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Item 7. Management’s Discussion and Analysis

2023-02-09 compared with 2022-02-11 · 169 added, 200 removed, 568 unchanged (39% of the section changed)

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Management Overview

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.

We believe our 2022 operating performance demonstrates the continued momentum of our operations, confirms the resilience of our markets, and reflects the considerable capabilities of our experienced team to overcome the uncertainties of the current environment.

Throughout the turbulence, we maintained and further extended 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.

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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

2022 ANNUAL REPORT 27

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

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

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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.

(“AutoCrib”) for a cash purchase price of $35.4 million.

AutoCrib, based in Tustin, California, designs, manufactures and markets asset and tool control solutions.

The acquisition of AutoCrib complemented and expanded Snap-on’s existing tool control offering to customers in a variety of industrial applications, including aerospace, automotive, military, natural resources and general industry.

On January 31, 2020, Snap-on acquired substantially all of the assets related to the TreadReader product line from Sigmavision Limited (“Sigmavision”) for a cash purchase price of $5.9 million.

Sigmavision designs and manufactures handheld devices and drive-over ramps that provide tire information for use in the automotive industry.

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.

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.

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

Pro forma financial information has not been presented for 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.

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;

Unless otherwise indicated, references in this document to “fiscal 2022” or “2022” refer to the fiscal year ended December 31, 2022;

references to “fiscal 2021” or “2021” refer to the fiscal year ended January 1, 2022;

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

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

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

References in this document to 2022, 2021 and 2020 year end refer to December 31, 2022, January 1, 2022, and January 2, 2021, respectively.

Snap-on’s 2022 and 2021 fiscal years each contained 52 weeks of operating results.

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A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 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)

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 1, 2022, which was filed with the SEC on February 10, 2022, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our website at www.snapon.com .

SNAP-ON INCORPORATED

Non-GAAP Measures

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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.

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Summary of Consolidated Performance

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.

Consolidated net sales of $4,492.8 million in 2022 increased $240.8 million, or 5.7%, from 2021 levels, reflecting a $357.2 million, or 8.7%, organic gain and $8.5 million of acquisition-related sales, partially offset by $124.9 million of unfavorable foreign currency translation.

Operating earnings before financial services of $941.2 million in 2022 increased $89.7 million, or 10.5%, compared to $851.5 million in 2021.

As a percentage of net sales, operating earnings before financial services of 20.9% compared to 20.0% 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%, compared to 22.3% last year.

Operating earnings of $1,207.2 million in 2022 increased $83.7 million, or 7.4%, compared to $1,123.5 million last year.

As a percentage of revenues (net sales plus financial services revenue), operating earnings of 24.9% compared to 24.4% last year.

Net earnings attributable to Snap-on in 2022 of $911.7 million, or $16.82 per diluted share, increased $91.2 million, or $1.90 per diluted share, from 2021 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

Net earnings attributable to Snap-on in 2021 were $820.5 million, or $14.92 per diluted share.

2022 ANNUAL REPORT 29

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

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 $1,406.3 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 consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government and military, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels.

Segment net sales of $1,399.2 million in 2022 decreased $7.1 million, or 0.5%, from 2021 levels, reflecting a $60.8 million, or 4.5%, organic sales increase, more than offset by $67.9 million of unfavorable currency translation.

The organic growth primarily reflects a double-digit gain in the segment’s specialty tools business, a high single-digit increase in the segment’s Asia Pacific operations, and low single-digit gains in the segment’s European-based hand tools business and in sales to customers in critical industries, despite lower activity with the military.

Operating earnings of $197.6 million in 2022, including $8.6 million of unfavorable foreign currency effects, decreased $12.3 million, or 5.9%, compared to $209.9 million in 2021.

The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2023:

• Continuing to invest in emerging market growth initiatives;

• Expanding our business with existing customers and reaching new customers in critical industries and other market segments;

• Continuing to invest in emerging market growth initiatives;

• Broadening our product offering designed particularly for critical industry segments;

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• Continuing to reduce structural and operating costs, as well as improve efficiencies, through RCI initiatives.

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 $1,938.6 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:

• Continuing to improve franchisee satisfaction, productivity, profitability and commercial health;

The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel.

Segment net sales of $2,072.0 million in 2022 increased $133.4 million, or 6.9%, from 2021 levels, reflecting a $162.5 million, or 8.5%, organic sales gain, partially offset by $29.1 million of unfavorable foreign currency translation.

The organic increase includes a double-digit gain in the U.S.

franchise business, while sales in the segment’s international operations were mixed, but overall essentially flat.

Operating earnings of $458.7 million in 2022, including $10.1 million of unfavorable foreign currency effects, increased $47.6 million, or 11.6%, compared to $411.1 million in 2021.

In 2023, the Snap-on Tools Group intends to continue its expansion with specific focus on the following initiatives:

• Continuing to improve franchisee sales productivity, profitability, commercial health, and satisfaction;

• Developing new programs and products to expand market coverage, reaching new technician customers and increasing penetration with existing customers;

• Increasing investment in new product innovation and development;

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

• Improving 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 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 $1,503.1 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)

Segment net sales of $1,666.9 million in 2022 increased $163.8 million, or 10.9%, from 2021 levels, reflecting a $188.8 million, or 12.8%, organic sales increase and $8.5 million of acquisition-related sales, partially offset by $33.5 million of unfavorable foreign currency translation.

The organic gain is comprised of double-digit increases in sales of undercar equipment and in activity with OEM dealerships, and a mid single-digit increase in sales of diagnostic and repair information products to independent repair shop owners and managers.

Operating earnings of $393.3 million in 2022, including $4.8 million of favorable foreign currency effects, increased $44.7 million, or 12.8%, from $348.6 million in 2021.

SNAP-ON INCORPORATED

The Repair Systems & Information Group intends to focus on the following strategic priorities in 2023:

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Originations of $1,153.1 million in 2022 increased $79.9 million, or 7.4%, from 2021 levels.

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.

Operating earnings from financial services in 2022 of $266.0 million, including $2.5 million of unfavorable foreign currency effects, decreased $6.0 million, or 2.2%, compared to $272.0 million last year.

Financial Services intends to focus on the following strategic priorities in 2023:

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The $291.4 million decrease is primarily due to a $354.5 million change in net operating assets and liabilities, partially offset by a $92.5 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 $206.2 million in 2022 included additions to finance receivables of $955.8 million, partially offset by collections of $826.9 million, as well as $0.5 million of cash provided by acquisitions.

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 $199.7 million for the acquisitions of Dealer-FX, AutoCrib Germany and Pradines.

Capital expenditures in 2022 and 2021 totaled $84.2 million and $70.1 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 $485.0 million in 2022 included $313.1 million for dividend payments to shareholders and $198.1 million for the repurchase of 899,000 shares of Snap-on’s common stock.

These amounts were partially offset by $55.0 million of proceeds from stock purchase and option plan exercises and net proceeds from other short-term borrowings of $1.6 million.

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.

SNAP-ON INCORPORATED

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

2022 ANNUAL REPORT 31

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

Results of Operations

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Interest expense (47.1) (1.0) % (53.1) (1.2) % 6.0 11.3 %

Other income (expense) – net 16.5 0.4 % 8.7 0.2 % 7.8 89.7 %

Other income (expense) – net 42.5 0.9 % 16.5 0.4 % 26.0 NM

Earnings before income taxes and equity earnings

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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 $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.

Net sales of $4,492.8 million in 2022 increased $240.8 million, or 5.7%, from 2021 levels, reflecting a $357.2 million, or 8.7%, organic gain and $8.5 million of acquisition-related sales, partially offset by $124.9 million of unfavorable foreign currency translation.

Gross profit of $2,181.1 million in 2022 increased $70.3 million, or 3.3%, compared to $2,110.8 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.

Gross margin (gross profit as a percentage of net sales) of 48.5% in 2022 declined 110 basis points (100 basis points (“bps”) equals 1.0 percent) from last year primarily due to higher material and other costs, partially offset by higher sales volumes and pricing actions, benefits from the company’s RCI initiatives, and 20 bps of favorable foreign currency effects.

Operating expenses of $1,239.9 million in 2022 compared to $1,259.3 million in 2021.

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)

Operating expenses as a percentage of net sales of 27.6% in 2022 improved 200 bps from last year primarily due to higher sales volumes, savings from RCI initiatives, and lower costs associated with stock-based expenses.

Operating earnings before financial services of $941.2 million in 2022 increased $89.7 million, or 10.5%, compared to $851.5 million in 2021 .

As a percentage of net sales, operating earnings before financial services of 20.9% compared to 20.0% last year.

SNAP-ON INCORPORATED

Financial services revenue of $349.7 million in 2022 was unchanged from 2021 .

Financial services operating earnings of $266.0 million in 2022 compared to $272.0 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.

Operating earnings of $1,207.2 million in 2022 increased $83.7 million, or 7.4%, compared to $1,123.5 million last year.

As a percentage of revenues, operating earnings of 24.9% compared to 24.4% last year.

Interest expense decreased $6.0 million in 2022 compared to last year.

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

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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 both 2021 and 2020 was 23.2%.

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

The effective income tax rate on earnings attributable to Snap-on was 22.8% in 2022 and 23.2% in 2021.

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

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 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.

Net earnings attributable to Snap-on in 2022 of $911.7 million, or $16.82 per diluted share, increased $91.2 million, or $1.90 per diluted share, from $820.5 million, or $14.92 per diluted share, in 2021.

Segment Results

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and (iv) Financial Services.

The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments, primarily through direct and distributor channels.

The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel.

The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government and military, power generation, transportation and technical education market segments, primarily through direct and distributor channels.

The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel.

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

SNAP-ON INCORPORATED

Commercial & Industrial Group

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Segment operating earnings $ 197.6 14.1 % $ 209.9 14.9 % $ (12.3) (5.9) %

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.

Segment net sales of $1,399.2 million in 2022 decreased $7.1 million, or 0.5%, from 2021 levels, reflecting a $60.8 million, or 4.5%, organic sales gain, more than offset by $67.9 million of unfavorable currency translation.

2022 ANNUAL REPORT 33

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

Segment gross margin in 2022 of 37.1% declined 110 bps from last year, primarily due to increased material and other costs, partially offset by benefits from the higher sales volumes and pricing actions, as well as from the segment’s RCI initiatives.

Segment operating expenses as a percentage of net sales in 2022 of 23.0% improved 30 bps as compared to 2021 primarily due to the effects of higher sales volumes.

As a result of these factors, segment operating earnings of $197.6 million in 2022, including $8.6 million of unfavorable foreign currency effects, decreased $12.3 million, or 5.9%, compared to $209.9 million in 2021.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 14.1% in 2022 compared to 14.9% last year.

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Segment operating earnings $ 458.7 22.1 % $ 411.1 21.2 % $ 47.6 11.6 %

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.

The organic increase includes a double-digit gain in the U.S.

franchise business, while sales in the segment’s international operations were mixed, but overall essentially flat.

Segment gross margin in 2022 of 44.9% declined 70 bps from last year primarily due to increased material and other costs, and 20 bps of unfavorable foreign currency effects.

These declines were partially offset by benefits from the higher sales volumes and pricing actions.

Segment operating expenses as a percentage of net sales in 2022 of 22.8% improved 160 bps from last year and includes benefits from higher sales volumes, the effects of lower expenses related to the company’s franchisee stock purchase plan, and savings associated with RCI initiatives.

As a result of these factors, segment operating earnings of $458.7 million in 2022, including $10.1 million of unfavorable foreign currency effects, increased $47.6 million, or 11.6%, compared to $411.1 million in 2021.

Operating margin for the Snap‑on Tools Group of 22.1% in 2022 compared to 21.2% last year.

2021 ANNUAL REPORT 33

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

Repair Systems & Information Group

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Segment operating earnings $ 393.3 23.6 % $ 348.6 23.2 % $ 44.7 12.8 %

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.

The organic gain is comprised of double-digit increases in sales of undercar equipment and in activity with OEM dealerships, and a mid single-digit increase i n sales of diagnostic and repair information products to independent repair shop owners and managers.

SNAP-ON INCORPORATED

Segment gross margin in 2022 of 43.9% declined 200 bps from last year primarily due to higher material and other costs, and increased sales in lower gross margin businesses.

These declines were partially offset by benefits from pricing actions and savings from RCI initiatives, as well as 50 bps of favorable foreign currency effects.

Segment operating expenses as a percentage of net sales in 2022 of 20.3% improved 240 bps from last year primarily due to benefits from sales volume leverage, higher activity in lower-expense businesses, and savings from RCI initiatives.

As a result of these factors, segment operating earnings of $393.3 million in 2022, including $4.8 million of favorable foreign currency effects, increased $44.7 million, or 12.8%, from $348.6 million in 2021.

Operating margin for the Repair Systems & Information Group of 23.6% in 2022 compared to 23.2% last year.

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Segment operating earnings $ 266.0 76.1 % $ 272.0 77.8 % $ (6.0) (2.2) %

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%.

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

Financial services revenue of $349.7 million in 2022 was unchanged from 2021 , as the benefits from the slightly larger average financial services portfolio were offset by the slightly lower average yield in 2022 as compared to last year.

In 2022 and 2021, the respective average yields on finance receivables were 17.6% and 17.7%.

In both 2022 and 2021, the average yield on contract receivables was 8.5%.

Originations of $1,153.1 million in 2022 increased $79.9 million, or 7.4%, from 2021 levels.

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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 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.

Financial services expenses in 2022 increased $6.0 million from last year primarily due to higher provisions for credit losses as compared to those recorded in 2021.

As a percentage of the average financial services portfolio, financial services expenses were 3.7% and 3.5% in 2022 and 2021, respectively.

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.

As a result of these factors, segment operating earnings of $266.0 million in 2022, including $2.5 million of unfavorable foreign currency effects, decreased $6.0 million, or 2.2%, from 2021 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.

Snap-on’s general corporate expenses in 2022 of $108.4 million decreased $9.7 million from $118.1 million last year.

The year-over-year decrease primarily reflects lower costs associated with the company’s employee stock purchase plan.

2022 ANNUAL REPORT 35

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

Quarterly Data

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* 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 INCORPORATED

Fourth Quarter

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Other income (expense) – net 11.8 1.0 % 5.1 0.3 % 6.7 NM

Earnings before income taxes and equity earnings

Earnings before income taxes

311.7 25.1 % 293.2 24.5 % 18.5 6.3 %

Income tax expense (67.2) (5.4) % (64.1) (5.3) % (3.1) (4.8) %

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) NM

Net earnings 244.5 19.7 % 229.1 19.2 % 15.4 6.7 %

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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 $1,108.3 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.

Net sales of $1,155.9 million in the fourth quarter of 2022 increased $47.6 million, or 4.3%, from 2021 levels, reflecting an $85.3 million, or 8.0%, organic gain, partially offset by $37.7 million of unfavorable foreign currency translation.

Gross profit of $560.7 million in the fourth quarter of 2022 increased $27.3 million, or 5.1%, compared to $533.4 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.

Gross margin of 48.5% in the quarter improved 40 bps from the fourth quarter of 2021 primarily due to increased sales volumes and pricing actions, 40 bps of favorable foreign currency effects, and benefits from the company’s RCI initiatives.

These improvements were partially offset by higher material and other costs.

Operating expenses of $312.7 million in the fourth quarter of 2022 compared to $301.2 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.

Operating expenses as a percentage of net sales of 27.0% in the quarter improved 10 bps from last year.

Operating earnings before financial services of $248.0 million in the fourth quarter of 2022 increased $15.8 million, or 6.8%, compared to $232.2 million in the fourth quarter of 2021 .

As a percentage of net sales, operating earnings before financial services of 21.5% compared to 21.0% last year.

Financial services revenue of $88.3 million in the fourth quarter of 2022 compared to $86.9 million last year.

Financial services operating earnings of $63.9 million in the period compared to $67.2 million in 2021 .

SNAP-ON INCORPORATED

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.

Operating earnings of $311.9 million in the fourth quarter of 2022, increased $12.5 million, or 4.2%, compared to $299.4 million last year.

As a percentage of revenues, operating earnings of 25.1% in the quarter was unchanged from last year.

Interest expense in the fourth quarter of 2022 increased $0.7 million compared to last year .

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

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

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.

2022 ANNUAL REPORT 37

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

The effective income tax rate on earnings attributable to Snap-on was 22.0% in the fourth quarter of 2022 and 22.3% in the fourth quarter of 2021.

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

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.

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

Net earnings attributable to Snap-on in the fourth quarter of 2022 of $238.9 million, or $4.42 per diluted share, increased $15.2 million, or $0.32 per diluted share, as compared to $223.7 million, or $4.10 per diluted share, in the fourth quarter of 2021 .

Segment Results

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Segment operating earnings $ 47.9 14.0 % $ 50.1 14.0 % $ (2.2) (4.4) %

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.

Segment net sales of $343.2 million in the fourth quarter of 2022 decreased $15.5 million, or 4.3%, fro m 2021 levels, reflecting a $5.7 million, or 1.7%, organic sales increase, more than offset by $21.2 million of unfavorable foreign currency translation.

The organic increase primarily reflects a double-digit gain in the segment’s specialty tools business, as well as a low single-digit increase in sales to customers in critical industries, despite lower activity with the military.

These gains were partially offset by a mid single-digit decline in the segment’s European-based hand tools business.

Segment gross margin in the fourth quarter of 37.7% improved 120 bps from last year primarily due to increased sales volumes and pricing actions, benefits from the segment’s RCI initiatives, and 20 bps of favorable foreign currency effects, partially offset by higher material and other costs.

Segment operating expenses as a percentage of net sales of 23.7% in the fourth quarter increased 120 bps from last year primarily due to reduced sales in lower-expense businesses.

As a result of these factors, segment operating earnings of $47.9 million in the fourth quarter of 2022, including $2.3 million of unfavorable foreign currency effects, decreased $2.2 million from 2021 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)

Operating margin for the Commercial & Industrial Group of 14.0% in the quarter was unchanged from last year.

Snap-on Tools Group

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Segment operating earnings $ 116.1 21.4 % $ 110.5 21.9 % $ 5.6 5.1 %

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.

Segment net sales of $542.7 million in the fourth quarter of 2022 increased $37.9 million, or 7.5%, from 2021 levels, reflecting a $47.4 million, or 9.6%, organic sales gain, partially offset by $9.5 million of unfavorable foreign currency translation.

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

franchise business and a low single-digit increase in the segment’s international operations.

Segment gross margin in the fourth quarter of 43.2% declined 70 bps from last year primarily due to 40 bps of unfavorable foreign currency effec ts, increased sales of lower gross margin products, and higher material and other costs.

These declines were partially offset by benefits from the higher sales volumes and pricing actions.

Segment operating expenses as a percentage of net sales of 21.8% in the fourth quarter improved 20 bps from last year.

SNAP-ON INCORPORATED

As a result of these factors, segment operating earnings of $116.1 million in the fourth quarter of 2022, including $4.5 million of unfavorable foreign currency effects, increased $5.6 million, or 5.1%, from 2021 levels.

Operating margin for the Snap‑on Tools Group of 21.4% in the quarter compared to 21.9% last year.

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Segment operating earnings $ 110.6 25.3 % $ 97.2 24.8 % $ 13.4 13.8 %

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.

Segment net sales of $437.9 million in the fourth quarter of 2022 increased $45.4 million, or 11.6%, from 2021 levels, reflecting a $54.9 million, or 14.3%, organic sales increase, partially offset by $9.5 million of unfavorable foreign currency translation.

The organic gain is comprised of double-digit increases in sales of undercar equipment, in activity with OEM dealerships, and in sales of diagnostic and repair information products to independent repair shop owners and managers.

Segment gross margin in the fourth quarter of 45.0% declined 110 bps from last year primarily due to higher material and other costs and increased sales in lower gross margin businesses.

These declines were partially offset by benefits from pricing actions and savings from RCI initiatives, as well as 80 bps of favorable foreign currency effects.

Segment operating expenses as a percentage of net sales in the fourth quarter of 19.7% improved 160 bps from last year primarily due to benefits from sales volume leverage, higher activity in lower-expense businesses, and savings from RCI initiatives.

As a result of these factors, segment operating earnings of $110.6 million in the fourth quarter of 2022, including $2.1 million of favorable foreign currency effects, increased $13.4 million, or 13.8%, from $97.2 million in 2021.

Operating margin for the Repair Systems & Information Group of 25.3% in the quarter compared to 24.8% last year.

SNAP-ON INCORPORATED

Financial Services

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Segment operating earnings $ 63.9 72.4 % $ 67.2 77.3 % $ (3.3) (4.9) %

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.

Financial services revenue of $88.3 million in the fourth quarter of 2022 increased $1.4 million, or 1.6%, from $86.9 million last year.

In the fourth quarters of 2022 and 2021, the respective average yields on finance receivables were 17.6% and 17.7%.

In the fourth quarters of 2022 and 2021, the average yields on contract receivables were 8.6% and 8.5%, respectively.

Originations of $299.7 million in the fourth quarter of 2022 increased $43.4 million, or 16.9%, from 2021 levels.

Financial services expenses in the fourth quarter of 2022 increased $4.7 million from last year primarily due to higher provisions for credit losses as compared to those recorded in the fourth quarter of 2021.

As a percentage of the average financial services portfolio, financial services expenses were 1.1% and 0.9% for the fourth quarters of 2022 and 2021, respectively.

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.

As a result of these factors, segment operating earnings of $63.9 million in the fourth quarter of 2022, including $0.9 million of unfavorable foreign currency effects, decreased $3.3 million, or 4.9%, from 2021 levels.

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

2022 ANNUAL REPORT 39

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

Snap-on’s fourth quarter 2022 general corporate expenses of $26.6 million compared to $25.6 million last year.

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

Non-GAAP Supplemental Data

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Transactions between the Operations and Financial Services businesses were eliminated to arrive at the Consolidated Financial Statements.

2021 ANNUAL REPORT 39

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

Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2022, 2021 and 2020 is as follows:

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Other intangibles – net 275.6 301.7 — —

Pension assets 70.6 160.7 — —

Other assets 27.1 27.9 0.1 0.1

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Current liabilities:

Notes payable and current maturities of long-term debt

Notes payable

$ 17.2 $ 17.4 $ — $ —

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Total current assets 3,368.9 3,053.4

Notes payable and current maturities of long-term debt (17.4) (268.5)

Notes payable (17.2) (17.4)

Accounts payable (287.0) (277.6)

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(i) the funding of $955.8 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.

(ii) dividend payments to shareholders of $313.1 million;

(iii) the repurchase of 899,000 shares of the company’s common stock for $198.1 million;

and (iv) the funding of $84.2 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;

(i) $826.9 million of cash from collections of finance receivables;

(ii) $675.2 million of cash generated from operations;

(iii) $55.0 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.

and (iv) $1.6 million of net proceeds from other short-term borrowings.

Of the $757.2 million of cash and cash equivalents as of 2022 year end, $244.1 million was held outside of the United States.

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

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.

Trade and other accounts receivable – net of $761.7 million as of 2022 year end increased $79.4 million from 2021 year-end levels primarily due to higher sales, partially offset by $18.2 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 61 days and 58 days at the respective 2022 and 2021 year ends.

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The long-term portions of net finance and contract receivables of $1,554.6 million as of 2022 year end compared to $1,492.2 million at 2021 year end.

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.

The combined $81.8 million increase in net current and long-term finance and contract receivables compared to 2021 year-end levels is primarily due to an increase in net receivable originations, partially offset by $20.5 million of foreign currency translation.

Inventories – net of $1,033.1 million as of 2022 year end increased $229.3 million from 2021 year-end levels primarily due to higher demand, increased costs and from efforts to manage the current supply chain situation, partially offset by $29.3 million of foreign currency translation.

As of 2022 and 2021 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 2.5 turns and 2.8 turns, respectively.

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The company’s LIFO reserve was $108.6 million and $87.2 million at 2022 and 2021 year end, 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.

Notes payable of $17.2 million as of 2022 year end compared to $17.4 million as of 2021 year end.

Average notes payable outstanding were $18.6 million and $16.7 million in 2022 and 2021, respectively.

The 2022 weighted-average interest rate on such borrowings of 9.93% compared with 8.39% in 2021.

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 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.

At 2022 year end, the weighted-average rate on outstanding notes payable of 10.89% compared with 8.39% in 2021.

The 2022 year-end rate increased primarily due to higher rates on local borrowings in emerging markets.

Accounts payable of $287.0 million as of 2022 year end increased $9.4 million from 2021 year-end levels, primarily due to the timing of payments, partially offset by $7.4 million of foreign currency translation.

Other accrued liabilities of $436.4 million as of 2022 year end increased $12.1 million from 2021 year-end levels, primarily due to higher income tax accruals, partially offset by $11.7 million of foreign currency translation.

Long-term debt of $1,183.8 million as of 2022 year end consisted of:

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

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.

and (iii) $500.0 million of 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), partially offset by $16.2 million of unamortized debt issuance costs.

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

no amounts were outstanding under the Credit Facility as of January 1, 2022.

no amounts were borrowed or outstanding under the Credit Facility during the year ended and as of December 31, 2022 or January 1, 2022.

Borrowings under the Credit Facility bear interest at varying rates based on either:

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Snap-on may, up to two times during any five-year period during the term of the Credit Facility (including any extensions thereof), elect to increase the maximum Leverage Ratio to 0.65 to 1.00 and/or increase the maximum Consolidated Net Debt to EBITDA Ratio to 4.00 to 1.00 for four consecutive fiscal quarters in connection with certain material acquisitions (as defined in the related credit agreement).

As of January 1, 2022, the company’s actual ratios of 0.09 and 0.37 respectively, were both within the permitted ranges set forth in this financial covenant.

As of December 31, 2022, the company’s actual ratios of 0.09 and 0.37 respectively, were both within the permitted ranges set forth in this financial covenant.

Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit Facility as back-up liquidity to support such commercial paper issuances.

SNAP-ON INCORPORATED

There was no commercial paper issued or outstanding during the year ended and as of December 31, 2022 or January 1, 2022.

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

As of 2022 year end, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements.

SNAP-ON INCORPORATED

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.

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Amortization expense was $28.7 million in 2022 and $29.2 million in 2021.

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

See Note 6 and Note 7 to the Consolidated Financial Statements for information on property and equipment, goodwill and other intangible assets.

Investing Activities

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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.

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.

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

Net cash used by investing activities in 2022 also included $0.5 million of cash provided by acquisitions.

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

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

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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 $485.0 million in 2022 included net proceeds from other short-term borrowings of $1.6 million.

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 other short-term borrowings of $3.3 million.

Proceeds from stock purchase and option plan exercises totaled $55.0 million in 2022 and $162.4 million in 2021.

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 2022, Snap-on repurchased 899,000 shares of its common stock for $198.1 million under its previously announced share repurchase programs.

As of 2022 year end, Snap-on had remaining availability to repurchase up to an additional $362.4 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 1,943,900 shares of its common stock for $431.3 million in 2021.

The repurchase of Snap-on common stock to offset dilution related to equity plan issuances or for other corporate purposes is at the company’s discretion, subject to prevailing financial and market conditions.

Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any.

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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.

Snap-on continues to monitor developments in this area.

New Accounting Standards

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The allowance for credit losses on finance receivables is maintained at a level management believes is adequate to cover expected losses in Snap-on’s finance receivables portfolio as of the reporting date.

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.

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 remaining 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 provision for credit losses and, as a result, net earnings.

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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%.

As of December 31, 2022, the ratio of the allowance for credit losses to finance receivables was 3.39%.

As of January 1, 2022, the allowance ratio was 3.90%.

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 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 reference, a 100 bps increase in the allowance ratios for finance receivables as of December 31, 2022, would have increased Snap-on’s 2022 provision for credit losses and related allowance for credit losses by approximately $17.9 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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Inherent in fair value determinations are significant judgments and estimates, including material assumptions about future revenue, profitability and cash flows, the company’s operational plans and its interpretation of current economic indicators.

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.

Should the operations of the businesses with which goodwill is associated incur 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, 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

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Based on forward-looking capital market expectations, Snap-on selected an expected return on plan assets assumption for its U.S.

pension plans of 6.50%, a decrease of 25 bps from 2021, to be used in determining pension expense for 2022.

pension plans of 7.5%, an increase of 100 bps from 2022, to be used in determining pension expense for 2023.

In estimating the domestic expected return on plan assets, Snap-on utilizes a nominal returns forecasting method.

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In making this determination, the company takes into account the timing and amount of benefits that would be available under the plans.

The domestic discount rate as of 2021 and 2020 year end was selected based on a cash flow matching methodology developed by the company’s outside actuaries and which incorporates a review of current economic conditions.

The domestic discount rate as of 2022 and 2021 year end was selected based on a cash flow matching methodology developed by the company’s outside actuaries that incorporates a review of current economic conditions.

This methodology matches the plans’ yearly projected cash flows for benefits and service costs to those of hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service or Standard & Poor’s credit rating agencies available at the measurement date.

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

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.

We believe that our markets and our operations possess and have demonstrated considerable resilience against the varying turbulence evident in the current environment.

In 2023, despite the uncertainties, Snap-on expects to make continued progress 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 2023 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