97.2 24.8 % $ 90.0 24.9 % $ 7.2 8.0 %

Segment net sales of $361.1 million in the fourth quarter of 2020, reflecting a $23.7 million, or 7.0%, organic sales increase and $2.4 million of favorable foreign currency translation, compared to $335.0 million in the fourth quarter of 2019.

The organic sales increase includes a double-digit gain in sales to OEM dealerships and a high single-digit increase in sales of diagnostic and repair information products to independent repair shop owners and managers, partially offset by a low single-digit decrease in sales of undercar equipment.

Segment gross margin in the fourth quarter of 46.1%, including 10 bps of unfavorable foreign currency effects, decreased 160 bps from last year primarily due to the impact of higher sales in lower gross margin businesses.

Segment operating expenses as a percentage of net sales of 21.2% in the fourth quarter improved 50 bps from last year primarily due to the impact of higher sales volumes, partially offset by 30 bps related to $1.0 million of costs from restructuring actions in Europe and 10 bps of unfavorable foreign currency effects.

SNAP-ON INCORPORATED

As a result of these factors, segment operating earnings of $90.0 in the fourth quarter of 2020, including $1.0 million of costs related to restructuring actions, $0.2 million of direct costs associated with COVID-19 and $0.2 million of unfavorable foreign currency effects, compared to $87.2 million in 2019.

Segment net sales of $392.5 million in the fourth quarter of 2021 increased $31.4 million, or 8.7%, from 2020 levels, reflecting a $19.7 million, or 5.5%, organic sales increase and $12.2 million of acquisition-related sales, partially offset by $0.5 million of unfavorable foreign currency translation.

The organic gain is comprised of a double-digit increase in sales of undercar equipment 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 low single-digit decrease in sales to OEM dealerships.

Segment gross margin in the fourth quarter of 46.1% was unchanged from last year.

Benefits from pricing actions and 60 bps from acquisitions were offset by increased material and other costs.

Segment operating expenses as a percentage of net sales in the fourth quarter of 21.3%, increased 10 bps from last year primarily due to 150 bps of unfavorable acquisition effects in 2021, partially offset by the impact of higher sales volumes and 30 bps from lower costs related to $1.0 million of restructuring actions recorded in the fourth quarter of 2020.

As a result of these factors, segment operating earnings of $97.2 million in the fourth quarter of 2021, including $0.3 million of favorable foreign currency effects, increased $7.2 million, or 8.0%, from $90.0 million in 2020, which included $1.0 million of restructuring charges.

Operating margin for the Repair Systems & Information Group of 24.8% in the quarter compared to 24.9% last year.

SNAP-ON INCORPORATED

Financial Services

4 unchanged sentences

Segment operating earnings $ 67.2 77.3 % $ 68.5 73.3 % $ (1.3) (1.9) %

Financial services revenue of $93.4 million in the fourth quarter of 2020 increased $9.5 million, or 11.3%, from last year, primarily reflecting $9.4 million of higher revenue as a result of an additional week of interest income from the 53-week 2020 fiscal year, growth in the company’s financial services portfolio and $0.1 million of increased revenue from higher average portfolio yields.

In the fourth quarters of 2020 and 2019, the respective average yields on finance receivables were 17.7% and 17.5%, and the respective average yields on contract receivables were 8.5% and 9.2%.

The lower yield on contract receivables in 2020 includes the impact of business operations support loans that were provided to franchisees in the second quarter of 2020 in response to the COVID-19 environment.

Originations of $272.4 million in the fourth quarter of 2020 increased $10.0 million, or 3.8%, from 2019 levels.

Financial services expenses in the fourth quarter of 2020 increased $3.2 million from last year primarily due to higher variable compensation and other costs, partially offset by lower provisions for credit losses.

Financial services revenue of $86.9 million in the fourth quarter of 2021 decreased $6.5 million, or 7.0%, from $93.4 million last year, primarily as a result of an additional week of interest income from the 53-week 2020 fiscal year.

In the fourth quarters of both 2021 and 2020, the average yield on finance receivables was 17.7% and the average yield on contract receivables was 8.5%.

Originations of $256.3 million in the fourth quarter of 2021 decreased $16.1 million, or 5.9%, from 2020 levels.

Financial services expenses in the fourth quarter of 2021 decreased $5.2 million from last year primarily due to lower provisions for credit losses as compared to those recorded in the fourth quarter of 2020.

As a percentage of the average financial services portfolio, financial services expenses were 0.9% and 1.1% for the fourth quarters of 2021 and 2020, respectively.

Financial services operating earnings of $68.5 million in the fourth quarter of 2020, including $0.2 million of favorable foreign currency effects, increased $6.3 million, or 10.1%, from 2019 levels.

As a result of these factors, segment operating earnings of $67.2 million in the fourth quarter of 2021, including $0.2 million of favorable foreign currency effects, decreased $1.3 million, or 1.9%, from 2020 levels.

See Note 1 and Note 4 to the Consolidated Financial Statements for further information on financial services.

Snap-on’s fourth quarter 2021 general corporate expenses of $25.6 million compared to $23.6 million last year.

The year-over-year increase in general corporate expenses is primarily due to higher stock-based and variable compensation costs.

The year-over-year increase in general corporate expenses is primarily due to higher performance-based compensation costs.

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, diagnostic and equipment products, software and other non-financial services operations with Financial Services on the equity method.

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.

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Net earnings attributable to Snap-on $ 820.5 $ 627.0 $ 693.5 $ 161.2 $ 133.7 $ 129.9

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

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

SNAP-ON INCORPORATED

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Total assets $ 5,551.3 $ 5,090.0 $ 2,163.6 $ 2,170.3

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

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

2021 ANNUAL REPORT 41

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Total liabilities and equity $ 5,551.3 $ 5,090.0 $ 2,163.6 $ 2,170.3

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

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

SNAP-ON INCORPORATED

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Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost.

As of the close of business on February 5, 2021, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service;

As of February 4, 2022, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service;

A- and A-2 by Standard & Poor’s;

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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, based on current macroeconomic conditions resulting from the ongoing uncertainty caused by the COVID-19 pandemic, Snap-on cannot provide any assurances of the availability of future financing or the terms on which it might be available, or that its debt ratings may not decrease.

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 Consolidated Balance Sheets.

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Working capital $ 2,071.2 $ 1,918.1

Cash and cash equivalents of $923.4 million as of 2020 year end increased $738.9 million from 2019 year-end levels primarily due to:

Cash and cash equivalents of $780.0 million as of 2021 year end decreased $143.4 million from 2020 year-end levels primarily due to:

(i) the funding of $878.1 million of new finance receivables;

(ii) the repurchase of 1,943,900 shares of the company’s common stock for $431.3 million;

(iii) dividend payments to shareholders of $275.8 million;

(iv) the repayment of $250.0 million of the 2021 Notes;

(v) the funding of $199.7 million for acquisitions;

and (vi) the funding of $70.1 million for capital expenditures.

These decreases in cash and cash equivalents were partially offset by:

(i) $966.6 million of cash generated from operations;

(ii) $854.2 million of cash from collections of finance receivables;

(iii) $489.9 million of net proceeds from the 2050 Notes;

and (iv) $55.8 million of cash proceeds from stock purchase and option plan exercises.

These increases in cash and cash equivalents were partially offset by:

(i) the funding of $835.0 million of new finance receivables;

(ii) dividend payments to shareholders of $243.3 million;

(iii) $187.2 million of net repayments on other short-term borrowings;

(iv) the repurchase of 1,109,000 shares of the company’s common stock for $174.3 million;

(v) the funding of $65.6 million of capital expenditures;

and (vi) the funding of $41.5 million for acquisitions.

(iii) $162.4 million of cash proceeds from stock purchase and option plan exercises;

and (iv) $3.3 million of net proceeds from notes payable and other short-term borrowings.

Of the $780.0 million of cash and cash equivalents as of 2021 year end, $293.1 million was held outside of the United States.

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Although the Tax Cuts and Jobs Act (“Tax Act”) generally eliminated U.S.

federal taxation on dividends from foreign subsidiaries, such dividends may still be subject to state income taxation and foreign withholding taxes.

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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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Trade and other accounts receivable – net of $640.7 million as of 2020 year end decreased $53.9 million from 2019 year-end levels primarily due to the impact of lower sales volume as a result of the COVID-19 pandemic and collections of amounts due, partially offset by $5.1 million of receivables related to acquisitions and $13.0 million of foreign currency translation.

Trade and other accounts receivable – net of $682.3 million as of 2021 year end increased $41.6 million from 2020 year-end levels primarily due to higher sales and $9.7 million from acquisitions, partially offset by $12.5 million of foreign currency translation.

Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months sales, times 360 days) was 58 days and 64 days at the respective 2021 and 2020 year ends.

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The long-term portions of net finance and contract receivables of $1,492.2 million as of 2021 year end compared to $1,511.0 million at 2020 year end.

The combined $59.3 million increase in net current and long-term finance and contract receivables over 2019 year-end levels is primarily due to continued growth of the company’s financial services portfolio and $12.0 million of foreign currency translation.

Inventories – net of $746.5 million as of 2020 year end decreased $13.9 million from 2019 year-end levels primarily due to $40.1 million of inventory reductions, partially offset by $3.0 million of inventories related to acquisitions and $23.2 million of foreign currency translation.

The combined $8.8 million decrease in net current and long-term finance and contract receivables compared to 2020 year-end levels is primarily due to $36.6 million of higher originations more than offset by collections and other reductions as well as $2.6 million of unfavorable foreign currency translation.

Inventories – net of $803.8 million as of 2021 year end increased $57.3 million from 2020 year-end levels primarily to support higher customer demand, new product innovations and $2.8 million from acquisitions, partially offset by $16.1 million of foreign currency translation.

As of 2021 and 2020 year end, inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balance for the trailing 12 months) were 2.8 turns and 2.4 turns, respectively.

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The company’s LIFO reserve was $87.2 million and $84.0 million at 2021 and 2020 year end, respectively.

Notes payable and current maturities of long-term debt of $268.5 million as of 2020, consisted of $250.0 million of unsecured 6.125% notes that mature on September 1, 2021 (the “2021 Notes”) and $18.5 million of other notes.

Notes payable of $202.9 million as of 2019 year end consisted of $193.6 million of commercial paper borrowings and $9.3 million of other notes.

Average notes payable outstanding, including commercial paper and short-term credit facility borrowings, were $68.4 million and $175.0 million in 2020 and 2019, respectively.

As of 2021 year end, notes payable and current maturities of long-term debt consisted of $17.4 million of other notes.

Notes payable of $268.5 million as of 2020 year end consisted of $250.0 million of the 2021 Notes and $18.5 million of other notes.

Average notes payable outstanding, including commercial paper borrowings in 2020 and short-term credit facility borrowings in both years, were $16.7 million and $68.4 million in 2021 and 2020, respectively.

The 2021 weighted-average interest rate on such borrowings of 8.39% compared with 2.98% in 2020.

Average commercial paper borrowings were $41.0 million and $162.2 million for 2020 and 2019, respectively, and the weighted-average interest rate of 1.53% on such borrowings in 2020 decreased from 2.27% last year.

No commercial paper was outstanding as of year-end 2020.

There were no commercial paper borrowings during 2021.

Average commercial paper borrowings were $41.0 million in 2020 with a weighted-average interest rate of 1.53%.

No commercial paper was outstanding as of year-end 2021 or 2020.

There were no amounts borrowed under the short-term credit facility during 2021.

Average short-term credit facility borrowings were $13.9 million in 2020 with a weighted-average interest rate of 1.7%.

No amounts were outstanding under the short-term credit facility as of year-end 2020 and no amounts were borrowed under the short-term credit facility in 2019.

At 2020 year end, the weighted-average interest rate on outstanding notes payable of 8.87% compared with 2.23% at 2019 year end.

The 2020 year-end rate increased primarily due to higher local borrowings in emerging markets.

Accounts payable of $222.9 million as of 2020 year end increased $24.4 million from 2019 year-end levels, primarily due to the timing of payments, $1.1 million related to acquisitions and $5.9 million of foreign currency translation.

Other accrued liabilities of $445.5 million as of 2020 year end increased $74.7 million from 2019 year-end levels primarily due to higher tax accruals, $5.2 million related to acquisitions and $8.2 million of foreign currency translation.

No amounts were outstanding under the short-term credit facility as of year-end 2021 or 2020.

At 2021 year end, the weighted-average interest rate on outstanding notes payable of 8.39% compared with 8.87% in 2020.

The 2021 year-end rate decreased primarily due to lower rates on local borrowings in emerging markets.

Accounts payable of $277.6 million as of 2021 year end increased $54.7 million from 2020 year-end levels, primarily due to the timing of payments and $3.4 million from acquisitions, partially offset by $3.4 million of foreign currency translation.

Other accrued liabilities of $424.3 million as of 2021 year end decreased $21.2 million from 2020 year-end levels primarily due to lower tax accruals and $7.1 million of foreign currency translation, partially offset by $3.7 million from acquisitions.

Long-term debt of $1,182.9 million as of 2021 year end consisted of:

(i) $300.0 million of the unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”);

(i) $300.0 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”);

(ii) $400.0 million of unsecured 4.10% notes that mature on March 1, 2048 (“the 2048 Notes”);

and (iii) $500.0 million of the 2050 Notes, partially offset by $17.9 million from the net effects of debt amortization costs.

SNAP-ON INCORPORATED

and (iii) $500.0 million of 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), partially offset by $17.1 million from the net effects of debt amortization costs.

Snap-on has an $800 million multi-currency revolving credit facility that terminates on September 16, 2024 (the “Credit Facility”);

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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.

SNAP-ON INCORPORATED

Snap-on’s Credit Facility and other debt agreements also contain certain usual and customary borrowing, affirmative, negative and maintenance covenants.

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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.

however, it is continuing to monitor the impact of the COVID-19 pandemic on its business and the credit and financial markets.

Snap-on manages its aggregate short-term debt borrowings so as not to exceed its availability under the Credit Facility.

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 scheduled debt payments, including the maturity of the 2021 Notes, payments of interest and dividends, funding to support new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise.

Near-term liquidity requirements for Snap-on include payments of interest and dividends, funding to support new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise.

Snap-on intends to make contributions of $9.4 million to its foreign pension plans and $9.5 million to its domestic pension plans in 2022, as required by law.

Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its pension plans in 2021.

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

Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2022.

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

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

Operating Activities

Net cash provided by operating activities of $1,008.6 million in 2020 increased $334.0 million from $674.6 million in 2019.

The $334.0 million increase is primarily due to $430.2 million from net changes in operating assets and liabilities, partially offset by a $64.8 million decrease in net earnings.

Net cash provided by operating activities of $966.6 million in 2021 decreased $42.0 million from $1,008.6 million in 2020.

The $42.0 million decrease is primarily due to a $253.6 million change in net operating assets and liabilities, partially offset by a $195.0 million increase in net earnings.

Depreciation expense was $75.6 million in 2021 and $73.3 million in 2020.

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See Note 7 to the Consolidated Financial Statements for information on goodwill and other intangible assets.

2020 ANNUAL REPORT 45

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Investing Activities

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Net cash used by investing activities of $187.8 million in 2020 included additions to finance receivables of $835.0 million, partially offset by collections of $750.3 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, diagnostic and equipment products on an extended-term payment plan, generally with average payment terms of approximately four years.

Net cash used by investing activities in 2020 also included a total of $41.5 million for the acquisitions of Sigmavision and AutoCrib and a $0.2 million working capital adjustment for the 2019 Cognitran acquisition.

Net cash used by investing activities in 2019 included a total of $38.6 million (net of $1.0 million of cash acquired) for the acquisitions of TMB, Power Hawk and Cognitran.

See Note 3 to the Consolidated Financial Statements for information on acquisitions.

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

Net cash used by investing activities in 2021 also included a total of $199.7 million for the acquisitions of Dealer-FX, AutoCrib Germany and Pradines.

Net cash used by investing activities in 2020 included a total of $41.5 million for the acquisitions of Sigmavision and AutoCrib and a $0.2 million working capital adjustment for the 2019 Cognitran acquisition.

See Note 3 to the Consolidated Financial Statements for information about acquisitions.

Capital expenditures in 2021 and 2020 totaled $70.1 million and $65.6 million, respectively.

T he lower capital spending as compared to the prior year was a result of the decreased activity in response to the COVID-19 pandemic, particularly in the second and third quarters of 2020.

Capital expenditures in both years included continued investments related to the company’s execution of its strategic growth initiatives and Value Creation Processes.

Capital expenditures in both years included continued investments related to the company’s execution of its strategic Value Creation Processes.

The company also invested in:

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(ii) new production and machine tooling to enhance manufacturing operations, as well as ongoing replacements of manufacturing and distribution equipment, particularly in the United States;

(iii) the ongoing enhancement of the company’s global enterprise resource planning (ERP) management information systems;

and (iv) a consolidated warehouse facility for the company in Pleasant Prairie, Wisconsin.

and (iii) the ongoing enhancement of the company’s global enterprise resource planning (ERP) management information systems.

Snap-on believes that its cash generated from operations, as well as its available cash on hand and funds available from its credit facilities will be sufficient to fund the company’s capital expenditure requirements in 2022.

2021 ANNUAL REPORT 45

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Financing Activities

Net cash used by financing activities of $818.8 million in 2021 included the $250.0 million repayment of the 2021 Notes at maturity and net proceeds from notes payable and other short-term borrowings of $3.3 million.

Net cash used by financing activities of $84.3 million in 2020 included Snap-on’s sale, on April 27, 2020, of $500 million of the 2050 Notes at a discount, from which Snap-on received $489.9 million of net proceeds, reflecting $4.4 million of transaction costs, partially offset by repayments of notes payable and other short-term borrowings of $187.2 million.

Net cash used by financing activities of $409.4 million in 2019 included net proceeds from other short-term borrowings of $17.6 million.

Proceeds from stock purchase and option plan exercises totaled $162.4 million in 2021 and $55.8 million in 2020.

Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and franchisee stock purchase plans, stock options and other corporate purposes.

Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and franchisee stock purchase plans, as well as stock options, and for other corporate purposes.

In 2021, Snap-on repurchased 1,943,900 shares of its common stock for $431.3 million under its previously announced share repurchase programs.

As of 2020 year end, Snap-on had remaining availability to repurchase up to an additional $275.7 million in common stock pursuant to its Board of Directors’ (the “Board”) authorizations.

As of 2021 year end, Snap-on had remaining availability to repurchase up to an additional $454.9 million in common stock pursuant to its Board’s authorizations.

The purchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions.

Snap-on repurchased 1,109,000 shares of its common stock for $174.3 million in 2020.

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 share repurchases, if any, in 2021.

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.

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Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends in 2022.

SNAP-ON INCORPORATED

Off-Balance-Sheet Arrangements

Except as included below in the section labeled “Contractual Obligations and Commitments” and Note 16 to the Consolidated Financial Statements, the company had no off-balance-sheet arrangements as of 2020 year end.

Contractual Obligations and Commitments

A summary of Snap-on’s future contractual obligations and commitments as of 2020 year end are as follows:

(Amounts in millions) Total 2021 2022-2023 2024-2025 2026 and

Contractual obligations:

Notes payable and current maturities of long-term debt

$ 268.5 $ 268.5 $ — $ — $ —

Long-term debt 1,182.1 — — — 1,182.1

Interest on fixed rate debt 970.5 51.9 83.3 83.3 752.0

Operating leases 55.7 20.3 25.3 8.9 1.2

Finance leases 10.8 3.0 5.4 2.4 —

Purchase obligations 117.6 113.6 3.8 0.2 —

Total $ 2,605.2 $ 457.3 $ 117.8 $ 94.8 $ 1,935.3

Snap-on’s contractual obligations for long-term debt and operating and finance leases are reflected in the Consolidated Balance Sheets;

see Note 10 and Note 17 to the Consolidated Financial Statements for information on the company’s long-term debt and leases.

Snap-on also enters into contracts for future purchases in the normal course of business.

As of year-end 2021, the company had $147.5 million in purchase commitments to be paid in 2022 and $17.3 million to be paid thereafter.

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 additional discretionary cash contributions to its pension plans in 2022;

Snap-on has not presented estimated pension and postretirement funding contributions in the table above as the funding can vary from year to year based on changes in the fair value of the plan assets and actuarial assumptions;

see Note 12 and Note 13 to the Consolidated Financial Statements for information on the company’s benefit plans and payments.

Due to the uncertainty of the timing of settlements with taxing authorities, Snap-on is unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits for its remaining uncertain tax liabilities.

As a result, $9.1 million of unrecognized tax benefits have been excluded from the table above;

See Note 9 to the Consolidated Financial Statements for information on income taxes.

SNAP-ON INCORPORATED

Environmental Matters

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Snap-on believes that, as a general matter, its handling, manufacture, use and disposal of these substances are in accordance with environmental laws and regulations.

It is possible, however, that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could bring into question the company’s handling, manufacture, use or disposal of these substances.

It is possible, however, that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could affect the company’s handling, manufacture, use or disposal of these substances.

In recent years there has been increased public awareness, concern and focus on environmental and sustainability issues, including matters related to global climate change.

The current focus on these matters is expected to result in additional and/or more restrictive regulations, requirements and/or industry or third-party standards to reduce or mitigate global warming and other environmental or sustainability risks, though the timing is uncertain.

Snap-on is monitoring developments in this area.

New Accounting Standards

See Note 1 to the Consolidated Financial Statements for information on new accounting standards.

2020 ANNUAL REPORT 47

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Critical Accounting Policies and Estimates

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The allowance represents management’s estimate of the expected losses in the company’s finance receivables portfolio based on ongoing assessments and evaluations of credit losses over the expected contractual life of the receivables portfolio considering collectability, historical loss experience, current conditions and future market changes.

Determination of the proper level of allowance requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the expense for credit losses and, as a result, net earnings.

Determination of the proper level of allowance requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings.

The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current and future economic conditions and credit risk characteristics.

Some of these factors are influenced by items such as the customers’ financial condition, past payment experience, credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral.

Changes in economic conditions and assumptions, including the resulting credit quality metrics relative to the performance of the finance receivables portfolio, create uncertainty and could result in changes to both the allowance for credit losses and expense for credit losses.

2021 ANNUAL REPORT 47

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Management utilizes established policies and procedures in an effort to ensure the estimates and assumptions are well controlled, reviewed and consistently applied.

As of January 1, 2022, the ratio of the allowance for credit losses to finance receivables was 3.90%.

In 2020, financial services expenses included higher provisions for credit losses related to the company’s adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326) .

As of December 28, 2019, the allowance ratio was 3.65%.

As of January 2, 2021, the allowance ratio was 4.38%.

While management believes it exercises prudent judgment and applies reasonable assumptions in establishing its estimates for allowances for finance receivables, there can be no assurance that changes in economic conditions or other factors would not adversely impact the financial health of our customers and result in changes to the estimates used in the allowance calculation.

For reference, a 100 bps increase in the allowance ratios for finance receivables as of January 2, 2021, would have increased Snap-on’s 2020 expense for credit losses and related allowance for credit losses by approximately $17.5 million.

For reference, a 100 bps increase in the allowance ratios for finance receivables as of January 1, 2022, would have increased Snap-on’s 2021 provision for credit losses and related allowance for credit losses by approximately $17.2 million.

For additional information on Snap-on’s allowances for credit losses, see Note 1 and Note 4 to the Consolidated Financial Statements.

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Within its four reportable operating segments, the company has identified 11 reporting units.

SNAP-ON INCORPORATED

Snap-on evaluates the recoverability of goodwill by utilizing an income approach that estimates the fair value of the future discounted cash flows of the reporting units to which the goodwill relates.

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Should the operations of the businesses with which goodwill is associated incur significant 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, some or all of the recorded goodwill could be subject to impairment and could result in a material adverse effect on Snap-on’s financial position or results of operations.

SNAP-ON INCORPORATED

Snap-on completed its annual impairment testing of goodwill in the second quarter of 2021, which did not result in any impairment.

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Since asset allocation is a key determinant of expected investment returns, the current and expected mix of plan assets are also considered when setting the assumption.

2020 ANNUAL REPORT 49

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Pension expense increases as the expected rate of return on plan assets decreases.

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This technique calculates bond portfolios that produce adequate cash flows to pay the plans’ projected yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

2021 ANNUAL REPORT 49

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The selection of the 2.9% weighted-average discount rate for Snap-on’s domestic pension plans as of 2021 year end (compared to 2.7% as of 2020 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.

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The expected returns on plan assets for foreign pension plans ranged from 1.3% to 5.6% as of 2021 year end.

Due to the net change in these two key assumptions, in addition to the overall benefit plan status, pension expense in 2021 is expected to decrease.

Other factors, such as changes in plan demographics and discretionary contributions, may further increase or decrease pension expense in 2021.

Due to the net change in these two key assumptions, in addition to the overall benefit plan status, Snap-on expects to have pension income in 2022.

Other factors, such as changes in plan demographics and discretionary contributions, may further increase or decrease pension income in 2022.

See Note 12 to the Consolidated Financial Statements for further information on pension plans.

COVID-19 spread across the globe during 2020 and continues to impact economic activity worldwide into 2021.

Snap-on is accommodating to the related risks while safely pursuing opportunities in the COVID-19 environment.

In 2021, the company believes there will be ongoing advancements against the virus-related turbulence, and that the trajectory of progress may be uncertain due to the evolving nature and duration of the pandemic.

Snap-on does expect to make continued progress in 2021 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high.

COVID-19, its subsequent variants, as well as related supply chain inefficiencies, continue to impact economic activity worldwide in 2022.

Snap-on is accommodating to the virus-related turbulence and is capitalizing on opportunities in this mixed environment.

The company believes that our markets and our operations possess and, indeed, have demonstrated considerable resilience against the impact of the virus and that there will be ongoing advancement even in the midst of the pandemic.

The trajectory, however, may be uncertain due to the evolving nature and duration of the situation.

Snap-on expects to make continued progress in 2022 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high.

In pursuit of these initiatives, it is projected that capital expenditures in 2022 will be in a range of $90 million to $100 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis