What changed in this filing

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Item 1A. Risk Factors

2023-02-09 compared with 2022-02-11 · 54 added, 43 removed, 202 unchanged (32% of the section changed)

1 unchanged sentence

Each of these risk factors could adversely affect, and in some cases may have already affected, the company’s business, operating results, cash flows and/or financial condition, as well as adversely affect the value of an investment in the company’s common stock.

Risk related to COVID-19 and Other Infectious Diseases

The ongoing COVID-19 pandemic is expected to continue to pose risks to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.

We face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic.

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.

Existing measures may be extended in certain regions and additional measures may be imposed to combat the COVID-19 pandemic or future outbreaks of infectious diseases.

Among the effects of COVID-19, and potential effects of other similar outbreaks, on the company could include, but are not limited to, reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, supply chain inefficiencies, and reduced business and consumer spending, which could adversely affect our results of operations by reducing our sales, margins and/or net income as a result of rising costs, a slowdown in customer orders or order cancellations.

To the extent the COVID-19 pandemic, or a future outbreak, adversely affects our business, financial condition, results of operations and cash flows, it may also heighten many of the other risks described in this section.

The ultimate impact of COVID-19, as well as future outbreaks of infectious diseases, 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.

Business Risks

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A decrease in the use of privately-operated vehicles may lead to fewer repairs and less demand for our products.

2021 ANNUAL REPORT 13

In addition, the number of electric and hybrid vehicles developed and sold has risen in recent years, and is expected to continue to increase in the future.

While we believe that advances in vehicle technologies provide us with opportunities to provide innovative products and solutions to the vehicle repair market, if we are not able to execute on those possibilities, our business and results of operations could suffer.

While we believe that advances in vehicle technologies provide us with opportunities to develop innovative products and solutions for the vehicle repair market, if we are not able to execute on those possibilities, our business and results of operations could suffer.

2022 ANNUAL REPORT 13

The performance of Snap-on’s mobile tool distribution business depends on the success of its franchisees.

Approximately 42% of our consolidated net revenues in 2021 were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel.

Approximately 43% of our consolidated net revenues in 2022 were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel.

Snap-on’s success is dependent on its relationships with franchisees, individually and collectively, as they are the primary sales and service link between the company and vehicle service and repair technicians, who are an important class of end users for Snap-on’s products and services.

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We may not be able to compete effectively unless we continue to enhance existing products or introduce new products to the marketplace in a timely manner.

Product improvements and new product introductions require significant financial and other resources, including significant planning, design, development, sourcing and testing at the technological, product and manufacturing process levels.

Product improvements and new product introductions require significant financial and other resources, including planning, design, development, sourcing and testing at the technological, product and manufacturing process levels.

Our competitors’ new products may beat our products to market, be more effective, contain more features, be less expensive than our products, and/or render our products obsolete.

Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development.

Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other factors, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development.

Failure to adequately protect intellectual property, or claims of infringement, could adversely affect our business, reputation, financial condition, results of operations and cash flows.

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Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business.

SNAP-ON INCORPORATED

The global tool, equipment, diagnostics, and repair information industries are competitive.

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Price competition in our various industries is intense and pricing pressures from competitors and customers continue to increase.

In general, as a manufacturer and marketer of premium products and services, the expectations of Snap-on’s customers and its franchisees are high and continue to increase.

In general, as a manufacturer and marketer of premium products and services, the expectations of Snap-on’s customers and its franchisees are high.

Any inability to maintain customer satisfaction could diminish Snap-on’s premium image and reputation and could result in a lessening of our ability to command premium pricing.

We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase market share or profitability.

Foreign operations are subject to political, economic and other risks that could adversely affect our business, financial condition, results of operations and cash flows.

SNAP-ON INCORPORATED

Foreign operations are subject to political, economic, trade and other risks that could adversely affect our business, financial condition, results of operations and cash flows.

Approximately 28% of our revenues in 2022 were generated outside of the United States.

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These and other potential implications could adversely affect our business and results of operations.

The February 2022 Russian invasion of Ukraine and the ongoing conflict in the region has led to sanctions and actions taken against Russia and Belarus by the United States, the U.K., the European Union and others.

The war in Ukraine has not had a material impact on our business and operations;

however, expansion of the conflict beyond its current geographic, political and economic scope could adversely impact our business, results of operations and financial condition.

Risks related to this situation include supply chain inefficiencies, price increases and shortages of raw materials and components, exchange rate volatility, energy shortages in Europe, an increase in cybersecurity incidents, and potential impairment of certain assets.

Our foreign operations are also subject to other risks and challenges, such as the need to staff and manage diverse workforces, respond to the needs of multiple national and international marketplaces, and differing business climates and cultures in various countries.

Operational Risks

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We manufacture a significant portion of the products we sell.

Any prolonged disruption in the operations of our existing manufacturing facilities, whether due to technical or labor difficulties, facility consolidation or closure actions, lack of raw material or component availability, destruction of or damage to any facility (as a result of natural disasters, climate or weather events, use and storage of hazardous materials, acts of war, sabotage, terrorism, civil unrest or other events), or other reasons, including outbreaks of infectious diseases, such as the ongoing COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Any prolonged disruption in the operations of our existing manufacturing facilities, whether due to technical or labor difficulties, facility consolidation or closure actions, lack of raw material or component availability, destruction of or damage to any facility (as a result of natural disasters, climate or weather events, use and storage of hazardous materials, armed conflicts, sabotage, terrorism, civil unrest or other events), or other reasons, including outbreaks of infectious diseases, such as the ongoing COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

2022 ANNUAL REPORT 15

Price fluctuations and shortages of raw materials, components, certain purchased finished goods and energy sources could adversely affect the ability to obtain needed materials or products and could adversely affect our results of operations.

Price inflation and shortages of raw materials, components, certain purchased finished goods and energy sources have impacted, and in the future could adversely affect, the ability to obtain, as well as the cost of, needed materials or products and, in turn, our results of operations.

Snap-on’s supply of raw materials and purchased components are generally available from numerous suppliers, and the company continuously works to expand its supplier base to ensure availability.

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Some of these materials have been, and in the future may be, in short supply, particularly in the event of mill shutdowns or production cut backs.

In addition, outbreaks of infectious diseases, weather events or other circumstances beyond our control could also impact the availability of raw materials and components.

In addition, outbreaks of infectious diseases, weather events, armed conflicts or other circumstances beyond our control could also impact the availability of raw materials and components.

Physical risks of climate change may also impact the availability and cost of materials, sources and supply of energy and could also increase operating costs.

Raw materials, components and certain purchased finished goods can exhibit price and demand cyclicality, including as a result of tariffs, other trade protection measures, inflationary factors, and supply chain inefficiencies.

Associated unexpected variability could result in an increase in product costs and require Snap-on to increase prices to maintain margins.

Associated unexpected variability has resulted, and in the future could result, in an increase in product costs and require Snap-on to increase prices to maintain margins.

We use various energy sources to transport, produce and distribute products, and some of our products have components that are petroleum based.

Petroleum and energy prices have periodically increased significantly over short periods of time;

future volatility and changes may be caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, climate change regulations, world events and changes in governmental programs.

Energy price increases raise both our operating costs and the costs of our materials, and we may not be able to increase our prices enough to offset these costs in certain areas.

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failure of our systems to operate effectively could adversely affect our business and reputation.

We depend heavily on information technology infrastructure to achieve our business objectives and to protect sensitive information, and continually invest in improving such systems.

Problems that impair or compromise this infrastructure, including natural disasters, power outages, major network failures, security breaches or malicious attacks, or during system upgrades and/or new system implementations, could impede our ability to record or process orders, manufacture and ship in a timely manner, manage our financial services operations including originating, processing, accounting for and collecting receivables, protect sensitive data of the company, our customers, our suppliers and business partners, or otherwise carry on business in the normal course.

Any such events, if significant, could cause us to lose customers and/or revenue and could require us to incur significant expense to remediate, including as a result of legal or regulatory claims, proceedings, fines or penalties, and could also damage our reputation.

While we have taken steps to maintain adequate data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency, and redundancy and recovery processes, as well as by securing insurance, these measures may be inadequate.

These risks may be heightened when associates work remotely.

We depend heavily on information technology infrastructure to achieve our business objectives and to protect sensitive data, and we continually invest in improving such systems.

In the ordinary course of business, we collect and store sensitive data and information, including personally identifiable information about our employees and the company’s proprietary and regulated business information, as well as that of our customers, suppliers and business partners.

Our information systems, like those of other companies, are susceptible to malicious damage, intrusions and outages due to, among other events, viruses, cyber attacks, industrial espionage, phishing attempts, hacking, break-ins and similar events, as well as other breaches of security, natural disasters, power loss or telecommunications failures.

Techniques used to breach information technology systems are growing in sophistication and increasingly come from threat actors of all types, including individuals, criminal organizations and state-sponsored operatives.

In early March 2022, as previously disclosed, Snap-on detected unusual activity in some areas of its information technology environment, quickly took down its network connections as part of the company’s defense protocols, launched a comprehensive analysis assisted by a leading external forensics firm, and notified law enforcement.

The company continued to pursue its commercial activities and restored connections as system interfaces were cleared.

The information technology incident did not significantly affect the company’s financial results.

SNAP-ON INCORPORATED

In response to the evolving cyber threat environment, we continue to invest in data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency, and redundancy and recovery processes, as well as by securing insurance.

Future problems that impair or compromise the company’s information technology infrastructure, including those due to natural disasters, power outages, major network failures, security breaches or malicious attacks, or those occurring during system upgrades and/or new system implementations could impede our operations.

Such impacts could interfere with our ability to record or process orders, manufacture and ship in a timely manner, manage our financial services operations including originating, processing, accounting for and collecting receivables, protect sensitive data of the company, our customers, our suppliers and business partners, or otherwise carry on business in the normal course.

The March 2022 incident did not have a significant impact on the results of our operations;

however, future cyber events could cause us to lose customers and/or revenue and could require us to incur significant expense to remediate, including as a result of legal or regulatory claims, proceedings, fines or penalties, and could also damage our reputation.

In association with initiatives to better integrate business units, rationalize our operating footprint and improve responsiveness to franchisees and customers, Snap-on is continually enhancing its global Enterprise Resource Planning (ERP) management information systems.

As we integrate, implement and deploy new information technology processes and enhance our information infrastructure across our global operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flows.

SNAP-ON INCORPORATED

Failure to attract, retain and effectively manage qualified personnel could lead to a loss of revenue and/or profitability.

Snap-on’s success depends, in part, on the efforts and abilities of its senior management team and other key employees.

Their skills, experience and industry contacts significantly benefit our operations and administration.

Snap-on’s success depends, in part, on the efforts and abilities of its senior management team and other key employees whose skills, experience and industry contacts significantly benefit our operations and administration.

The failure to attract and retain members of our senior management team and other key employees, to effectively develop personnel and to execute succession plans could have a negative effect on our operating results.

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If we were to incur a substantial charge or are unable to effectively manage our cost reduction and restructuring efforts, our business, financial condition, results of operations and cash flows could be adversely affected in certain periods.

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Financial Risks

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Adverse fluctuations in interest rates and/or our ability to provide competitive financing programs could also have an adverse impact on our revenue and profitability.

2021 ANNUAL REPORT 17

Exposure to credit risks of customers and resellers may make it difficult to collect receivables, and our allowances for credit losses for receivables may prove inadequate, which could adversely affect operating results and financial condition.

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The company maintains allowances for credit losses for receivables to provide for defaults and nonperformance.

These allowances represent an estimate of losses over the remaining contractual lives of our receivables which include current market conditions and estimates for reasonable and supportable forecasts, when appropriate.

These allowances represent an estimate of expected credit losses over the remaining contractual life of the receivables, using historical loss experience, asset specific risk characteristics, current conditions, reasonable and supportable forecasts, and an appropriate reversion period, when applicable.

The determination of the appropriate levels of the allowances for credit losses involves a high degree of subjectivity and judgement, and requires the company to make estimates of credit risks, which may undergo material changes as a result of economic conditions and other factors.

The company’s allowances may not be adequate to cover actual losses, and future allowances for credit losses could materially and adversely affect our financial condition, results of operations and cash flows.

The company’s allowances may not be adequate to cover actual losses, and future provisions for credit losses could materially and adversely affect our financial condition, results of operations and cash flows.

Foreign operations are subject to currency exchange, inflation, interest and other risks that could adversely affect our business, financial condition, results of operations and cash flows.

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Substantial fluctuations in the value of the U.S.

dollar or other transactional currencies could have a significant impact on the company’s financial condition and results of operations.

We are also affected by changes in inflation rates and interest rates.

Additionally, cash generated in certain non-U.S.

dollar or other transactional currencies have had and, in the future, could have a significant impact on the company’s financial condition and results of operations.

We are also affected by changes in inflation and interest rates in non-U.S.

jurisdictions.

Cash generated in certain non-U.S.

jurisdictions may be difficult to repatriate to the United States in a tax-efficient manner.

Adverse developments in the credit and financial markets could negatively impact the availability of credit that we and our customers need to operate our businesses.

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Inability to access credit or capital markets, or a deterioration in the terms on which financing might be available, could have an adverse impact on our business, financial condition, results of operations and cash flows.

SNAP-ON INCORPORATED

Increasing our financial leverage could affect our operations and profitability.

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Therefore, we cannot give assurances that credit will be available on terms that we consider attractive, or at all, if and when necessary or beneficial to us.

SNAP-ON INCORPORATED

Failure to achieve expected investment returns on pension plan assets, as well as changes in interest rates or plan demographics, could adversely impact our results of operations, financial condition and cash flows.

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Our determination of whether impairment has occurred is based on a comparison of each of our reporting units’ fair market value with its carrying value.

Significant and unanticipated changes in circumstances, such as significant and long-term adverse changes in business climate, adverse actions by regulators, unanticipated competition, the loss of key customers, and/or changes in technology or markets, could require a provision for impairment in a future period that could substantially impact our reported earnings and reduce our consolidated net worth and shareholders’ equity.

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Significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, changes in key personnel or litigation, a sustained decrease in share price and/or other events, could require a provision for impairment in a future period that could substantially impact our reported earnings and reduce our consolidated net worth and shareholders’ equity.

Should the economic environment in these markets deteriorate, our results of operations and financial position could be materially impacted, including as a result of the effects of potential impairment write-downs of goodwill and/or other intangible assets related to these businesses.

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and (ii) classification of third parties, including our franchisees, as independent from the company, as well as the manner in which they are applied, could significantly impact our business and the economy as a whole.

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Financial services businesses of all kinds are subject to significant and complex regulations and enforcement.

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These developments, and other potential future legislation and regulations, including the increasing global regulation of privacy rights, may also adversely affect the customers to which, and the markets into which, we sell our products, and increase our costs and otherwise negatively affect our business, reputation, results of operations and financial condition, including in ways that cannot yet be foreseen.

SNAP-ON INCORPORATED

Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows.

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Legal disputes could adversely affect our business, reputation, financial condition, results of operations and cash flows.

From time to time we are subject to legal disputes that are being litigated and/or settled in the ordinary course of business.

In the ordinary course of our business, we are subject to legal disputes that are litigated and/or settled.

Disputes or future lawsuits could result in the diversion of management’s time and attention away from business operations.

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Adverse outcomes or settlements could also require us to pay damages, potentially in excess of amounts reserved, or incur liability for other remedies that could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flows.

SNAP-ON INCORPORATED

Our operations expose us to the risk of environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations and reputation.

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We cannot provide assurance that our costs of complying with current or future environmental protection and health and safety laws will not exceed our estimates.

The inability to successfully defend claims from taxing authorities could adversely affect our financial condition, results of operations and cash flows.

The inability to successfully defend claims from taxing authorities and changes in tax laws and rules could adversely affect our financial condition, results of operations and cash flows.

We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions.

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Claims from taxing authorities related to these differences could have an adverse impact on our financial condition, results of operations and cash flows.

Risk related to COVID-19 and Other Infectious Diseases

The ongoing COVID-19 pandemic continues to pose risks to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.

We face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic.

In response to COVID-19 and its variants, national and local governments around the world have instituted certain protective measures at various times.

While such restrictions have generally eased in many countries where we have operations, existing measures may be extended in certain regions and additional measures may be imposed to combat the COVID-19 pandemic or future outbreaks of infectious diseases.

The effects of COVID-19 or other similar outbreaks on the company could include reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, supply chain inefficiencies, and reduced business and consumer spending, which could adversely affect our results of operations by reducing our sales, margins and/or net income as a result of rising costs, a slowdown in customer orders or order cancellations.

To the extent the ongoing COVID-19 pandemic, or a future outbreak of an infectious disease, adversely affects our business, financial condition, results of operations and cash flows, it may also heighten many of the other risks described in this section.

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General Risk Factor

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These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending.

We, our franchisees and our customers, and the economy as a whole, also may be affected by future world or local events outside our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, armed conflicts, civil unrest, conflicts in international situations, weather events and natural disasters, outbreaks of infectious diseases such as the ongoing COVID-19 pandemic, as well as government-related developments or issues, including changes in tax laws and regulations, including regulations related to climate change and other sustainability matters, and changes in financial accounting standards.

We, our franchisees and our customers, and the economy as a whole, also may be affected by future world or local events outside our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, armed conflicts (including the current war in Ukraine), civil unrest, conflicts in international situations, weather events and natural disasters, outbreaks of infectious diseases such as the ongoing COVID-19 pandemic, as well as government-related developments or issues, including changes in tax laws and regulations, new or enhanced regulations related to climate change and other sustainability matters, and changes in financial accounting standards.

These factors may affect the results of operations by reducing our sales, margins and/or net earnings as a result of a slowdown in customer orders or order cancellations, impact the availability and/or pricing of raw materials and/or the supply chain, and could potentially lead to future impairment of goodwill or other intangible assets.

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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 1A. Risk Factors